State Court Litigation Updates

[Pages:31]State Court Litigation Updates

May 1, 2016

Moderator:

Melissa Richards, CMB, Chief Legal & Risk Officer , CMG Financial

Panelists:

T. Robert Finlay, Partner, Wright Finlay & Zak, LLP Murray Silverstein, Shareholder, Greenberg Traurig, P.A. Michael Pfeifer, Managing Partner, Pfeifer & de la Mora, LLP

Topics Covered in this Presentation --

1. Nevada Supreme Court's SFR Decision and Aftermath: HOA Rights of Foreclosure and Lien Supremacy. [Mr. Finlay]

2. Florida's conflicting DCA Opinions Bartram, Beauvais: Whether FL's 5-Year SOL can be used as a defense to reinstating lender's involuntarily dismissed judicial foreclosure action. Florida Supreme Court to decide. [Mr. Silverstein.]

3. California Supreme Court's Yvanova Decision and its Progeny: Whether Borrowers Have Standing to bring Wrongful Foreclosure Actions due to MBS/Secondary Market Fallout Events. [Mr. Pfeifer.]

State Court Litigation

May 1, 2016

Presented by T. Robert Finlay, Partner Wright, Finlay & Zak, LLP

Nevada HOA Update

? What happened and how did we get here?

? September 18, 2014? Nevada Supreme Court rules in SFR Investments Pool 1, LLC v. U.S. Bank, N.A. -? 9 months of HOA dues constitutes a super-priority lien that is senior to an otherwise 1st DOT. ? A properly-conducted non-judicial foreclosure of the HOA lien extinguishes "1st" DOTs. ? Mortgage Protection Clause in the CC&Rs does not invalidate the HOA foreclosure sale. ? $6,000.00 HOA foreclosure sale ? $885,000.00 first lien ? not commercially unreasonable as a matter of law. ? Case remanded back to state court for further proceedings.

? Post-SFR ? the fight continues.

Post-SFR Claims and Defenses

Against the HOA purchaser (sale is invalid) ? SFR should not be applied retroactively. ? An inadequate price plus "fraud, unfairness or oppression" could render the foreclosure sale invalid. ? Statutory notice provisions for HOA foreclosures are unconstitutional on their face. ? Taking property of the FHFA violates Housing and Economic Recovery Action ("HERA"). ? Taking property of the U.S. government violates the Property and Supremacy Clauses. ? A rejected tender of the super priority lien invalidates the HOA foreclosure sale. ? Sale in violation of BR's bankruptcy is void. ? Collusion between the buyer and the HOA or its Trustee.

Post-SFR Claims and Defenses

Against the HOA and its Trustee (damages only) ? HOA's refusal to provide payoff information or accept lender payments. ? HOA failed to provide proper notice. ? HOA's decision to foreclose violates the Mortgagee Protection Clause in the CC&Rs. ? Consequences of naming the HOA/HOA trustee (NRED Mediation). Against the Borrower ? as a sold-out junior lienholder.

Additional Considerations

? When to litigate, walk away or settle with the Buyer, HOA and HOA Trustee?

? Servicing Issues: Whether to: ? Foreclose, negotiate loss mitigation, market if an REO? ? Continue advancing for taxes and insurance? ? Advance for new HOA dues? ? Report the BR as delinquent? ? Treat the loan as charged off?

? Impact of SB 306 on future HOA sales (effective 10/1/15).

Will Senate Bill 306 fix Nevada?

? SB 306, effective 10/1/15, revised existing law as follows: 1. Clarifies and limits the amount of "collection costs" in enforcing a lien as part of the super priority portion of the lien. 2. A lienholder who advances funds to pay the homeowner's debt can recover that sum from the homeowner. 3. The NOD must describe the super priority portion of the HOA lien. 4. HOA trustee must serve NOD and NOS to each lienholder of record. 5. Association must record an affidavit setting forth each lienholder's name and address who was served with the NOD/NOS. 6. HOA sales must now be conducted in the same location as lenders' HOA sales.

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