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.
August 1, 2013 | Permalink | No Comments
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.
August 1, 2013 | Permalink | No Comments
Arkansas Court Rules That MERS Did Not Violate the State’s Statutory Foreclosure Act
The court in Coley et al v. Accredited Home Lenders Inc et al (E.D. Ark. 2011) dismissed the homeowner-plaintiff’s claims against MERS pursuant to Federal Rules of Civil Procedure 12(b)(6). In granting MERS’ motion to dismiss the court considered, then rejected the plaintiff’s contentions.
First, the plaintiff alleged that the defendants failed to comply with the notice requirements of 12 U.S.C. 1701x(c)(5), a provision of National Housing Act that requires private lenders servicing non-federally insured home loans to advise borrowers of any home ownership counseling that they of the US Department of Housing and Urban Development may offer. The court however, reasoned that regardless of whether the defendants were in compliance with the act or not, the act does not create a private right of action.
Next, the plaintiff alleged that the defendants violated the state Statutory Foreclosure Act concerning non-judicial foreclosures, and they sought to enjoin the defendants from proceeding with the foreclosure sale. They also sought an order declaring the mortgage’s notice of default and intention to sell, the limited power of attorney, and the corporate assignment of mortgage to be fatally defective and invalid. The court however rejected this contention.
Third, the plaintiffs argued that even if the assignment was valid, the subsequent notice of default and intention to sell was invalid because it was prepared and filed by the Law Offices of Shapiro & Kirsch more than two weeks before HSBC executed a limited power of attorney giving Shapiro & Kirsch the power to act on its behalf. The court rejected this argument, as they noted that whether the notice of default was valid was moot because the non-judicial foreclosure described in the notice was cancelled. Thus, Shapiro & Kirsch would be required by law to file a new notice of default and intention to sell before a sale could take place.
August 1, 2013 | Permalink | No Comments
July 31, 2013
Court Holds That MERS Assignment, in Isolation, Could Not Prove Ownership
The court deciding In Re Wilhelm (Case No. 06-51747) was faced with the issue of when actual notes prove that the note’s chain of ownership is unclear. In reaching their decision the court found that in such a situation, the MERS assignment could not, on its own, prove ownership of the note.
The court in this case stated that the MERS assignment was legitimate when taken as a whole, along with proper transfer of the note. The court further went on to note “in hundreds of stay relief motions, including many post-Sheridan, creditors are providing adequate documentation and explanation to meet the requisite standing requirements.”
July 31, 2013 | Permalink | No Comments
Financial Literacy Literacy
Personally, I was disappointed by the CFPB’s Financial Literacy Annual Report. It seems to me that the Bureau’s Division of Consumer Education and Engagement is thinking too small in setting forth its research agenda. For its financial education evaluation project,
The Bureau is conducting a quantitative evaluation of two existing financial coaching programs. Financial coaching generally involves one-on-one sessions with clients to increase clients’ awareness of their financial decisions and to provide support for clients to reach financial goals mutually set by the coach and client. (46)
Seems to me that there are some fundamental questions about financial literacy that need to be studied before small, resource-intensive projects like financial coaching are. I have blogged about these issues before, but the bottom line is that there is no solid empirical evidence that financial education achieves good results in general. So why study particular initiatives?
I would like to see the Bureau engage in a broad survey of financial literacy first and then develop a research agenda that reflects the big issues, including
- do improved disclosures improve outcomes for consumers?
- do consumers have the basic math skills to take advantage of disclosures?
- what useful metrics exist for measuring the impact of financial literacy initiatives?
These are just a few big questions that I would want to answer before I looked at particular programs.
The Bureau should start from the premise that we have little reason to believe that financial education works. Let’s build up a body of knowledge from there. If we assume that it works, as the Bureau’s current research agenda implies, then that assumption can lead us on a wild goose chase as we study program, after initiative, after project, looking for that golden-egg laying goose.
July 31, 2013 | Permalink | No Comments
July 30, 2013
Nevada Court Finds MERS Lacked Standing to Bring Foreclosure Action as it Failed to Establish Itself as a Real Party in Interest and Failed to Provide Sufficient Evidence of it Authority
In MERS v. Chong, No. 09-661 (D. Nev. 2011) the court affirmed the order from the bankruptcy court holding that MERS lacked standing to bring an action. In the underlying bankruptcy action, MERS filed its motion for relief from stay, seeking to have the automatic stay lifted so that MERS could conduct a non-judicial foreclosure sale.
The court affirmed the bankruptcy court’s determination that MERS was not a beneficiary as MERS failed to present sufficient evidence showing it was a real party in interest. The court found that MERS might have had standing to prosecute the motion in the name of its members as a nominee.
However, in this case there was no evidence that the named nominee was entitled to enforce the note or that MERS was the agent of the note’s holder. As such the court found that MERS lacked standing.
July 30, 2013 | Permalink | No Comments
Michigan District Court Holds That MERS Cannot Foreclose by Advertisement But Can Assign its Security Interest
In Knox v. Trott & Trott, No. 10-13175, Dist. Court, (Michigan 2011) the court denied the plaintiff’s motion for reconsideration under Rule 60(b)(3) and (4). Knox maintained that the court erred in rejecting his argument that the defendants lacked standing under Mich. Comp. Laws 600.3204(1)(d) to foreclose on his property.
Plaintiff based his request on a previous Michigan court of appeals case, Info-Hold, Inc. v. Sound Merchandising, Inc. 538 F.3d 448, 455 (6th Circ. 2008). However, the court distinguished that case from the present case, as the former dealt with the narrow issue of whether MERS could foreclose by advertisement or whether it must use judicial foreclosure. In the present case, the court stressed that absent a showing by MERS that it owned “an interest in the indebtedness secured by the mortgage,” it lacked authority under the Michigan statute to foreclose.
In the present case, however the court found that MERS was not the foreclosing entity. As such, its status as defendant in the litigation fell outside the parameters of the issue resolved in Residential Funding.
July 30, 2013 | Permalink | No Comments
