As part of the bill to avoid the so-called “fiscal cliff,” Congress extended the Mortgage Forgiveness Debt Relief Act for another year until January 1, 2014.  Created in 2007, the Mortgage Forgiveness Debt Relief Act protects homeowners from liability for income taxes on the portion of their primary residence’s mortgage that is forgiven in a short sale, principle reduction, or foreclosure.  Before Congress enacted this provision, the federal government taxed homeowners on the forgiven debt – also known as debt discharge income – as this was considered “taxable income.”

This news brings much needed relief to Nevadans, many of whom are seeking to modify their current home mortgages or short sell.  Nevadan homeowners can now obtain debt relief through a short sale without any tax liability for the related debt discharge income.


Black & LoBello on AM720 KDWN

Tune in as Black & LoBello offers free legal advice on a wide range of topics

Click here to listen to the Legal Hour on KDWN AM720 from September 5th, 2012 in which Managing Partner, Tisha Black Chernine, Esq., hosts special guest and community bankers Eric Colvin of Meadows Bank and John Sullivan with First Security Bank.  Mrs. Black Chernine, Mr. Colvin and Mr. Sullivan discuss the differences between the big banks from community banks (2:10), types of loans sold into secondary market (3:15), how real estate agents may list a foreclosed property owned by a community bank (8:20), benefits of trying to modify a loan with a community bank (10:00), loss share (13:45), how judicial foreclosure affects selling a property (18:16), tips to modify Fannie, Freddie or FHA loans (24:55), where community banks can invest (27:50) and how community banks compete with big banks (29:00).

Please tune in to AM720 KDWN’s “Legal Hour,” every Wednesday, from 9 AM to 10 AM.  Listen live on the radio or online.   Feel free to call in with your comments or questions at 702-257-5396.

To listen to past shows, visit our Media page.

A case coming out of Superior Court in Massachusetts gives hopes to homeowners who have attempted loan modifications under HAMP (the Federal Homes Affordable Modification Program) and been delayed and given the run around by their servicers.

The case in question, Parker v. Bank of America, NA, et al., Lawyers Weekly No. 12-268-11., revolves around  a homeowner whose lender attempted to foreclose on her property after allegedly delaying and obstructing her efforts to receive a loan modification under  HAMP.  The ruling stated that the homeowner could sue the lender as a third-party beneficiary of its agreement with the government to participate in HAMP.

The homeowner’s argument stated that borrowers were “intended beneficiaries of HAMP SPA’s (Servicer Participation Agreements).  SPAs are agreements between lenders and the government and only identify parties in interest as the lenders and successors in interest.

Obstruction and Delay?

Plaintiff Valerie Parker took out first and second mortgages on her home with Bank of America as servicer at the height of the market, 2007.  For two years, she made her payments on time- however, as the economy tanked, she began having difficulty.  By December of 2009, Parker could no longer make payments.  At that time, she submitted a packet to the bank requesting a loan modification.  As many borrowers have seen in their dealings with their lenders, Bank of America allegedly assured her that they would help, but later told her that no program to assist her was in existence.

Then, in  early 2010, Bank of America implemented a HAMP loan modification.  In July of 2010, B of A allegedly told the plaintiff she qualified for HAMP, but then never sent her the required and requested forms and repeatedly lost the paperwork she submitted.

When Parker complied with the bank’s demand for more paperwork, the bank reportedly lost it again. Meanwhile, according to Parker, the bank made false promises of relief and gave conflicting messages as to whether she should make loan payments in the interim and in what amount.

Ultimately, Bank of America began foreclosure proceedings.   At this point, Parker sued Bank of America in Superior Court, bringing allegations of fraud, negligence, breach of contract and violation of Chapter 93A, among other claims.  The bank filed a motion to dismiss.

“Particularly when viewed against the backdrop of three decades that saw medium-sized banks acquiring small banks, only to be taken over by larger banks, which were then absorbed into megabanks, it is apparent that [the language in question] is just a straightforward successor clause, to be taken at face value and no more,” Judge Thomas P. Billings wrote in denying the motion to dismiss filed by the lender.

“Denial of third-party beneficiary status to persons aggrieved by violations such as are alleged here would be — borrowing the words of the [Supreme Judicial Court] when considering a different claim by beneficiaries of a federal government contract — to ‘mock the very goals of’ the program that the contract was intended to further, placing its ‘legitimacy … in grave doubt,’” the judge said, quoting the SJC’s 1989 decision in Ayala v. Boston Hous. Auth.

