Real estate agents, HOAs battle over liens

It’s a Nevada Supreme Court decision that didn’t resolve much.

The court’s September ruling in SFR Investments Pool 1 LLC v. U.S. Bank gave homeowner associations the right to wipe out entire mortgages through foreclosures for late dues. But it also launched a legislative effort to reverse the right to what’s called a super-priority lien.

Today, the battle continues between real estate agents, who say the rules put banks on the brink of a local lending boycott, and HOAs, who say the system is finally working the way it should.

Both sides have taken to courts and to Carson City to make the case for additional change. The results could have long-term implications for Southern Nevada’s housing market.

One thing the legal challenges and legislative changes have yet to accomplish is to seal the bitter division between the two sides.

Question of fairness

It’s “rank unfairness” to let an HOA with a claim of $3,000 or $4,000 in late dues and fees foreclose on a lender and wipe out a $300,000 first mortgage, said Keith Lynam, president of the Greater Las Vegas Association of Realtors.

Allowing super priority also undermines the local real estate market.

“Lenders have made it clear that extinguishment of noteholders needs to be addressed. If it’s not, it will be addressed for us,” Lynam said. “They have made it clear they will not lend here.”

Association managers counter that the real unfairness happens when banks let delinquent homes languish, HOA dues unpaid.

The Supreme Court’s decision helped patch that problem, said Norman Rosensteel, vice president of the Nevada chapter of the Community Associations Institute and president of ATC Collections Group.

The ruling “made a lot of banks step up and pay assessments,” he said.

Without the fear of seeing their note nixed, nothing forced banks to pay up, Rosensteel added. Sometimes they would delay paying for years, because pulling the plug on a delinquent loan and selling a foreclosed home would put bad numbers on the books and force a sale in a down market.

“A lot of associations had to decide what bills they could pay and what services they had to cut back on,” Rosensteel said. “Typically, they cut back on security companies and patrol services. Some tried to cut back on landscape maintenance. Many associations stopped making monthly transfers to fund their reserves.”

Most association board members have no interest in the hassles of buying or renting out a delinquent unit, so in most cases HOAs simply quitclaimed the foreclosed home back to the homeowner for the amount owed, Rosensteel said.

The problem was, the amount owed wasn’t simply past-due assessments. Homeowners, including banks, had to shell out thousands more in collection fees. So what associations really did was make a fortune on administrative charges, sometimes through companies their management firms owned, Lynam said.

“It’s created tremendous revenue for HOA managers and their collections companies. It’s a system rife with abuses,” he said.

Still, the biggest potential fallout a lending embargo — isn’t borne out by the numbers.

Statistics from real estate research firm RealtyTrac show that lenders originated 15,435 local mortgages in the first quarter of this year. That was down 5 percent from last year’s third quarter, when the Supreme Court issued its decision. But originations fell even more nationwide, dropping 10.6 percent in the same period, to 1.6 million.

RealtyTrac Vice President Daren Blomquist tied the declines to an uptick in mortgage rates in late 2014.

Year over year, originations in Las Vegas were up significantly, jumping 14 percent from 13,568 in the first quarter of 2014, as interest rates dipped in early 2015 and new federal rules made mortgage insurance and down payments more affordable.

“At least in practice, lenders are not pulling back,” Blomquist said.

A state law scheduled to take effect Oct. 1 could keep it that way, at least in the near term.

Tougher notification laws

Senate Bill 306 will “add a lot of protections and clarifications” to super-priority laws, Rosensteel said.

For starters, it will toughen notification laws. Banks today have to record a request for notice of an HOA sale. After October, they’ll automatically be notified.

Banks will have to do their part, too: HOAs have trouble finding details on who should get notices, and where. Starting Oct. 1, lenders will have to provide the state Financial Institutions Division with the name and address of a contact in case of HOA default. Contact information will appear on the division’s website.

There’s also a redemption period that lets lenders reclaim a property within 60 days of an HOA foreclosure sale.

All of those regulations should mean fewer HOA foreclosures.

“It cleaned up the process and went a long ways toward helping,” Lynam said.

There’s just one problem, he said: The law will still allow HOAs to extinguish first deeds of trust, continuing uncertainty for lenders.

So sales agents and lenders are eyeing other lawsuits and future legislative sessions for more fixes.

Lien laws seen changing

Several cases involving super priority are working their way through federal courts, so lien laws will keep changing, said Zach Ball, a local real estate attorney and managing partner of the Ball Law Group.

But the Nevada Supreme Court’s ruling “solidified” much of the state’s law, he said.

