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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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.  

 

reo_find_home.jpg

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