Nevada Supreme Court: You Gotta Prove Chain of Title

A pair of very interesting foreclosure rulings were handed down today by the Nevada Supreme Court. They provide further evidence that documentation problems are rife in the mortgage industry, including documents showing chain of title. They also provide another example of a state supreme court demanding proof of valid chain of title before permitting foreclosure.  

Both cases arise from Nevada's foreclosure mediation program. In one case, Pasillas v. HSBC Bank USA, the Nevada Supreme Court ordered sanctions against HSBC for failing to mediate in good faith. What was the failure? HSBC failed to show up at the mediation with the required loan documentation, namely two pages of the mortgage note were missing, the assignment to HSBC was incomplete, a BPO rather than an appraisal was provided.  Moreover, HSBC didn't show up at the mediation with authority to settle because it still required "investor approval." The foreclosure mediator refused on these ground to authorize the foreclosure. The district court ordered the foreclosure to proceed, but the Nevada Supreme Court reversed the ruling and remanded with instructions for the district court to determine appropriate sanctions.  

Three things are of note in this case.  First, it shows that the Nevada Supreme Court takes a very serious view of enforcing the requirements of the state's foreclosure mediation program. This was a unanimous decision. Second, it's another illustratation of the mortgage documentation SNAFU. And third, there's a very long footnote discussing and endorsing the Massachusetts Supreme Judicial Court's ruling in Ibanez v US Bank:  "We agree with the rationale that valid assignments are needed when the beneficiary of a deed of trust seeks to foreclose on a property."  That's now two states Supreme Courts now that are making clear that there's got to be good chain of title.  We can add to that the NC Court of Appeals and arguably New Jersey. 

All of this brings us to the second case, Levya v. National Default Servicing, Inc., another unanimous decision. Again, this case arose from a foreclosure mediation. At the mediation, Wells Fargo produced a certified original copy of the note and deed of trust naming another entity as the lender.  Wells did not produce any assignments, just a notarized statement that it was in possession of the original note and DOT and any assignments thereto. (Gosh, I wonder if that employee had personal knowledge of the fact or not... Do you really think the employee looked at the physical paper?). The mediator found that Wells Fargo hadn't met the statutory requirements for the mediation, but didn't make a finding of bad faith.  The homeowner petitioned the district court for review, arguing that Wells Fargo acted in bad faith and should be sanctioned.  The district court concluded that there was no bad faith. The Nevada Supreme Court reversed on appeal. 

What's interesting in this case is an extended discussion of what constitutes a valid assignment of deeds of trust and of notes. For starters, the court noted that the transfers "are distinctly separate." Nevada, like Massachusetts, is a title theory state. That indicates that the mortgage follows the note theory just doesn't work there. And it's not as if the Nevada Supreme Court were unaware of UCC Article 9. The court discusses Judge Markell's 9th Circuit BAP decision in In re Veal that includes a detailed discussion of the working of UCC Article 9. [In re Veal never addressed the issue of whether UCC 9-203(g) applies to deeds of trust (which are sale and repurchases, not liens); the language of 9-203(g) could be read not to apply, but that need not concern us here.]  Instead, Nevada's views a deed of trust as a conveyance of land, so the state's Statute of Frauds applies, and it requires a written assignment. Wells never produced a chain of assignments from the originator to whatever trust was involved. Maybe Wells could do so, but it didn't. 

Similarly, without being able to prove that the note had been endorsed or otherwise transferred to Wells (meaning that it was given to Wells for the purpose of enforcement), Wells "has not demonstrated authority to mediate the note."  Put differently, Wells failed to prove standing. 

Now let me emphasize that just because Wells didn't prove standing doesn't mean that it can't. But this should be raising a lot of questions. Does the paper exist? Can we verify that it is in fact the original and the dating of the signatures? If so, why isn't Wells producing it? Who is bearing the cost of these screw-ups? Is it MBS investors or is Wells eating it?  

This strikes me as further evidence that the proposed BoA MBS settlement is just too hasty. There's simply too much evidence of major problems in the system for investors to settle without knowing more. It's a very different settlement if the documentation is fine, but the servicer's just incompetent and can't produce it than if the documentation was never done right in the first place and there's nothing the servicer can do. If I were an MBS investor, I'd want to know which situation I was facing. 

