What Happens to My Mortgages if the HOA Forecloses its Lien?

The answer depends on the mortgages' priority.

If you own a home that's part of a homeowners' association (HOA) and fall behind in your dues or assessments, the HOA can probably foreclose its lien. But what happens to other mortgages you have on the property when an HOA forecloses? The answer depends on the priority of those mortgages.

Generally, priority is determined by the lien's recording date. The general rule is "first in time, first in priority." Some liens, however, like property tax liens, have automatic superiority over essentially all prior liens. A mortgage's priority, though, is generally determined by its recording date. On the other hand, in many states, the priority of an HOA lien is determined by the recording date of the Declaration of Covenants, Conditions, and Restrictions (CC&Rs); no further recording of the lien in the county records is required. Although, state law sometimes adjusts an HOA lien's priority.

The matter of priority typically comes up in foreclosure actions because, if a senior lienholder forecloses, the foreclosure wipes out any junior liens. But if a junior lienholder forecloses, the foreclosure is subject to senior liens.

What Happens to a First Mortgage After an HOA Forecloses?

An HOA lien is usually junior to a first mortgage because the lien is either:

  • recorded after the first mortgage, or
  • the terms of the CC&Rs or state law makes the HOA lien junior to any first mortgage.

So, a first-mortgage lien will usually remain on the property following an HOA's foreclosure; the purchaser at the foreclosure sale takes the property's title subject to the lien of the first-mortgage holder.

What Happens to a Second Mortgage After an HOA Forecloses?

If a second mortgage was recorded after the HOA lien is perfected, the second-mortgage lien would be eliminated by the HOA's foreclosure. On the other hand, if the second mortgage was recorded before the HOA lien, the mortgage lien would typically remain on the property following the HOA's foreclosure.

In some cases, though, an HOA lien might be senior to the second-mortgage lien even if the HOA lien was recorded after the date of the second mortgage. For example, say 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. Because the Declaration was recorded before the second mortgage, the HOA lien is technically "senior" to that mortgage—even if the HOA lien was recorded after the second mortgage. So, the second-mortgage lien would then be wiped out in an HOA's foreclosure.

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If an HOA initiates a foreclosure against you, consider talking to a foreclosure attorney to learn about different options that might be available in your situation.

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