According a Bloomberg article a Nevada judge has ordered Bank of America unit, ReconTrust Co., to temporarily stop any foreclosures in the state that aren’t approved by a court order. This preliminary ruling blocks ReconTrust from conducting nonjudicial foreclosures until a hearing to be held Feb. 28 determines whether to make the ban permanent. See the story: BofA Unit Ordered to Halt Foreclosures in Nevada
[Update: The BofA case docs can be found here, BofA Case – Docs and History.] [Update January 26, 2011: Bank of America seeks to overturn freeze on foreclosures] [Update January 31, 2011: Judge overturns order, allows 8,900 Nevada foreclosures to resume ]
I suppose freezing foreclosures is one way to lower the number of foreclosures in the state. This morning RGJ reports that Reno-Sparks ranked 11th on the list of the nation’s 206 metropolitan areas in foreclosure activity, and Las Vegas ranked #1. According to RealtyTrac’s 2010 Year-End Metropolitan Foreclosure Market Report one in every 16 Reno-Sparks homes went into foreclosure in 2010; in Las Vegas it’s one in every nine homes. See the story: 1 in 16 Reno-Sparks homes foreclosed in ’10, Las Vegas leads U.S.
Move to Reno?
Guy, how many foreclosures in the pipeline do you think that this will affect in Reno and/or Nevada?
John Newell
To my knowledge, the Fifth Judicial District does not have electronic filing and record retrieval, at least not to which I have access. Does anyone know if the actual order has been posted online? I do not want to comment more until I read the order.
Guy Johnson
Move to Reno,
Good question, but difficult to answer…especially at the state level. Perhaps Mike McGonagle can provide an estimate. In Mike’s most recent post on foreclosure activity in Washoe County, he linked to the following numbers: In December 2010 there were 689 Notices of Sale filed in Washoe County, and 262 Trustees Deeds (foreclosure sales) recorded.
– Guy
inclinejj
Kick the can down the road. You want to know how many foreclosure Countrywide or BOFA have going in Washoe County. Easy, go on the website and look.
Stupid move cause this just delays the obvious foreclosure.
Sully
A bit of an adder to headline story:
http://www.usatoday.com/money/economy/housing/2011-01-27-foreclosures27_ST_N.htm?csp=34money&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+UsatodaycomMoney-TopStories+%28Money+-+Top+Stories%29&utm_content=My+Yahoo
GreenNV
He’s a list of the ReconTrust TD sales upcoming in NV, 6377 total: http://www.recontrustco.com/upcoming_counties.aspx?state=Nevada
I’ve found the case on PACER, but the temporary stay hasn’t been posted yet. I’ll keep looking for it
Guy Johnson
Great link, GreenNV. Thanks.
John Newell
inclinejj,
That is why I would like to see the filings and the order in the Nye County case. Is this just a delaying tactic, or is there a more serious issue? As has been discussed here on the board before, by the letter of Nevada law, a trustee without the proper documentation cannot proceed with a trustee’s sale under the deed of trust. However, other than as leverage to negotiate a modification, stopping the trustee’s sale does not benefit the debtor in the long run unless the debt can be severed from the security.
From what I can tell, the order in this case is a temporary protective order pending a hearing on whether to issue a permanent injunction. It will be interesting to see if the permanent injunction is issued and why it is issued. I suspect this case is mainly a delaying tactic aimed at coercing BofA to agree to a loan modification, but I could be wrong. If it is not just a delaying/negotiating tactic, and the debtor is trying to sever the debt from the security, then this case merits watching.
I will say that, given the information I have to date, I will be somewhat surprised if the permanent injunction is issued. Other than under probate law, which gives the court sweeping power over the property of the estate, I do not know of another successful Nevada state court action to enjoin a non-judicial foreclosure when the debtor clearly is in default. There is, of course, the Mitchell case in US Bankruptcy Court, but that ruling is really in the context of whether the beneficiary under a deed of trust can be considered a secured creditor if the beneficiary is unable to produce the note.
