August 1, 2013
by Olivia A. Todd & Mark S. Bosco
Tiffany & Bosco, P.A.
USFN Member (Arizona, Nevada)
July 1, 2013 marked exactly four years since the Nevada legislature enacted AB149, which brought mediations to the state of Nevada. What a four years it has been! During this time, the Nevada Supreme Court has enacted four rule changes; and the Nevada Legislature brought the program to a complete stop with the passage of AB284 back in October 2011, which required that an affidavit be completed and recorded with the notice of default. This bill produced a suspension of new foreclosures in Nevada for a period of more than nine months while lenders and servicers drafted their respective versions of the required affidavit, resulting in no mediations being elected and depleting funding for the mediation program. Not content with this major change, the 77th session of the Nevada legislature rocked our mediation world again with the passage of AB273 — changing the program from an “opt-in” program to an “opt-out” program, effective with notice of defaults that are recorded on or after October 1, 2013.
So many changes in so little time. This alone has proven to be a unique challenge in the mediation arena as servicers and lenders adjust their processes to the ever-changing rules and regulations in Nevada. However, the focus of this article is on the new rules adopted by the Nevada Supreme Court on December 6, 2012, effective January 1, 2013, and the impact that these rule changes has had on lenders.
State Supreme Court Changes — The most significant change was the addition of a “pre-conference” meeting to exchange documents and provide an opportunity to inquire about the intentions of the borrower. This is critical for a servicer who now has only fifteen days to review documentation submitted by the borrower and determine whether additional documentation will be necessary in order to consider a loan modification or alternative plan. The time frame is reduced to five days for the servicer to request additional clarification or documentation once the borrower has submitted the initial documentation. The significance of this new rule cannot be emphasized enough, as the servicer cannot subsequently claim that it cannot consider a loan modification due to “lack of documents or information.” This will result in the certificate being denied and the servicer may be sanctioned by the court.
On a positive note, if the borrower advises the mediator and the servicer’s representative at the pre-conference meeting that he no longer wants to retain the property, this will allow the servicer to focus on the “short sale” option and the new rules that must be adhered to relating to a short sale. These new rules are stringent and include the servicer’s ability to negotiate the following: (1) the listing price; (2) the date by which the property will be listed; (3) the period of time in which the property will be marketed; (4) a specified time in which the servicer must accept or reject any offer; and (5) the maximum length of time the escrow may be open. Lastly, the short sale agreement must state whether the deficiency is waived or not.
The documentation that the servicer has been required to produce to the mediator prior to the mediation has always been burdensome; however, specificity was provided in the new rules. Servicers are now required to present a separate “certification” for each document, including the note and each note endorsement, the deed of trust, all assignments, and the merger documents if applicable. This certification must include an original signature and be notarized. If these certifications are not given to the mediator prior to the mediation, this will cause a denial of a certificate and could result in a “bad faith” finding of sanctions, leaving the servicer with only two options: (1) starting a new foreclosure action or (2) filing a petition for judicial review (PJR). However, it would not be prudent to file a PJR if a servicer failed to provide the required documentation.
The new rules require that a broker’s price opinion (BPO) be provided as part of the documentation for the mediator, and this BPO must be dated within 60 days of the mediation scheduled date. The BPO must be signed, dated, and performed by a third-party independent appraiser or broker.
A positive rule change was the clarification regarding dates when the homeowner is relinquishing the property. At the mediation, the mediator will now establish the “vacate date,” which is when the homeowner will move out, and the “certificate issuance date,” which is the date that the mediation program administrator will issue the certificate, allowing the servicer to continue with the foreclosure action and set a sale date.
The foreclosure mediation program is currently under a lot of pressure due to a lack of funding arising from limited foreclosures and insufficient staffing. These problems have resulted in the program forwarding mediator statements to the trustees, which in turn has delayed the ability to request a certificate from the program allowing a servicer to proceed with the foreclosure action. The lack of staffing has also resulted in delays in trustees being notified that borrowers have elected mediation and the subsequent assignment of cases to a mediator.
Hopefully there will not be any changes to the mediation rules for the time being, allowing lenders and servicers to proceed with the foreclosure process. However, stay tuned and we will provide you with any new updates to the Nevada mediation program.
©Copyright 2013 USFN. All rights reserved.
Summer USFN Report.