It’s no secret that Nevada is one the national hot points for foreclosures, especially Las Vegas. One way the state government has tried to reduce the strain on underwater and defaulted homeowners is to create the Foreclosure Mediation Program (FMP) in 2009. The goal of the program is to keep homeowners in their homes while respecting the lender’s interest in getting paid. The parties must enter the FMP in good faith, and the lender may not proceed with a nonjudicial foreclosure unless it receives a program certificate. Las Vegas bankruptcy lawyers watched carefully the results of a recent ruling by the Nevada Supreme Court over whether one bank entered foreclosure mediation in bad faith, in a case titled Edelstein v. Bank of New York Mellon. Here are four lessons from the case:
- It’s critical that lenders entering the FMP be able to demonstrate to the mortgagor that it is both the beneficiary of the deed of trust and the current holder of the promissory note. If they cannot then they are proceeding in bad faith.
- When the beneficiary of the deed of trust is the Mortgage Electronic Registration System (MERS), and the promissory note is held by the lender, the lender may not initiate a nonjudiciail foreclosure in Nevada, and it cannot enter mediation in good faith. MERS is a privately owned deed recording system that allows banks to know the title status of individual properties regardless of state laws and county recording requirements. Its existence helps facilitate the country’s very large mortgage-backed security market.
- If either the beneficiary of the deed of trust or the holder of the promissory note gains possession of the other, it can proceed to foreclosure mediation in good faith.
- Even if the deed of trust and the promissory note are separated when the mortgage is created, reunifying the two allows the owner of both to go to enter the FMP.
There were other issues to Edelstein’s case that did not make it to the Nevada Supreme Court, but the general point is that the necessary documents the parties must produce before entering foreclosure mediation can be quite complicated. Hiring an experienced Las Vegas bankruptcy lawyer will help your case if you realize that the bank doesn’t really have the authority to initiate a nonjudicial foreclosure against you.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.