Nevada Supreme Court: You Gotta Prove Chain of Title

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Nevada Supreme Court: You Gotta Prove Chain of Title

posted by Adam Levitin

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.

37 Responses

  1. Neil I’m getting error messages on the links….

    Check into it, great stuff especially for the testilying lawyers in Ingress v. Merrimack Mortgage, Wells Farge et al I am so glad I hadn’t yet sent my Ethics Complaint as now I will include these cases.

    In this link late tonight or tomorrow after she adds these cases to her

    1. Motion to Quiet Title
    2. Federal Complaint

    I will include those documents in this Mortgage Movies Journal entry:

    http://mortgagemovies.blogspot.com/2011/07/kingcastmortage-movies-reaching-into-nj.html

    Peace and keep up the great work!
    C

  2. If we would all contact local and national news and radio stations by flooding their phone lines, facebook, twitter and email nonstop, they’ll listen and they’ll spread the word for us. We can start right here by everyone researching then posting contact information for news and radio stations and personalities. Then we choose a start date and keep the pressure on for as long as it takes. We can form a coalition RIGHT HERE, RIGHT NOW!!! LETS DO IT….

    Recall Elections for Fraud on America is a nice theme…

    “Recall elections are an electoral device in American politics which allow citizens to remove an elected official from office before the end of that person’s term in office. Like initiatives and referendum, recall elections are considered an extension of democracy in that they allow citizens to hold elected officials to account after they have been elected and during their term in office.

    Those who wish to remove an official need to raise a petition with the names of typically 25% of the number of people who voted for that official in the previous election….”
    quoted from http://www.historylearningsite.co.uk/recall_elections.htm

  3. anonymous- las vegas is quoted as being ground zero for foreclosures- what do you need for me to do? who do i trust?

    last night on face to face with jon ralston- he spoke of this decision with a local attorney- mathew callister- who is suing B of A for HAMP – class action lawsuit currently in fed court-23 state multi district litigation- think you can watch replay of show on internet- jon is a local investigative reporter- can speak to both of these gentleman but who in government?

  4. johngault

    Sure you are still quite dashing.

    las vegas —

    Whoever we can get — and there might be some Congressmen/women and Senators that are willing to help — depends on your state. But, not my state.

  5. @ anonymous, Well, I don’t have too much longer getting the #@!* kicked out of me. My season in hell is almost over. So maybe if I’m still standing, I’ll get in that act – the coalition, try to get it going on. First I have to get used to making appearances as an ugly toad, since prior to this world reknown, class F bs bs, I was dashing and debonair.

  6. anonymous: coalition of whom? Homeowners, lawyers, news reporters? taxpayers? Investors? In writing? in protest? In person?

  7. johngault,

    Well — I would expect a little more interest than that. But, interest — who knows where it really lies??

  8. @anonymous – I already volunteered my 10.00 contribution. Someone needs to start a legitimate escrow fund. All right, I will if I must! But not THIS week.
    A little levity and mirth:

    MERS trademark is
    “PROCESS LOANS, NOT PAPERWORK”

  9. Do not think we need a revolution — need to organize a coalition — to be able to present our side of the fraud to the AGs. There is no one on our side in the AG negotiations — the AGs just want a settlement.

    Have been calling for a coalition for some time. Have tried over the years — but, few have seemed interested. May be too late now. But, have to try something. .

  10. Nothing will stop that settlement except a full scale revolution.

    Although I do wonder how the attorneys general can waive individual rights. Guess we haven’t needed a Constitution foe awhile

  11. anonymous, what can a nevada homewoner do to stop settlement?

  12. Does not matter which theory of fraud one believes — a settlement will absolve the culprits.

    The trust/trustee as named party is not working for them.- because the trust/trustee/security investors were never the creditor. Thus, settlement will clear the path for foreclosures to go through in banks name — with no consequence of liability.

    Problem is most banks have disposed of collection rights to loans that were never more than a collection right to a false mortgage to begin with. Therefore, we will see debt buyers (which could be a bank) and hedge funds surface in foreclosure actions. In debt collection, the debt buyer does not have to disclose how much they paid for collection rights. If they did, this would provide grounds for principal reduction. But, no one will be required to write down principal — and, if they do so voluntarily, it will be trivial.

    The settlement will only address foreclosure process. The AG investigation – or lack there-of — does not include investigation of fraud in the origination of the false mortgages — the source of the fraud. If this was included — as it should be — then this is new “discovery” and provides new challenge to foreclosure. They cannot allow this to happen — so all is shut down as to investigation — before investigation ever really began.

