The Economy


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.

arra2009ChartThis is a follow up to my February 27, 2009First Time Buyer $8,000 Tax”  Note my other linked blogs of Housing and Economic Recovery Act of 2008, Part I   and part II   and part III .

As a follow up o my February 2009 interview of Diane W Clough Cpa Ltd, 6130 W Elton Av, Las Vegas, NV, 1 (702) 870-0888; cloughcpa@att.net she reports the following:

Diane reminds us of the following in her most recent Report from July 2009:

The American Recovery and Reinvestment Act of 2009

On February 17, 2009 congressed passed the American Recovery and Reinvestment Act of 2009, authorizing approximately $787 billion in new spending and tax cuts to stimulate the economy.  How will the $787 billion legislation affect taxpayers?  Here are just a few of the highlights of the plan.

 First Time Homebuyer Credit

The American Recovery and Reinvestment Act of 2009 encourages first-time home buyers to purchase homes between January 1, 2009 through December 1, 2009 by giving them a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000. Unlike the 2008 act, there is no 15 year repayment of the credit required.  A first time homebuyer is defined as any taxpayer who has not owned a home in the previous 3 years.  Additionally, the taxpayer can file an amended return for 2008 to claim the 2009 tax credit. It is advised to seek professional tax assistance to use the legislation favorably.

 Auto purchases
The sales tax paid on a new, not used, vehicle purchased in 2009 can be taken as an “above the line” deduction on 2009 taxes, meaning that taxpayers can claim the deduction even if they don’t itemize.  This applies to tax on the first $49,500 of the vehicle’s purchase price.  Income limitations apply. 

Plug-in electric vehicles qualify for a $2,500 tax credit for the first 200,000 vehicles sold.

 Tax Credits for Energy-Efficient Improvements

If you have been thinking about doing improvements to your home, consider going green.  Tax credits for energy efficient improvements to existing homes have been extended through 2010.  The amount of the current tax credit is 30 percent of the amount paid or incurred by the taxpayer for qualified energy efficient improvements made during the taxable year.  This tax credit is capped at $50 for any advanced air circulating fan, $150 for any qualified natural gas, propane, oil furnace or hot water boiler, and $300 for any item of energy-efficient building property such as insulation and storm windows and doors.

 COBRA health insurance assistance

Individuals who may be eligible for COBRA continuation coverage as a result of an involuntary termination of employment from September 1, 2008 through December 31, 2009 may receive 65 percent in financial assistance towards their health insurance premium payments for up to nine months, which leaves the individual paying only 35 percent of the health premium costs.  Former employers will pay the 65 percent of the premium costs and will be able to recover the financial assistance through quarterly payroll tax form 941.  To become eligible for COBRA and receive assistance:

  1. The individual’s termination must be involuntary
  2. The individual must not qualify for other group health coverage (i.e. spouse’s health plan, new employer health plan, or Medicare)
  3. The employer health plan continues to exist
  4. The employer reported 20 or more employees in the prior year.

 Making Work Pay

In lieu of a rebate check, such as taxpayers received in 2008, the new Making Work Pay provision lowers the amount of withholding in each paycheck.  The credit shows up as about an extra $10 per week in the paychecks of eligible individuals.  Most seniors and the disabled should receive a one-time $250 payment from social security arriving soon.

 College Credit

The tuition credit was raised to $2,500 a year for any year of college.  The change is only available in 2009 and 2010 and income limits do apply.  Taxpayers need to spend at least $4,000 to get the full credit.