We created this Blog as a reference and interactive site for our clients and other interested web guests. We intend to use this site to answer questions frequently asked of us by our clients and to address newsworthy issues we wanted to comment upon. If you have any questions or commentary, we invite you to post them and we will do our best to timely respond. Please keep in mind that this site is editorial and should not be considered as legal advice.
Warm Regards,
Tisha Black-Chernine
David Gorka, head of Black & LoBello’s Submission and Processing department, answers some common questions clients have regarding the document submission process when dealing with a short sale and the lenders involved.
Be sure to pick up the latest edition of Attorney at Law Magazine featuring Tisha and the rest of the Black & LoBello team. In addition to an article feature by our very own Andras Babero, Esq.
http://digitaleditions.walsworthprintgroup.com/publication/?i=118851
Click here to listen to the Legal Hour on KDWN AM720 from August 8th, 2011 in which Christopher J. Phillips talks about adult guardianship, probate, trusts and asset protection.
Click here to listen to a two minute clip from the Legal Hour on KDWN AM720 in which Christopher J. Phillips explains the importance of planning ahead in regards to wills and beneficiary designations as well as some scenarios he has encountered due to lack of forethought.
Click here to listen to the whole show (approximately 40 minutes)
Click here to listen to a clip from the Legal Hour on KDWN AM720 in which Tisha Black-Chernine explains the trends in the Las Vegas real estate market of the past and present and what affects it today.
Effective October 1, 2011, the Nevada Legislature has amended the definition of the “parent-child relationship.” Under NRS 128.015, the “parent-child relationship” was previously defined as including “all rights, privileges and obligations existing between the parent and child, including the rights of inheritance.”
Generally, if a parent is unfit to raise his or her child, either the state of Nevada or a third party can seek to terminate that parent’s legal rights to that child. Similarly, a parent can voluntarily relinquish his or her rights to a child by signing certain documents. When a parent’s rights to a child are legally severed, either by termination or by voluntary relinquishment, that parent is no longer responsible for financially supporting the child (i.e. paying monthly child support), and the child no longer stands to inherit from that parent. Further, if both parents’ rights are severed, all of a child’s legal ties with any siblings are severed. For all intents and purposes, the parent and the child no longer have any legal relationship with one another and the Court considers the parent a “stranger” to the child.
The Nevada Legislature’s recent change to the definition of “parent-child relationship” removes the language that the relationship “includes the rights to inheritance.” Section 2 of NRS 128.015 adds the provision that “the termination of parental rights pursuant to this section does not terminate the right of a child to inherit from his or her parents, except that the right to inherit terminates if the child is adopted…” Therefore, under the amended version of NRS 128.015, if a District Court terminates a parent’s rights, or if a parent voluntarily relinquishes his or her rights, that child can still inherit through that parent until that child is adopted. This is especially beneficial to children whose parents’ rights are terminated but who remain in foster care and will likely never be adopted. This is also beneficial to single parents who have terminated the rights of their child’s father or mother but who have never re-married or have never allowed their child to be adopted by a step-parent.
Click here to listen to a two minute clip from the Legal Hour on KDWN AM720 in which Christopher J. Phillips explains the probate process, what purpose it serves and the functions and benefits of a will.
Click here to listen to the whole show (approximately 40 minutes)
As everyone in the valley is well aware, we have been hit by an unprecedented wave of foreclosures. The banks holding these notes have been completely unwilling to modify the principal of these loans. They have agreed to short sales and to loan modifications, but these processes are frustrating and time consuming at best. Unfortunately, frustration with the process has led some homeowners to enact a measure of revenge by damaging the home that is about to go into foreclosure.
The Nevada Legislature has passed, and the Governor has signed, a law that criminalizes such actions. The law makes it a misdemeanor for a person to conceal remove or destroy property if: 1) the person knows of a foreclosure proceeding, 2) an entity or person holds a security interest in the property, 3) the person acted with the intent to defraud the secured party and 4) the person’s actions causes the secured party to suffer monetary loss at foreclosure. The final Bill is much less severe than the original Bill. The original Bill made it a Class E Felony. A Class E Felony is punishable by 1-4 years in prison and a maximum fine of $5,000. A misdemeanor is defined as a crime punished by no more than 6 months in the county jail and a $1,000 fine. Moreover, the original Bill only required that the prosecutor prove that there was intent to diminish the value of the property. In the current Bill, the person must have acted with the intent to defraud the secured party. Under the original Bill, an innocent homeowner simply trying to remove an improvement could have been convicted of a felony and sent away to the state prison for well over a year. The law takes effect on October 1, 2011.
