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April 25, 2014

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In Nevada, a fight over foreclosure paperwork

Many times a lender’s representative shows up at a home foreclosure mediation hearing with the wrong documents, a homeowners’ lawyer says. Not true, a banking executive counters: The percentage of foreclosures based on flawed paperwork is virtually nil.

The wide gulf between these observations shows how hard it will be for the Nevada attorney general’s office to determine whether banks have used faulty documents to reclaim homes.

Allegations have surfaced nationwide that banks have used poorly trained workers to handle foreclosures, haven’t taken enough time to read the paperwork, haven’t properly notarized documents, have placed them in the wrong files and even threw them away by mistake.

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Catherine Cortez Masto

Nevada Attorney General Catherine Cortez Masto announced this month that her office joined 48 states in a widespread probe into these allegations while federal agencies launched parallel investigations.

Cortez Masto’s office is closed-mouthed about how it will pursue its investigation beyond contacting mortgage servicers. But there could be a potential gold mine of information in the foreclosure mediation program overseen by the Nevada Supreme Court and in the petitions for judicial review filed in District Court in Clark County by homeowners and lenders unhappy with mediation.

In the year after the voluntary mediations began in July 2009, officials estimated that more than 62,500 single-family residences in Nevada received default notices from lenders. Of those, 3,749 avoided foreclosure through mediation and 156 sought judicial review. Many who avoided foreclosure stayed in their homes after receiving modified bank loans. Others agreed to short sales to get out from under the properties.

What isn’t tracked is the number of foreclosures that may have occurred prematurely in Nevada because lenders didn’t have all the necessary documents, but still got away with reclaiming the properties.

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Barbara Buckley

Assembly Speaker Barbara Buckley, D-Las Vegas, whose 2009 bill created the mediation process, thinks the number could be substantial because of what she sees in her job as executive director of the Legal Aid Center of Southern Nevada.

“We have seen many clients with complaints about their lenders,” Buckley said. “They can’t get ahold of anyone at a bank and they request documents over and over again.”

Mediator Philip Hoffman of Las Vegas said that of the estimated 100 cases he has mediated, he reached agreements in about 85 percent of his cases. Of the 15 cases without a settlement, he estimated that about a third were because the banks acted in bad faith by showing an unwillingness to negotiate, such as by using delay tactics. Hoffman is one of 270 individuals trained and appointed to serve as a mediator in the program.

Hoffman doesn’t attempt to resolve whether the bank seeking the foreclosure actually owns the loan. Many banks use the Mortgage Electronic Registration Systems, which stores mortgage loan information for lenders, including loans that were transferred from original lenders to other banks. But the system, known as MERS, come under fire from homeowners and their attorneys nationwide who question whether it has the legal authority to initiate foreclosure.

Hoffman doesn’t think it is the place of a mediator to settle challenges of the validity of documents by homeowners. “If there is a MERS dispute, the proper forum is before a judge,” he said.

The mediation process has its flaws. One of the biggest, said Las Vegas attorney Robert Kern, who has represented homeowners in mediation, is that lenders are permitted to certify that they own the mortgage documents without having to produce the originals. Although the certification must be notarized, Kern said the lender can use its employees to notarize the documents.

“We have to accept that certification, and we have no way in mediation to challenge whether it is true,” Kern said.

He recalled one case when a lender came to the mediation with documents on a home owned by someone in Arizona that had nothing to do with the Nevada dispute.

What’s needed is a revision allowing the mediator to demand the original documents in, for example, every 100th case involving a particular lender, he said. If that lender cannot produce originals while certifying otherwise, Kern said the punishment should be the lender must produce originals in all subsequent mediations for a certain period. The theory is that if lenders think they might get caught with faulty documents, they won’t attempt to use them.

Bill Uffelman, president and CEO of the Nevada Bankers Association, counters that although human errors are possible in foreclosure actions, 99.99 percent of them are legitimate.

“I’m sure there are flaws in getting things done but I believe in the system,” he said.

As an example of that faith, Uffelman pointed to the decision by Bank of America last week to resume foreclosures after a temporary halt during an internal review of its process.

But Buckley and her legal aid foreclosure specialist, attorney Michael Joe, think there is much evidence of flawed documentation in foreclosures.

Joe said lenders, to save money, will do anything to skirt state laws. He cites instances where a bank has had someone tape a default notice to a homeowner’s front door rather than attempting to serve the notice in person, as required.

“They feel the laws don’t apply to them,” Joe said. “They’re just out to lie, cheat and steal.”

Joe hopes Nevada will join the 23 states that require lenders to file foreclosure documents in court because it would give homeowners more legal clout to retain their homes. In Nevada, he said, banks simply have to file notices of default with the county recorder without requiring judicial review, making it more difficult for homeowners to mount a challenge.

Homeowners, though, can petition for judicial review if they are unhappy with mediation. Those petitions are reviewed by District Judge Donald Mosley. His law clerk, Brian Watkins, said the court sees problematic paperwork on foreclosures but it often has more to do with the homeowner lacking copies of pay stubs, tax documents or other evidence of financial worth or the lender having sent foreclosure documents to the wrong address.

Regardless of whether faulty documentation has led to improper foreclosures in Southern Nevada, Las Vegas attorney Paul Terry said the homeowners associations he represents as a board member of the Nevada chapter of Community Associations Institute want the issue resolved quickly. That’s because homeowners associations can’t collect assessments from homeowners while the foreclosure process lingers on — assessments that help pay for maintenance of streets, landscaping and other common areas.

