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FIVE OPTIONS IN NEVADA WHEN BEHIND IN YOUR MORTGAGE

2011-01-11T14:34:00Z

Once you get behind in your mortgage payments there are only five possible outcomes. Just as every airplane flight ends in a landing, one of the following five events is going to occur when you get behind in your mortgage. There are different rights and impacts for each of the five events.

Keep in mind that each person and entity’s situation is unique. Employment of an experienced lawyer is extremely important to both ensure that all options are explained to the client and that the client understands the legal impact of every decision that is being made. These decisions have long range implications on the clients’ financial future. the importance of being fully informed of the law cannot be overstated.

In Nevada the common financing instrument for real property is a promissory note secured by a deed of trust. This article refers to a note and deed of trust as a mortgage, although because they are two separate documents they have separate rights and obligations associated with each document. The differences are not important to the general discussion below.

1. Loan modification. This procedure has become essentially routine in the past year. All mortgages insured or owned by either Freddie Mac or Fannie Mae, about 80% of the market as of the date of this article, must offer a loan modification on terms dictated by the U.S. Treasury Department. The Home Affordable Modification Program (HAMP) in a nutshell tries to reduce the interest rate and extend the repayment term to get the homeowner’s payment to 31% of his/her gross monthly income. This 31% payment includes interest, principal, taxes, insurance and HOA dues.

2. Short sale. Also called a short payoff. The lender agrees to accept payment of less than the full loan balance to allow the property to be sold. Due to the rapid fall in prices selling real estate for its current value will usually not be enough to pay off the loan balance. Some lenders are requiring the borrower to sign a promissory note obligating the borrower to pay the lender the difference between the amount that is being paid and the loan balance.
By far this is currently the preferred option from the lender’s viewpoint when a loan modification is not available.
A short sale is almost impossible to achieve when a second mortgage exists on the property because the lender in second position has to agree to accept nothing or close to nothing for seller to transfer clear title.

3. Deed in Lieu of Foreclosure. The borrower provides a deed to the lender in satisfaction of the outstanding mortgage. This is rarely used other than by private lenders because the foreclosure process clears up the title to the property by notifying and eliminating all private liens and encumbrances recorded against the title to the property after the mortgage was originated. Government liens such as taxes and municipal utility services are not eliminated by a foreclosure sale.

4. Reinstatement. The borrower reinstates the loan by paying all past due amounts, without any modification of the terms of the loan.

5. Foreclosure. The lender can initiate and complete a foreclosure. Although Nevada does have procedures for both judicial and non-judicial foreclosure, non-judicial foreclosure is so much faster and cheaper that there are virtually no judicial foreclosures unless there is a title issue that would have to be resolved by the court anyway.
The lender can seek a deficiency judgment against the borrower for the difference between the sale price at the foreclosure sale and the loan balance on that date. Suit must be filed to adjudicate the deficiency judgment within six months of the foreclosure sale.
If the property is a primary residence, the homeowner can request a mediation with the lender through the Foreclosure Mediation Program. The request must be made within 30 days of receipt of the Notice of Default. The goal of mediation is to explore avenues other than completing the foreclosure sale such as through a loan modification, a short sale, or a deed in lieu of foreclosure.　

I’ve been an attorney for 20 years in Las Vegas. Let my experience work for you.

You are welcome to visit my website benchilds.com or call or email me to schedule an appointment.

(702) 251-0000
Email : ben@benchilds.com

BANKS REQUIRED TO PROVE CLEAR CHAIN OF TITLE

2011-01-11T10:01:00Z

A unanimous decision by the Massachusetts Supreme Judicial Court on January 7, 2011 rocked the banking world, immediately generating news headlines like Top Mass. Court Says Banks Can't Foreclose Without Proper Title (Westlawnews) and Top Massachusetts Court Rules Against Foreclosing Banks (Chicago Tribune). Shares in Wells Fargo fell 4 % and U.S. Bancorp fell 14 % and Bank of America fell 2.8 %, on a day when the stock market was up.

The cases are U.S. Bank N.A. v. Ibanez and Wells Fargo Bank N.A. v. LaRace et al, Massachusetts Supreme Judicial Court, No. SJC-10694.