This ruling may be instrumental in giving teeth to the Making Homes Affordable program.  Although HAMP was a good start according to many practitioners & real estate professionals, the Making Homes Affordable Program is viewed in whole as a failure, due to the fact that the program simply relies on guidelines and has little to no enforcement mechanisms built into its regulations.

“The ruling sends a message to banks that if they don’t comply with federal guidelines [regarding the handling of HAMP modification requests], they’ll be held accountable,” he said. “This encourages banks to comply and gives more potential help to homeowners and consumer advocates,” states John F. Skinner III of Manchester, N.H, who represented the homeowner.

Framingham lawyer Richard D. Vetstein, who has written extensively about the foreclosure crisis on his real estate blog, said the ruling in Parker breaks new ground.

This ruling is certainly a step in the right direction for the borrower who is frequently pushed around by large lending institutions.  Framingham lawyer Richard D. Vetstein, who has written extensively about the foreclosure crisis on his real estate blog, said the ruling in Parker could be deemed as a groundbreaking case.  “I hear these stories all the time — Bank of America, Wells Fargo and others losing paperwork, borrowers having to resubmit 10 times, and then the mortgage being shipped off to foreclosure, forcing the borrower to start from square one while interest and attorneys’ fees are ticking away,” said Vetstein, who was not involved in Parker. “It looks like the judge is finally throwing his hands up and siding with the little guy more and more.”

Having recognized the general viability of third-party beneficiary claims by borrowers, Billings also found that the plaintiff in Parker had adequately alleged a violation of the SPA.

Lenders are expected to respond to a HAMP application within a certain period of time and cease all foreclosure activity during the evaluation process, the judge said, denying the bank’s motion to dismiss. “Inertia is not an option.”

Let’s hope this decision will be instrumental in turning the tide for Nevada homeowners as well.

Originally reported by Eric T. Berkman, in Massachusetts Lawyers Weekly.

Tiffany N. Ballenger, Esq


Black & LoBello on the Radio

Click here to listen to the Legal Hour on KDWN AM720 from October 12th, 2011 in which Managing Partner, Tisha Black Chernine, Esq., discusses how to deal with banks on the phone, loan modification, the fears associated with deficiency judgment, the purpose of mortgage insurance, construction defect issues on a short sale, landlords and underwater rental properties.

Please tune in to AM720 KDWN’s “Legal Hour,” everyday, from 9 AM to 10 AM.  Listen live on the radio or online.   Feel free to call in with your comments or questions at 702-257-5396.

To listen to past shows, visit our Media page.


OCWEN Gets Creative With Loan Modifications

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.

Tisha Black Chernine, Esq.

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Government Programs and Principal Reductions

Treasury officials confirmed that the Administration was examining principal reduction as a tool in the modification arsenal. Shortly thereafter, Bank of America unveiled a principal reduction program for borrowers whose LTV ratios are more than 120% (which is a large percentage of Nevadans as approximately 62% of our market is thought to be underwater).  Hopes have been high as they were with prior announcements of principal reduction programs.

The  Bank of America program targets three mortgage products:  1) subprime loans; 2)payment-option mortgages with negative amortization features; and 3) 2-1 adjustables that offered teaser interest rates for the first two years then converted into annual adjustments. The program is an earned or phased in approach to the reduction. The idea being, if you stay current over a specified period of years, you will gradually earn the whole of the agreed upon reduction amount.

Following suit, Wells Fargo has also put together a selective principal reduction program for certain underwater loans. The hope is that, either through in-house or government leaning, principal reduction programs will begin to take root.  Accordingly, be aware and intrigued; question your lender or servicer if you are interested in keeping your home. If your inquiries are shut down or you are not certain as to what type of loan you purchased, you can utilize state or federal regulations to help you get the information that you need.

Tisha Black Chernine, Esq.

HARP Program Extended Through June 2012

If you are one of the few Nevada residents that is current on your mortgage and you are seeking a loan modification, good news! The Federal Housing Finance Agency has extended the Home Affordable Refinance Program to June 30, 2012. The program allows homeowners  with loans administered by Fannie Mae or Freddie Mac, who are current on their loans and whose loan-to-value rations are between 80 and 125 percent, to finance to a lower loan rate.  Given that Nevadans suffer with negative equity averaging more than 60%, this program is not likely to be of much assistance in our state.  However, if you are one of the few that can qualify, getting a lower interest rate (and perhaps, a small principal reduction of up to 5%) is worth pursuing.

