August 1, 2013
Nevada Supreme Court Holds a Bank’s Mere Possession of the Note and Deed of Trust is not Sufficient to Create an “Enforceable Interest”
In Leyva v. Nat’l Default Servicing Corp., 255 P.3d 1275 (Nev. 2011) the court found in favor of Leyva that mere possession of the mortgage note does not create an “enforceable interest in the property subject of the mediation.” The court reversed the district court’s order and remanded the matter with instructions to determine sanctions for Wells Fargo in accordance with the ruling in Pasillas v. HSBC Bank USA, 255 P.3d 1281(2011) (here).
In 2007, Leyva received a recorded a quitclaim deed and without expressly assuming the mortgage note, he began making monthly mortgage payments on the Las Vegas property. After 25 months, Leyva defaulted on the mortgage. Both he and the original mortgagor elected to participate in the Foreclosure Mediation Program. At the mediation, Wells Fargo produced the original deed and mortgage note which both named MortgageIT, Inc. as the lender along with a notarized statement that they were in possession of the note and deed. No resolution was made at the mediation. Leyva filed a petition for judicial review in district court claiming that Wells Fargo mediated in bad faith by not providing written assignments of the deed of trust and mortgage note at the mediation session as required by Nevada Revised Statutes (“NRS”) 107.086(4) and Foreclosure Mediation Rule (“FMR”) 5(6). The district court ruled against Leyva and ordered that a letter of certification be entered because Wells Fargo provided the “essential” documents and operated in good faith.
The Supreme Court reversed. First, the court held that both Nevada’s Foreclosure Mediation Program according to NRS 107.086(3) and FMR 5 allow the “grantor or person who holds the title of record” to mediate. Leyva held a valid, recorded quitclaim deed and properly elected to mediate.
Second, the court found that strict compliance with NRS 107.086 (4) and FMR 5(6) is required for a foreclosure mediation to proceed. Mere possession of the note is not sufficient to continue foreclosure mediation proceedings. Wells Fargo did not provide proof of a proper endorsement in its name or proof of transfer of the note in accordance with NRS 111.205(1) and Article 3 of the UCC. The court’s ruling built upon its prior holding in Pasillas. In that case, the court held that when a party fails to 1) provide the required documents or 2) attend the mediation in person or, fails to have authority to modify the loan or access to such a person then the district court should impose appropriate sanctions. Wells Fargo failed to provide the required documents because strict compliance is required. The court reversed the district court decision and remanded the matter to determine sanctions for Wells Fargo in accordance with Pasillas.
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