The Ibanez decision is just the latest in a series of state court decisions which hold that, as the headline states, banks can't foreclose without proper title. The facts of both the iba and the LaRace mortgages are not uncommon.

FACTUAL SUMMARY

The iba mortgage

The mortgage was originated on December 1, 2005 by Rose Mortgage, Inc. and recorded the next day. Rose executed an assignment in blank; i.e., without any named assignor being specified. At some point the blank was filled in with Option One Mortgage Corporation and that assignment was recorded on June 7, 2006. On January 23, 2006, obviously before recording, Option One executed an assignment in blank. U.S. Bank stated that the mortgage being foreclosed was assigned three times after the assignment to Option One, then bundled into a pool of 1,220 other mortgages and assigned one more time to U.S. Bank, "as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z. With this last assignment, the Ibanez and other loans were pooled into a trust and converted into mortgage-backed securities that can be bought and sold by investors--a process known as securitization."

U.S. Bank stated that the last assignment occurred based on a trust agreement, which trust agreement was not in the trial court record. What was in the record is a 273 page private placement memorandum (PPM) dated December 26, 2006. "The PPM describes the mortgage pools and the entities involved, and summarizes the provisions of the trust agreement, including the representation that mortgages "will be" assigned into the trust. According to the PPM, "[e]ach transfer of a Mortgage Loan from the Seller [Lehman Brothers Holdings Inc.] to the Depositor [Structured Asset Securities Corporation] and from the Depositor to the Trustee [U.S. Bank] will be intended to be a sale of that Mortgage Loan and will be reflected as such in the Sale and Assignment Agreement and the Trust Agreement, respectively." The PPM also specifies that "[e]ach Mortgage Loan will be identified in a schedule appearing as an exhibit to the Trust Agreement." However, U.S. Bank did not provide the judge with any mortgage schedule identifying the Ibanez loan as among the mortgages that were assigned in the trust agreement."

At the foreclosure sale July 5, 2007. U.S. Bank purchased the property from itself as the trustee for $94,350, much less than both the value of the property and the balance due. The foreclosure deed was recorded May 23, 2008. A written assignment from American Home Mortgage Servicing, Inc, as "successor-in-interest" to Option One to U.S. Bank, as trustee for the securitization trust, was executed on September 2, 2008 and was recorded September 11, 2008. Until that time Option One was the record holder of the Ibanez mortgage.

The Larace mortgage

The mortgage was originated on May 19, 2005 by Option One and recorded the same day. On May 26, 2005 Option One executed an assignment in blank.

"According to Wells Fargo, Option One assigned the LaRace mortgage to Bank of America in a July 28, 2005, flow sale and servicing agreement. Bank of America then assigned it to Asset Backed Funding Corporation (ABFC) in an October 1, 2005, mortgage loan purchase agreement. Finally, ABFC pooled the mortgage with others and assigned it to Wells Fargo, as trustee for the ABFC 2005-OPT 1 Trust, ABFC Asset-Backed Certificates, Series 2005-OPT 1, pursuant to a pooling and servicing agreement (PSA)."

Again, the "flow sale and serving agreement" is not in the record, and there was no document memorializing the transfer from Option One to Bank of America. An unexecuted copy of the mortgage purchase agreement was provided, which was an exhibit to the PSA and makes reference to a schedule of mortgages being assigned, but again the schedule was not in the record.

Wells Fargo provided an unsigned copy of the PSA which was downloaded from the Securities and Exchange website. The unsigned PSA was between ABFC as depositor, Option One as servicer, and Wells Fargo as trustee. The unsigned PSA stated that the despositor assigned all rights to and did deliver "the original mortgage note, an original mortgage assignment ‘in form and substance acceptable for recording,’". The PSA did not contain loan schedules. Wells Fargo made an argument that a schedule identified the LaRace loan even though it that did not include names, addresses nor a loan number matching the loan number or servicing number on the loan, but is contained the zip code and city and payment history and loan amount matched the LaRace mortgage.

At the foreclosure sale July 5, 2007. Wells Fargo purchased the property from itself as the trustee for $120,397.03, much less than both the value of the property and the balance due. The foreclosure deed was executed May 7, 2008 and on that same day Option One, still the record title holder of the mortgage, executed an assignment to Wells Fargo, which assignment was recorded May 12, 2008. This assignment stated an effective date of April 18, 2007, but note that it was execucted ten months after the foreclosure sale.

DECISION

The website of the Massachusetts Supreme Judicial Court represents that it is the oldest continuously functioning court in the western hemisphere. It is a well respected court and the briefing was extensive. In addition to the briefs of the parties, four amicus briefs were filed. An amicus brief was filed by a Mortgage Fraud and Forensic Analyst and Certified Fraud examiner, who had been appointed by the trial court. Amicus briefs were also filed by the Real Estate Bar Association of Massachusetts, the National Consumer Law Center and the Massachusetts Attorney General.

For simplicity the phrase deed of trust is used interchangeably with the word mortgage in this article. Massachusetts, like Nevada, allows non-judicial foreclosures of notes secured by mortgages or deeds of trust. Both states are "title theory" states in which a mortgage is a transfer of legal title to secure a debt. In the simplest explanation, the lender can foreclose after a borrower stops paying his/her mortgage. However, because there is no judicial oversight, the lender must strictly follow the terms of the power sale in the loan document. If there is a defect in the execution of the power of sale, "the sale is wholly void" under an 1871 Massachusetts case. State case authority from Massachusetts and Michigan is cited to support the rule that if the foreclosing party lacks "jurisdiction and authority" the foreclosure sale is void.

Further, notice requirements must be fulfilled. Importantly, the opinion states that "the mortgagor is entitled to know who is foreclosing and selling the property, the failure to identify the holder of the mortgage in the notice of sale may render the notice defective and the foreclosure sale void." Failure to strictly comply with the notice requirements would render the sale void.

Because it is a transfer of an interest in land, a valid mortgage requires a writing signed by the grantor. Whether they are bundled or not, mortgages remain legal title to land and are subject to the laws respecting real estate titles. There must be a clear chain of title evidencing ownership of the mortgage and the foreclosing entity must hold the mortgage at the time of the notice.

The opinion makes the following basic statements regarding title to real property.

"... there must be proof that the assignment was made by a party that itself held the mortgage."

"A foreclosing entity may provide a complete chain of assignments linking it to the record holder of the mortgage, or a single assignment from the record holder of the mortgage."

"If the claimant acquired the note and mortgage from the original lender or from another party who acquired it from the original lender, the claimant can meet its burden through evidence that traces the loan from the original lender to the claimant". The key in either case is that the foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale (or the foreclosing entity must be one of the parties authorized to foreclose)" under the Power of Sale statute¹ and under the Foreclosure statute²

The conclusion is that the securitization documents did not prove that U.S. Bank in the iba case and Wells Fargo in LaRace case were the holders of the respective mortgages at the time of the publication of the notices and the sales.

Three other arguments raised by the banks were addressed in the opinion. First, the assignments in blank were not valid assignments. "We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment." ³

Second, mere possession of the note is not sufficient to prove ownership of the note. A valid assignment, or a court order of assignment, is required to required; otherwise the mortgage holder remains unchanged.

Third, postsale assignments will not cure a defect that existed on the dates of the publication of the notice or the foreclosure sale. Because they did not have the assignments when the notice was published and the foreclosure sale occurred, the U.S. Bank and Wells Fargo lacked the authority to foreclose at the time. Thus, their published claims of being the holders of the mortgages at the time of the publication of the notice and the foreclosure sale were false. Simply stating an earlier effective date does not alter this fact. An assignment of a mortgage is a transfer of legal title and it becomes effective only on the date of the transfer; "it cannot become effective before the transfer." While an earlier assignment can be confirmed, a confirmatory assignment cannot confirm an assignment that was not validly made earlier nor can it backdate an assignment being made for the first time.

The Ibanez decision is a unanimous decision. Two justices wrote a separate, concurring opinion to their surprise at the banks’ "utter carelessness with which the banks documented the titles to their assets." The concurring opinion notes that the strict compliance necessary in a title theory state because of the non-judicial nature of foreclosure proceedings in those states.

It is important to remember that in the cases being reviewed the banks were the plaintiffs, that therefore bore the burden or proof. In Nevada judicial foreclosure is a rarity for this very reason. However, neither the reasoning nor the law in the Ibanez decision is either complicated or expansionary. It just applied common law principles of property ownership and conveyances to what is a routine set of facts.

Endnotes

1. Mass. G. L. C. 183 § 21 states :

Section 21. The following "power" shall be known as the "Statutory Power of Sale", and may be incorporated in any mortgage by reference:

(POWER.)

But upon any default in the performance or observance of the foregoing or other condition, the mortgagee or his executors, administrators, successors or assigns may sell the mortgaged premises or such portion thereof as may remain subject to the mortgage in case of any partial release thereof, either as a whole or in parcels, together with all improvements that may be thereon, by public auction on or near the premises then subject to the mortgage, or, if more than one parcel is then subject thereto, on or near one of said parcels, or at such place as may be designated for that purpose in the mortgage, first complying with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale, and may convey the same by proper deed or deeds to the purchaser or purchasers absolutely and in fee simple; and such sale shall forever bar the mortgagor and all persons claiming under him from all right and interest in the mortgaged premises, whether at law or in equity

2. Mass. G. L. C. 244 § 14 states :

Section 14. The mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person, may, upon breach of condition and without action, do all the acts authorized or required by the power; but no sale under such power shall be effectual to foreclose a mortgage, unless, previous to such sale, notice thereof has been published once in each of three successive weeks, the first publication to be not less than twenty-one days before the day of sale, in a newspaper, if any, published in the town where the land lies or in a newspaper with general circulation in the town where the land lies and notice thereof has been sent by registered mail to the owner or owners of record of the equity of redemption as of thirty days prior to the date of sale, said notice to be mailed at least fourteen days prior to the date of sale to said owner or owners to the address set forth in section sixty-one of chapter one hundred and eighty-five, if the land is then registered or, in the case of unregistered land, to the last address of the owner or owners of the equity of redemption appearing on the records of the holder of the mortgage, if any, or if none, to the address of the owner or owners as given on his deed or on the petition for probate by which he acquired title, if any, or if in either case no address appears, then to the address to which the tax collector last sent the tax bill for the mortgaged premises to be sold, or if no tax bill has been sent for the last preceding three years, then to the address of any of the parcels of property in the name of said owner of record which are to be sold under the power of sale and unless a copy of said notice of sale has been sent by registered mail to all persons of record as of thirty days prior to the date of sale holding an interest in the property junior to the mortgage being foreclosed, said notice to be mailed at least fourteen days prior to the date of sale to each such person at the address of such person set forth in any document evidencing the interest or to the last address of such person known to the mortgagee. Any person of record as of thirty days prior to the date of sale holding an interest in the property junior to the mortgage being foreclosed may waive at any time, whether prior or subsequent to the date of sale, the right to receive notice by mail to such person under this section and such waiver shall be deemed to constitute compliance with such notice requirement for all purposes. If no newspaper is published in such town, or if there is no newspaper with general circulation in the town where the land lies, notice may be published in a newspaper published in the county where the land lies, and this provision shall be implied in every power of sale mortgage in which it is not expressly set forth. A newspaper which by its title page purports to be printed or published in such town, city or county, and having a circulation therein, shall be sufficient for the purpose.

The following form of foreclosure notice may be used and may be altered as circumstances require; but nothing herein shall be construed to prevent the use of other forms.

(Form.)
MORTGAGEE’S SALE OF REAL ESTATE.

By virtue and in execution of the Power of Sale contained in a certain mortgage given by............ to............ dated............ and recorded with
.....
Deeds, Book............, page............, of which mortgage the undersigned is the present holder,............

(If by assignment, or in any fiduciary capacity, give reference.)

.....
for breach of the conditions of said mortgage and for the purpose of foreclosing the same will be sold at Public Auction at............o’clock,............ M. on the............ day of............ A.D. (insert year),............ (place)............ all and singular the premises described in said mortgage,

(In case of partial releases, state exceptions.)

To wit: "(Description as in the mortgage, including all references to title, restrictions, encumbrances, etc., as made in the mortgage.)"

Terms of sale: (State here the amount, if any, to be paid in cash by the purchaser at the time and place of the sale, and the time or times for payment of the balance or the whole as the case may be.)

Other terms to be announced at the sale.

(Signed) ___________________________________________________________________

Present holder of said mortgage.___

A notice of sale in the above form, published in accordance with the power in the mortgage and with this chapter, together with such other or further notice, if any, as is required by the mortgage, shall be a sufficient notice of the sale; and the premises shall be deemed to have been sold, and the deed thereunder shall convey the premises, subject to and with the benefit of all restrictions, easements, improvements, outstanding tax titles, municipal or other public taxes, assessments, liens or claims in the nature of liens, and existing encumbrances of record created prior to the mortgage, whether or not reference to such restrictions, easements, improvements, liens or encumbrances is made in the deed; but no purchaser at the sale shall be bound to complete the purchase if there are encumbrances, other than those named in the mortgage and included in the notice of sale, which are not stated at the sale and included in the auctioneer’s contract with the purchaser.

3. Mass. G. L. C. 183 § 3 states :

Section 3. An estate or interest in land created without an instrument in writing signed by the grantor or by his attorney shall have the force and effect of an estate at will only, and no estate or interest in land shall be assigned, granted or surrendered unless by such writing or by operation of law.

Relevant, corresponding Nevada statutes are set forth below.

POWER OF SALE IN DEED OF TRUST

NRS 107.080 Trustee's power of sale: Power conferred; required notices; effect of sale; circumstances in which sale may be declared void; duty to record; fees.

1. Except as otherwise provided in NRS 107.085 and 107.086, if any transfer in trust of any estate in real property is made after March 29, 1927, to secure the performance of an obligation or the payment of any debt, a power of sale is hereby conferred upon the trustee to be exercised after a breach of the obligation for which the transfer is security.

2. The power of sale must not be exercised, however, until:

(a) Except as otherwise provided in paragraph (b), in the case of any trust agreement coming into force:

(1) On or after July 1, 1949, and before July 1, 1957, the grantor, the person who holds the title of record, a beneficiary under a subordinate deed of trust or any other person who has a subordinate lien or encumbrance of record on the property has, for a period of 15 days, computed as prescribed in subsection 3, failed to make good the deficiency in performance or payment; or

(2) On or after July 1, 1957, the grantor, the person who holds the title of record, a beneficiary under a subordinate deed of trust or any other person who has a subordinate lien or encumbrance of record on the property has, for a period of 35 days, computed as prescribed in subsection 3, failed to make good the deficiency in performance or payment;

(b) In the case of any trust agreement which concerns owner-occupied housing as defined in NRS 107.086, the grantor, the person who holds the title of record, a beneficiary under a subordinate deed of trust or any other person who has a subordinate lien or encumbrance of record on the property has, for a period that commences in the manner and subject to the requirements described in subsection 3 and expires 5 days before the date of sale, failed to make good the deficiency in performance or payment;

(c) The beneficiary, the successor in interest of the beneficiary or the trustee first executes and causes to be recorded in the office of the recorder of the county wherein the trust property, or some part thereof, is situated a notice of the breach and of the election to sell or cause to be sold the property to satisfy the obligation; and

(d) Not less than 3 months have elapsed after the recording of the notice.

3. The 15- or 35-day period provided in paragraph (a) of subsection 2, or the period provided in paragraph (b) of subsection 2, commences on the first day following the day upon which the notice of default and election to sell is recorded in the office of the county recorder of the county in which the property is located and a copy of the notice of default and election to sell is mailed by registered or certified mail, return receipt requested and with postage prepaid to the grantor or, to the person who holds the title of record on the date the notice of default and election to sell is recorded, and, if the property is operated as a facility licensed under chapter 449 of NRS, to the State Board of Health, at their respective addresses, if known, otherwise to the address of the trust property. The notice of default and election to sell must:

(a) Describe the deficiency in performance or payment and may contain a notice of intent to declare the entire unpaid balance due if acceleration is permitted by the obligation secured by the deed of trust, but acceleration must not occur if the deficiency in performance or payment is made good and any costs, fees and expenses incident to the preparation or recordation of the notice and incident to the making good of the deficiency in performance or payment are paid within the time specified in subsection 2; and

(b) If the property is a residential foreclosure, comply with the provisions of NRS 107.087.

