Regular readers of this blog know that I’ve preached from the street corners that an avalanche is coming which will send the American housing market into a massive tailspin. Billions of dollars will be lost and won. Ultimately, individual homeowners will be the big losers.
Remember the refrain? An avalanche starts with just a tiny imbalance, a molecule of ice falling from the crest of a snow ridge. But that tiny chip can hurl millions of tons of snow down a mountainside. Living in Colorado, all of us who love the outdoors have to be wary of this potential killer.
The Nevada Supreme Court might have just set off such a disaster. It ruled that a super priority lien, no matter how small, can destroy a first deed of trust. The implications for the Nevada housing industry are stunningly dismal. The court was narrowly divided. But the 4-3 majority ruled that a petty HOA lien can utterly wipe out the mortgage loan on a million dollar home.
A hundred dollar fine for a trash can left outside an hour after the deadline can be escalated into thousands of dollars in legal expenses and collection fees.
The boards of Homeowners Associations are cheering the news. This court decision now gives them unprecedented power to throw petty fines into the air to stifle any sign of dissent in a neighborhood. They’ll be able to grab million dollar properties and auction them off to fill the HOA budget.
Meanwhile, the boards of mortgage companies are now meeting to discuss two questions: Wouldn’t we be financial idiots if we ever loaned another dime to a Nevada homeowner? Or the alternative: How high shall we raise interest rates on every new mortgage to cover our expected losses?
Nevada! The nation’s focal point of HOA corruption is poised to do it all over again.