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 are all aware, commissions are non-negotiable.  (see by other blogs on setting commissions) and on (buyer broker commissions within FHA loans).

But what if there is an issue with the commission?  Can the listing and selling broker reduce to writing an agreement to reduce commission?

Well, you as listing agent are between a rock and a hard place when the commission is being negotiated.  You should gain the opposing broker’s approval and even then a negotiated commission may not be enforceable.

Recent examples are when you as the listing agent neglected to warn a selling broker that the commission may be reduced by the lender of the property.  (See my blog on this issue).  But now the lender is validly reducing the commission.  Well, since you did not warn the selling broker, you as the listing agent are stuck in paying the full commission.  “Hail Malthus!” you say?  No, you mustn’t give up yet.  If the selling broker is willing to work with you, you can mutually negotiate a compromise.  The problem is that it is not clear if the selling broker still has the right to file a grievance for commission with the Greater Las Vegas Association of REALTORS® under Article 17.  I believe that if the selling broker executes the attached document, you should be safe [see attachment]

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.