As long as the issue of flawed documents remains unresolved, he said, “it’s going to have an unintended negative impact on us.”

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  1. Absolutely true. I have been a realtor for 10 years. As a loyal realtor, I attended five mediations with clients. Only at one, was the lawyer up to speed on the facts.

    The other four, the lawyer was missing paperwork,dependant on the home owner for documents, becuase the bank had not forwarded them anything.

  2. First thing, this article is wrong -- it says "Nevada Attorney General Catherine Cortez Masto announced this month that her office joined 48 states in a widespread probe into these allegations while federal agencies launched parallel investigations." That's 49 states -- see http://ag.state.nv.us/newsroom/press/201...

    The article also says "...a banking executive counters: The percentage of foreclosures based on flawed paperwork is virtually nil."

    Maybe it's not just with politicians and attorneys whose telltale sign they're lying is moving lips. What else would this "banking executive" say -- admit the truth, that his bank can't find the original Notes on all the properties it's foreclosed on?

    Can you say "RICO"?

    My experience with this mediation program is it's a complete farce -- the attorney for the bank showed up after getting the case just the day before, and the mediator, another attorney who was also a CPA, then ignored the carefully-laid paper trail submitted to both well ahead of time and instead commenced to do a tag team for a loan mod under the guise of "we're just trying to help you." Neither were interested in the well-documented, lawful demands for the bank to prove it was the Note's lawful holder. Instead the interest wasn't on who was owed the payments, but that the payments were owed, period.

    For perspective I highly recommend http://www.nytimes.com/2010/09/19/busine...

    TomD, hermit -- you guys are hopelessly ignorant with your "pay or leave it's that simple" posts. My point is in your unexamined bit "You are not taking care of your financial obligation. In the end that is all that matters." The ENTIRE "financial obligation" is the actual Note the homeowners signed, and 90% of everything one needs to know lies in this loaded little clause: "1. BORROWER'S PROMISE TO PAY ..... I understand that Lender may transfer this Note. Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the "Note Holder."

    The Note itself proves who owns the loan. Very few foreclosers demanding to be paid under threat of taking our homes are shown on the Notes, nor can they even prove they own the very loans they're enforcing. Really, all they do is have their minimum-wage corporate drones push more paper at you.

    Then there's the whole MERS fraud ...

    "If you're going to take my house away from me, you better own the note." -- Joe Lents (who hasn't made a payment on his $1.5 million mortgage since 2002) in Bloomberg's 2/22/08 "Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish"

  3. "Pay your financial obligation. You are burying yourself in mumbo jumbo legalese... blah-blah-blah-"

    TomD -- no Note = no "obligation." That's been the law of notes in some form since the Lex Mercartario, and in this state is now found in NRS 104.

    Your last post shows you to be willfully ignorant and therefore irrelevant to this Discussion. Expect to be disrespected and ignored.

    "The paper bubble is then burst. This is what you and I, and every reasoning man, seduced by no obliquity of mind or interest, have long foreseen; yet its disastrous effects are not the less for having been foreseen. We were laboring under a dropsical fulness of circulating medium. Nearly all of it is now called in by the banks, who have the regulation of the safety-valves of our fortunes, and who condense and explode them at their will. Lands in this State cannot now be sold for a year's rent; and unless our Legislature have wisdom enough to effect a remedy by a gradual diminution only of the medium, there will be a general revolution of property in this state." -- Thomas Jefferson by letter to John Adams, 1819, from "The Works of Thomas Jefferson" Vol. 12

  4. "KillerB, The real question here is why did you not pay your mortgage in the first place?"

    hermit -- what leads you to post I have a mortgage?

    You were not "sent" to any links. You'll notice the links above are in context, the first as a correction and the second for perspective only. There is no better proof than what is in black-and-white on the actual Notes, which use the standard "Fannie Mae/Freddie Mac UNIFORM INSTRUMENT." If you can't understand the simplicity of "1. BORROWER'S PROMISE TO PAY" then there is nothing for us to discuss here.

  5. "It's not your house if you don't pay your mortgages as YOU promised to do!"

    tomfranklin -- go back and read my first post then try again, starting with "1. BORROWER'S PROMISE TO PAY."

    Better yet, if you have a mortgage and a copy of your Note, look at it. Then compare that with the entity demanding payments now. If they're not the same then you need to review exactly what "YOU promised to do!" Start by getting a copy of your file from the county recorder and trace the chain of title. Then look up NRS 104.3501 before you demand to see a current copy of your Note from who you've been paying, keeping in mind all transfers have to be stamped on the Notes, much like a canceled checks.

    As for your bet about .1% you're wrong -- Professor Katie Porter, who once taught at UNLV, estimated it to be over 50%. Couple that with MERS on an estimated 60 million deeds of trust and you might start grasping how widespread the fraud goes. You can get a bit of education on that @ http://www.nytimes.com/2010/10/19/busine...

    hermit -- you jumped to a conclusion not supported by the facts. I wasn't there, I communicated with the homeowners who were last fall, and they let me see their complete file.

    Overall the high level of ignorance posted here shows the flip side of the wrongful foreclosures problem -- these institutions don't deserve either your respect or the benefit of the doubt. It's going to be interesting to watch how Masto handles so many homeowners getting screwed by the banks and their parasites on her watch.