IMAG1702NRS 40 Does Not Limit Lenders’ Right to Sue Homeowners Even When the Note was Discounted on the Secondary Market.

In 2011 the Nevada Legislature passed A.B. 273.  One of the hot topics was how much a lender could sue a borrower for; if that lender purchased the note from a previous lender at a discounted price.  The discussion of the day (back in the summer of ’11) was that the current lender (who bought the note from a prior lender), pursuing the borrower was capped at the amount the suing bank paid to take over the loan. This seemed to be a protection for borrowers. There were numerous cases in the Nevada District System (Trial Level) that ruled in this way, in favor of the borrower, enforcing a cap. Basically the borrower was held to only be liable for what the current lender paid to buy the discounted note, which could be pennies on the dollar.

On December 24, 2014 the Nevada Supreme Court ruled that the language, ‘limited to the amount of the consideration paid by the bank,’ does not speak to the amount a bank or investor pays to buy the note, removing the cap. So, if bank 1 lends $400,000 and sells the note for pennies, say for $10,000 to bank 2, bank 2 can recoup the entire value of money lent or $400,000.  Many District Court cases were ruling that the deficiency was capped at the amount bank 2 paid to take over the loan.  No more.

The Supreme Court of Nevada stated:

“We therefore hold that NRS 40.451 does not in and of itself set an assignor-assignee, consideration-based limit on FFB’s recovery against respondents.”  First Fin. Bank v. Lane  339 P.3d 1289, 1294 (Nev.,2014) 

OTHER POSTS ON DEBT

Income Taxes & Foreclosure/Short Sales 2014 Update (12.17.2014)

Ten Facts about Mortgage Debt Forgiveness

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

OTHER SHORT SALE POSTS

7 Tips for Short Sale

Addendum to Short Sale Listing 1.26.2010

Advance Fees Continued and the FTC 1.6.2011

Advance Fees – Short Sales – FTC II 5.4.2011

Charging for negotiating short sales/Negotiators 10.1.2010

Deficiency Judgments Nevada 4.27.2007

Foreclosure and the One Action Rule in Nevada 4.10.2007

HAMP the Federal Shortsale Program coming April 2010

Income Taxes & Foreclosures/Shortsales 12.21.2007

IRS PUBLICATIONS shortsales/foreclosures:

Ten Facts about Mortgage Debt Forgiveness

IRS publication on how 1099 taxes are calculated, exempt, etc.

IRS explanation as to taxes resulting from Foreclosure and Debt Cancellation.

Judicial Foreclosures (Short sales are looking more attractive..) 3.23.2012

Lender Short Sale Approval Addendum

Nevada Home Owner’s Bill of Rights (Foreclosure/Short Sale/Judicial Foreclosure)

Nevada Supreme Court Mandatory Mediation Program and How it Affects Shortsale

Nevada Short Sale Documents

Seller Being Released From Liability Language in Shortsale

Seller Liability After Short Sale 4.20.2007

Short Sale Advanced Fees

Short Sale Addendum to Purchase Agreement October 2010

Short Sales and Bankruptcy and Waiting Periods 10.5.2012

Short Sale – “Dual Tracking” and the Homeowner’s Bill of Rights in Nevada May 2013

Short Sale Junior Lien/Senior Liens Rights To Sue & Other Changes

Short Sale Wallet Size Answer Sheet

Questions? email me darren@dwelshlaw.com

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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

As you know the Greater Las Vegas Association of REALTORS® Multiple Listing Service sign on page is requiring the following be acknowledged.  [Stop-Read-This].  This memo from the Board is quite clear and informative, I suggest you read it a few times.  You might also note that each of these hints and examples have been on your Legal Blog for many months. 

So when you are at a pool party this weekend, you can let your fellow REALTORS® know that your legal department’s blog on REOs:

https://ameglegal.wordpress.com/2007/11/09/tgif-legal-tip-resale-packages-for-nevada-reo-sales/

Foreclosures:

https://ameglegal.wordpress.com/2007/04/27/tgif-legal-tip-foreclosuredeficiency/

Short Sales:

https://ameglegal.wordpress.com/2008/02/08/tgif-short-sales-from-the-listing-agents-perspective/

are cutting edge and already defined each of these terms and created multiple Addendums and helpful hints for you.  When they stare at you in disbelief, looking pale in their terry cloth, realizing the lost opportunities by not being at your brokeraage, freshenup their ice-tea drink and give them Michael Hinton’s phone number at 702-499-0668 (Americana’s Recruiter) and tell them it is time for a successful change.  

