As the battle over the super lien heats up, not all banks are lining up to extinguish this obligation. Some banks are recognizing the importance of the super lien and are siding with community associations in the enforcement of super lien rights. Currently there are 23 states that have enacted some form of a priority lien which allows associations to collect between 6 – 9 months of common expense assessments prior to a first mortgagee.
However, over the last few years this lien priority has been under attack by lending institutions and the Federal Housing Finance Agency, which claim that the super lien is not a lien but rather a payment obligation that does not carry with it a lien right. For many of the reasons stated in an article by Wesley Blair in National Mortgage News, this position would have a devastating impact on community associations.
Blair’s article recognizes the need for community associations to have uninterrupted cash flow from all owners for the efficient operation of the community. By ensuring that the association has sufficient cash flow, the bank’s security is protected and is not diminishing in value. Without this lien obligation, banks will not have the incentive to foreclose on properties which are not paying assessments, thus starving the association of its much needed assessment stream. The right to a super lien will continue to be a major discussion topic until the association’s lien position is assured. As always, we will continue to update you on this very important issue.
If FHFA wants to call it a “payment” instead of “an obligation secured by a lien,” fine. It needs to recognize the importance of it. Many times, in my experience, the banks have failed to do right by the associations by foreclosing and completing the process in a timely manner, which makes matters worse for the associations. Once the banks take deed to the property, they must make the assessment payments, and that is what really helps us. The payment of the Super Lien helps repair some of the damage caused by the previous owner’s failure to pay.
I think the Super Lien should be amount equal to one-year’s assessments OR the actual amount owed by the owner, WHICHEVER IS LESS. Maybe this would give the banks some incentive to complete their process, especially if the mount owed is less than what they would otherwise have to pay.