Friday, December 26, 2014

The Federal Housing Finance Agency is "concerned" about state legislatures....


Statement of the Federal Housing Finance Agency on Certain Super Priority Liens

Today, the Federal Housing Finance Agency (FHFA) is alerting homeowners, financial institutions, and state authorities of the agency’s concerns with state-level actions that threaten the first-lien status of single-family loans owned or guaranteed by Fannie Mae and Freddie Mac.  In particular, FHFA is concerned about state actions to create super-priority liens in two instances: 1) through certain energy retrofit financing programs structured as tax assessments and 2) through granting priority rights in foreclosure proceedings for homeowner associations.  In issuing this statement, FHFA is acting in furtherance of its statutory obligations as regulator and conservator of Fannie Mae and Freddie Mac. 

The existence of these super-priority liens increases the risk of losses to taxpayers.  Fannie Mae and Freddie Mac, while operating in conservatorship, currently support the housing finance market by purchasing, guaranteeing, and securitizing single-family mortgages.  One of the bedrock principles in this process is that the mortgages supported by Fannie Mae and Freddie Mac must remain in first-lien position, meaning that they have first priority in receiving the proceeds from selling a house in foreclosure.  As a result, any lien from a loan added after origination should not be able to jump in line ahead of a Fannie Mae or Freddie Mac mortgage to collect the proceeds of the sale of a foreclosed property.  However, as is detailed below, FHFA is concerned by some liens being advanced to “super-priority” status over Fannie Mae and Freddie Mac first-lien mortgages...FHFA is aware that, in certain jurisdictions, liens for unpaid homeowner association ("HOA") dues may be deemed to be senior to preexisting mortgage liens on a homeowner's property.  As a result, on December 5, 2014, FHFA and Fannie Mae filed an action in federal court in Nevada, seeking a determination that a HOA's foreclosure sale is invalid and contrary to federal law to the extent that it purports to extinguish Fannie Mae's property rights.  Federal National Mortgage Association v. SFR Investments Pool 1, LLC, No. 2:14-cv-02046 (D. Nev. December 5, 2014).  FHFA has also intervened in Saticoy Bay, LLC Series 1702 Empire Mine v. Federal National Mortgage Assoc., No. 2:14-cv-01975 (D. Nev.), seeking a declaration that a prior HOA foreclosure sale is invalid to the extent that it purports to extinguish Fannie Mae's property interests.   
​​These FHFA actions are based on federal law which precludes involuntary extinguishment of liens held by Fannie Mae or Freddie Mac while they are operating in conservatorships and bars holders of other liens, including HOAs, from taking any action that would extinguish a Fannie Mae or Freddie Mac lien, security interest or other property interest. Specifically, Title 12 USC Section 4617(j)(3) states that "[no] property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency."  FHFA is authorized, as conservator, to bring this suit because Enterprise lien interests in collateral constitute property protected by this provision.   FHFA has an obligation to protect Fannie Mae's and Freddie Mac's rights, and will aggressively do so by bringing actions to void foreclosures that purport to extinguish Enterprise property interests in a manner that contravenes federal law.
Needless to say, the Community Associations Institute is vehemently opposed to this FHFA position. CAI is the major proponent of "superlien" laws that give associations priority over first mortgages to some extent.  Here's what CAI has to say about this:

