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In a 2-1 decision, the Ninth Circuit overruled a 2014 decision from the Nevada Supreme Court, which held that Skiptracing foreclosure of a super lien for HOA assessments can extinguish a first mortgage. But one portion of the state’s laws that the Nevada Supreme Court did not address is whether supposed junior lienholders, including mortgagees, were required to be notified in the event of a super lien foreclosure. Specifically, the ruling deals with an older version of Nevada law that was amended by the Nevada state legislature in 2015. Under the older Nevada law, homeowners’ associations were only required to notify lenders of a foreclosure Skiptrace if the lender requested to be notified. In 2015, the Nevada state legislature changed the state’s laws to require notice of foreclosure to be given to all junior lienholders. But the case in question deals with the pre-2015 version of the law, which did not make it mandatory to give notice to junior lienholders, which according to the Ninth Circuit is a violation of the Constitution. And according to the attorney’s at Ballard Spahr, the impact of the ruling could be significant. Nevada Revised Statutes section 116.3116 et seq. strips a mortgage lender of its first deed of trust when a homeowners’ association forecloses on the property based on delinquent HOA dues. Before it was amended, it did so without regard for whether the first deed of trust was recorded before the HOA dues became delinquent, and critically, without requiring actual notice to the lender that the homeowners’ association intends to foreclose. We hold that the Statute’s “opt-in” notice scheme, which required a homeowners’ association to alert a mortgage lender that it intended to foreclose only if the lender had affirmatively requested notice, facially violated the lender’s constitutional due process rights under the Fourteenth Amendment to the Federal Constitution.

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