{"id":3021,"date":"2023-06-02T08:56:48","date_gmt":"2023-06-02T12:56:48","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=3021"},"modified":"2024-04-25T23:17:37","modified_gmt":"2024-04-26T03:17:37","slug":"its-a-bird-its-a-plane-its-a-super-lien","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/its-a-bird-its-a-plane-its-a-super-lien\/","title":{"rendered":"It\u2019s a Bird. It\u2019s a Plane. It\u2019s a Super Lien!"},"content":{"rendered":"\n<figure class=\"wp-block-image aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"425\" src=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/super-liens-on-real-estate-1024x425.jpg\" alt=\"\" class=\"wp-image-3022\" srcset=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/super-liens-on-real-estate-1024x425.jpg 1024w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/super-liens-on-real-estate-300x124.jpg 300w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/super-liens-on-real-estate-768x319.jpg 768w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/super-liens-on-real-estate-1536x637.jpg 1536w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/super-liens-on-real-estate-2048x850.jpg 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p>Some states give certain <a href=\"https:\/\/www.deeds.com\/articles\/know-the-facts-about-liens\/\">liens<\/a> a special status: <em>super liens<\/em>! Whoever records a super lien gets their money back first \u2014 they jump in front of the prior recorded liens on the property. Sometimes, homeowners\u2019 associations have this super power. If so, they can override the famous &#8220;first in time, first in right&#8221; rule for liens.<\/p>\n\n\n\n<p>Homeowners usually don\u2019t think too much about lien priority. But mortgage companies do. And people who <a href=\"https:\/\/www.forbes.com\/sites\/forbesbusinesscouncil\/2021\/08\/06\/how-to-buy-a-mortgage-note-from-the-bank\/\" target=\"_blank\" rel=\"noreferrer noopener\">invest in mortgage notes<\/a>, considering them first-priority liens, absolutely do. Lien priority is a factor they check before investing in debt in a given state.<\/p>\n\n\n\n<p>Let\u2019s take a look at liens, super liens, and how mortgage companies and mortgage investors react to them. &nbsp;<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">Normally, How Do Liens Get Recorded on Home Titles?<\/h2>\n\n\n\n<p>A mortgage that a home buyer gets is called a <em>first mortgage<\/em>. It\u2019s recorded in the county where the property exists, and becomes the <em>first lien<\/em>.<\/p>\n\n\n\n<p>If the owner takes out other home loans later on, then a second lien goes on the title, and so forth.<\/p>\n\n\n\n<p>Being first matters. The priority of a lien dictates which lender (lien holder) gets paid first if the home value gets liquidated in a foreclosure. Second or third lien holders are \u201cjunior\u201d to the first lien holder and rarely get fully repaid.<\/p>\n\n\n\n<p>Another type of lien is the kind a homeowners\u2019 association puts on the title when a unit owner owes the association dues or fines, and doesn\u2019t pay up.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Are Homeowners\u2019 Association (HOA) Super Liens?<\/h2>\n\n\n\n<p>Many of today\u2019s home properties \u2014 houses and condos alike \u2014 have homeowners\u2019 associations (HOAs). These associations have rules, and fines for breaking those rules. They also charge regular fees, and sometimes they charge the unit owners with special assessments.<\/p>\n\n\n\n<p>Unit owners must pay the HOA fees, assessments, and any fines in a timely manner. If they don\u2019t, their associations will record liens on their titles.<\/p>\n\n\n\n<p>Most states are not super-lien states for condo properties. This means the HOA liens are junior liens. So the association is out of luck if the mortgage lender with superior lien status forecloses a unit.<\/p>\n\n\n\n<p>But close to half of all U.S. states change the game. These states have legislated to give HOAs \u201csuper-lien\u201d powers. Super lien states promote HOA interests, deliberately positioning the associations in front of the mortgage lenders.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why Would States Give Homeowners\u2019 Associations Special Status?