 CAI: FHFA Move Threatens Associations & Owners 

12/23/2014  - Falls Church , VA
Dec. 23, 2014—The Federal Housing Finance Agency (FHFA) released a statement yesterday expressing concern about state statutes that allow community associations to obtain lien priority over first mortgages for unpaid association assessments. By asking a federal court to intervene, FHFA is trying to bail out mortgage servicers that have failed to fulfill basic contractual obligations to Fannie Mae and Freddie Mac.
"Make no mistake, FHFA is bailing out mortgage servicers that lacked the competency to meet basic contractual requirements and follow established rules of civil procedure," said Thomas M. Skiba, CAE, chief executive officer of Community Associations Institute (CAI). "By suing community associations, FHFA is trying to protect Fannie and Freddie at the expense of association homeowners. That's unfair, unconscionable and unacceptable."
For years, CAI has joined with federal regulators (as well as Fannie Mae) to call on mortgage servicers to secure and maintain vacant and abandoned properties and meet their financial obligations to community associations and their homeowners. These calls and regulatory directives have been largely ignored with impunity by mortgage servicers. 
"In one case, Fannie Mae’s servicers failed to respond to legal service of process and, despite mandatory notification pursuant to Nevada law, failed to appear at a foreclosure auction to protect Fannie Mae's financial interests," Skiba continued. "It says a lot about FHFA priorities that the agency now is suing to recoup Fannie Mae's losses from the pockets of community association homeowners, rather than suing servicers for breach of contract. Someone must stand up for homeowners and that’s what CAI will continue to do."
FHFA is nothing if not strategic, electing to release its statement on the heels of a lawsuit filed by the agency in federal court in Nevada. FHFA is seeking a determination that an HOA's foreclosure sale is invalid and contrary to federal law because it would extinguish Fannie Mae's property rights. However, the right of foreclosure FHFA is seeking to invalidate nationwide is permitted by law in Nevada, 21 other states and the District of Columbia.
FHFA asserts that it is compelled by law to file suit to protect Fannie Mae's and Freddie Mac's rights and to prevent taxpayers from incurring losses. Skiba said the FHFA statement "blatantly ignores" Fannie Mae and Freddie Mac rights under the respective seller/servicing guides that allow these mammoth enterprises to recover losses resulting from the mismanagement of mortgage servicers. Despite a range of available remedies, FHFA has opted to sue to invalidate state priority lien statutes rather than enforcing its rights under contract.
"It's incredulous that a Federal agency would sacrifice the interests of 65 million taxpayers who live in community associations to protect the very banks all American taxpayers spent billions of dollars to bail out during the economy-shattering housing crisis," Skiba said. "And it’s shocking for FHFA to attack state laws that have been in place for more than 100 years of precedent and practice. Fact is, by paying their association assessments and protecting property values, these homeowners protect the value of lenders' assets in associations. Yet, FHFA is enabling the bad behavior of mortgage servicers who don't spend a dime to maintain and protect their own property investments."
CAI will continue to monitor FHFA's hostile actions against the right of community associations to secure priority liens on properties within their boundaries.”
Get more information on the priority lien issue, including a detailed CAI statementand a map of states with priority lien statutes. See the Nevada Supreme Court decision.
With more than 33,000 members dedicated to building better communities, CAI works in partnership with 60 chapters to provide information, education and resources to community associations and the professionals who support them. CAI’s mission is to inspire professionalism, effective leadership and responsible citizenship—ideals reflected in communities that are preferred places to call home. Visit or call (888) 224-4321

Thursday, December 25, 2014

Las Vegas HOA fraud trial will stay in Las Vegas

Why? Because it happened in Vegas.  The judge on this massive fraud trial ruled that the trial will stay right where it is, denying a change of venue motion based on the level of publicity.  The defense is particularly upset at the Las Vegas Review-Journal's Jeff German for obtaining documents concerning  Leon Belzer's plea bargaining talks with the US Attorney's office. Those talks didn't result in a deal, so off  to trial they go.  The funny part: the only reason German was able to get the documents is that one of the defendants put them in the court record and they were available to the public for two days. So the most damaging publicity is their own fault.

Pasco county HOA calls homes unsafe

In the sense that they might fall down in a high wind.

Malfunctioning elevators and association inaction equal financial disaster

A condo association has had malfunctioning elevators for six years and hasn't fixed them properly because they say they can't afford it. Now they are facing $5 million in fines. I wonder if they can afford that.

