Does HOA take precedence over the bank?

Hi and thanks for any help.

I am looking at a condo, foreclosed on by HOA with a $27k HOA dues lien on it.
There is also a B of A loan on it. I am amazed that B of A missed the HOA taking the property back, but it’s done and HOA is on title. Question is, can B of A still foreclose on this property, even though the borrower no longer is on title?

NOD filed in April. If HOA takes precedence, is there a way to have B of A lien stripped, or if HOA takes precedence is B of A out of it completely and having to release the lien? Or…???

Thanks.

If the HOA lien is in first position, then BofA will get wiped out by the sale. If you buy the property at sale, all junior liens are wiped.

Exception - if there’s a right of redemption in your state, juniors may have a right to step in and redeem. Or if a junior lien is IRS (in which case they have a federal right of redemption).

Also, keep in mind that just because the LIEN is wiped off, the underlying debt is still valid and BofA can sue the homeowner for the debt (but they will likely sell the note to a collection company for pennies on the dollar and you can settle it).

If the HOA lien is in first position, then BofA will get wiped out by the sale. If you buy the property at sale, all junior liens are wiped.

TRUE, however every HOA I have dealt with has a subordination clause in its By_laws specifically stating about purchase money mortgages.

Depends on your state law

In many states, HOA liens are priority by statute.

In Colorado, for example, we have a “bifurcated” lien, which puts the HOA in front of the mortgage for up to six months of dues, and everything else is junior to the mortgages.

Interesting, Bill, never dealt in CO. How do lenders protect themselves in this situation?

Very interesting situation, Bill.

Have never dealt in CO.

How do lenders protect themselves with this ?

Must they step upand pay the HOA?

Overview of CO bifurcated HOA vs Mortgage as I read it.

What Happens to a Mortgage if the HOA Forecloses?
Often, the CC&Rs and/or state law contain a provision that the HOA lien has priority over all liens and encumbrances recorded after the recordation of the declaration of CC&Rs except a first mortgage (or deed of trust) that was recorded before the date the assessment became delinquent. If this is the case, the first mortgage lien will remain on the property following the HOA foreclosure. A second mortgage, on the other hand, would typically be wiped out by the foreclosure of a senior HOA assessment lien, though this also depends on state law.

Lenders will pay up the HOA lien in front of them and demand payment back from homeowner.

Bill,

I figured your “Bifurcated”, two path law, said something to the order that you just posted.

The lender will only pay up the senior lien, not the junior part. If they foreclose, they wipe out the junior part of the lien.