Comments

[factchecker]

HSBC is reportedly ridding household,subprime lender

Of course they date back to the 1980s, it seems that fees upon fees and tricks make a domino, can't pay

Nobody is saying how hard or easy it is to title,
obviously resorting to forgery is an easy careless way many times, but one is left wondering whether that was a quick and fast way to hide the problem,
although some say it cannot be proven, electronic transactions and securities are usually linked, many accountants say avoiding tax is not easy ,

[Lorraine]

This is an absolute "Masterpiece" from New York.

Judge Schack really knows this game and uses every possible example of the abuse.

It will leave you breathless.

http://stopforeclosurefraud.com/2011/07/06/hsbc-v-taher-judge-schack-grand-slam-mers-plaintiffs-counsel-ocwen-robo-signers-christina-carter-scott-anderson-margery-rotundo-dismissed-w-prejudice/

[David Fahrny]

Thank you Nevada Supreme Court. Nevada is one of the hardest hit states and we have not seen much help for the homeowner. Proving the chain of title was always a requirement. Why has it not been inforced? The judges in Nevada have no clue and need to be educated. All they are concerned about is that a deadbeat homeowner is trying to get a free house. The reality is that a Fraudster Bank is getting a free house. Just because they collected payments and can create forged documents(Let us call it what it is) does not give them the right to steal a house from a homeowner. The homeowner like all of us is another victim of the Coup D' etat by wall street of our government. Wake up America and get Mad as Hell. Thank You
Dave F
Las Vegas

[William Roper]

Cleaner copies of these decisions as handed down by the Nevada Supreme Court are posted here:

Leyva v. National Default Servicing Corp, No. 55216, 27 Nev. Adv. Op. No. 40 (Nev. 2011)
http://www.scribd.com/doc/59663706/Leyva-v-National-Default-Servicing-07-Jul-2011

Pasillas v. HSBC Bank USA, No. 56393, 127 Nev. Adv. Op. No. 39 (Nev. 2011)
http://www.scribd.com/doc/59665111/Pasillas-v-HSBC-Bank-USA-07-Jul-2011

I will add a link to the Google Scholar version of these cases when the case is posted there.

[L]

Cleaner copies? They appear the exact same? How do they differ in Google Scholar? Just for future reference.

[William Roper]

@L:

The copies are cleaner in two respects. First, the copies have been enhanced through Optical Character Recognition (OCR), which allows keyword searching. Second, the copies have NOT been degraded by the addition of commerical links to a foreclosure defense web site, a defect in the copy posted at the site linked by Adam.

If one wants to download and use the Adobe version, one will find the addition of embedded links by the site operator to be exceptionally disagreeable. And if one doesn't have a full version of Adobe, the links cannot be removed.

As to the advantage of a Google Scholar version, this is readily apparent to regular users of Google Scholar. Google Scholar affords two advantages. First, it will include hyperlinks to the cases cited within the decision. Second, it will also include a tabbed page to show cases citing these decisions. The latter will become more useful over time.

Of course, to those attorneys in regular practice and academic attorneys with access to robust online legal references through their univesities (such as Lexis and WestLaw), Google Scholar affords little advantage at all.

But for an impoverished pro se litigant, accessibility to decisions through LexisOne (ten most recent years appellate decisions) and Google Scholar provides much of the power of Lexis and WestLaw for FREE.

I would encourage you to show a little empathy for the economy minded who find LexisOne and Google Scholar to be exceptionally useful.

Unquestionably, for those with access, either for free or who can readily afford the cost, Lexis and WestLaw are far more robust!

[lizinsarasota]

William Roper as in LPS researcher on scribd.com, that William Roper? Oh, boy! You're my hero!

[ploughman]

If evidence of standing isn't produced at trial, should there be a presumption that it doesn't exist? And where does the investor stand on this issue?

[papergate]

I think William Roper deserves an incredible amount of gratitude - he endlessly supplies cases etc. without which would be impossible to move forward . . . thanks Bill!

[Leslie]

Am I to understand that this case is Nevada's version of the Ibanez case in Massachusetts? This is truly excellent news.

Does anyone have a guess as to when the Bevilacqua case in Massachusetts will be decided?

