New Tool Helps Mortgage Servicers Avoid ‘Super Lien’ Losses

Mortgage & Real Estate

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A new solution allows mortgage servicers and investors to identify the risk of homeowners association “super liens.”

Using the tool, called HOA Lien Pro, Black Knight Financial Services’ data and analytics division pulls data from title plants, including lien-recorded dates, part names and lien amounts, according to a Feb. 19 press release. If Black Knight identifies delinquent HOA obligations, it can provide the servicer with the information it needs to clear the HOA delinquencies in order to maintain its first-lien status.

The tool is offered by in four states Arizona, Illinois, Florida and Nevada that allow so-called super liens to supersede the first lien on a property.

A super lien occurs when a homeowners association forecloses on a property after the owner accrues a significant amount of delinquent HOA dues or fees. Mortgage servicers can incur significant losses if the HOA sells the foreclosed home.

The tool is available to mortgage servicers on both a one-off and continual basis, allowing them to keep tabs on which loans in its portfolio may be subject to an HOA and at risk of a super lien situation.

The Jacksonville, Fla.-based company also offers an HOA estoppel letter service, which can help servicers find information on a borrower’s financial standing with an HOA and the schedule of future payments.

Currently, no central HOA information database exists, making Black Knight’s new tool an invaluable resource for mortgage servicers.

In 22 states, HOA liens can receive super-lien status, which is a by-product of the recent mortgage crisis during which many HOAs suffered from a high volume of unpaid dues.

Nevada’s Supreme Court ruled in favor of upholding a state law that allowed for homeowners associations to foreclose before first mortgage holders. The case was brought forth by SFR Investments, a company that owned 300 properties in Las Vegas, after Bank of America tried to foreclose on a property SFR had purchased from a homeowners association for $6,000. The bank’s first mortgage on the home totaled to $885,000.

Since that ruling, the Federal Housing Finance Agency has said it is seeking an exemption from these laws that protect HOAs for properties whose mortgages are held by government-supported mega-lenders Fannie Mae and Freddie Mac.

Black Knight Financial Services is a subsidiary of Fidelity National Financial.

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