Underwater borrowers may have a new loan modification option, at least with Ocwen Financial Corporation. Ocwen is expanding its SAM (Shared Appreciation Modification) Program, which allows borrowers to modify their loans at a more realistic value – generally, about 95% of their current value. In return for the modification, the homeowners contract with Ocwen to share 25% of the home’s appreciation with the investor when the home is eventually sold or refinanced.
A group of lobbyists, hired by some of the country’s largest banks, tried to convince the Nevada Legislature to reduce the homestead exemption from its current amount of $550,000. A homestead exemption is a statutory protection that exempts your primary residence from execution by your creditors. In Nevada, pursuant to N.R.S. 21.090, the homestead exemption amount is up to $550,000. However, a homeowner must file a homestead declaration in order to claim such exemption. The declaration must be recorded with the Clark County Recorder’s office. Consequently, if a homeowner filed the proper homestead declaration, a creditor cannot force a homeowner to sell their property if the homeowners equity (difference between what the homeowner owes and the value of the property) in their property is less than $550,000.
Further, in bankruptcy, a homeowner will be allowed to retain his home as long as the equity in such home is less than $550,000. However, under the bankruptcy law, the homeowner must have lived in Nevada for at least 40 months (three years and four months) before the homeowner can claim the Nevada homestead protection. If the homeowner has not lived in Nevada for 40 months, the homeowner is limited to the federal homestead exemption amount of $146,450.
Luckily, the proposed bill was defeated, and as such, the homestead exemption in Nevada remains at $550,000. Therefore, in conclusion, if a homeowner is lucky enough to have equity in their home, and this equity is less than $550,000, a creditor cannot force the homeowner to sell the property and, if applicable, the homeowner may retain the home even if he files bankruptcy.
Last Wednesday, the Federal Reserve issued a consent cease and desist order and assessed an $85 million civil money penalty against Wells Fargo & Company of San Francisco, a registered bank holding company, and Wells Fargo Financial, Inc., of Des Moines. This has been a long-time coming since the Federal Reserve began its investigation into one Wells Fargo for fraudulent and neglectful lending practices, such as steering prime-eligible buyers into subprime mortgages and falsifying borrowers’ financial information.
While Wells Fargo has yet to admit to any serious malfeasance, the company entered into the agreement with the Federal Reserve to overhaul its mortgage practices. As John Stumpf, chairman and CEO of Wells Fargo, put it, “The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo. Fair and responsible lending practices have been at the core of our culture, and they will continue to guide us as we work closely with the Federal Reserve to provide restitution to customers who may have been harmed, and to reinforce internal controls so they further reflect Wells Fargo’s commitment to helping customers succeed financially.”
The purchase of a house is the largest purchase most people will ever make. When hard times hit and a homeowner loses their house, the debt the homeowner still owes to the bank is the largest debt a person will ever have. After suffering a pay cut or the loss of a job and with few job prospects in Nevada, a homeowner might feel that they will never be able to pay off a defaulted loan on their house. If there are two loans, the situation is even worse. Many homeowners are nervous about what a bank can do to them and scared of the bank bringing a lawsuit against them. Nevada Assembly Bill 273 makes major improvements to the law to protect homeowners by limiting the amount of money a bank can collect after a homeowner loses their home. The law also reduces the time a bank has to file a lawsuit against some homeowners. These protections will greatly improve a homeowner’s opportunity to start over after a foreclosure or short sale, without the threat of a huge debt or a lawsuit by a lender.
Some definitions will make it easier to understand the new laws. Many of AB 273’s new laws apply to “second lienholders” who have been mostly unregulated under Nevada law. A “second lienholder” or “junior lienholder” is a bank, trust, investor or other entity that currently owns the second mortgage and has the right to collect a deficiency on a second mortgage. A “deficiency” is the amount of money a homeowner owes a lender on a mortgage loan after the house is sold at a foreclosure sale, trustee sale, short sale or a deed in lieu of foreclosure. The term “lender” in this article includes banks, mortgage companies, loan companies, investment trusts and any other entity that “holds” or owns the mortgage note or loan papers. In Nevada, under the old laws, a person’s individual assets and income could be taken by a judge if a lawsuit found the person owed a deficiency to a mortgage lender.