 

 

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Please visit my other blogs concerning short sales:

December 21, 2007 at tgif-legal-tip-mortgage-debt-relief-for-foreclosures-short-sales

October 12, 2007 at tgif-legal-tips-financial-help-for-those-facing-foreclosure-short-sales-etc

August 17, 2007  at short-sale-reduced-commissions

and May 4, 2007 at tgif-legal-tip-short-sale-seller-perspective

The most similar to today’s blog is the May 4, 2007 entry where I discussed the Seller’s perspective.

From the listing agent’s perspective… let’s talk about how to handle and orchestrate a short sale.

First don’t forget the basics…remember again, prior to taking the listing and entering it in the MLS as a short sale review with our client how a short works.

Memorandum_Of_Warning_Concerning_Seller_Performing_A_Short_Sale 

Also protect yourself by amending the MLS Co-Op offering, “….Transaction … subject to …. upon bank approval; … compensation … will be reduced if the lender(s) reduce … commission…reduction to be split 50/50.”  See short-sale-reduced-commissions.

Once you do have an offer ….. and your seller accepts the offer, you should place the listing into the contingent “C” status within two days of the sales agreement being mutually executed (signed by all parties) while you wait for the bank’s approval and once you gain the seller’s lender’s approval, change the status to pending or “P” if all other contingencies have been met, within two days of receiving approval from the bank.  See MLS_Tip_2008-02.

You should have your Seller orchestrate the deliver of the offer and I suggest the fact that there is an actual opened escrow to the lender of the Seller as soon as you.  As discussed above, try to find out this contact of the Seller’s lender prior to receiving an offer to make good use of your time.

What if you receive an offer while the bank is reviewing your offer, you should let the prospective purchaser know that there is already an offer.  But they should know this as it is in C status.  You can inform the prospective purchaser that they are able to submit an offer, but it will be a back up offer, subject to the cancellation of the prior by the Seller and subject to the bank approval.  Your seller can entertain accepting this offer, but remember the Short Sale Addendum to Purchase Agreement  allows for a three (3) day first right of refusal, prior to your seller being able to accept such a back up offer and even open escrow, always subject to the prior being canceled by the Seller and bank approval. 

Can you send the offer to the lender?  Can you make the lender of the Seller aware that there is another offer?  Good question.  I telephoned the Nevada Real Estate Division at 702 486 4000 and asked this question and was informed that you can, in fact, inform the Seller’s lender of the other newly received offer and you can share the offer with the Lender.  I cannot find within the NRS, NAC, or REALTORS® Code of Ethics a guidance that prohibits the Seller or the Seller’s REALTOR® from disclosing information to the Seller’s lender. (Of course keep in mind Standard of Practice 1-9.  While it is true that this disclosure of a secondary offer may affect the Seller’s lender’s decision in whether or not to accept the first buyer’s offer.  But this is result of the offer being rendered subject to bank approval. 

3 day first right of refusal in the Short Sale Addendum to Purchase Agreement

The Buyer in first position, per the Short Sale Addendum to Purchase Agreement, has a 3 day first right of refusal.  ‘Buyer is informed that the property will be placed in “Contingent” status after the Purchase Agreement is executed, while the transaction is subject to Lender Approval. The Parties are informed that additional offers will be presented to the Seller.  If the Seller receives a written offer, which the Seller is willing to accept, the Seller will give Buyer written notice of the offer including the material financial terms and conditions and the Buyer shall have the right for 3 business days to meet the price and terms as contained in the third party’s offer.’

What about NAC 645.605(6)?   NAC 645.605(6) says each licensee must “deal fairly with all parties,” to the transaction.  I asked the NRED about this and was informed that NAC 645.605(6) does not say, it is improper to share with the Seller’s lender the fact that another offer has arrived.  Lets not forget the other side of the coin which is NAC 645.63.  All offers must be presented and once the Seller elects to share the new offer with the lender it must be done.  Also if there is a rejection of any offers this must be presented timely per NAC 645.632.