Tisha Black Chernine, Esq.

Las Vegans are subjected to a non-stop barrage of commercials and advertisements from people and companies promising principal reductions through loan modifications.  However, the majority of loan modifications do not include a principal reduction.

The majority of loan modifications come in three different forms:

  1. The lender reduces your interest rate to no lower than 2%;
  2. The lender increases the term of your loan to thirty (30) or sometimes forty (40) years from the date you sign the agreement; and
  3. The lender MAY forbear on a portion of the principal or, in layman’s terms, the lender will not charge interest on a portion of the loan.  However, the borrower will owe whatever the forbear amount is at the time the house sells or at the end of the term of the new loan.  In some cases a lender may blend these tools to modify your loan.

The goal of any loan modification is to reduce the amount due and owing on the home plus any costs relating to taxes, HOA, and insurance to an amount of 31% of your gross income OR to an amount that is affordable to you.

For example, a borrower’s gross income is $6,500 per month and the mortgage plus taxes, insurance, and HOA is $2,500 month at an interest rate of 6.25%.   The outstanding principal balance of the loan is $400,000.  Therefore, the lender must reduce the monthly mortgage payment plus taxes, insurance, and HOA to $2,015 ($6,500 X 31%). If taxes, insurance, and HOA equal $300 per month then the lender must change the terms of the loan so that a payment on the principal amount of $400,000 will equal $1,715.  This can be accomplished if the lender reduces the interest to 3.5% and changes the term length of the loan to thirty (30) years from today.

A successful modification is not always the outcome.  If, in the above example, the homeowner’s gross income was only $4,200, the lender would reduce the monthly mortgage payment plus taxes, insurance and HOA to $1,302 ($4,200 X 31%).  Again, the taxes, insurance and HOA equal $300 per month.  Therefore, the lender must change the terms of the loan so that a payment on the principal amount of $400,000 will equal $1,002.  These payment adjustments are not possible without either a principal reduction or forbearance on the principal of the outstanding due and owing. Lenders are very reluctant to allow either of these options.

Declaring chapter 13 bankruptcy may also be able to reduce or eliminate many other debts, including a second lien on a property which is something no loan modification can do.   Chapter 13 can stop a foreclosure and allow a borrower up to five years to catch up on the missed payments. Many homeowners are able to catch up on their missed payments if they are given the time to do so.  Modifying a loan directly with a mortgage company will normally allow a matter of months, not years, to spread out the missed payments.

Knowing all the options makes for a more informed decision.  A good attorney can, and will, freely discuss which option is a better solution for you.

Randy M. Creighton, Esq.

On June 2, Bank of America began its new mortgage program for eligible underwater borrowers which includes an earned principal forgiveness in a loan modification.  Bank of America mailed out an initial round of letters notifying customers who may qualify.  Upon review of these customer applications, the first trial offers for the program could find their way to distressed borrowers as early as the second half of June.

For qualifying borrowers, the bank will employ a principal reduction as the first step toward reaching HAMP’s affordable payment target of 31 percent of household income, ahead of lowering the interest rate and extending the term.  The reduced principal balance will be a non-interest bearing forbearance amount and the homeowner may earn forgiveness of the forborne amount by remaining in good standing on payments for several years.

To be eligible for principal forgiveness under the Bank of America plan, the amount of principal owed must exceed the current property value by at least 20 percent and the loan must be at least 60 days past due.  In addition, the loan must have been originated by Countrywide before January 1, 2009.

Joshua D. Carlson, Esq.

bILLSNevada Supreme Court Justice James W. Hardesty announced that more than 3,400 homeowners who received notices of default have requested mediation in the Nevada Foreclosure Mediation Program as they seek to hold on to their homes.  Since the program first began on July 1, 2009, 372 mediations have been conducted and another 805 mediations have been scheduled.  An additional 1,401 cases have been assigned to mediators, who are working to schedule and hold those mediations within 90 days of the notices of default being recorded.  Justice Hardesty announced that the statistics are current as of November 16, 2009

Important Note to Homeowners:  If you receive a “Notice of Default and Election to Sell,” you must sign the application form and mail it with $200.00 in certified funds within 30 days from the day you receive your notice to seek mediation.  You should receive two copies of the application form.  Sign both and mail them in the supplied envelopes.  Mail one copy of the application and your $200.00 certified funds using the supplied envelope addressed to the Nevada Foreclosure Mediation Program Office.  If you do not receive any application forms or envelopes, contact the Foreclosure Mediation Program

Currently, the Foreclosure Mediation Program has 95 mediators who have been appointed by the Supreme Court.  Those mediators have all been through rigorous training designed to teach the mediators the intricacies of the mortgage loan and foreclosure process and some mediation techniques.  Another 80 mediators have been trained recently and the Supreme Court will select from the list of those who successfully completed the training.

