August 1, 2013
Nevada Supreme Court Holds Sanctions are Proper in Foreclosure Mediation when Bank Fails to Provide Either Documents Required by Statute or an Adequate Representative
In Pasillas v. HSBC Bank USA, 255 P.3d 1281 (Nev. 2011), the court held sanctions are appropriate when a bank 1) fails to provide documents required by statute at a mediation session or 2) fails to send a representative with the proper authority to a mediation session as required by Nevada Revised Statutes 107.086(4) and (5) (“NRS”) and Foreclosure Mediation Regulations 5(7)(a) (“FMR”). The court reversed the district court’s order and remanded the matter to determine sanctions.
In 2006, Pasillas purchased a loan from American Brokers Conduit. The note and deed of trust were later allegedly assigned to HSBC. After defaulting, Pasillas opted for mediation. HSBC provided a mortgage note with two pages missing and an incomplete assignment of the mortgage note and deed of trust to HSBC at the initial mediation meeting. After two meetings there was no resolution and the bank representative at the session admitted that he needed to receive additional approval before agreeing to a final resolution. Pasillas subsequently filed a petition for judicial review and sanctions in the district court. The district court found in favor of HSBC and ordered a certification, allowing the foreclosure to proceed.
On appeal, the Supreme Court reversed and remanded for sanctions. The court interpreted the statutory phrase “shall bring to the mediation” as a mandatory requirement. “We conclude that NRS 107.086(4) and (5) and FMR 5(7)(a) clearly and unambiguously mandate that the beneficiary of the deed of trust or its representative (1) attend the mediation, (2) mediate in good faith, (3) provide the required documents, and (4) have a person present with authority to modify the loan or access to such a person.”
In violation of the requirements set forth in NRS 107.086(4) and (5) and FMR 5 7(a), HSBC failed to provide a complete mortgage note, a deed of trust, or any written assignments of the deed of trust or mortgage note and sent someone to the mediation without the authority to modify the loan. The court determined a violation of any of these four statutory requirements is subject to sanctions and prevents the foreclosure from proceeding. The court reversed and remanded the case to determine proper sanctions in consideration of the following factors: whether the violations were intention, the amount of prejudice to the non-violating party, and the violating party’s willingness to mitigate any harm by continuing meaningful negotiation.
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