A short sale signed by a Seller is a subject to contract.  And the subject to is as powerful as the Buyer’s typical contingency of “financing.”  The Seller’s right to work with their lender, to share that other offers have been made must be viewed in the same way we respect the Buyer’s control of his/her financing.

As long as the sale is “subject to bank approval” the transaction is subject to twists and turns buyers are not used to and are not subject to in a transaction ‘not’ subject to bank approval.

See also the April 2008 MLS Terms of Use Memo from the Greater Las Vegas Association of REALTORS

gavel1.jpg I am getting questions on how a Chapter 13 affects a foreclosure?

Being the General Counsel of Prudential, Americana Group, REALTORS®, I do not practice in bankruptcy law and so I have asked this question of David Krieger, Esq., Haines & Krieger, LLC, 1020 Garces Ave., Suite 100, Las Vegas, NV 89101, PH: 702-880-5554, Fax: 702-385-5518, email: davkrieg@hainesandkrieger.com

David Krieger, Esq., says:

“Through a type of Bankruptcy called a “Chapter 13″ people can keep their property from being sold at foreclosure.  Quite often, filing a chapter 13 will also discharge (eliminate) any outstanding credit card debts, medical bills, payday loans and other unsecured debts.  In certain circumstances, a chapter 13 can even strip off (eliminate) a 2nd or 3rd mortgage.”

And I asked, “but what about Chapter 7?  Does that also assist arresting foreclosure?”

David says,

“Not really.  Chapter 7 doesn’t provide for a mechanism to cure pre-bankruptcy arrears.  Hence, chapter 7 is not a viable solution for saving homes in foreclosure.  However, a chapter 7 may be able to deal with any deficiencies resulting from foreclosed upon properties.”

“In order to be eligible to file a chapter 13, you must have regular income sufficient to support your ongoing Mortgage payments as they become due in the future.  You will also be required to make monthly payments to a chapter 13 trustee (who is a person appointed by the bankruptcy Court to administer the monthly payments).  Generally, through a chapter 13, someone who has fallen behind with their mortgage payments will make monthly payments over a course of 3 to 5 years to come current with their pre-petition mortgage deficiencies.  Upon completion of the plan payments, the mortgage is reinstated, the property is out of foreclosure and, frequently, all other personal debts are eliminated.”

“There are many misconceptions about how chapter 13 works.  Most of my clients (before they meet with me) think that they will have to repay all their debt.  This is almost never true.  The Bankruptcy system is set in place to help people in their time of need.”

“Also, many clients don’t think they will ever be able to purchase property or finance new cars again.  This is also untrue.  Not only will most chapter 13 debtors be able to purchase cars, homes, etc., in the future, but they are in better position to do.  Creditors lend based on the credit worthiness and other criteria of credit applicants.  When juxtaposed, a person in a chapter 13, who is discharging credit debt and reinstating mortgage terms is generally much more appealing than a debtor who has NOT filed bankruptcy still has significant outstanding debts such as defaulted loan/credit card obligations, mortgage deficiencies, etc.  To put this in further perspective, Creditors make lending decisions based on risk of default.  Generally, someone who in a chapter 13 for 12 months has established an ability to repay their ongoing debts, whereas a person who has not filed bankruptcy, but has bad debt outstanding has only demonstrated the opposite, an inability to manage their debt.  Accordingly, many of my clients are happily surprised when they receive offers for financing for new homes and cars within 12 months of filing a chapter 13.”

Altogether, Chapter 13 is very powerful tool for people who need financial assistance.  Unfortunately, clients of your REALTORS® are far from alone.  This real estate market has sent many people into my office who under normal economic conditions would never have dreamed of needing a bankruptcy attorney.  I meet with many clients weekly (including bankruptcy) seeking bankruptcy counsel, and generally this is the only option.  On that note, my clients often feel they are doing something bad, where in reality a Bankruptcy is frankly the most responsible outlet for most people facing the present dire financial circumstances.”

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Please also see my June 10, 2009 Update on CIC Packages.