Justice Hardesty provided the following statistics regarding the program:

  • Notices of Default filed:                 29,242 (July through October)
  • Requests for mediation:                3,446
  • Mediations conducted:                  372
  • Mediations scheduled:                   805
  • Cases processed and
    ready for mediations
    to be scheduled                               1,402

(All statistics beginning July 1, 2009, and as of November 16, 2009 unless noted)

Carlos L. McDade, Esq.


Federal Programs for Homeowners

We have received a lot of questions regarding the federal plans to aid homeowners facing the threat of foreclosure.  The federal programs, called the Making Home Affordable Programs, are also nicknamed the “Obama Plans.”  There is a plan for Home Refinancing and another for Home Loan Modification.  Here are some facts to assist borrowers to make sense of the two programs. 

Home Affordable Refinance Program (“HARP”) 

  • Fannie Mae and Freddie Mac loans only
  • A borrower must be current in mortgage payments (not over 30 days delinquent)
  • The amount owed on 1st lien mortgage does not exceed 125% of current market value of the residential property
  • The borrower must have a reasonable ability to pay the new mortgage payments; and
  • The refinance improves the long-term affordability or stability of the home loan. 


Q:  My house is worth less than I owe.  Do I qualify? 

A:  As long as the amount due on the first lien mortgage is less than 125% of the value of the property, borrowers may be eligible for HARP.  

Q:  What about my second mortgage?

A:  The second mortgage holder must agree to remain in a junior lien position, and the borrower must be able to pay the modified payments on the first mortgage.  

Q:  Will refinancing lower my payments? 

A:  Possibly.  The goal is to “improve the long-term affordability or stability of the loan.” 

  • This may be accomplished by lowering an interest rate and reducing monthly payments.
  • It may be accompanied by refinancing a borrower out of an Adjustable Rate Mortgage (“ARM”) or a balloon payment.  This may increase monthly payments in the short-term to avoid huge payments later.  This meets the goal of the program even though it would not result in a lower monthly payment at first. 

Q:  Will refinancing lower my principal amount?

A:  No.

Q:  Can I get cash out of the refinance to pay other debts?

A:  Not really.  The program allows a modest amount of cash up to $250 only. 

Home Affordable Modification Program (“HAMP”)

 This program is designed to encourage and motivate lenders to work with borrowers to modify their mortgage loans. 

Eligibility for HAMP: 

  • A borrower must own a one to four unit home;
  • Have an unpaid balance that is equal to or less than:
    • 1 unit:   $729,750
    • 2 units: $934,200
    • 3 units: $1,129,250
    • 4 units: $1,403,400
  • The first lien mortgage must have originated on or before January 1, 2009;
  • The monthly mortgage payment must be greater than 31% of the borrower’s monthly gross (pre-tax) income, (the monthly mortgage payment includes taxes, insurance and home owner’s association dues), and
  • There must be a financial hardship that can be documented that makes the borrower unable to pay the mortgage.


Q:  Do I have to have missed a payment?

A:  No.  This program applies to borrowers who have missed a payment and those who have not, if the borrower is at risk of imminent default. 

Q:  What qualifies for a risk of imminent default?

A:  If a borrower faces a significant increase in the mortgage payment that they cannot afford, even with a steady income, they may be eligible. 

Q:  What qualifies as a hardship?

A:  Each case is different.  Circumstances of hardship may include a reduction of pay, loss of a job, having to care for a sick or injured relative, unexpected expenses like medical bills, inability to work for an extended period of time, and other “changed circumstances.” 

 Q:  Does this work on my investment properties that I rent out?

A:  No.  The program only covers the primary residence of the borrower. 

Q:  Is the government subsidizing my modification?

A:  Yes.  The Treasury Department is providing incentive payments to borrowers who make their monthly modified payments on time.  The incentive payments are applied directly to the loan balance.  These payments could lower the principal balance up to $5,000. 

Q:  The house across the street sold for 50% of mine.  Can I make a lender reduce my principal down to the current value of my house?

