REO


Happy Birthday Webster The Nevada Supreme Court issued a ruling concerning MERS on Thursday September 27, 2012. Edelstein v. Bank Of New York Mellon, the Las Vegas Review Journal reported it was a “win” for the banks in foreclosure?

What does it mean?  The banks that relied on MERS are allowed to foreclose.  What is MERS?  See below.

  SHORT ANSWER  – MERS (Mortgage Electronic Registration System, Inc.), was confirmed as a proper player in the foreclosure process, and the assignments to and from MERS were upheld. The Court clarified however that the holder of the note and the holder of the deed must be the same. So, to say it is a win for the banks?  I guess you could look at it that way.  Mostly it clarified that at the time of foreclosure, the note holder (lender) and the deed holder (usually MERS) must be the same.  So MERS must assign the deed to the note holder (lender) for foreclosure to proceed.  In this case the note and deed were held by the foreclosing bank, so the Court allowed the foreclosure.

LONG ANSWER – It is obviously more complicated than that, Bank of New York Mellon’s trustee ReconTrust, BNY Mellon’s trustee, physically possessed the note a the time of the Nevada Supreme Court Mediation and used their servicer Bank of America as their representative in the Nevada Supreme Court Mediation Program.  But at the end of the day, the note and deed were held by the same bank and that bank was allowed to foreclose. So, a win for the banks? Not really, another way to look at it is that the banks must, yet again, clean up their paper work and hold both the note and deed at the time of foreclosure. This is not going to cause a landslide of foreclosures. It was not the impediment per se. It will make some mediations in the Nevada Supreme Court program perhaps go smoother.

What is this MERS you speak of centurion? MERS is often the holder of a deed of trust, and it is shown to that effect on the deed.  However, often the rights to the deed are transferred but not recorded at the county recorder. The Court explained MERS in a pretty succinct manner,

Typically, when a loan is originated, MERS is designated in the deed of trust as a nominee for the lender and the lender’s ‘successors and assigns,’ and as the deed’s ‘beneficiary’ which holds legal title to the security interest conveyed. If the lender sells or [transfers] the … [note] to another MERS member, the change is recorded only in the MERS database, not in county records, because MERS continues to [be the beneficiary of record] on the new lender’s behalf. So long as the sale of the note involves a MERS Member, … [t]he seller of the note does not and need not assign the [deed of trust] because under the terms of that security instrument, MERS remains the holder of title to the [deed of trust], that is, the mortgagee, as the nominee for the purchaser of the note, who is then the lender’s successor and/or assign. According to MERS, this system ‘saves lenders time and money, and reduces paperwork, by eliminating the need to prepare and record assignments when trading loans.

In Nevada to perform a non-judicial foreclosure on an owner-occupied residential property …(in other words not a judicial foreclosure NRS 40.430 nor a non-owner occupied foreclosure) the lender must meet certain requirements…

The Court confirmed that to enforce a foreclosure the deed and note must be held together by the same person/entity.  In this case MERS held the deed and note was held by a number of different lenders.  At the time of foreclosure MERS transferred the deed to the current note holder. The Court concluded, that the temporary separation (when one group held the deed and another held the note) was not irreparable or fatal to either the promissory note or the deed of trust. However, if they are not brought together, it prevents enforcement of the deed of trust through foreclosure. The two documents must ultimately be held by the same party.

The Court concluded that when MERS is the named beneficiary and a different entity holds the promissory note, the note and the deed of trust are split, making nonjudicial foreclosure by either improper. However, any split is cured when the promissory note and deed of trust are reunified. Because the foreclosing bank in this case became both the holder of the promissory note and the beneficiary of the deed of trust, proceeding to foreclosure was proper.

More importantly were the three cases before the Nevada Supreme Court this morning, addressing, statute of limitations on short sales, and junior liens and the right to sue borrowers as passed by the Nevada Legislature in 2011.

 Sandpointe Apartments., LLC vs. Dist. Ct. (CML-NV Sandpointe, LLC) Docket No. 59507

Nielsen vs. Dist. Ct. (Branch Banking and Trust Co.) Docket No. 59823

Lavi vs. Dist. Ct. (Branch Banking) Docket No. 58968.