This is actually a follow up to Blog dated October 5, 2007 on REO properties. 

Question:  But isn’t it a Nevada law that the resale package is to be delivered prior to close of escrow?  So if an REO/Bank seller refuses to supply the resale package, is the contract valid?  Isn’t this illegal?   

Answer:  It is unlawful for a Seller to not, “furnish to a purchaser” a re-sale package.  Per NRS 116.4019.  This applies to banks, estates (probate) and guardians (all sellers).  However, if the buyer closes escrow the buyer as effectively waived their rights as explained below.   

NRS 116.4109  Resales of units, states, a unit’s owner or his authorized agent shall furnish to a purchaser a resale package containing all of the following: 

(a) A copy of the declaration, the bylaws, the rules or regulations of the association and the information statement required by NRS 116.41095; 

(b) A statement setting forth the amount of the monthly assessment for common expenses and any unpaid assessment of any kind currently due from the selling unit’s owner; 

(c) A copy of the current operating budget of the association and current year-to-date financial statement for the association, which must include a summary of the reserves of the association required by NRS 116.31152; and which must include, without limitation, a summary of the information described in paragraphs (a) to (e), inclusive, of subsection 3 of NRS 116.31152; and 

(d) A statement of any unsatisfied judgments or pending legal actions against the association and the status of any pending legal actions relating to the common-interest community of which the unit’s owner has actual knowledge. 

Each of the above items is noticed in the Receipt of Resale located at Prudential®, Americana Group, REALTORS® Ameriforms: Purchaser’s Receipt of Resale Package 

When the purchaser receives the resale package he/she may, by written notice, cancel the contract of purchase until midnight of the fifth calendar day following the date of receipt of the resale package.  That’s five (5) days from the receipt and it is calendar days, so if it falls on a Saturday, you must cancel that Saturday. 

If the purchaser elects to cancel he/she must hand deliver the notice of cancellation to the unit’s owner or his authorized agent.  The Cancellation is without penalty, and all payments made by the purchaser before cancellation must be refunded promptly. 

BUT WITH ALL THAT STATED, WHAT IF THE RESALE PACKAGE IS NOT RECEIVED BY THE PURCHASER?  WHAT IF THE BANK JUST WON’T TURN IF IT OVER?    

If the purchaser has accepted a conveyance of the unit, the purchaser is not entitled to: 

“Cancel the contract pursuant to this subsection;” or 

“Damages, rescission or other relief based solely on the ground that the unit’s owner or his authorized agent failed to furnish the resale package, or any portion thereof, as required by this section.”  

THUS, once the transfer occurs, the purchaser does not have the right to make complaint. 

Sue Saunders, General Counsel, Nevada Association of REALTORS, Legal Information Line Frequently Asked Questions April 2008 describes this scenario a bit different.  Sue Sanders writes,

“Can an REO seller require the buyer to get his/her own resale package from a homeowners’ association (HOA)?

No, the seller cannot require the buyer to get his/her own resale package. The law requires a unit owner or his authorized agent to furnish the purchaser with a resale package obtained from the HOA. See NRS 116.4109. NRS 116 does not provide that buyers can waive this requirement. Instead, NRS 116.1104 states, “except as expressly provided in this chapter, its provisions may not be varied by agreement, and rights conferred by it may not be waived.” [Emphasis added] However, the parties may agree (in writing, of course) for the buyer to reimburse the cost of the package at close of escrow.”

Legal Information Help Line Frequently Asked Questions April 2008, Nevada Association of REALTORS; April 2008, Page 1; Question 3.  nvar.org

However, we are still left with what “furnish” means.  It is either to “provide” or to “provide with what is necessary for a purpose.”  So the Seller may still only be required to make arrangements for the re-sale package to be supplied.

 

But in the end, it does not matter, due to the fact that if a bueyr closes without a re-sale package, this buyer has no right to make complaint.  Therefore as a practical matter, as a buyer, it is best to first gain the re-sale package and to review it to confirm it is not going to restrict your 18 wheel caravan parking needs, for example, prior to close of escrow.

See also the April 2008 MLS Terms of Use Memo from the Greater Las Vegas Association of REALTORS