Foreclosure victory pays little for Reno man

If you told Emiliano Pasillas that he would be making history when he bought his new house in 2006, he likely would have a different kind of history in mind.

"My family and I used to live in a condominium before we moved to our new home," Pasillas said. "So this was the first house that I ever bought. I just felt wonderfully happy when we first moved in. It's our dream house."

Five years after buying his Reno home, however, Pasillas made a different kind of history. In July 2011, the Nevada Supreme Court ruled in his favor after determining that lender HSBC Bank did not negotiate in good faith during two foreclosure mediation sessions with Pasillas.

Along with the case of Southern Nevada resident Moises Leyva, which also reached the state Supreme Court, Pasillas' case set a precedent for the Nevada Foreclosure Mediation Program.

More specifically, both cases affirmed the need for banks and lenders to do their due diligence during foreclosure mediations with distressed borrowers who are trying to keep their homes. Otherwise, they will face sanctions for negotiating in bad faith.

The mediation program was created in 2009 after Assembly Bill 149 was passed by the Nevada Legislature.

"It was one of two seminal cases" defining how the foreclosure mediation program works, Reno lawyer Geoffrey Giles said.

"Prior to those cases, all we had was a statute that was very vague and gave broad discretion to judges. We had no guidance, which these two cases gave us. They're really quite important and shifted the direction of the foreclosure mediation process."

HOLLOW VICTORY

Today, however, Pasillas' victory at the state Supreme Court rings hollow.

Before appealing to the Supreme Court, Pasillas' petition for a judicial review was denied by District Judge Patrick Flanagan, who authorized foreclosure proceedings to move forward against the homeowner.

After the state Supreme Court ruled in favor of the Reno resident, his case was remanded back to Washoe County District Court.

There, Flanagan reached a new judgment in November, ordering another round of mediation for Pasillas.

Flanagan also sanctioned HSBC to pay for all mediation costs plus an additional $2,500 to be payable to Washoe Legal Services, a nonprofit that provides legal services to low-income county residents. That meant Pasillas could not use the money to pay his lawyer.

The decision was just about the most lenient interpretation of the state Supreme Court opinion, which gave the District Court leeway to impose tougher penalties on the bank, Reno lawyer Keith Tierney said.

"That decision is not normal," Tierney said. "What's normal is to have the prevailing party request sanctions with attorney's fees going to the homeowner. At least that's what you see in the East Coast, where courts have been coming down strongly on the side of homeowners in cases like this."

Giles also thought the judgment against HSBC was lighter than he expected, given the latitude provided by the state Supreme Court decision for sanctions.

"The Supreme Court reversed the District Court decision and imposed sanctions" on HSBC, Giles said. "A new mediation isn't much of a sanction."

Pasillas' lawyer Terry Thomas was particularly critical of Flanagan's order. Such a light sanction won't serve as a deterrent for banks that do not negotiate in good faith at foreclosure mediations, Thomas said.

"This sanction is a perpetual do-over, plus a few bucks to charity, which (the lender) can deduct as a contribution to a 501c3," Thomas said.

"Paying $2,500 isn't even a slap on the wrist for the banks. This order means simply that banks may do absolutely anything in bad faith at the mediation ... because there basically are no sanctions. It makes mediation a farce."

NOT ONLY PRECEDENT

Flanagan made some history of his own in early 2011 after coming down hard on Wells Fargo in the case of a Reno couple, Duke and Tina Renslow.

Flanagan used a provision in Nevada's foreclosure mediation law to modify Duke Renslow's mortgage, setting his payment to $1,145 a month and reducing his interest rate for the life of the note to 2 percent.

It was the first time a Nevada District Court judge used the provision, which is being challenged by lenders as unconstitutional.

At the time, lawyers such as Giles and Tierney lauded Flanagan's decision, calling it a game-changer for the foreclosure mediation program.

With other mediation-related cases scheduled to appear before Flanagan in District Court, lawyers wonder what kind of judgment they will get: one more in line with Pasillas or one that's closer to the Renslow case.

"That's the $64,000 question," Giles said. "On what basis does it go either way?"

A MATTER OF FAITH

In court documents explaining his decision, Flanagan cited an extraordinary display of bad faith by the bank as the reason he modified the Renslow mortgage.

Duke Renslow said he was meticulous in keeping records, including records and correspondence from the bank that proved his claims.

Meanwhile, Pasillas remains stuck in a quagmire that started back in 2008 after he lost his job.

Later that year, Pasillas stopped making house payments because his lender said he couldn't qualify for a loan modification unless he was late on his mortgage.

These days, Pasillas works part-time at a church, Iglesia de Cristo Miel, where he is a pastor. Pasillas already has paid $3,000 to his lawyer for his initial case.

He intends to pay Thomas the remaining $3,000 in legal fees he owes him for the services provided during his appeal.

Pasillas is puzzled that he did not get his legal fees reimbursed after the state Supreme Court ruled in his favor.

Given that his first two mediations failed because the bank did not bring the required paperwork both times, Pasillas worries the same thing will happen in his upcoming mediation.

The mediation will take place either this month or in February.

For now, Pasillas' hope is to get his payments lowered to $1,400 per month. With his $340,000 mortgage debt ballooning to $450,000 after late fees and penalties, however, he is uncertain about his prospects.

Meanwhile, his wrecked credit will make searching for an apartment tough if he loses his home, Pasillas said.

All he wants is for his family to get a chance to stay in their home, Pasillas said.

"I got a wife and six kids and this is our first house. We love this house. We love this neighborhood. Hopefully, we can continue to raise our kids here."

Comments

Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

1. VegasDude2010 Jan. 8, 2012 | 2:33 p.m. Report Abuse

   OK, this makes no sense. The deadbeat had a mortgage. Deadbeat doesn't pay mortgage. Deadbeat lives in house for almost 2 years rent free. Deadbeat "wins" case saying they didn't handle his foreclosure properly. Deadbeat really gained nothing. Deadbeat has six kids because he has never heard of birth control. I could go on for hours.

2. mutter Jan. 8, 2012 | 1:04 p.m. Report Abuse

   Mortgage companies should not be allowed to refuse to work with people to keep their houses and force people to be behind to renegociate a loan. My question is he wanted his mortgage lowered to 1400 a month, so Mr Pasillas, since you haven't been paying your mortage for 3 yrs, you have paid off all your other debt or you put away 50,400.00 right? Ofcourse not. You have to pay your fair share too Mr. Pasillas.

3. TimeRanger Jan. 8, 2012 | 12:45 p.m. Report Abuse

   Something is Drastically WRONG when you have to stop paying (and wreck your credit) before a lender will even talk to you about modifying or refinancing your mortgage.

4. local_voice Jan. 8, 2012 | 12:05 p.m. Report Abuse

   Dude, pay the mortgage or walk away. You are not going to win a fight with the lender.

5. TheBrain Jan. 8, 2012 | 11:43 a.m. Report Abuse

   What is this country coming to!?? Look maybe it made economic sense to try and work out a mortgage modification instead of foreclosing but there is no "right" to a modification so how can a court hold that a lendor didn't act in good faith when they had no obligation to do ANYTHING?! People sign a contract when they take out a mortgage and if they break the contract they should lose the house and be responsible for any remaining amounts on the mortgage that can't be satisfied by selling the house. Except in a few states lendors are able to go after these additional funds and they should. People need to understand their obligations instead of thinking they were somehow the victim (laughable) and should be able to get a free pass. And "deputy dog" while people may be sympathetic of someone that loses their job there is no additional responsiblity on the part of the lendor in that case. Bottom line this guy couldn't live up to his financial obligations and lost the house, as he should. I disagree with even a $2500 fine and hope the guy that put them through this has such bad credit he can never buy another house or rip off another lendor!

6. Bob.G Jan. 8, 2012 | 9:48 a.m. Report Abuse

   He hasnt made a payment in 3 years?? Lets say you reset his payment to $1,145, instead of probably 2k or so. $1,145 X 36 months is $41,220 in payments he hasnt made. If he had to move out and rent, he would have had to make rental payments somewhere, so shouldnt he be able to pay his attorney with the money he saved over the past 3 years from not making a house or rental payment? What about people in apartments? Should they be allowed to stay in the apartment if they lose their job, and not pay rent for 3 years??

7. deputy.dog Jan. 8, 2012 | 7:50 a.m. Report Abuse

   scarlet, you missed the part where he said he lost his job, huh? no one buys a house thinking that they're going to lose their job and be unable to pay the mortgage. this guy's situation is different than those who buy a house using one of those loans that gets more expensive over time and then the owner decides he no longer wants to pay it because the house is worth less.

8. scarlet111111 Jan. 8, 2012 | 5:58 a.m. Report Abuse

   This court case would never have come to pass if this individual had honored the contract he signed. If he could not honor it then he should have rightfully lost the house. Perhaps he shouldn't have purchased such a large expensive home in the first place. Perhaps he should have purchased something within his means or just stayed in his condo, especially having six kids to support. Seems like common sense to me.