These upcoming decisions will affect thousands of Nevadans that have been foreclosed upon or sold via a short sale.  I will let you know when I hear more.

Questions:  darren@dwelshlaw.com

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Is REO title safe?  I contacted Equity Title of Nevada and asked this exact question and here is what I have to report.

Yes.  Provided you have title insurance.

Then why these reports about REO, and foreclosure?  These indictments you hear about from the Attorney General are discussing the ‘procedures’ that some limited persons used in filing foreclosures.  The Attorney General is not representing the consumer in attempting to unwind any sales.  The question really is, will a former owner arrive and demand to be reinstated on title?  Well, since that would come with the debt also, let’s just say, I doubt it.

But if there is a claim about the foreclosure process that affected my home (literally my home is listed as one of those with potential previous foreclosure defects) am I safe?  Yes, again. The odds of there being a claim on your title are very remote.  If there was one, you have title insurance, and you are going to be able to get title insurance in the future.  So it is a non-issue for the normal consumer.

Let’s discuss title insurance.

On residential purchase transactions, there are three primary forms of title insurance that are currently available to buyers.

  • The Homeowners Policy (most recently revised in 2010).
  • The ALTA Residential Policy (1987 form).
  • The ALTA 2006 standard coverage owners policy.

All of these policies provide coverage against loss or damage sustained by reason of title defects which exist as of the date of policy.  Imagine a hypothetical scenario in which, after the date of policy, a former homeowner files a lawsuit which seeks to set aside the prior foreclosure as defective.  If this former owner is successful and ultimately obtains a final, non-appealable court order which rescinds the foreclosure and reinstates his ownership interest then he will have established that the insured’s title was in fact defective as of the date of policy.  Even though the filing of the lawsuit itself was a post-policy matter, the outcome is a court determination of a pre-policy title defect, i.e. an invalid foreclosure.  In this scenario, a title defect or a marketability claim tendered by the insured under any of the above listed owners policy forms would presumably be determined by the underwriter to be a covered matter which must be defended.

There is however, a new law that went into effect on October 1, 2011.  This new law may cause some discussions.  Title companies may not be willing to insure post-foreclosure without a special exception for any claims that are based on an allegation that the foreclosure did not comply with the provisions of AB284.  An REO buyer must simply object to not receiving this coverage.  This is not happening now.  The coverage is being granted.  We need merely watch the field and see if the industry changes.

Equity Title of Nevada recommends to any residential buyer that they consider obtaining the Homeowners Policy. There are many additional benefits to this form of policy which are worth a buyer paying the additional 10% premium.

Any questions, email me darren@dwelshlaw.com or call me 7022451787.

Dealing With REO as “Asset Managers” in Nevada, as of October 1, 2011.

SB 314

http://www.leg.state.nv.us/Session/76th2011/Bills/SB/SB314_EN.pdf

For those salespersons that have REO clients, this new statute is fun. Look for a Nevada Real Estate Division update very soon.  Here is a sneak preview.

Short Version, to get ahead of the curb get your property management certificate by attending this coursehttp://americanaacademy.com/Default.aspx?pageId=1141702  A list of all schools that provide property management certificate is located here http://red.state.nv.us/forms/502.pdf.  That should render you exempt from most of these new rules.  But as I say above, stay tuned, the real direction from the NRED is on the way.

Long Version, Let’s discuss…

1.) what is an asset manager?

2.) why you should get your Property Management Permit,

3.) what you can and cannot do for your clients? and

4.) the guidance on how to handle abandoned personal property.

What is an Asset Manager and does it apply to me?

An “Asset management company” means a person, for compensation and pursuant to a contractual agreement,
engages in asset management on behalf of a bank.

An “Asset manager” means a person engaged in the business of asset management who is an independent contractor of an asset
management company.

“Asset management” means oversee or direct actions (preserve, restore or improve the value and to lessen the risk of damage to the property) taken to maintain real property on behalf of a client before or in preparation for sale of real property owned by the client pursuant to a foreclosure sale. (This definition would also include any person that buys at a trustee sale, but the definition of client singles out only banks.  Therefore listing homes for trustee sale flippers would not appear to be asset management.)

The statute does not apply to a person or broker who has a current permit to engage in property management pursuant to chapter
645 of NRS.  However, to be exempt the provisions concerning asset management services (see definition above) must be
included in the property management agreement entered into pursuant to NRS 645.6056.  Application will still be required, a fee, etc., reporting and mandatory errors and omissions insurance requirements.

Therefore, if you are directing actions to preserve, restore or improve the value and to lessen the risk of damage to the property which is owned by a client pursuant to a foreclosure sale, you apparently are “asset managing.”

What am I allowed to do?

As an asset manager you are allowed to perform the following on foreclosed properties. (Although the rule says in foreclosure
and it defines “in foreclosure” correctly. Obviously, they meant “after foreclosure” as the lender has no rights to
entre the property until the completed foreclosure sale.  So we will ignore that issue.)

  1. Securing real property in foreclosure once it has been determined to be abandoned and all notice provisions required by law have been complied with;  Providing maintenance for real property, including
    landscape and pool maintenance;
  2. Cleaning the interior or exterior of real property;
  3. Providing repair or improvements for real property;
  4. Removing trash and debris from real property and the surrounding property.
  5. Dispose of personal property abandoned on the premises of a residence in foreclosure or left on the premises after the
    eviction of a homeowner or a tenant of a homeowner only in the following manner:

30 Days – You shall provide a safe storage of the property for 30 days.  You are liable for your negligence
in storing the property.

Disposal – 14 days Notice.  Prior to disposal you must notify the homeowner/tenant in writing of your intention
to dispose of the property and allow 14 days to elapse. It must be mailed to the homeowner/tenant at the present address of the homeowner/tenant and, if that address is unknown, then at the last known address.  After the expiration of the 30-day period, you may dispose of the property.

  • Vehicles must be disposed of in the manner provided in chapter 487 of NRS for abandoned vehicles.

 

What am I not allowed to do?

As an asset manager you are not allowed to perform on foreclosed properties

  1. Evict a real property owner or a tenant of a real property owner until after the time during which the real property owner
    may redeem the real property in foreclosure.
  2. Perform any repair, maintenance or renovation on the real property in foreclosure:* Which is required to be performed by a person holding a license unless such repair, maintenance or renovation is done by a person licensed in this State to perform such repair, maintenance or renovation; or

    * Which requires a permit or inspection by any governmental entity in this State, unless the permit is first obtained and the inspection is performed after completion.

    * Receive, collect, hold or manage any money which belongs to another person, including, without limitation.

   …… Changes to the Nevada residential real property disclosure.  Effective October 1, 2011 the Seller’s Real Property Disclosure Form, also known as the S.R.P.D. can longer be waived. This form must be provided in just about every residential transaction in Nevada.  There are some exceptions, see below.

    …… The statute controlling this form (NRS 113) was modified within Senate Bill 314 in the July 2011 Nevada Legislative Session removing the section that allowed a seller and buyer to mutually agree that the SRPD would not be provided. Such a waiver had to be signed before a notary by a buyer.  The Law can be found here NRS 113

  …… This will affect many sales such as probate, short sales, and bank owned (REO). Exceptions are foreclosure (when the trustee sale occurs, not a bank selling after they have already foreclosed) between co-owners and new home. All sellers in Nevada must now provide this form. Some sellers have not lived in, or even seen these properties, but the statute is clear, it must still be filled out. If a Seller does not provide the form, a buyer may cancel, without penalty.

…… This should not affect the August 7, 2007 entry on disclosure – New Clarification of Real Estate Disclosure Laws in Nevada.  Remember in that case (the Nelson Case), the Nevada Supreme Court ruled on the scenario where a defect, now repaired, was not disclosed on the Nevada SRPD – “Once the [damage] was repaired … it no longer constituted a condition
that materially lessened the value or use of the [home. Accordingly, [the Seller] did not have a duty to disclose the …. damage.” This rule would still apply.

This is a series of Disclosure Entries see also:

An Updated All Inclusive & Belt Way Disclosure

The New, Improved All Inclusive Disclosure

Nevada Condominium Hotel Disclosure

Nevada S.R.P.D. New Clarification of Real Estate Disclosure  Laws in Nevada

Any questions, you can call me Darren Welsh 702 245 1787.

 The Chirper and the New Clark County Code; Abatement of Public Nuisance

Effective June 1, 2010 Clark County Code was modified to address Nuisance and Abatement of problem Chirper[i] homes. This will affect you if you are working with short sales or REOs that are in serious disrepair upon your taking the listing.  Dave Pollex, Supervisor County Code Enforcement, 702 455 4509 explains that the key is communication.  The County is not getting timely and proper responses to the notices of violations, so the Code 11.06.070 attached here as a PDF was modified.  The cite for the code is here but it is not up to date yet.  The codes allows instant civil penalties up to $1,000 per day levied against the property.  A fine levied in this manner is similar to a tax and does not get removed in the event of foreclosure. 

Post Your Information.  When you take an REO listing the County suggests that you immediate place inside a window that can be seen from the street a sheet of paper [attached notice] that indicates you are the listing agent and your contact information.  It should be readable from the sidewalk if at all possible.

Notices.  Likely before fines are levied the County will contact you and demand that certain repairs are made.  This is why you want the contact information provided timely.  The County reports that they will first work with the salesperson on a time frame to get the items completed before they issue a citation.  Communication is important.  If, for example, your lender is very slow to approve repairs the County should be made aware of this.  The County can then make note of pending action on your part and even inform neighbors if further complaints are received.  Notices levied against property will have the direct contact information on the Notice for the assigned enforcement agent and describe the appeal process.

Priority Lien.  The fines that Clark County Code 11.06.07 can produce are Priority Tax Liens.  That means if they are present prior to a foreclosure, they do not get whipped away, rather they stay recorded against the property and will need to be paid.  It is important to look for these on preliminary title reports if you take an REO that was a Chirper for long time.


[i] “Chirper.” (c̸hʉrp -ûr) Noun. Slang. Described vacant home that chirps from within due to the home’s smoke detectors warning they need new batteries.  The larger the house, the more the smoke detectors.  If you get up to 3,000 square feet a melody can result, chirp ….ch chirp, chirp chirp from inside as the various detectors chirp.

Real Property Inspections & Prior Inspections

 

Inspections From Prior Transactions:  In the current REO/Short Sale dominated environment there are many failed transactions.  Within these failed transactions there is, at times, a home inspection performed.  This ‘prior inspection’ may or may not be the reason for the prior cancellation.  Lately these ‘prior inspections’ have become an issue where a defect was discovered in the ‘prior inspection’ affiliated with the prior failed transaction, yet this defect is not noticed in the inspection of the successful transaction.  It is rare, but it can happen.

 As The Listing Agent, Attempt To Get A Copy Of All Inspections.  As you know in the Greater Las Vegas Association of REALTORS® Residential Purchase Agreement  Section 12(B) p. 7 Property Inspection/Condition, if a buyer cancels the purchase agreement due to a specific inspection report, the buyer is to provide the seller with a copy of the inspection report.  But what if the cancellation is to due to another reason?  Ask the selling agent for any reports gained by the buyer via email or facsimile. 

 As The Selling Agent, Request of the Seller, Any Prior Inspections In Their Possession:  When making an offer on a short sale or REO request of the Seller via p. 10, Section 28  Additional Terms, “Seller to provide to Buyer copies of any inspection reports in Seller’s possession concerning the property.  This shall include inspections prior to listing and/or any previous unsuccessful escrows.”  This information, can then be forwarded to your buyer.

The BPO Rider in Nevada was created per the July 1, 2009 new law as discussed in my June 19, 2009 Legal Update

Prudential, Americana Group, REALTORS® created a rider to meet the July 1, 2009 deadline, but the form has now been modified/adopted by the Greater Las Vegas Association of REALTORS®.  The new BPO Rider is now on Ameriforms

Here is an example of how to fill out the new GLVAR form.

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