    Need to stop any settlement.

  13. Alice

    The bankers sleep very well in their multimillion dollar homes. My home has already been stolen. Don’t ask mr her I live now….

  14. I think it SHOULD collapse…and start over…

  15. I have a different take on the attorney general compromise. So they accept the terms..that does not mean that everyone that has a securitized 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.

  16. Carie

    Your comment expesses exactly why big brother must END this. Your word, Pervasive, means it has the potential to bring wall street and big banks and everything else to a screeching halt. If millions sue to get their homes back, can’t you imagine the chaos. The court system would COLLAPSE. If counties/states sue for unpaid taxes, same thing.. The IRS clearly is afraid to touch this. Big brother WILL protect against “pervasive” problems because these problems threaten the established order.

  17. I personally don’y think a settlement can be reached…the fraud is too pervasive, and too obvious…

  18. I have known this mortgage fraud challenge by homeowners would end by government fiat from the moment I realized my home was being stolen. The bailout was a big hint that the banks would be protected against the individual homeowners. The citizens of this country are IRRELEVANT, except to the extent we further enrich the rich banksters and governing elite. We exist to work for these masters; when we clamor for justice they change the laws to enshrine their monstrous behavior as virtue: “why the rich create jobs, you sily worthless people.”. “why if the banks fail, there will be a catastrophe.”

    I say, bring it on.

  19. say, whenever YOU lend money or credit to somebody, YOU, the lender, has a problem. The borrower does not have a problem unless they do not know or the rules are so complicated that the borrower does not know.

  20. hey, a bank is a business. Profits and Loss. Good customers have high credit scores. Bad customers have low credit scores. What’s so serious about it all? So you did’t pay them back, on the extended credit, based on leverage no doubt. You bad boy, you cannot do business with us again. Shame on you. Oh well, it’s business.

  21. so if you own a business you can extend credit to anybody you want to. you don’t need anybodies approval. If it doesn’t work out, oh well. Not so serious. It’s business. I took a chance, risk.

    and if you are a person, you can extend credit to anybody you want to, you don’t need anybodies approval. You took a chance, risk or reward.

    Who is trying to take over the lending of credit? Banks, credit cards, payday loans, it’s money to be made. Anybody can create money from lent money. It’s the leverage part and the rules so complicated on the banks part that is confusing.

    Why anybody and everybody is a banker at one point in their life. Did you ever lend some money to somebody?

    Do you realize, if you have 500,000 dollars in the bank, and you call all your friends, and tell them you can lend them some money at 2 percent interest for whatever time period you want and agree upon, and now you are into banking. And all can be good.

  22. So , in my example of the copy shop, lets say the guy I extended “credit” too, and lets say I worked the deal with him, that in 20 days if he pays me back the money plus some amount extra, like 10% of the original amount lent, why now I’m actually into BANKING. I just extended credit.

    So he pays me back plus some interest, all is good. I got my money plus some extra for allowing the customer to make copies that he will use to further his business, he makes not as much profit on his business deal but he still comes out ahead and all is good. And thus banking in that degree is helpful and will facilitate production or exchange of product.

    So the extensions of credit to exchange products is good. But realize this is all based on a “rather have the cash” up front, so I can book and use the money to expand more rapidily or provide more goods to the consumer of such goods. Instead of waiting for the money to come in. Thus enter in Banks, extender of credits, a middleman, thus enter in credit cards, a middle man, to the exchange of products and services in society. Now enter in Wall Street and their security game of debt – ABS, MBS.

  23. @gene, I have to disagree with you. A ‘chain of title’ shows assignment going from a to b to c to d. Missing one, the chain is broken. There’s no piece of paper called a chain of title.The a to b to c to d assignments themselves create the chain. And they weren’t done. Pesky paperwork. Since the SC found them necessary for a party to engage in mediation, it stands to reason to me, such a chain is required to foreclose. Well, good luck on that one because they don’t exist. Everyone look up your own state’s status: lien theory or title theory. Just google it. “Is Montana a lien theory or title theory state?” , say. If you’re in a title theory state, chances are if they don’t have this chain of title for the dot, they will never get your home. You could try citing this case as “emerging law”.