4. The trustee, or other person authorized to make the sale under the terms of the trust deed or transfer in trust, shall, after expiration of the 3-month period following the recording of the notice of breach and election to sell, and before the making of the sale, give notice of the time and place thereof by recording the notice of sale and by:

(a) Providing the notice to each trustor, any other person entitled to notice pursuant to this section and, if the property is operated as a facility licensed under chapter 449 of NRS, the State Board of Health, by personal service or by mailing the notice by registered or certified mail to the last known address of the trustor and any other person entitled to such notice pursuant to this section;

(b) Posting a similar notice particularly describing the property, for 20 days successively, in three public places of the township or city where the property is situated and where the property is to be sold;

(c) Publishing a copy of the notice three times, once each week for 3 consecutive weeks, in a newspaper of general circulation in the county where the property is situated; and

(d) If the property is a residential foreclosure complying with the provisions of NRS 107.087.

5. Every sale made under the provisions of this section and other sections of this chapter vests in the purchaser the title of the grantor and any successors in interest without equity or right of redemption. A sale made pursuant to this section may be declared void by any court of competent jurisdiction in the county where the sale took place if:

(a) The trustee or other person authorized to make the sale does not substantially comply with the provisions of this section or any applicable provision of NRS 107.086 and 107.087;

(b) Except as otherwise provided in subsection 6, an action is commenced in the county where the sale took place within 90 days after the date of the sale; and

(c) A notice of lis pendens providing notice of the pendency of the action is recorded in the office of the county recorder of the county where the sale took place within 30 days after commencement of the action.

STATUTE OF FRAUDS

NRS 111.210 Contracts for sale or lease of land for periods in excess of 1 year void unless in writing.

1. Every contract for the leasing for a longer period than 1 year, or for the sale of any lands, or any interest in lands, shall be void unless the contract, or some note or memorandum thereof, expressing the consideration, be in writing, and be subscribed by the party by whom the lease or sale is to be made.

2. Every instrument required to be subscribed by any person under subsection 1 may be subscribed by the agent of the party lawfully authorized.

NRS 111.220 Agreements not in writing: When void. In the following cases every agreement is void, unless the agreement, or some note or memorandum thereof expressing the consideration, is in writing, and subscribed by the person charged therewith:

1. Every agreement that, by the terms, is not to be performed within 1 year from the making thereof.

2. Every special promise to answer for the debt, default or miscarriage of another.

3. Every promise or undertaking made upon consideration of marriage, except mutual promises to marry.

4. Every promise or commitment to loan money or to grant or extend credit in an original principal amount of at least $100,000 made by a person engaged in the business of lending money or extending credit.

5. Every promise or commitment to pay a fee for obtaining a loan of money or an extension of credit for another person if the fee is $1,000 or more.

RECORDING STATUTES

NRS 111.315 Recording of conveyances and instruments: Notice to third persons.

Every conveyance of real property, and every instrument of writing setting forth an agreement to convey any real property, or whereby any real property may be affected, proved, acknowledged and certified in the manner prescribed in this chapter, to operate as notice to third persons, shall be recorded in the office of the recorder of the county in which the real property is situated or to the extent permitted by NRS 105.010 to 105.080, inclusive, in the Office of the Secretary of State, but shall be valid and binding between the parties thereto without such record.

NRS 111.325, Unrecorded conveyances void as against subsequent bona fide purchaser for value when conveyance recorded.

Every conveyance of real property within this state hereafter made, which shall not be recorded as provided in this chapter, shall be void as against any subsequent purchaser, in good faith and for a valuable consideration, of the same real property, or any portion thereof, where his own conveyance shall be first duly recorded.

