Yesterday, the U.S. District Court for the District of Nevada issued an important ruling concerning the litigation over whether homeowners’ association foreclosures under Nevada’s super-priority lien statute (NRS 116.3116) can extinguish first deeds of trust when the underlying indebtedness is owned by a Government-Sponsored Enterprise (GSE) like Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Company (Freddie Mac).

In Skylights LLC v. Byron, Case No. 2:15-cv-00043-GMN-VCF, Chief Judge Gloria Navarro held that federal law prohibited a state-law HOA foreclosure from extinguishing a first deed of trust assigned to Fannie Mae. However, the Court’s decision included language indicating that its holding could be limited to the rare scenario where Fannie Mae (or Freddie Mac) is record beneficiary of the deed of trust at the time of the HOA’s foreclosure—a potential limitation that could greatly limit the extent of the Court’s ruling.

As discussed several times before on this blog, lenders and mortgage servicers doing business in Nevada have found themselves enmeshed in litigation over whether they still have a valid security interest securing loans for many of properties in the State following the Nevada Supreme Court’s opinion in September 2014 holding that a properly conducted HOA foreclosure under NRS 116.3116 would indeed extinguish all other security interests on the property—including purchase-money first deeds of trust recorded before the HOA even recorded its notice of default.  Read more: