Bradley Helps Get Big Ninth Circuit Win for Fannie and Freddie Lenders and Servicers Dealing With Nevada HOA Foreclosures


Bradley attorneys helped obtain a significant win in the U.S. Court of Appeals for the Ninth Circuit for Fannie Mae and Freddie Mac mortgage lenders and servicers fighting off claims arising from Nevada homeowner association (HOA) foreclosure sales.

According to the Nevada Supreme Court’s decision in SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408 (Nev. 2014), Nevada is a superpriority lien state for HOAs, which means an HOA can foreclose on a property for unpaid HOA dues – and wipe out the first deed of trust held by the mortgage lender. Under that decision, a foreclosure arising from a few hundred dollars of unpaid HOA dues could nullify a mortgage for hundreds of thousands of dollars.


Since 2014, Nevada’s state and federal courts have been flooded with quiet-title actions brought by real estate speculators who purchased property at HOA foreclosures. In each case, the purchaser seeks a judgment that the sale extinguished the first deed of trust and the purchaser owns the property “free and clear.” Bradley has been heavily involved in opposing claims brought by those speculators, who often scooped up properties for tiny fractions of the market value at HOA foreclosure sales and then claimed the foreclosure wiped out the banks’ security interests, which secure hundreds of thousands of dollars of mortgage debt.

In a recent Bradley case, Berezovsky v. Moniz, the plaintiff argued that the Nevada superpriority lien provision allowed the HOA to sell the property to him free of any other liens or interests. Bank of America, N.A., and Freddie Mac (which is under Federal Housing Finance Agency (FHFA) conservatorship) removed the case to federal district court, counter-claimed for a judgment that the deed of trust survived the sale, and moved for summary judgment.

Bank of America, Freddie Mac and FHFA (which intervened in the case) argued that Berezovsky did not acquire a “free and clear” title because the Federal Foreclosure Bar trumps Nevada law. The Federal Foreclosure Bar is one of three property right protections created by HERA (Housing and Economic Recovery Act) and prohibits nonconsensual foreclosure of FHFA assets. The federal district court agreed and granted summary judgment in favor of the defendants.


On August 25, 2017, the Ninth Circuit issued a published opinion holding that HERA does preempt Nevada state law and prevents extinguishment when Fannie Mae or Freddie Mac owns a loan at the time of the HOA sale. Speculators’ loans owned by Fannie Mae and Freddie Mac constitute as much as a third of the potentially $1 billion-plus portfolio of loans affected by the issue.

Bradley attorneys assisted in working up the case in the trial court, resulting in a successful grant of summary judgment. The Bradley appellate team represented Bank of America on appeal and worked with attorneys at Arnold & Porter Kaye Scholer representing the FHFA Housing Finance Agency to preserve the win and obtain the published decision in the Ninth Circuit.

The court’s decision could have industry-wide ramifications for the financial services industry as banks and mortgage lenders continue to struggle with the crisis in Nevada. While there are still hurdles to clear, the decision represents the most significant single victory for the lenders’ interests in the litigation.