NEVADA HOMEOWNERS NOW ENTITLED TO MEDIATION BEFORE FORECLOSURE

2009-06-26T17:25:00Z

Existing Nevada law allows banks and lenders to foreclose on Nevada homeowners without any judicial process afforded to these homeowners. As such, Nevada ranks first in the nation in foreclosures. Nevada law makers have recently adopted new law which essentially changes foreclosures in Nevada. AB149 was signed into Nevada law and becomes effective July 1, 2009. The bill was sponsored by Assemblywoman Barbara Buckley and Senator Steve Horsford. This bill is in direct response to the foreclosure crisis Nevada homeowners are facing.

Approximately 67% of homeowners are upside down in their houses. Due to the rapidly declining real estate value. This is the highest percentage in the country. The average Nevada home has declined in value about 50% from the peak prices in December, 2006. The extensive use of "creative" mortgage instruments like interest only, negative amortization loans, or option ARMs coupled with nothing down financing only served to increase the severity of the problem with the downward spiral of the real-estate market.

With an estimated 70,000 to 90,000 homeowners either in foreclosure or pre-foreclosure status, AB149 is the legislature’s solution. AB149 only provides protection to a homeowner who occupies the home being foreclosed upon.

In Nevada, 99% of residential foreclosures are completed by a trustee exercising the power of sale provisions set forth in Nevada Revised Statute ("NRS") 107.080. This is referred to as a non-judicial foreclosure because the courts are not involved when a lender forecloses on property. A non-judicial foreclosure requires two written notices be recorded and served on the owner. The first "Notice of Breach" or "Notice of Default" is required to be served by certified mail. The homeowner has 35 days to cure the accumulated arrearage and stop the foreclosure process summarily by reinstating the loan payments. The second notice is the "Notice of Sale" which is recorded and served 21 days prior to the scheduled foreclosure sale and is required to be served by registered mail. Although a narrow reading of the statute does not require it, every legitimate foreclosure company serves both notices on everyone with an interest in the property as determined by a title report called a Trustee’s Sale Guarantee. The non-judicial foreclosure process takes a minimum of approximately four months to complete.

Thanks to AB149, non-judicial foreclosure is basically over for the homeowner who lives in the home a lender is trying to foreclose on. Now, the notice of default mailed to the homeowner must contain disclosure of contact information for (1) the investor or lender "with authority to negotiate a loan modification on behalf of the beneficiary of the deed of trust;" (2) a local HUD approved counseling agency; and (3) a form for the homeowner to use to request mediation and an enveloped addressed to the Mediation Administrator. The homeowner has 30 days to return the form to the trustee by certified mail. If mediation is elected, the trustee then has to notify, by certified mail, the beneficiary and all other interested persons or entities in the property which is recorded, so thus should be reported on the Trustee Sale Guarantee.

This law finally gives Nevada homeowners contact information for a local representative with authority for their lenders or investor. Many, if not most, original lenders, do not even know the identity of the current investor as the loan has been sold. When a loan is sold, the bank that originally executed the loan may have remained to service the loan in behalf of the new investor.

It is a no-brainer for every Nevada homeowner facing foreclosure to at least request mediation as provided under AB149. Once mediation is requested, the power of sale is on hold "until the completion of the mediation." The mediation process will be coordinated through a new government office patterned along the lines of the Nevada Supreme Court Settlement Program. How it will actually be implemented remains to be seen, although there are already 300+ mediators signed up eligible for training, with mediations anticipated to begin the middle of July. Most of these mediators will be licensed Nevada Attorneys.

One interesting requirement of AB149 is that "[t]he beneficiary of the deed of trust or his representative shall attend the mediation." Here’s the important part. "The beneficiary of the deed of trust shall bring to the mediation the original or a certified copy of the deed of trust, the mortgage note and each assignment of the deed of trust or mortgage note." Certified copy of a deed of trust is not a problem to obtain from the Recorder. But where does one obtain a certified copy of a mortgage note or assignment? These are normally not recorded. Who will be certifying to the authenticity of the a mortgage note?

If the homeowner elects mediation under this new law, the foreclosure sale cannot happen until the mediation is completed.

Benjamin Childs can be contacted at 251 000, ben@benchilds.com