(I would also like to add my two cents about William Roper. Mr. Roper, you are a national treasure! You basically provide a free online library for homeowners who are fighting foreclosure; thank you ever so much.)

And Professor Levitin, what can I say? You're the man! Thank you, ever so much for all that you do.

[William Roper]

For those with an interest in looking a bit behind the decision and the dynamics of the argument, the oral arguments for at least the Leyva case are posted on Scribd:

Leyva vs. NDSC - Arguments Before the Nevada Supreme Court (Part I)
http://www.youtube.com/watch?v=asyilaWFyn0

Leyva vs. NDSC - Arguments Before the Nevada Supreme Court (Part II)
http://www.youtube.com/watch?v=IJ7X-QYTaDs

[Judge Roy Bean]

Professor - "... This was a unanimous decision. Second, it's another illustratation of the mortgage documentation SNAFU."

With all due respect, this is not a "mortgage documentation SNAFU."

"Situation Normal, All Fouled Up" implies some kind of typical, expected bungling on the part of an obtuse, unmanageable yet seemingly benign entity where things just are the way they are because that's the way they have been.

The foreclosure mess is no such thing. It is the ugly exposure of a deliberately concocted scheme that was designed to quickly dispose of toxic waste before the perpetrators could be linked to it and held responsible.

Judge Schack and a few others have now shed some light on the problem; the question remains - how long before their attempts to expose the realities of life are made moot by legislative protections for the criminals?

[dani ramirez]

nevada judges are non nonsense brave judges that wont roll over for no banksters fraud
god bless the brave judges of nevada

[California Lemon Law]

I have a different take on the attorney general compromise. So they accept the terms..that does not mean that everyone that has a security loan cannot do a strategic default. They will spend decades foreclosing on 65 million homes. Think of all the people involved that will loose their homes and that includes the a/gs, their assistants, their staff, their family members…the list is endless and if I were an a/g I wouldn’t even want to face them. The ramifications of a settlement, don’t even want to think about that…all for an anonymous banker, no. How will he explain himself to his son who is loosing his home…will he tell him he gave his blessing is to the biggest ponzi scheme ever put over on the American people. How will he/she sleep at night.

[Steven M. Weiss, Esq.]

Could this opinion be read as requiring chain of title only when required by state statute? My guess is that is how MBS trustees will use it.

[lost]

banks are in it to make money, that's for sure.
but it's the homeowner who signs on the dotted line and then can't afford to pay for the property. so does 2 wrong make a right? and don't tell me the
homeowner were swindled into signing paperworks to buy a property because they can't understand the language of the documents? that's just the homeowner not taking responsibility to do some research before signing, and why? greed! because they want the property or the money from the 2nd mortgage! same greed as the bank's greed.

the only thing that is unfair here is the banks got a bailout and the average citizen didn't! but sympathy for suckered homeowners? they made a mistake, own up to it!

[lost]

this paperwork fiasco is the backend of the bank trying to make more money and they got caught doing it without correct documents..that does not mean the house belongs to the defaulting homeowners.

people seem to forget that when you ask the bank to borrow money on a property. let's say homeowner as bank to borrow $100,000 on a no money down loan.
they bank actually do pay $100,000 to the seller of that property. so for people to say the homeowner owns the house and bank has no rights to it! bollycock! if homeowner has not been paying the agreedupon mortgage, the bank do have the rights to own the property. these homeowners in some instances are living on a defaulting property for over 2 years, without paying a DIME!
how can that be fair? i would like to live rent/mortgage free and not pay my mortgage and then say my bank has no right to my property because they got some paperwork mixed up.

both banks and homeowners are wrong but for different reasons...but if homeowner did not pay the mortgage as AGREEDUPON when they signed the documents, then they should relinquish the house.

again, i wish our govt gave bailouts directly to homeowner who has to use bailout to pay down their property instead of what had happened.

banks are evil and a lot of defaulting homeowners are irresponsible to their decision making.

[L]

Always room for more :)

Nevada Supreme Court used the Pasillas case as an example

http://stopforeclosurefraud.com/2011/07/13/redmon-v-homeq-servicing-inc-nevada-supreme-court-vacating-judgment-remanding-mediation-sanctions-in-re-pasillas/