“The majority of arguments being pushed forward at this point are minor. The laws might change in limited cases, but I think overall, the Supreme Court’s decision will stand that super priority wipes out the holder of the first deed of trust.”

That’s why real estate agents and banks are looking forward to the state’s 2017 legislative session.

Lynam all but guaranteed the law will change then. A bill to end super priority passed the Assembly in the spring, but it missed the deadline to shift to the Senate by less than an hour.

“I’m very confident we have the votes,” Lynam said.

But with two years until the next session, Lynam said he can only hope that super-priority liens won’t hurt the market anymore.

“Let’s hope there are so few of these that it doesn’t become an issue and the feds don’t pull their lending out.”

That’s not likely, Blomquist said.

The 15,435 local mortgages that lenders issued in the first quarter had a volume of more than $3.6 billion.

“It depends on the level of risk, but that’s a lot of money on the table for lenders to walk away from,” he said. “It would have to be a very serious threat for them to do that. And there are tools for them to mitigate that risk by monitoring HOA foreclosure notices.”

Ball agreed that the borrowing outlook should stay relatively healthy.

“You hear the battle cry that banks aren’t going to lend, yet the banking community goes forward with making loans in the state. Fees may go up, and interest rates may increase, but to stop lending in a major metro area like Las Vegas would seem like a real loss of business.”

Contact Jennifer Robison at jrobison@reviewjournal.com. Follow @J_Robison1 on Twitter.

