U.S. Appellate Court Says Federal Bar on Nonconsensual HOA Foreclosures Preempts State Law

PUBLISHED United States Court of Appeals for the Ninth Circuit decision (August 25, 2017).

This case involved a dispute between the purchaser of a property at a foreclosure sale and the Federal Home Loan Mortgage Corporation (“FreddieMac”) over the validity of FreddieMac’s lien on the property that was purchased by the plaintiff in the action. The purchaser contended that the “superpriority lien” provisions contained in Nevada statutes empowered the foreclosing homeowners association to sell the property free and clear of all other liens or interests, including the interest held by FreddieMac.  FreddieMac contended that the purchaser purchased the property subject to its interest in the property because a Federal Foreclosure Bar preempts Nevada’s state law that purports to extinguish other interests such as the interest held by FreddieMac. Because FreddieMac had not consented to the association’s foreclosure of its lien, the district court concluded that the Federal Foreclosure Bar prevented the extinguishment of FreddieMac’s interest in the property upon foreclosure.