Boston, MA Led by Senator Elizabeth Warren (MA-D), the Massachusetts congressional delegation wrote to urge Federal Housing Finance Agency (FHFA) director Melvin Watt to reconsider FHFA’s attack on state-level priority lien laws.

The Massachusetts congressional delegation wrote: “Given the widespread effect that FHFA’s new policy will have, we believe the agency should solicit and consider public comments before implementing it. Accordingly, we request that FHFA delay implementation of its new policy on state priority lien laws and set up a process for obtaining and reviewing public comments on the issue. FHFA should consider how its policy would advance each of its statutory purposes, including its obligation to ensure that ‘the operations and activities of each regulated entity foster liquid, efficient, competitive, and resilient national housing finance markets.’”

Delay Implementation

The letter asks FHFA to delay implementation of a recent policy interpretation of the Housing and Economic Recovery Act of 2008. The new policy interpretation states that FHFA will not consent to the foreclosure of Fannie Mae or Freddie Mac liens in connection with “super lien” laws.

The practical implication of the FHFA policy interpretation is that the Federal government protects big banks at the expense of local community associations by compromising state priority lien laws that have been in place in many states for 20-30 years. The priority lien laws have successfully protected the majority of community association owners who are paying their assessments regularly from banks who choose to prolong foreclosures and allow abandoned property to become a blight in the community and drag down property values and home sales within local communities.

Massachusetts passed their priority lien law in 1992. Today, Massachusetts banks recognize the priority lien law as a win-win-win for all involved. The banks, home owners and community associations have found the priority lien law to be a critical tool for economic recovery in their community. The net result of more than two decades of priority lien law includes – a much faster recovery from the 2008 housing crisis, rising property values, higher common area service levels, lower legal fees and faster transition of abandoned homes, which creates blight and distress within communities.

The Fabulous Five

Informally known as the fabulous five, Community Associations Institute (CAI) members from Massachusetts spent a tremendous amount of time and effort advocating to Senator Warren and the other members of the Massachusetts delegation. The fabulous five include, Wes Blair (community banker), Laura Cardoos (community manager), Stephen Marcus (attorney), Ellen Shapiro (attorney) and Scott Wolf (management company executive).

Massachusetts and 21 other jurisdictions have “priority lien” laws giving community association liens priority over first mortgage liens. This allows community associations to foreclose on a property to collect the priority portion of their lien, which usually consists of up to six months’ worth of owed fees. These priority lien laws often encourage first mortgage lienholders to temporarily cover delinquent association fees, allowing associations to maintain upkeep without needing to raise fees on other residents of the community.