<\/h2>\n\n\n\n<figure class=\"wp-block-image alignright size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"285\" height=\"428\" src=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/why-would-a-state-give-homeowners-associations-special-lien-powers.jpg\" alt=\"\" class=\"wp-image-3023\" srcset=\"https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/why-would-a-state-give-homeowners-associations-special-lien-powers.jpg 285w, https:\/\/www.deeds.com\/articles\/wp-content\/uploads\/2023\/06\/why-would-a-state-give-homeowners-associations-special-lien-powers-200x300.jpg 200w\" sizes=\"auto, (max-width: 285px) 100vw, 285px\" \/><\/figure>\n\n\n\n<p>When unit owners miss HOA payments or ignore fines, the services and upkeep for the whole community can be strained. It severe cases, communities can suffer neglect and start to decline in value. This happened a lot during the housing crisis of 2007-2010.<\/p>\n\n\n\n<p>States that allow super lien status for HOAs create these provisions to help associations protect their real estate values. So, the public policy focuses on shoring up the financial health of neighborhoods.<\/p>\n\n\n\n<p>The Community Association Institute (CAI) presses heavily for super liens. CAI says super-priority status for HOA liens makes association properties more appealing. This is because it helps all the other unit owners preserve their home equity despite particular unit owners who fall behind on their payments.<\/p>\n\n\n\n<p>In Colorado, Tennessee, and some other states, HOAs use super-priority liens to claw back six months of unpaid fees that they assessed before a foreclosure. In a few states, like Florida and Connecticut, HOAs recover nine months\u2019 worth. But recent federal policy issued by <a href=\"https:\/\/www.wisepropertysolutions.com\/fannie-mae-revises-6-month-priority-lien-policy\" target=\"_blank\" rel=\"noreferrer noopener\">Fannie Mae<\/a> could rule out new state laws prioritizing HOAs for more than six months\u2019 worth of back dues. In any case, when a first-mortgage lender forecloses on a unit in HOA super lien states, the HOA takes what it is owed (up to six months, generally) from the foreclosure sale proceeds. So, first the HOA gets theirs. Then the mortgage lender gets paid. And, finally, the foreclosed unit\u2019s owner gets any remaining funds.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sometimes, Mortgage Companies Pay Off HOA Super Liens for a Unit Owner\u2019s Unpaid Dues. Why?<\/h2>\n\n\n\n<p>Sometimes, it\u2019s the HOA that forecloses on a unit. Say the association builds up hefty liens on a unit owner\u2019s title. At a certain point, the HOA will recoup its costs by initiating foreclosure.<\/p>\n\n\n\n<p>Then, the mortgage lender will get notice of the HOA\u2019s decision to begin the foreclosure process.<\/p>\n\n\n\n<p>If the unit is in a super-lien state, the mortgage lender has a peculiar problem. It will lose its first-priority status to the HOA. So, the company may opt to pay off the lien for the late payments the unit owner owes the HOA. This keeps the HOA lien from overriding the mortgage.<\/p>\n\n\n\n<p>But the mortgage lender isn\u2019t giving away free money, of course. The amount of payoff will be added to the unit owner\u2019s mortgage.<\/p>\n\n\n\n<p>So, if a unit owner defaults on HOA dues and does not repay the association, the mortgage lender could potentially be the one coming after that debt. This is how a foreclosure that began as the HOA\u2019s action could actually turn into a mortgage foreclosure.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How Do Lien Holders and Investors Avert Risk in HOA Super Lien States? &nbsp;<\/h2>\n\n\n\n<p>Investors and loan servicers should take steps to find out when past-due fees and fines turn into HOA liens on properties in their portfolios. As explained above, mortgage companies can lose their first-priority lien status in states where HOA liens elbow them out. Potential investors should consider whether a property is in a super lien state as part of a risk assessment.<\/p>\n\n\n\n<p>CoreLogic is one firm that offers an <a href=\"https:\/\/www.corelogic.com\/wp-content\/uploads\/sites\/4\/downloadable-docs\/hoa-super-lien-check.