The Nevada Supreme Court has sent a message to banks trying to foreclose on homeowners: Follow the rules, or forget about foreclosing and face sanctions.
In three decisions last week, the court sided with homeowners who complained they tried to save their homes through the state’s foreclosure mediation program, but that lenders either didn’t provide the right documentation or didn’t send someone with decision-making authority to the mediation.
In a Washoe County case pitting Emiliano and Yvette Pasillas against HSBC Bank USA, Power Default Services and American Home Mortgage Servicing Inc., the court sent the case back to District Court so it could determine sanctions against the defendants.
“Because (state law) and the Foreclosure Mediation Rules expressly require that certain documents be produced during foreclosure mediation and that someone with authority to modify the loan must be present or accessible during the mediation, we conclude that a party’s failure to comply with these requirements is an offense subject to sanctions by the District Court,’’ the court said in its ruling.
In this case, the District Court judge had allowed the foreclosure to proceed even after the mediator recommended against it and reported:
• The loan “beneficiary or his representative failed to participate in good faith.”
• The “beneficiary failed to bring to the mediation each document required.”
• Two pages of the mortgage note were missing.
• The assignment purportedly assigning the mortgage note and deed of trust to HSBC was incomplete.
• Instead of an appraisal, HSBC provided a broker’s price opinion.
• The foreclosing parties “stated they would need additional investor approval before agreeing to a loan modification.’’
Perhaps significantly, the Nevada Supreme Court also noted that in this case, “an assignment for the mortgage note was provided, but the name of the assignee was missing.’’
“We determine that an assignment provided without the name of the assignee is defective for the purposes of the Foreclosure Mediation Program because it does not identify the relevant parties,’’ the court found.
The court referenced in its opinion in a Massachusetts Supreme Court ruling from January, finding two banks couldn’t gain clear title to homes they had foreclosed on because they couldn’t produce documents showing they had an interest in the mortgages at the time of the foreclosures.
“Similar to this case, the banks (in Massachusetts) were not the original mortgagees and, therefore, they had to show that the mortgages were properly assigned to them in writings signed by the grantors before they could notice the sales and foreclosures of the properties,’’ the Nevada ruling said.
“In an attempt to prove that they had the authority to foreclose on the properties, the banks provided contracts purporting to assign to them bundles of mortgages; however, the attachments that identified what mortgages were being assigned were not included in the documents provided. The court concluded that the banks demonstrated no authority to foreclose on the properties because they did not have the assignments,’’ the Nevada ruling said.
“We agree with the rationale that valid assignments are needed when a beneficiary of a deed of trust seeks to foreclose on a property,’’ the Nevada court ruling said.
In a second ruling last week from Clark County District Court involving Wells Fargo Bank, the court rejected arguments by Wells Fargo that it produced adequate documentation at a foreclosure mediation.
In this case, involving homeowner Moises Leyva, records show Wells Fargo “produced a certified copy of the original deed of trust and mortgage note, on both of which MortgageIT Inc., not Wells Fargo, was named as the lender, as well as a notarized statement from a Wells Fargo employee asserting that Wells Fargo was in possession of the deed of trust and mortgage note, as well as any assignments thereto.’’
That documentation was insufficient, the Nevada court found.
“To prove that MortgageIT properly assigned its interest in land via the deed of trust to Wells Fargo, Wells Fargo needed to provide a signed writing from MortgageIT demonstrating that transfer of interest. No such assignment was provided at the mediation or to the District Court, and the statement from Wells Fargo itself is insufficient proof of assignment. Absent a proper assignment of a deed of trust, Wells Fargo lacks standing to pursue foreclosure proceedings against Leyva,’’ the court found.
As in the first case, the court sent Leyva’s case back to District Court in Las Vegas for a determination of sanctions against Wells Fargo.
Wells Fargo argued in the case it did not participate in the mediation in bad faith.
“Wells Fargo attended the mediation with all necessary documents to show its authority to enforce the note and deed of trust, presented Leyva with several options for avoiding foreclosure and informed Leyva of its reasoning and basis for such options,’’ bank attorneys argued in a court brief. “That Leyva did not like these offers and rejected them does not constitute bad faith on the part of Wells Fargo.’’
In a third case, involving Washoe County homeowners Philip and Patricia Redmon and loan servicer HomEq Servicing Inc., the Nevada Supreme Court sent the case back to District Court to determine if HomEq made someone available during the mediation at issue who had the authority to negotiate the Redmons’ loan.
“If the District Court concludes that HomEq failed in this regard, the District Court shall determine how HomEq should be appropriately sanctioned,’’ the Nevada high court said in its order.
Last week’s orders came as Nevada continues to lead the nation in foreclosures, as the nation’s largest banks continue to negotiate a settlement to federal and multistate probes of foreclosure issues related to “robosignings’’ and other problems and as Nevada Attorney General Catherine Cortez Masto continues to pursue a lawsuit charging Bank of America mismanaged foreclosures and harmed Nevada homeowners by falsely leading them to believe it would modify their mortgages – charges denied by Bank of America.