ad-high_impact_4
Business
3 Mario Batali restaurants on Las Vegas Strip to close
Days after new sexual misconduct allegations were made against celebrity chef Mario Batali, his company announced Friday that it will close its three Las Vegas restaurants July 27. Employees of Carnevino Italian Steakhouse, B&B Ristorante and Otto Enoteca e Pizzeria, all located in The Venetian and Palazzo resorts, were informed of the decision Friday morning. Bastianich is scheduled to visit the restaurants Friday to speak to employees about the next two months of operation as well as how the company plans to help them transition to new positions.
Las Vegas union members voting to authorize the right to strike
Thousands of Las Vegas union members voting Tuesday morning to authorize the right to strike. A “yes” vote would give the union negotiating committee the power to call a strike anytime after June 1 at the resorts that fail to reach an agreement. (Todd Prince/Las Vegas Review-Journal)
Small businesses struggle to find qualified candidates
A 2018 survey found that over two-thirds of small businesses in Nevada find it somewhat to very difficult to recruit qualified candidates. Bailey Schulz/Las Vegas Review-Journal
Nevada secretary of state website offers little protection against fraudulent business filings
Property developer Andy Pham tells how control of his business was easily seized by another person using the secretary of state website.
Caesars may be going solo in its marijuana policy
Several Southern Nevada casino companies aren’t following Caesars Entertainment’s lead on marijuana testing.
How much is the Lucky Dragon worth?
Less than a year-and-a-half after it opened, the Lucky Dragon was in bankruptcy.
Gyms and discount stores take over empty retail spaces
Grocery stores used to draw people to shopping centers. But many large retail spaces have been vacant since 2008. Discount stores like goodwill and gyms like EOS Fitness are filling those empty spaces, and helping to draw shoppers back in. K.M. Cannon/Las Vegas Review-Journal
Funding source of Las Vegas stadium for the Raiders is sound, expert says
The stadium is funded in part by $750 million of room taxes, the biggest such tax subsidy ever for a professional sports stadium. Robert Lang, executive director of Brookings Mountain West and The Lincy Institute at UNLV, says that is a good use of public funds. (Richard Velotta/Las Vegas Review-Journal)
Las Vegas needs light rail, expert says
Robert Lang, executive director of Brookings Mountain West and the Lincy Institute said he is afraid of a "congestion mobility crisis." Las Vegas needs a light rail system, he said, to accommodate the city's growing number of attractions. (Richard Velotta/Las Vegas Review-Journal)
Three takeaways from Wynn Resorts' Earnings Call
Matt Maddox came out swinging in his first earnings conference call as Wynn Resorts chief executive officer, boasting of record Las Vegas quarterly revenues and applicants lining up for work.
Star Wars VR Comes to Las Vegas
Sneak peak at the new "Star Wars: Secrets of the Empire" VR experience at the Grand Canal Shoppes.
Elaine Wynn continues her fight to change Wynn Resorts board
Elaine Wynn, the largest shareholder of Wynn Resorts Ltd., is seeking to kick a friend of her ex-husband Steve Wynn off the company’s board of directors. (Todd Prince/Las Vegas Review-Journal)
Zillow is getting into house flipping in Las Vegas
Las Vegas Review-Journal real estate reporter Eli Segall says flipping houses has waned in popularity after the housing bubble burst.
Ellis Island Buys Mt. Charleston Lodge
Ellis Island, which operates a casino, brewery and hotel just off the Strip, purchased the Mt. Charleston Lodge in early April.
Casinos to be penalized for allowing drug-impaired customers to gamble
Nevada Gaming Commission Chairman Tony Alamo talks about an amendment making casinos subject to the same disciplinary standards of preventing people to gamble if impaired by drugs as they are for letting them play while intoxicated by alcohol.
Terrible Herbst to open large travel center in Southern Nevada
The 50,000-square-foot commercial travel center will include 96 fuel pumps and the third White Castle restaurant in Southern Nevada. Wade Tyler Millward reports.
Art Bell’s Top 10 Shows
A selection of radio host Art Bell’s most popular shows.
Hooters owner talks about room upgrades at his hotel-casino
George Ruff, founder and senior principal of Trinity Hotel Investors L.L.C., owner of Hooters Hotel and Casino in Las Vegas, talks about recent room upgrades at the hotel. K.M. Cannon/Las Vegas Review-Journal
Passengers Discuss Allegiant Air
Allegiant Air passengers voice their views on the airline at McCarran International Airport on April 16, 2018. (Bailey Schulz/Las Vegas Review-Journal)
Longtime Las Vegas attorney John Momot dies at age 74
Criminal defense attorney John Momot, who represented mob figures and even played himself in the movie “Casino,” has died.
Trump Slams Amazon for Not Paying Enough in Taxes
Trump Slams Amazon for Not Paying Enough in Taxes Trump tweeted his concerns about the company on Thursday. This isn't the first time Trump commented on the issues via Twitter. August 2017 December 2017 Amazon did hold back on paying state taxes in 1995, but the company has been routinely collecting state sales taxes since then. In 2016, the company's report from the Securities and Exchange Commission confirmed it paid $412 million in taxes.
David Copperfield in court after man injured during magic trick
The attorney for a British man who is suing illusionist David Copperfield said his client suffered serious injuries after being called on stage during Copperfield's show at MGM Grand.
eyecandylab CEO shows augmented reality during NAB
Robin Sho Moser, CEO and co-founder of eyecandylab gives an augmented reality demonstration at his booth during the National Association of Broadcaster Show at the Las Vegas Convention Center. K.M. Cannon/Las Vegas Review-Journal
Trends in access to capital for local black business owners
Denette Braud, owner of Braud’s Funnel Cake Cafe, talks about what owning her own business means to her.
Sir Richard Branson announces purchase of Hard Rock Hotel
Sir Richard Branson, founder of the Virgin Group, has acquired the Hard Rock Hotel with partners and plans to turn it into a Virgin-branded property by the end of 2019.
Calvary Christian Learning Academy, “There was no fair warning.”
Samantha O’Brien, whose three-year-old daughter attended the Calvary Christian Learning Academy daycare, found out Monday night when her daughter’s teacher called about the school closing.
Adobe unveils #HackTheBracket application for March Madness
Adobe unveiled their #HackTheBracket application at the Adobe Summit trade show at Sands Expo. People can use data from Adobe Analytics to make their bracket for March Madness. K.M. Cannon/Las Vegas Review-Journal
Adidas Signs Yankees' Star Aaron Judge
Adidas Signs New York Yankees Star Aaron Judge The slugger is set to don a new set of stripes this season after signing with the apparel company. Aaron Judge Terms of the deal were not disclosed. The deal includes branding on his batting gloves and wristbands. Judge, the AL's reigning Rookie of the Year, was previously under contract with Under Armour since 2014. Judge won the American League Rookie of the Year award last season after setting an MLB record for most homers in a rookie season (52).
Esports athletes are sponsored, too
Meet Red Bull-sponsored professional esports player Daryl S. Lewis, better known by his in-game name Snake Eyez. Nicole Raz Las Vegas Review-Journal.
Bettor Investments turned into a bad bet
Bettor Investments formerly operated a Nevada-licensed entity betting operation. The company promised “conservative growth, profits and stability for our investors.” Matt Stuart, who ran the fund, shut it down in late 2016 and never made good on an agreement with shareholders.
TOP NEWS
News Headlines
Events
Home Front Page Footer Listing
Circular
You May Like

You May Like