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">HOA Super Lien Check<\/a> to flag properties with homeowners\u2019 associations in HOA super-priority lien states. The firm advises investors if and when new liens are filed or foreclosures are initiated.<\/p>\n\n\n\n<p>Black Knight Data and Analytics offers a similar service. Black Knight\u2019s <a href=\"https:\/\/www.blackknightinc.com\/press-releases\/black-knight-data-and-analytics-launches-hoa-lien-pro-to-protect-mortgage-servicers-and-investors-from-potential-hoa-super-lien-losses\/\" target=\"_blank\" rel=\"noreferrer noopener\">HOA\u00a0Lien\u00a0Pro<\/a> \u201chelps mortgage servicers and\u00a0investors\u00a0to identify the potential risk of HOA\u00a0super liens\u00a0on properties.\u201d When HOAs record past-due debt, Black Knight alerts the mortgage servicer to resolve the charges, in order to preserve the mortgage loan\u2019s superior lien status.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Questions About Super Liens and Your Real Estate?<\/h2>\n\n\n\n<p>We hope this brief introduction to super liens adds to our readers\u2019 general knowledge about an evolving area of real estate law. Some states have quite recently equipped their HOAs with super lien powers. A buyer can check the association\u2019s governing documents for information on the HOA\u2019s lien process. A buyer can additionally search for \u201csuper lien\u201d and the state in which they\u2019re buying a home if they wish to review current lien laws.<\/p>\n\n\n\n<p>Please be aware that lien priority in a foreclosure is a complicated question. Mortgage industry professionals should be alert to situations in which HOA foreclosures impact mortgage liens even in <a href=\"https:\/\/blog.protitleusa.com\/cananhoaforeclosureinanon-superlienstatewipeoffthemortgagefromtheproperty\" target=\"_blank\" rel=\"noreferrer noopener\">non-super-lien states<\/a>.<\/p>\n\n\n\n<p>For case-specific information, readers should consult a law firm in the state where the property is located. Of course, we recommend finding a lawyer who\u2019s faster than a locomotive, and able to leap tall buildings in a single bound.<\/p>\n\n\n\n<p><strong>Supporting References<\/strong><\/p>\n\n\n\n<p class=\"has-small-font-size\">Condo Manager USA via <em>CondoManagerUSA.com<\/em>: <a href=\"https:\/\/condomanagerusa.com\/hoa-super-lien\/\" target=\"_blank\" rel=\"noreferrer noopener\">Should You Be Aware of an HOA Super Lien<\/a>? (citing Colo. Rev. Stat. \u00a7 38-33.3-316 and Nev. Rev. Stat. \u00a7 116.3116).<\/p>\n\n\n\n<p class=\"has-small-font-size\">Deardorff, Rath &amp; Pichon, LLC via Lakeside Title Company: <a href=\"https:\/\/www.lakesidetitle.com\/maryland-lien-priority-super-liens\/\" target=\"_blank\" rel=\"noreferrer noopener\">Maryland \u2013 Lien Priority and Super Liens<\/a> (Jan. 19, 2022).<\/p>\n\n\n\n<p class=\"has-small-font-size\">And as linked.<\/p>\n\n\n\n<p class=\"has-small-font-size\">Photo credits: <a href=\"https:\/\/www.pexels.com\/photo\/a-boy-wearing-a-superman-costume-5961611\/\" target=\"_blank\" rel=\"noreferrer noopener\">Vicki Yde<\/a> and <a href=\"https:\/\/www.pexels.com\/photo\/hotel-desk-bed-bedroom-12003594\/\" target=\"_blank\" rel=\"noreferrer noopener\">Andrea Davis<\/a>, via Pexels.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Some states give certain liens a special status: super liens! Whoever records a super lien gets their money back first \u2014 they jump in front of the prior recorded liens on the property. Sometimes, homeowners\u2019 associations have this super power. If so, they can override the famous &#8220;first in time, first in right&#8221; rule for [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[104],"tags":[],"class_list":["post-3021","post","type-post","status-publish","format-standard","hentry","category-liens"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>It\u2019s a Bird. It\u2019s a Plane. It\u2019s a Super Lien! - Deeds.com<\/title>\n<meta name=\"description\" content=\"Let\u2019s take a look at liens, super liens, and how mortgage companies and mortgage investors react to them. 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