What happens to my mortgages if the HOA forecloses on its lien?
If your homeowners association (HOA) forecloses on your home, condo, or town home, what happens to your other mortgages depends on lien priority.
If you own a home, condo, or townhome that is part of a homeowners association and fall behind in your HOA dues or assessments, the HOA can foreclose on its lien. But what happens to other mortgages you have on the property when the HOA forecloses? The answer depends on the lien priority of those mortgages.
Generally, lien priority is determined by the recording date of the lien. The general rule is first in time, first in priority. (Some liens though, such as property tax liens, have automatic superiority over essentially all prior liens.) Typically, the matter of priority comes up in foreclosure actions because, if a senior lienholder forecloses, it wipes out any junior liens. However, if a junior lienholder forecloses, its foreclosure is subject to the senior lien.
Most HOAs have the power to place a lien on your home if you become delinquent in paying the monthly dues and/or any special assessments. In many states, the priority of the lien is determined by the recording date of the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and no further recordation of lien is required.
First Mortgages After an HOA Foreclosure
HOA liens are usually junior to a first mortgage. This is because the HOA lien is either:
- recorded after the first mortgage, or
- the CC&Rs or state law makes the HOA lien junior to any first mortgage (even if the HOA lien is actually senior).
This means that the first-mortgage lien will stay on the property following the HOA foreclosure and the purchaser at the foreclosure sale will take title subject to the lien of the first mortgage holder. (Learn more in Nolo's article HOA Liens & Foreclosures: An Overview.)
HOA Super Liens Are Senior to First Mortgages
Some states give certain HOA liens super priority. In super-lien states, a certain number of months worth of past-due HOA assessments are given super-lien status and are senior to even a first mortgage. (Any amounts owed beyond the super lien are then junior to the mortgage.) If the HOA forecloses a super lien, it can potentially, in some cases, eliminate the first mortgage and any other junior mortgages on the property. (Learn more in Nolo’s article Homeowners Association Super Liens.)
(Keep in mind that just because a mortgage lien is eliminated, this doesn’t mean you’re off the hook for the debt. Learn more in Nolo’s article What Happens to Liens and Second Mortgages in Foreclosure?)
Second Mortgages After an HOA Foreclosure
If the second mortgage was recorded after the HOA lien is perfected, it would be eliminated by the HOA foreclosure. On the other hand, if the second mortgage was recorded prior to the HOA lien, the mortgage would typically remain on the property following the HOA foreclosure.
In some cases though, an HOA lien may be senior to the second mortgage even if the HOA lien was recorded after the date of the second mortgage. For example, in Colorado, a lien for assessments is automatically created when the Declaration creating the HOA is recorded. While the HOA doesn't have to record the lien later on down the line if the owner falls behind in assessments, sometimes the HOA will go ahead and record the lien anyway.
Even if this occurs after the second mortgage is recorded, since the Declaration was recorded before the second mortgage, the HOA lien is technically "senior" to that mortgage. As a result, the second mortgage lien will then be wiped out in an HOA foreclosure.