On Monday, the U.S. District Court for Nevada issued significant decisions in three cases, holding that a foreclosure on a Nevada HOA’s super-priority lien could not extinguish a deed of trust securing a debt owned by a Government-Sponsored Enterprise (GSE). As previously noted on this blog, Chief Judge Navarro ruled a few weeks ago that the federal Housing and Economic Recovery Act (HERA) preempted state law to the extent that an HOA foreclosed on property for which a GSE was the record holder of the security interest. Monday’s decisions expand that rule to a much more common scenario, where the GSE owns the debt, but is not the recorded beneficiary of the deed of trust.
Chief Judge Navarro’s ruling will have significant implications for the hundreds of Nevada cases where the validity of the security interest securing a GSE’s loan is in dispute. However, other judges for the U.S. District Court for the District of Nevada are not bound by Chief Judge Navarro’s ruling and may disagree with her reasoning. Moreover, for cases pending in state court that are not removable, the decision only represents non-binding (albeit on-point) precedent. Ultimately, the Court of Appeals for the Ninth Circuit will have to resolve the issue for the federal courts—and the United States Supreme Court may have to adjudicate any conflicting decisions by the Ninth Circuit and the Nevada Supreme Court.