Tucker & Tighe attorney John Bernstein
Tucker & Tighe attorney John Bernstein (Melanie Bell)

A Broward Circuit Court ruling against Fannie Mae could help homeowner and condominium associations collect delinquent dues after foreclosure.

Lenders who recover property after foreclosure are the only group of new owners exempt under state law from paying the full amount of overdue maintenance fees. Under the safe harbor rule, they pay a year’s worth of late fees, or 1 percent of the mortgage, whichever is less.

But when the Federal National Mortgage Association, or Fannie Mae, sought protection under the same law, Circuit Judge Sandra Perlman ruled in favor of a Pompano Beach condo association.

The condo association successfully argued Fannie Mae bought the loan but was never legally assigned the mortgage, so the company that guarantees securities sold by lenders couldn’t claim the safe-harbor exemption that shields first mortgage holders, their successors or assignees.

“Fannie Mae often claims it owns a loan to get the discount on paying associations,” said John Bernstein, an attorney who represented the condo association in Federal National Mortgage Association v. Park Place at Pompano Condominium. “However, when you look closely as Judge Perlman did, the facts often do not support Fannie Mae’s claim. Fannie Mae’s been trying to get off cheap—to the detriment of associations throughout the state.”

Had it won the case, Fannie Mae would have paid Park Place about $1,375 instead of about $16,000 in delinquent fees.

It was a case that questioned whether a company with standing to foreclose on a mortgage qualified for protection given only to first mortgage holders and their successors or assignees.

“There’s been an ongoing struggle between associations and Fannie Mae, who’s been winning all its cases with equitable assignment,” said Bernstein of Tucker & Tighe in Fort Lauderdale. “But I think we got it right according to the letter of the law.”

Follow the Money

The case stemmed from a deal in 2006 deal when a homeowner used his condo as collateral for a $137,520 mortgage.

Documents listed the lender as Countrywide Home Loans Inc., which was sold to Bank of America, and the mortgagee as MERS, the Mortgage Electronic Registration Systems Inc.

Fannie Mae bought the loan and retained Countrywide Home Loans Servicing LP to service it.

But when it came to the mortgage, documents show MERS assigned it to Countrywide’s successor, BAC Home Loans Servicing LP, not Fannie Mae.

“Fannie Mae, chartered by the federal government, is buying loans. We’re talking millions in loans. But they never do an executed document. That’s one of the things that they don’t do,” Bernstein said. “Fannie Mae is a Washington, D.C., corporation, and the way they’re buying loans does not comply with Florida law. Judge Perlman’s opinion is the only one out there that has really taken the time to look at this and rule for an association. All the other times the banks just win.”

When the homeowner defaulted on the loan, BAC successfully filed a foreclosure suit. BAC identified itself as the servicer acting on behalf of the owner. It then assigned Fannie Mae its right to bid in the foreclosure sale, and the court issued a certificate of title to Fannie Mae, acknowledging the federal mortgage agency as the “legal and equitable owner and holder of the loan.”

Fannie Mae filed a complaint for declaratory relief against the Park Place condo association. In its affirmative defenses, the condo association argued Fannie Mae wasn’t in a position to avoid paying the delinquent fees.

“They might have gotten standing in a bank foreclosure court, but we’re not in a bank foreclosure court. Under the reading of the law, Fannie Mae is not a first mortgagee, and they were never assigned the mortgage,” Bernstein said. “They received equitable assignment for standing to foreclose, but it’s a judicially made law and does not relate to assignment in all cases.”

The judge agreed, denying Fannie Mae’s complaint for declaratory relief against the Park Place association.

“Fannie Mae argues that it is entitled to the benefits of the safe harbor provision because it took title of the condominium unit through a foreclosure as the first mortgagee,” Perlman wrote in a six-page decision dated May 28. “Contrary to this assertion, however, the summary judgment evidence reveals MERS, and not Fannie Mae, was the first mortgagee under the subject mortgage.”

Fannie Mae’s attorney, Aaron Williams of Greenspoon Marder in Fort Lauderdale, did not respond to requests for comment by deadline. A call for comment to the Federal Housing Finance Agency, which supervises Fannie Mae, also was not returned by deadline.

“They win almost every single case,” Bernstein said. “I won this case, and they didn’t appeal, and I think the reason is they didn’t want me to convince the appellate court that I’m right.”