Wednesday, December 24, 2014

Orange County Threatens Big Fines For Excessive Christmas Decorations

Looks like the grinch came early to Ladera Ranch this year:
"LADERA RANCH ( — Orange County is threatening substantial fines to one neighborhood over their extreme Christmas decorations. Twenty-one residents in Baudin Circle in Ladera Ranch say they received letters from the Orange County Public Works department, stating that their lights are safety hazards.  Some homeowners at Baudin circle have taken pride in putting together an impressive Christmas lights show for ten years....“This was, I think, our second notice today, and basically it says we have twenty-four hours to take (the lights) down, before we get fined five-hundred dollarsa day,” resident Cynthia Mellow said."

Tuesday, December 23, 2014

The bad kind of unionism?

Police unions have come to stand above all for the principles that (1) individual cops should be above the law,  and (2) police forces should operate independently of political control. Now that this situation has generated protest and media coverage, with institutional racism being exposed for teh whole world to see, police union bosses are dropping the mask of civility and going straight to authoritarian rage.  Very instructive for those who are paying attention.

"They’ve bitterly opposed civilian review boards (and, if established, have sought to undermine them). They’ve fought the placement of names and badge numbers on officer uniforms. They’ve resisted rooting out police misconduct. “The modern police union movement,” criminologist Samuel Walker argues, “originated largely in reaction to the civil rights movement and its criticisms of police conduct during the 1960s…. Any local unions originated or at least became more militant in response to specific police-community relations initiatives in the 1960s.”

Ohio town threatens legal action against zombie baby Jesus

I can never understand why people do things that are intended to annoy their neighbors, but here's the latest  outrage.

Monday, December 22, 2014

Why the controversy over police shootings is so ugly.

Joseph Wambaugh, a best-selling novelist and former LAPD officer, said that policing isn't a physically dangerous job if you look at the statistics. Being a cab driver, a construction worker, a farm laborer, and many other occupations have higher fatality rates.  But being a police officer is one of the most psychologically dangerous occupations by far.  More police officers die by their own hand than die in the line of duty.  Most of them start out as idealistic people who want to help others and the job is fun.  But they spend 8 hours per day seeing people at their worst and this gradually makes them cynical and pessimistic.  The cop subculture is their resource for dealing with these feelings because they all feel this way.  As time goes by cops develop an us versus them mentality. They get absorbed into the cop subculture where they come to believe that they are the thin blue line between naive sheep who don't understand how bad things are, and vicious predators. There is a lot of alcohol abuse and relationship problems are the norm. Over the years they come to surround themselves entirely with other cops.  They literally don't associate with anybody who isn't a police officer.  This leads to a profound sense of isolation from society, but they reinforce each other in these distorted perceptions.   Eventually they don't trust anybody who isn't a cop.  They become quick to get paranoid and angry and confrontational--and violent.  And they know that prosecutors and judges are terrified of their unions.  

This is why they cover for each other, even in the most inexcusable situations. It is why police unions relentlessly defend cops who killed unarmed civilians in situations that would lead to murder convictions for anybody else.

And if you look at the other side of the controversy, you see millions of people who are horrified at the thought that anybody with a badge and a gun can beat them senseless or shoot them full  of holes on the slightest pretext and face no legal consequences at all.  In African-American and Latino neighborhoods the rage, the sense that the time has come to say no more of this, is intense.  They have had over twenty years of "broken window" policing in their neighborhoods, where they get rousted for the most trivial reasons on the theory that this is how to haul in the people with warrants and weapons.  But think of all the bogus stops, the harrassment, the reality-based sense of being persecuted, that has built up in low income neighborhoods. It is intense. Read Matt Taibbi's take on that.  He says law enforcement is becoming illegitimate, because the poor are ground to hamburger by the law, but the rich can steal millions and face no consequences at all. It's like something out of Dickens.

And this is why the current controversy over police shootings and beatings has the potential to be so profoundly ugly. It will be hard to  find any middle ground, because maybe there isn't any.