    In a dot in a title theory state, the dot trustee holds “bare naked” or legal title to your home for the benefit of the beneficiary, which in the old days used to be synonymous with lender. The ramifications are not slight. It’s a game changer for anyone in a title theory state. And please note that it’s an application of existing law. This case says when a new bankster obtained an interest in the dot, the assignment had to be in writing and no hiding behind MERS. This is governed, as stated, by the Statute of Frauds and all states will have the SOF. Just hope your home is in a title theory state. I just hope this does not lead to a new wve of criminiality with forgery of heretofore non-existant assignments. It may offer hope for post-foreclosure actions, also if this decision can be gotten in as emerging law. I think. If I got this right, the banksters are going to croak. Assignments, unlike promissory note endorsements, are required to be dated and notarized.

    This is wonderful. The NV DC decisions have been made with such favor toward the banksters, it makes one wonder if the judges don’t have their own pecuniary interests.

  24. I mean if a debt is written off as uncollectable, and the original creditor gets his tax write off, the the debt is gone, It’s off the books. So now enter in “debt buyers” of written off debt. There is no debt, it’s written off.

    You do a google search and it always comes up with no answer, and the answer is always you still owe the debt. But why would you owe the debt if it is written off?

    If I own a business and i give a customer “credit” to pay his bill to me at some later date, whether I charge interest or not,

    I’m a copy shop, guy comes in all the time and makes lots of copies, and pays cash all the time. One day he comes in and says I just made these copies, but I ain’t got the dough, but I will in 20 days, can you float me. I says sure, I know who you are, you come in all the time. So I just extended “CREDIT” to him. So, 20 days goes by, he no show up to pay me. 50 days goes by, no show. Oh boy, what do I do? Sue him or hire somebody to collect the debt or write it off. If I decide to write it off, why then debt is gone and I get to lower my gross income by the CREDIT EXTENDED AMOUNT. So maybe I got lots of customers that I EXTENDED CREDIT too, that defaulted, and I wrote off the debt. Hey, why not sell the names of these defaulters for pennies on the dollar, hey I just recovered some of my lose and made some money at least on the busted deal. Oh well, next time I will have him sign a piece of paper, hey, I can sell those too.

  25. Anonymous,

    I’ve been doing some homework. And I’d have to agree with you wholeheartedly.

    The settlement is indeed a scam once again. The banks will inaffect be taking over, (the states rights to follow their own states civil codes and laws), as it is settled. And once again the individual home owner is left with nothing. Boy, they are really battling it to keep principle as is, which means to keep people in the debt, which means the individual pays handsomely to keep —–the banks books or accounting as is, so the banks do not have to suffer on their profits. Or more importantly, their bonus’s and pay.

    While I post alot and rate and rave if you will,

    I read this today and my eyes opened, it started with my research into “holder in due course”. And I was specifically trying to find the answer to this question of myself: If a buyer of debt buys defaulted debt from the original creditor, what is the specific rule, code or law that allows the debt buyer to sue the borrower for the money owed to the original creditor? I’m talking debt buyer, not an assignment of debt. “Holder in due course” would be NOT defaulted debt, so who is a “debt buyer”? As far as I can research, they are not “debt collectors” per the FDCPA.

    http://privateaudio.homestead.com/ForeclosureDefenseHandbook-1.pdf

  26. And, all of this — with absolutely little (or NO) investigation by AGs. This is strictly a political strategy. Nothing more. It is a strategy to put “to bed” all of the foreclosure fraud challenges. Political. And, your friendly AG — plays along. Hey — who (largely) elected them to plead your legal case and rights??? Elected to prosecute when warranted — not elected to negotiate a silencing of the fraud.

    How did we let this happen???????

  27. E. Tolle

    Dark days indeed. A settlement is a settlement — no wrong-doing admitted – and no liability. In effect, the AGs are settling your case fFOR YOU — with some bogus promise to — MAYBE — modify (falsely) your already bogus loan.

    Nice deal??? Yep — for them.

    Anyone can continue to go to court — but, will you get anywhere??? Not if settlement goes through.

    Go back quite awhile — E. Tolle —but, that is the way it will be.

    Game over.

  28. North Carolina Congressman Brad Miller sees the through the smoke screen of various government entities providing backdoor bailouts and other goodies….

    http://www.scribd.com/fullscreen/59794234

    Anonymous, hard to imagine what you’re saying could come to pass….individuals losing discovery and basically all law due to the AG settlement. Dark days ahead for sure. If that comes to pass, Rev 2. will be the only possible course of action.

  29. carie

    Just some times have to come back out. Now is another time.

    First, as to this post, absolutely correct — no mediation without the current “creditor” at the table.

    Second, is the issue as to whether the current “creditor” has any rights at all. YOU are correct — “MORTGAGE DOCUMENTATION ILLEGAL FROM THE START.” Thus, current so-called “creditor” –likely has NO rights.

    Third, if the 50 state attorney general “settlement” goes through without complete and thorough investigation, it is compounded fraud upon the American public and foreclosure victims. Challenges in court will be dismissed due to the bogus settlement. Liability is gone. We will have lost the battle.

    Any settlement between AGs and banks/debt buyers/servicers — must be stopped until a full investigation is completed. And, the people must be given an opportunity to be heard.

    This is the MOST important issue we currently face. We must STOP any settlement. Rights will be destroyed if we do not stop the settlement. There will be no credibility or discovery in individual court actions. Modification — (bogus anyway) — will continue to remain voluntary. There will be NO benefit to victims by a settlement. It will be a complete victory by the banks if a settlement goes through. Releases all liability. Again, RELEASES ALL LIABILITY..

    At this time, there is no other issue more important than stopping the AG settlement.

    Do not know how we can do this. But, it MUST be done.

  30. Are the real creditors even receiving notice of the foreclosure proceedings I wonder:

    See Mennonite Board of Missions v. Adams re: due process

    http://openjurist.org/462/us/791/mennonite-board-of-missions-v-c-adams

  31. This is the same determination we had with a mediation in Nevada. Wells had no standing, and not right to be in the room.

  32. Neil—this should be interesting:

    http://www.huffingtonpost.com/2011/07/11/self-regulation-hedge-funds_n_894919.html

    from article:

    Warren Heads Back Into The Lion’s Den

    Elizabeth Warren, the presidential adviser who temporarily heads the Consumer Financial Protection Bureau, heads back to the lion’s den on Thursday — to testify before the House Oversight Committee. At the close of her last appearance before the committee, Rep. Patrick McHenry (R-N.C.) accused her of lying during a YouTube-worthy exchange about how much time she would be testifying. As iWatchNews.com notes, the hearing to be led by Chairman Darrell Issa (R-Calif.) is ominously titled, ““Consumer Financial Protection Efforts: Answers Needed.”

  33. THAT’S the Huffington Post headline I’m waiting for:

    MORTGAGE DOCUMENTATION ILLEGAL FROM THE START

    NO REAL MORTGAGES

    WHAT DO WE DO NOW???

  34. “the documentation was never done right in the first place”.

    EXACTLY. Until THAT is properly addressed, America will continue to sink…

    But, they don’t want to address that, because if they do the mega banks will fail.

    BRING IT ON.

  35. http://www.huffingtonpost.com/2011/07/11/foreclosure-fraud-investigation-questions_n_892661.html

    from article:

    The Justice Department is pressing state attorneys general to release the banks from liability for a host of alleged violations in exchange for a far-reaching settlement, people familiar with internal discussions said. The Justice Department declined to comment.

    BofA, JPMorgan, Wells Fargo, Citigroup and Ally Financial are willing to pay a large sum in fines for use in pools that will be used to lower monthly payments for struggling homeowners, but only in exchange for broad amnesty, these people said. In May, the banks offered just $5 billion for the alleged wrongdoing, angering the government officials on the other side of the negotiating table.

    In April, these banks signed consent orders with federal bank regulators, promising to clean up bad practices. They neither admitted nor denied wrongdoing.

    All five banks declined to comment for this story.

    State and federal authorities’ failure to collect more evidence of wrongdoing by mortgage servicers comes in contrast to the public statements of influential officials who have cast the banks as culprits in a national epidemic of foreclosures.

    Sheila Bair, the former chairman of the Federal Deposit Insurance Corporation, told a Senate panel in May that “flawed mortgage banking processes have potentially infected millions of foreclosures.”

    BROAD AMNESTY FOR THE GREATEST CRIMES IN HISTORY…I want to throw up!

  36. Technical violations related to the Modification Statutes for NV. Key points.

    Passillas – Must bring certified copies OR originals of Deed, Note and all Assignments to mediation. Lender did not do so.

    Assignment was in blank. No assignee listed. This matched the requirements of the PSA, but not NV law. Assignment needed assignee named.

    A Chain of Assignments was not called for, only all Assignments. Big difference in the two.

    Levya – Wells did not bring Assignments to the hearing, nor the endorsement of the Note. Probably used copies of the recorded documents

    Bottom line- Easily correctable. And if done prior to future Mediation Hearings, not an issue.

    They will not err like this again.

  37. awesome, the court is paying attention. nevada is non-judicial

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