A:  No.  A lender may reduce principal but is not required to.  It is more likely that a lender will lower interest rates and extend the term of the loan. 

Other Programs

 Q:  Are there other programs?  How do I learn about them?

A:  Many lenders have their own programs for borrowers. You have to approach your bank to find specifics, and the programs are changed or modified often. 

Q: I don’t qualify for anything you’ve talked about.  Are there other things I can do?

A:  Yes. If you enter into a forbearance agreement with your lender, you will be allowed to skip payments for a certain amount of time but will have to pay extra later on to make up the missed payments.  A “short sale” is an agreement with your lender to sell the house for less than you owe on it.  And a deed-in-lieu of foreclosure is an agreement to basically give the house back to the lender.  Unfortunately, the latter two techniques will require a borrower to move out of the house to a more affordable residence.

- Carlos L. McDade, Esq.

Final Nevada Mandatory Foreclosure Rules Adopted

The Nevada Supreme Court has adopted final rules for the new mandatory foreclosure mediation.  These new rules become effective July 31, 2009. The rules include a number of significant changes, as the result of several public hearings conducted by the court.

The mandatory mediation program allows a homeowner receiving a Notice of Default on or after July 1, 2009, to request a mandatory mediation with the lender with the objective of obtaining a loan modification, or to estimate a short sale value the lender may consider.

One of the key questions has been exactly what documents the lender must provide.  The answer is that the lender must provide an original or a certified copy of the following:

       1.    Deed of Trust, and each of its assignments; and

      2.    Mortgage Note, and each of it assignments

A certified copy must be made under oath before a notary public and include a statement that the person certifying the copy is in actual possession of the original of each certified document.

In the event of a lost or destroyed document, the requirements of Nevada law shall apply as detailed in the Nevada Revised Statues. Should this event occur, hours of additional work would be created for all the parties involved.

The lender must provide under confidential cover to the mediator the “evaluative methodology” used in deciding whether a homeowner is eligible for a loan modification.  This will be helpful to the mediator in assisting both parties arrive at a resolution.

The lender must also provide the most current appraisal of the property and shall prepare an estimate of the short sale value that it may be willing to consider. Because “most current” may be practically meaningless in today’s market the burden in effect may be upon the homeowner to provide a truly current appraisal, meaning one made within the last six months.

Until there is a record of accomplishment for the mediation program, we will have no way to predict the effectiveness of this program. The Supreme Court has promulgated rules that give all parties an opportunity to effectively and persuasively present their case.

Carlos L. McDade, Esq.

Is your loan modifiction company licensed in Nevada?

On July 8, 2009, Governor Jim Gibbons signed emergency regulations that require all persons conducting loan modification and foreclosure consulting activities to have state licenses.

The emergency regulations are effective immediately.  The Governor’s act was authorized by Assembly Bill 152, which was passed in the last Legislative Session.  AB 152 modified Nevada Revised Statute 645F, and required the Commissioner of Mortgage Lending to adopt regulations to license the loan modification and foreclosure consulting companies.  The emergency regulations were promulgated recently and the Governor’s signature made them effective.

In  addition to the license, loan modification and foreclosure consultants now must follow specific operating rules and regulations.  Section 3.3 and 6.5 of AB 152 state that consultants must deposit a client’s money in a trust account.  Withdrawals of a client’s money from the trust account must be accounted for and the consultant must keep records for the client’s inspection.  In addition, Section 3.3 authorizes the Commissioner to inspect and audit the books of consultants. 

Violations of this law and certain regulations constitute mortgage lending fraud under Nevada law.  Homeowners and consumers should be careful to deal only with licensed companies.


Q:        Who has to have a license?

A:         All loan modification and foreclosure consulting activities taking place in Nevada must have a license.

Q:        Does my California loan modification company have to have a Nevada license?

A:         Yes.  EVERY company doing loan modification and foreclosure consulting activities in Nevada must have a Nevada license.

Q:        I work foreclosure consults on my own.  I don’t need a license, do I?

A:         Yes.  All natural persons in this type of consulting business must now be associated with a company.   All employees of companies and independent contractors working on behalf of companies must have a license. 

Q:        Can my attorney continue helping me with my loan modification?

A:         Yes.  Attorneys doing loan modification and foreclosure assistance, such as the law firm of Black and LoBello, are exempt from the licensing requirement.


Persons may apply for a Nevada license at:


If you would like to read the law, click on this link: