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Lenders' conduct in foreclosure program angers justices
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LAS VEGAS REVIEW-JOURNAL
Mortgage lenders who try to foreclose on distressed Nevada homeowners received a not-so-subtle message Tuesday when the Nevada Supreme Court heard a trio of appeals related to its Foreclosure Mediation Program: Follow the rules or suffer the consequences.
Just what those consequences might be remains to be seen, but a majority of justices expressed growing frustration and even anger with lenders who fail to participate in good faith.
The complaints against lenders' participation in the foreclosure program are legion and focus on three issues: They don't bring loan documents required by state law; they don't send someone authorized to modify a loan to mediation sessions; and they don't offer workable solutions designed to keep the borrower in the home.
When attorney Donna Osborn told justices that program mediators were biased in favor of borrowers, Chief Justice Michael Douglas bristled.
Mediators are using " extreme enforcement of the rules," said Osborn, who represents One West Bank and Regional Trustee Service. "They say, 'Let's see what we can find wrong' " with the lender.
"That's not what I'm hearing at our roundtable discussions," Douglas said with uncharacteristic emotion. "If you say that (to program employees), they will hand you your head. Now stick to the arguments presented this day."
Osborn's clients foreclosed on Karl and Frances Holt in 2008. The Holts opted to participate in mediation, but neither Regional Trustees nor One West Bank sent a representative to two scheduled mediations.
Clark County District Judge Donald Mosley denied the certification letter needed to proceed with the foreclosure but gave the lenders permission to restart the process.
The high court must decide if lenders can, as was allowed in the Holt case, simply file another foreclosure notice after being found to have acted in bad faith.
In Daane v. Clark County District Court, lender CitiMortgage didn't bring the required documents or provide someone who could modify a loan.
Found to have acted in bad faith by the mediator, CitiMortgage was later required to pay William Daane's attorney fees. But like other lenders, it simply filed a second notice of foreclosure after its first attempt failed.
Jacob Hafter, Daane's attorney, urged justices to close the loophole.
"There has to be consequences," he said. "Lenders don't take this serious."
In the third case, out of Reno, Washoe County Judge Patrick Flanagan, Mosley's counterpart in Northern Nevada, denied homeowners Emiliano and Yvette Pasillas judicial review.
As in the other cases, lender HSBC Bank failed to bring the required loan documents, and -- in a growing trend -- failed to even prove that the loan was theirs or that they had the right to foreclose. The assignment of the loan was blank.
When the Pasillas sought a bad faith ruling, Flanagan declined to impose sanctions despite evidence the lender failed in every aspect to comply.
Justices Mark Gibbons and Nancy Saitta said they were "incredulous" to learn the lender couldn't prove it held the note. "I'm having a hard time finding substantial compliance," Saitta said.
"Homeowners have a right to know the lender has a right to foreclose," Gibbons said.
Justice Ron Parraguirre suggested the high court might "encourage mediators to pull the plug" on noncompliant lenders.
"It seems like such a waste of time for nothing," he said.
The high court continues to fine-tune the program, which lawmakers created in 2009. When they issue their formal opinion on Tuesday's appeals, justices will not only rule on the individual cases, but will also redefine the meaning of good and bad faith as it pertains to the program.
They also must determine if more than two judges should conduct judicial reviews and must button down meaningful sanctions when lenders act in bad faith.
State law allows judges to modify loans from the bench, but Mosley and Flanagan agree that such a sanction constitutes an illegal taking.
Hafter agrees, but he said lenders could still be held to account through monetary sanctions.
"Judges don't have to modify the loan," he said. "They can impose a $50,000 sanction for bad faith and give that to the homeowner."
Hafter, who represents several homeowners, said he was happy with the stance taken by justices.
"It looks like homeowners have advocates on the high court," he said. "Hopefully, the Supreme Court will show lenders this isn't a game. Without accountability they're going to keep going after the emotional and financial well-being of homeowners."
Contact Doug McMurdo at dmcmurdo@reviewjournal. com or 702-224-5512.
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As a forensic mortgage auditor I meet with people daily that aren't paying the correct entity. Many notes have been sold, lost, fractionalized, etc. Many times when researching them the trail ends and there is no information to find the holder of the note. What this means to the homeowner is a possibility that you may pay enough payments to clear your debt to find out that you still don't own your home because you have paid the wrong people. It is important to pay, but paying the right entity is the key. When you find that you are paying the correct entity then you make sure that there was not fraud or there were no overcharges or miscalculations in your file. It is my experience that if you have the correct information and have done your homework the bank will pay attention to your requests. They will not, however, pay attention to something that cannot be substantiated.
To Mike, here's what we're talking about in bad faith. Check out 60 minutes April 3. http://www.cbsnews.com/video/watch/?id=7361572n
What "bad faith" on the part of the lenders? Say I lent you $100,000 at an agreed upon interest rate. I want my money, every damn penny of it, including the interest. If you won't pay as you AGREED in writing, I want the house. How is that "bad faith"???
The borrowers who borrowed money they can't afford to repay are the ones acting in bad faith. (Let's not forget about all those false loan applications, either. That is called bank fraud.)
The borrowers who trash the foreclosed houses are the ones acting in bad faith.
The damn judges and legislators who want the lenders to take less than they are owed are the ones who are acting in bad faith.
@anya---If no one entity can prove they own the note, then the courts can order the title be quieted, and the loan is written off by the bank, and your credit rating restored. These court decisions in this article say that in that the actual note and trust deed (originals) must be in proper possession by the bank
@MAC---What part of 'we dont have to pay our mortgage or any other bill unless the entity trying to collect that debt is the correct entity'.
I dont have a problem paying my mortgage. I have a problem not knowing if I'm paying the right company. These mortgage notes and trust deeds were shuffled around so fast in the mid 2000's, no one took the time to do the proper assignments, and recodations. So who you're paying may be the wrong entity. How would you like to pay off your home, and then get a letter from the real note holder, saying they haven't been paid? The servicing company didnt pass along the money as it should have......i'm not doing it. So till the bank can prove they are rightful beneficiaries, I'm not paying...
You're right - BOA sucks. I'm walking away from my home. This is just the beginning people. More and more people are finallt starting to get it - your home will NEVER be worth what you paid for it. And yes, the recession was caused by the greed of the big banks, Wall Street, and our wonderful government. Not people buying more house than they could afford! Watch the DVD "Inside Job" - it should be a good wake-up call for everyone. Stop letting our corrupt government the recession was caused by people being irresponsible and buying more than they could afford - it's another smoke screen.
Bank of America if the worst of these bailout-taking scumbags. Anyone who has their accounts with Bank of America should CLOSE them. Let's watch them stumble and FAIL they way they have with so many American homeowners. Let's give them the same consideration and assistance they've given us. My mortgage was purchased by B of A last year and every month I fire off the same letter to at least 3 administrative e-mails telling them what a piece of steaming crap they are and how I DEMAND that they sell my mortgage off so I don't have to hate myself for paying my mortgage to them every month. Will probably never do any good except to vent some frustration on my part. They hold a deaf ear to us ALL.
The mortgage holders are often NOT the pirates that sold the house nor the "banker" that lead anyone into an inappropriate loan. Mortgage holders are entitled to be paid or to foreclose when you fail to pay as agreed. You have the option to sign the place back to the holder and WALK AWAY. Might even save your credit rating. Certainly a heart ache but you're already living that nightmare. Move on? Start over?
Lenders who act in bad faith should have monetary sanctions imposed---$50K just doesn't seem like a reasonable punishment. But I do not believe that this money should go to the borrower !
I agree with many of the comments below. Who is going to hold the bums who trashed their houses before they left, just for spite? I bought a forclosed house and cleaned it up, but what pigs. The pigs who thought things were great in 2005, could care less in 2010. As for the "little people " bailing out the banks, no, that was GW Bush (no conservative) and Obama (liberal Bush on steriods).