Since September 2014, the lending industry has been scrambling to understand and reconcile the Nevada Supreme Court decision in SFR Investments Pool 1, LLC v. U.S. Bank, N.A., a decision that could potentially wash away billions of dollars of first lien interests across the state. However, recent decisions from the state and federal courts in Nevada—and expected decisions in the coming months—provide some hope to the industry that all is not yet lost. Given the state of flux around these issues, the industry can expect the wild ride down this increasingly muddy river to continue in the coming months.

Conflicting decisions from the United States District Court in Nevada, such as the first two below, frame a question that will ultimately be answered by the Ninth Circuit Court of Appeals: Can an HOA foreclosure sale extinguish an FHA-insured mortgage? The third case below is a lower Nevada state court wrestling with the issue of whether Nevada’s super-priority statute satisfies the requirements of constitutional due process.

Washington & Sandhill Homeowners Ass’n v. Bank of America: Chief Judge Gloria M. Navarro provided an important life vest to lenders in holding that the Supremacy Clause of the United States Constitution bars HOA foreclosure sales on properties with mortgages insured under the FHA insurance program.

Freedom Mortgage Corporation v. Las Vegas Development Group, LLC, et al.: District Judge Jennifer A. Dorsey held the opposite from Chief Judge Navarro in the Washington & Sandhill case—namely, “that the Supremacy Clause does not preempt NRS 116.3116(2)’s application to HUD-insured mortgaged properties because Nevada’s HOA superpriority lien law is consistent with HUD’s single-family mortgage-insurance program.”

Octavio Cano-Martinez v. HSBC Bank USA, National Association as Trustee for Wells Fargo Asset Securities Corporation, et. al.: Judge Kathleen E. Delaney of the 8th District Court (Clark County, Nevada) held Nevada’s superpriority lien statute “facially unconstitutional” as it violated the due process clauses of the Fifth and Fourteenth Amendments to the United States Constitution, as well as the Nevada Constitution, “because its ‘opt-in’ notice provisions do not mandate that reasonable and affirmative steps be taken to give actual notice to lenders and other holders of recorded security interests prior to a deprivation of their property rights.”

As these opinions suggest, the SFR decision—unfavorable as it may have been for the lending community—did not leave the industry dead in the water. While still swimming against the current following SFR, the industry may yet survive what many believed was a near certain drowning in the fall of 2014.