Bulletin: SLS2016002

Dear Associates:

A foreclosure of a prior lien may not extinguish rights held by (1) Fannie Mae or Freddie Mac, or (2) the Federal Deposit Insurance Corporation (FDIC) corporate or as receiver if the prior lien is an involuntary lien, or (3) HUD if the prior lien is an involuntary lien.

Consent to Foreclosure by FHFA as Conservator for Fannie Mae and Freddie Mac

The Federal Housing Finance Agency (FHFA) is conservator for Fannie Mae and Freddie Mac. 

FHFA takes the position that a superior lien, such as a lien for unpaid homeowner association dues in certain jurisdictions, may not extinguish a mortgage or title held by Fannie Mae or Freddie Mac without FHFA consent. FHFA relies on 12 U.S.C. §4617(j)(3).

You must secure FHFA consent to foreclosure of a prior lien that will extinguish title or a lien held by Fannie Mae or Freddie Mac. The prior lien could include a homeowner association lien, a condominium association lien, an ad valorem tax lien, a mechanic’s lien, a judgment lien, or a mortgage. 

Consent to Foreclosure by FDIC

The Federal Deposit Insurance Corporation (FDIC) issued its Statement of Policy on Foreclosure Consent and Redemption Rights in 1992. [Here is the link.]

FDIC takes the position that a prior statutory (involuntary) lien may not extinguish a mortgage or title held by FDIC corporate or FDIC as receiver of a failed depository institution without FDIC consent. FDIC relies on 12 U.S.C. §1825(b)(2).

You must secure FDIC consent to foreclosure of a prior statutory (involuntary) lien that will extinguish title or a lien held by FDIC corporate or FDIC as receiver of a failed depository institution. The prior statutory (involuntary) lien could include a homeowner association lien, a condominium association lien, an ad valorem tax lien, a mechanic's lien, or a judgment lien.  

For additional discussion of the FDIC Statement of Policy, see Bulletin NL000028 “FIRREA\Subordinate Liens by RTC and FDIC.”

Foreclosure of a Lien Prior to the Mortgage held by a Federal Agency

Some case law has held that a prior homeowners association lien may not extinguish a mortgage held or, in some cases, insured by a federal agency, such as HUD.

Do not insure the foreclosure of a prior statutory (involuntary) lien that will extinguish a lien insured or held by a federal agency such as HUD. The prior statutory (involuntary) lien could include a homeowner association lien, a condominium association lien, an ad valorem tax lien, a mechanic's lien, or a judgment lien.

State Law

If state law requires notice to FDIC, Fannie Mae, Freddie Mac, HUD, or another federal agency as holder of a lien, compliance with state law is required. 

Consent to foreclosure does not waive redemption rights that state or federal law recognizes. 

Require a release of all statutory (involuntary) liens recorded before a deed from Fannie Mae, Freddie Mac, FDIC, or another federal agency. A release is required of all later filed mechanic's liens.  

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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