Under a recently amended Nevada law, a lender may not collect a deficiency in court on first mortgages taken out after October 1, 2009. Section 3 of AB 273 extends those protections to second mortgages taken out after June 10, 2011. This law will apply if the lender is a financial institution, the real property is a single-family house and the homeowner owned the property, used the loan to purchase the property, lived in the property and did not refinance the loan. Section 3 also expands the protection afforded to homeowners by prohibiting collection of deficiencies on an eligible second mortgage not only after a foreclosure sale or trustee sale, but also after a short sale and a deed in lieu of foreclosure. For the first time, homeowners who cooperate with the lenders and try a short sale or a deed in lieu of foreclosure will be protected from lenders that will not release the deficiency, at least with regards to junior lienholders.
The State Legislature also took steps to protect homeowners with older second mortgage loans. Section 3.3 states that a junior lienholder must file a lawsuit to recover a deficiency within six months after a foreclosure sale, trustee sale, short sale or a deed in lieu of foreclosure that occurs on or after July 1, 2011. A six month statute of limitation applies to first lienholders after a foreclosure sale or trustee sale. Beginning on July 1, 2011, a homeowner will only have to wait six months to find out if a lender will file a lawsuit. That should provide some relief to nervous homeowners. Remember that (1) for sales occurring before July 1, 2011, the six-year statute of limitations will still apply to lawsuits for collections on second mortgages and (2) the six-year statute of limitations will apply to lawsuits for collections on first mortgages for deficiencies after short sales and deeds in lieu of foreclosure.
Dozens of homeowners have questioned why they have to pay the full amount after a foreclosure when the lender has collected insurance payments on that loan. The Legislature also acted to fix this unfair situation. The new law states that the lender will not be allowed to collect from both the insurance company and the homeowner. Section 2 of AB 273 directs judges to subtract the amount of proceeds received by, or payable to, the holder of a second mortgage from an insurance policy from the amount owed by the homeowner. The laws in Section 2 will only apply to second mortgages taken out after June 10, 2011.
Many homeowners are finding that their mortgages are being sold to debt collection agencies or secondary buyers that seem to just want a big, quick pay-off. Unlike the big banks, these secondary buyers are not interested in short sales, deeds in lieu of foreclosure or promissory note contributions and their demands for big cash settlements can be extremely stressful for a borrower. Homeowners are savvy enough to know that these buyers paid much less than full price for these second mortgages, yet these companies want to collect on the entire balance of the mortgage, plus fees, penalties, costs and interest. Nevada law allows a lender to recover in court an amount of deficiency that remains from the full loan balance after subtracting the fair market value or actual sale price of the home (with interest). Section 5 of AB 273 limits that recovery if the creditor acquired the right to obtain a money judgment (meaning the creditor bought the loan or the debt from a previous holder of the note). If so, the recovery is limited to the amount the creditor paid for the loan minus the fair market value or actual sale price of the house, plus interest. Section 5 becomes effective June 10, 2011. Creditors that purchase second mortgages and sue to collect are governed by Section 2 of AB 273. This law applies to any person or business that acquires the right to enforce a junior mortgage from a previous holder of the second mortgage, and limits the amount that can be won in court to the amount of money the new holder paid for that second mortgage, plus interest and costs. Sections 2 and 5 of the new law will stop businesses from paying pennies on the dollar for mortgages and then trying to collect in full.
These new Nevada laws go a long way toward protecting homeowners from unfair costs and lawsuits after the loss of their home.
Today, various news outlets have reported the Federal Trade Commission is issuing refund checks to homeowners that were overcharged by Countrywide Home Loans, Inc. These checks are a product of the FTC’s hefty settlement with Countrywide, which was made June of last year, after the FTC’s investigation uncovered severe inaccuracies in the Countrywide billings to its clients. These offenses (“Junk Fees”) include unreasonably marking up default-related fees such as inspections, maintenance services, title searches, and foreclosure trustee services, as well as falsifying charges during borrowers’ Chapter 13 bankruptcy proceedings. The checks amount to nearly $108 million, but this could be just the tip of the iceberg, so to speak.
FTC Chairman Jon Liebowitz recently remarked, “Countrywide’s unconscionable behavior harmed American consumers on a massive scale and we are proud to be getting every single dollar back to hundreds of thousands of struggling consumers who can least afford to lose the money.” The refund checks are only a portion of the FTC’s commendable work. That is, the settlement order also prohibits Countrywide, and Countrywide Home Loans Servicing LP’s successor BAC Home Loans Servicing, LP, from taking advantage of borrower’s in default and/or bankruptcy.
