Since 2009, Nevada implemented a foreclosure mediation program to resolve the rising wave of foreclosures that were ripping through the state at the time. We’ve discussed the statistics on the program in the past, as well as what happened when one homeowner won sanctions against a lender that acted in bad faith. Recently, the Nevada Supreme Court ruled in favor of a homeowner in a lawsuit relating to foreclosure mediation, which will hopefully show banks that they need to play ball with homeowners when going to mediation.
Marcia Bergenfield bought a home in Nevada and financed it with a promissory note to Countrywide Home Loans. She secured the promissory note with a deed of trust indentifying Countrywide as the lender but naming the Mortgage Electronic Registration Systems (MERS) as the beneficiary. MERS assigned its beneficial interest in the deed of trust to HSBC Bank USA, and Countrywide endorsed the promissory note “in blank,” meaning that whoever held the note could demand payment merely by producing the promissory note. Bank of America bought Countrywide, making it the holder of the promissory note.
Bergenfield defaulted on the loan, and she chose to go through foreclosure mediation. Bank of America attended, but HSBC Bank USA did not. The mediation broke down because Bank of America did not bring short-sale estimates, and Bergenfield did not provide updated financial information. Bergenfield then filed a petition for judicial review in Nevada district court alleging that Bank of America participated in bad faith. The district court decided that it did, and Bergenfield appealed claiming that Bank of America was not authorized to negotiate as it did not own the deed of trust securing the note, and Bank of America countered by claiming that as the owner of the promissory note, owning the deed of trust wasn’t necessary.
The Nevada Supreme Court held that because the state requires lenders initiating a nonjudicial foreclosure to own both the promissory note and the deed of trust, Bank of America did not have the authority to negotiate at the foreclosure mediation. It did, however, have the power to negotiate over the terms of the loan, but that wasn’t enough to satisfy the rules governing foreclosure mediation. The court remanded the case to the district court to determine the appropriate sanctions against Bank of America for participating in foreclosure mediation in bad faith.
It appears that Marcia Bergenfield won a victory for Nevada homeowners, though what will happen to her foreclosure is unknown. If you are facing foreclosure, discussing your situation with an experienced Las Vegas bankruptcy lawyer can help you decide whether to proceed with foreclosure mediation, a short sale, or bankruptcy.
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.