Farewell to the Terrible Twos: Nevada Foreclosure Mediation Update
Get the cake, balloons, and gifts ready – the Nevada Foreclosure Mediation Program (FMP) is turning three years old! Unfortunately, your invitation to the party may have been lost in the mail.
Over the last few years, the FMP has touted itself as a leader and model-program for responding to the foreclosure crisis. But while the rest of the country is seeing signs of economic improvement, Nevada’s economy (led by the real estate market) remains in a wearisome downward trend. Homeowners aren’t happy, lenders aren’t happy, and foreclosures are at the heart of the matter.
Three years in, one would think that the FMP’s rules would be well-developed and functioning smoothly. Yet, another round of rule-changes is on the horizon (lenders beware). And one would think that the achievements of this “model-program” would be highlighted and easily quantifiable. But the program remains secretive about the meaningful statistics – both good and bad. See, U.S. Department of Justice Report at http://www.justice.gov/atj/foreclosure-mediation.pdf, (pg. 18) stating that the FMP’s statistics are not organized in a way that makes them a viable source of information. As a result, the FMP’s developmental growth appears to have plateaued.
Fortunately, the Supreme Court of Nevada has recently issued several rulings to clear up some of the confusion plaguing the FMP. After all, the Supreme Court administers the FMP and adopted the Foreclosure Mediation Rules, so it certainly has enough familiarity to provide much needed guidance and interpretation. Unfortunately, the Supreme Court’s decisions have been largely unpublished, meaning the rulings cannot be used as precedent. See Supreme Court Rule 123.
The highlights of the recent decisions include:
Volkes v. BAC Home Loans Servicing (unpublished; Order dated February 24, 2012)- In Volkes, the Supreme Court provided clarity to several arguments that are ‘hot-button’ topics on judicial review of foreclosure mediations. First, the Court rejected the borrowers’ claim that an assignment from MERS is facially invalid. The Court recognized that MERS “serves at least some legitimate business purpose”. Second, the Court indicated that strict compliance with the documentation requirements only extends to the core or essential documents: Note, Deed of Trust, and each assignment. Strict compliance does not extend to other rules and requirements, such as the production of an appraisal or BPO ten days in advance of mediation. Third, and perhaps most importantly, the Supreme Court rejected the borrowers’ argument that NRS 40.451 limits the amount of indebtedness to the amount paid for the assignment of the deed of trust. In other words, borrowers were seeking to undercut the secondary market by limiting a lender’s recovery to the value paid for the assignment. The Court struck this rationale down based upon statutory construction, stating that the borrowers’ counsel inaccurately equated a “lien” with a “debt”. Lenders can rest assured that their note is (in theory) worth the face value. The Volkes decision also contains a reprimand of borrower’s counsel for “recycling the same brief with little regard for the actual facts underlying each individual client’s case.” The Volkes decision is a resounding victory for lenders, but unfortunately, the Court declined BAC Home Loans Servicing’s motion to publish the Order.
Davis v. U.S. Bank, as Trustee (unpublished; Order dated February 24, 2012) – In Davis, the Court again rejected the borrower’s contention that MERS is a “sham or a fraud”. The Court also reprimanded borrower’s counsel for making false and baseless assertions without citation to the record on appeal.
Miller v. Aurora Loan Services, LLC (unpublished; Order dated March 30, 2012) – In Miller, the Court built on its decision in the Leyva case by clarifying how evidence of transfer of a note can be demonstrated in the absence of an endorsement. Through its analysis, the Court provided further validation of MERS’ involvement as a nominee beneficiary. Specifically, the Court stated that an assignment of the Deed of Trust, even when signed by MERS, can act as evidence of transfer of the Note, so long as the assignment contains the standard language that the Deed of Trust is assigned along with the Note (i.e., the “moneys now owing or that may hereafter become due…”).
Surgeoner v. Credit Suisse First Boston (unpublished; Order dated May 16, 2012) – In Surgeoner, the Supreme Court confirmed that a servicer (through an attorney or representative) may appear at a mediation on behalf of the beneficiary. The Court also provided further affirmation that an assignment from MERS as a nominee beneficiary is proper.
Jones v. Suntrust Mortgage Inc. (128 Nev. Advance Opinion 18; Order dated April 26, 2012) – In a rare published case, the Supreme Court opines that a settlement agreement reached at mediation is binding upon the parties when consideration is exchanged. The Court held that a two-month hold on the foreclosure sale to allow time to pursue a short sale demonstrated sufficient consideration to make the agreement binding.
Though the Supreme Court of Nevada has been quite active in issuing decisions regarding the FMP, the lack of published opinions is troublesome. Without legal precedent to rely upon, the District Court Judges have no guidance, which equates to volatile and unpredictable outcomes on judicial review for both borrowers and lenders.
Despite three years of widespread discontent and confusion, the FMP still champions itself as a categorical success. When the FMP blows out the candles on its birthday cake, we can all keep wishing.