I have been extraordinarily honored to have participated in a working group with the Nevada Attorney General’s Office in Nevada Assembly Bill 284. AB 284 passed the Assembly with a vote of 33-9, and passed the Senate with a vote of 20-1. AB 284 was signed into law on May 20, 2011 with overwhelming support from Assembly Leader Marcus Conklin. The Bill takes effect October 1, 2011.
AB 284 will help the Nevada economy recover by significantly improving NRS 106, 107, and 205, with respect to foreclosures. The Bill is in response to inaccurate and fraudulently executed documents filed by lenders, trustees and servicers. AB 284 increases criminal penalties where “robo-signing” conduct occurs, and it creates a NEW private right of action for borrowers, which includes attorneys’ fees and a mandatory fine when a foreclosure has not proceeded properly. As a result, the Bill will reduce improper parties from foreclosing and creates a remedy for improper, deficient, or fraudulent documentation. Ultimately, this will aid in stabilizing real property values and restoring transparency and integrity in the foreclosure process, both of which are key to recovery. The Bill requires that the foreclosing party supplement the Notice of Default with a notarized Affidavit of Authority. The Affidavit of Authority, i) states the identity of the trustee, ii) describes the amount in default, iii) lists the full name and address of the current beneficiary (and every prior beneficiary under the deed of trust), and iv) includes the penalties and costs related to the default and foreclosure. This element of AB 284 will allow borrowers to determine the parties in the chain of beneficial interest, the amount of money they owe as result of default and foreclosure, and whether the foreclosing party has the right to foreclose.
AB 284 creates a standard of care for the trustee under a deed of trust. The trustee’s standard of care shall serve as a vast improvement from its predecessor, or lack thereof. A trustee under a deed of trust was not held to any specific standard prior to AB 284, nor was the term “trustee” defined in the foreclosure context. NRS 106 is amended to define who a trustee may be, and what their obligation is to the foreclosure parties. It also sets forth a private cause of action if trustees act improperly. Lastly, AB 284 requires all assignments of deeds of trust affecting real property be recorded in the County Recorder’s office where the property is situated.
The Nevada Supreme Court recently addressed a critical issue involving the Foreclosure Mediation Rules in the case of Leyva v. National Default Servicing Corp., App. No. 55216, Appeal from the Clark Co. District Court, A-10-600-651, 127Nev. ___, ___ P.3d ___ (Adv. Op. No. 40, July 7, 2011). The issue relates to the obligation of the lender to bring documents to the mediation that reveal who is the owner of the deed of trust and mortgage note. The Court’s ruling in this case will immediately arm homeowners with a serious weapon against the big banks and their servicers. Used in the correct way, many foreclosures may be stopped because of this recent opinion.
The State of Nevada Foreclosure Mediation Program was created in 2009. Facing foreclosure, the homeowner may request mediation through which a modification to home loan may be achieved. Once the homeowner requests mediation, no further action may be taken to exercise the power of sale until the completion of the mediation. The Nevada Supreme Court created the Foreclosure Mediation Rules (“FMR”) to govern those mediations.
The Leyva case presented the Nevada Supreme Court with an opportunity to interpret a critical portion of the mediation program requirements. NRS 107.086(4) and FMR 5 (8) (a) both provide: “In addition to the documents required by Rule 8 herein, the beneficiary [usually the lending bank] must bring to the mediation program the original or a certified copy of the deed of trust, the mortgage note and each assignment of the deed of trust and the mortgage note.” NRS 107.084(5) provides that “[i]f the beneficiary of the deed of trust or the representative fails to attend the mediation, fails to participate in the mediation in good faith or does not bring to the mediation each document required by section 4 or does not have authority or access to person with authority required by section 4, the mediator shall prepare and submit to the Mediation Administrator a petition and recommendation concerning imposition of sanctions against the beneficiary of the deed of trust or the representative, as the court deems appropriate, including, without limitation, requiring a loan modification in the manner determined proper by the court.”
The Nevada Supreme Court faced the issue of whether the lender’s failure to bring the required assignments and other documents as required by NRS 107.086(4) constituted bad faith under NRS 107.086(5). The answer to the question is not clear from the language of the statute or the FMR.
