Skylights LLC v. Byron
112 F. Supp. 3d 1145
D. Nev.2015Background
- In 2007 the Byrons took a first-priority deed of trust on a Las Vegas condo; that deed was assigned to Fannie Mae in March 2014. FHFA placed Fannie Mae into conservatorship in 2008 under HERA.
- The HOA foreclosed on its super‑priority lien and sold the unit at an HOA sale on September 17, 2014; Skylights purchased and recorded a trustee’s deed.
- Fannie Mae (with FHFA as intervenor/conservator) sued to quiet title, arguing the HOA sale could not extinguish Fannie Mae’s mortgage without FHFA consent under 12 U.S.C. § 4617(j)(3).
- The HOA and Skylights argued HERA’s property‑protection provision did not preempt Nevada’s HOA super‑priority statute (NRS § 116.3116) or otherwise bar the foreclosure from extinguishing the deed of trust.
- The court granted summary judgment for Fannie Mae/FHFA, holding § 4617(j)(3) prevents FHFA property (including lien interests acquired via conservatorship) from being foreclosed or extinguished without FHFA consent, thereby preempting state law to that extent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 12 U.S.C. § 4617(j)(3) bars an HOA foreclosure from extinguishing a mortgage held by Fannie Mae while under FHFA conservatorship | Section 4617(j)(3) does not apply to state HOA foreclosures or to Fannie Mae’s mortgage interest | § 4617(j)(3) plainly bars foreclosure or involuntary liens on FHFA property without FHFA consent; FHFA succeeds to Fannie Mae’s property interests | Court: § 4617(j)(3) applies and prevents the HOA sale from extinguishing Fannie Mae’s deed of trust without FHFA consent |
| Whether § 4617(j)(3) only protects FHFA in its corporate capacity or also protects Fannie Mae’s lien interests after conservatorship | Protects only FHFA (agency), not Fannie Mae’s preexisting mortgage | FHFA as conservator succeeds to Fannie Mae’s rights; “property” includes lien interests | Court: FHFA in conservatorship steps into Fannie Mae’s shoes; lien interests are protected |
| Whether § 4617(j)(3) is limited to state taxing authorities or extends to private entities (HOAs) | The statute targets taxation and taxing authorities; does not bar private HOA foreclosures | The statute’s text and structure protect against foreclosure or involuntary liens generally; analogous FIRREA cases support broad application | Court: Protection extends to private foreclosures as well as tax actions |
| Whether application of § 4617(j)(3) violates due process or was waived by FHFA/Fannie Mae | Application deprives HOA/purchasers of property without process; FHFA/Fannie Mae waived protection by not acting | Protection arises from valid federal legislation and conservatorship succession; legislative enactment satisfies due process; no waiver by servicer guidance | Court: No due process violation; Congress provided the rule; FHFA did not waive the protection |
Key Cases Cited
- SFR Investments Pool 1 LLC v. U.S. Bank, 334 P.3d 408 (Nev. 2014) (Nevada Supreme Court holding HOA super‑priority foreclosure can extinguish a prior mortgage under state law)
- Gonzales v. Raich, 545 U.S. 1 (2005) (Supremacy Clause confirms federal law displaces conflicting state law)
- Simon v. Cebrick, 53 F.3d 17 (3d Cir. 1995) (interpreting FIRREA to bar tax‑lien foreclosures from extinguishing FDIC held mortgages without consent)
- Matagorda Cnty. v. Russell Law, 19 F.3d 215 (5th Cir. 1994) (FIRREA protection prevents taxing units from extinguishing receiver’s mortgage without consent)
- FDIC v. Lowery, 12 F.3d 995 (10th Cir. 1993) (FIRREA’s plain language bars disposal of receiver property without consent)
- County of Sonoma v. FHFA, 710 F.3d 987 (9th Cir. 2013) (discussing FHFA authority and conservatorship actions)