DS News - U.S. Bank

68 the HOA was not reasonable because it did not articulate that the HOA was foreclosing to satisfy the superpriority portion of the lien, state how large the superpriority lien portion was, or warn that Wells Fargo's lien was in jeopardy. In its analysis, the Court first cautioned that the foreclosure sale itself was not a state or government action necessarily subject to the Due Process Clause. Notwithstanding this fact, the Ninth Circuit nonetheless rebuffed the lender's remonstration finding that Wells Fargo received precisely the notice prescribed by Nevada Law and therefore, constitutionally adequate notice of the foreclosure sale. Further, the Court held that simply by conceding receipt of notice of the foreclosure sale Wells Fargo's due process rights were not violated. A HAIL MARY PASS Anticipating the uphill battle of its Takings and Due Process claims, in what can best be characterized as a hail mary pass in further support of its appeal, Wells Fargo posited that the HOA foreclosure was unlawful under the Servicemembers Civil Relief Act and that the district court therefore abused its discretion in dismissing its complaint pursuant to Federal Rule of Civil Procedure 59(e). ough the Ninth Circuit did not contemplate Wells Fargo's rationale in detail, but rather politely admonished Wells Fargo for failing to raise the argument based upon evidence that was theoretically available earlier, it did not altogether dismiss this belated play, suggesting this would have been the lender's most persuasive tactic to challenge the HOA foreclosure and perhaps vacate the foreclosure sale and regain its position as a first priority lien. THE TAKE-AWAYS/LESSONS LEARNED 1. Be proactive: Wells Fargo could have satisfied the HOA lien to avert loss of its security interest. 2. Brainstorm all possible defenses: Carefully evaluate potential defenses, like the Servicemembers Civil Relief Act, and do so early on. is translates to investigating your borrowers and closely examining the history of the loan. 3. Don't cry wolf: Pay attention to chronology. Create a timeline to determine whether the lender's lien predates the HOA recording before claiming foul-play. THE NATIONAL IMPACT Homeowners and lenders beware, 20 states, including the District of Columbia, have assessment priority statutes akin to NRS 116.3116, which are not random, but are based in whole or in part on the Uniform Common Interest Ownership Act. is list includes Alabama, Alaska, Colorado, Connecticut, Delaware, Florida, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and West Virginia. While each state's threshold for designating HOA liens as true priority liens that hold a higher priority in a foreclosure than a first lien mortgage varies among this list, the message to borrowers and lenders in Nevada and D.C. rings clear—if an HOA properly conducts a foreclosure sale of its super lien, and the mortgagee does not act to redeem its interest by satisfying the HOA assessment, then the mortgagee's interests can potentially be extinguished despite even the most valiant attempts. Rosemarie C. Hebner is an Attorney in the New York office with a compelling background in New York litigation. She graduated with honors from Villanova University with dual B.A. degrees in literature and philosophy and additionally received her Master's in education from Fairleigh Dickinson University. Hebner obtained her Juris Doctorate from the Elisabeth Haub School of Law at Pace University, earning an advanced certificate in Environmental Law. As part of the Houser team, Hebner represents corporations, financial institutions and other institutional clients. Eric Houser received his Juris Doctorate degree in 1987 from the University of San Diego School of Law. Houser is the Managing Partner at Houser LLP, with offices in 11 states. Houser has successfully tried cases from Hawaii to Connecticut (and lots of places in between). Wells Fargo relied on the Due Process Clause in its appeal to challenge the constitutionality of the HOA foreclosure, specifically pointing to what the lender characterized as deficient notice. Feature By: Marcos Posada, Esq. and Jane E. Bond, Esq.

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