At the mediation in Leyva, the lender failed to deliver the assignments of the deed of trust and the mortgage note. However, the mediator did not find that the lender’s failure to provide the documents or other actions constituted a bad faith. Leyva disagreed and appealed the decision of the mediator to the Clark County District Court, Judge Donald Mosely. Ultimately, Judge Mosely agreed with the lender and entered an order finding that “there is a lack of showing of bad faith…”
Leyva appealed the decision of Judge Mosely to the Nevada Supreme Court. The Nevada Supreme Court issued its ruling on July 7, 2011 and rejected the lender’s arguments that it had participated in the mediation in good faith. The Nevada Supreme Court determined that since the statute used the word “shall” in reference to the obligation to bring certain documents to the mediation, strict compliance, not substantial compliance, was required. The Supreme Court went on the write “The legislative intent behind requiring a party to produce the assignments of the deed of trust and mortgage note is to ensure that whoever is foreclosing ‘actually owns the note’ and has the authority to modify the loan.”
The Supreme Court did not stop there. It felt compelled to then discuss what constitutes a valid assignment of deeds of trust and mortgage notes. By reaching this issue, the Supreme Court set the obligations for each lender with regards to their obligation to produce documents at mediation.
The Supreme Court then discussed the law regarding the assignment of a deed of trust. Since an assignment of an interest in land must be in writing, the Supreme Court concluded that “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 MortageIt demonstrating that transfer of interest.”
The Supreme Court then analyzed the method by which the interest in a mortgage note may be transferred and looked to Nevada’s Uniform Commercial Code – Negotiable Instruments. The Supreme Court wrote “[t]he obligor on the note has the right to know the identity of the entity that is “entitled to enforce” the mortgage note under Article 3, see NRS 104.3301, “[o]therwise, the [homeowner] may pay funds to a stranger in the case.” (Citation omitted.)
The Supreme Court rejected the arguments of Wells Fargo that mere possession of the mortgage note was sufficient. “[W]e conclude that Article 3 clearly requires Wells Fargo to demonstrate more than mere possession of the original note to be able to enforce a negotiable instrument under the facts of this case.” To meet its obligation under the Uniform Commercial Code, Wells Fargo had to show both endorsement of the mortgage note to it by the original lender and possession of the note.
Alternatively, Wells Fargo could have also demonstrated a transfer of the note to it. To demonstrate a transfer, Wells Fargo was obligated to prove that it was given the mortgage note for the purpose of enforcing it.
The Supreme Court then concluded that since Wells Fargo had failed to produced documents to demonstrate either a valid endorsement or transfer, Wells Fargo had neither demonstrated that it was entitled to foreclose on the property nor that it had authority to mediate with regards to the note. The Supreme Court, relying on its other opinion issued the same day, Pasillas v. HSBC Bank, 127Nev. __, __ P.3d __, Adv. Op. 39, July 7, 2011), ruled that the failure of Wells Fargo to bring the required documents “is a sanctionable offense under NRS 107.086 and the FMRs.” The Supreme Court then remanded the case to the district court for determination of the appropriate sanction.
This opinion seems to indicate that the “too big to fail” banks have met their match with the Nevada Supreme Court. The ramifications of this opinion will make the huge banks think twice before they allow the Nevada Supreme Court to hear any other issues concerning their foreclosure processes. This opinion arms homeowners, and especially their counsel, and creates an opportunity to stop the banks and their servicers from moving forward with a foreclosure with less that the full documentation proving their ownership of the mortgage note, and the authority to foreclose under the terms of the deed of trust.
The true scope and impact of the Leyva opinion on the foreclosure and mediation process in the Las Vegas valley will not be revealed any time soon. The banks will likely take any steps necessary avoid sanction as well as prevent the Nevada Supreme Court issuing any other opinions regarding the foreclosure process or the mediation program.
Continuing update on new Nevada Legislation for homeowners. Did you know that banks, lenders, financial institutions and their employees cannot unreasonably delay a response to an offer for a sale in lieu of foreclosure sale on a residential property? A response that is not made within 90 days of the offer is presumptively unreasonable. Of course, a homeowner can agree to give the lender additional time, in writing, if so desired. This new protection for homeowners is found in Senate Bill 414 which became effective on June 15, 2011.
Click here to listen to Mr. Phillips defines Guardianship, how it is achieved through the courts, and what affects it has over the parties involved.
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