Smarten, you have written at length about this general issue before. Any insight based on what we know so far?
John Newell
GreenNV,
I cannot access PACER right now. When was the case on PACER filed? Unless PACER has changed dramatically in the last year or so (since I last had cause to use it), state court cases are not part of the PACER system. The order was issued by the Fifth Judicial District of Nevada, not the Federal District Court. Unless the state court order is included in a federal court action, then it will not appear on PACER. The case you found may be an attempt by ReconTrust Co. to enjoin enforcement of the Nevada state court order. The order may be posted there as part of a petition for an injunction.
inclinejj
I know Bankuptcy files are on Pacer. Never knew any other cases to be on it.
I have understood that if the case is filed electronic you can not see what is filed unless you have a code or go into the courthouse.
Still think this is delaying the eventual foreclosures and is slowing down any hope of a market recovery
Mike McGonagle
PACER tracks all (I think) cases filed in the Federal Court System. http://www.pacer.gov/psco/cgi-bin/links.pl I don’t know of any restrictions on viewing electronic filings – I’ve never run into a problem.
http://www.REreno.com is running a mirror posting of my link to the documents in the case, but also has the case history of the properties involved.
Guy Johnson
I’ve posted a couple updates to the story in the post above.
MikeZ
He’s a list of the ReconTrust TD sales upcoming in NV, 6377 total: http://www.recontrustco.com/upcoming_counties.aspx?state=Nevada
Thanks. 567 in Washoe County. That qty should have a discernible effect on the foreclosure results until the order’s lifted, or unless there’s another unit that BAC can use in NV, instead of ReconTrust.
John Newell
Mike (McG),
I was able to access PACER last night and found the US District Court case, but thanks for the link.
The US District Court case is a request for removal of the case to US District Court from Nevada District Court. The defendants are alleging both diversity jurisdiction and federal question jurisdiction (although the federal question jurisdiction issue is likely moot under plaintiff’s second amended complaint). The US District Court case was filed on 1/25/2011, and the filing contains, as exhibits, all plaintiff’s filings and the temporary restraining order (issued 1/20/2011) from the Fifth Judicial District of Nevada case.
As for the underling state court action, plaintiff claims that she was was only behind because BofA advised her that she had to be three months behind to qualify for a modification (Sept 2009, Aug 2009, Oct 2009). She further claims that BofA told her not to make her Nov 2009 payment during the loan modification process, although it is not clear from plaintiff’s allegations whether this payment was postponed or waived. Plaintiff claims that she then made her regular payments from December 2009 to July 2010, until she was contacted by BAC (the servicer) and informed of BAC’s intent to accelerate the loan. What is missing from the pleading is that BofA apparently decided not to grant a modification (although she does claim that BofA led her to believe they were considering a modification when they had no intent to grant it), and plaintiff failed to bring the loan current after the modification was denied.
Other than the cause of action for injunctive relief based on ReconTrust lacking capacity to file the notice of default at the time it was filed, I am dubious as to the merits of plaintiff’s action. Plaintiff alleges negligence (in record keeping), wrongful foreclosure, breach of implied covenant of good faith and fair dealing, unjust enrichment (through late fees and costs), unfair trade practices, and slander of title. If an attorney had filed this action, I would be convinced that the purpose of such a kitchen sink filing was to encourage BofA to negotiate rather than have to defend all the allegations. However, as the plaintiff filed Pro Se, my suspicion is that plaintiff truly believes the allegations and that she is entitled to damages.
The gist of the state court order is that ReconTrust had not been properly substituted as trustee at the time the notice of default was recorded by ReconTrust, and therefore ReconTrust lacked capacity to file the notice of default at that time. I am a little perplexed the court agreed to enjoin ReconTrust “from conducting any non-judicial foreclosures, regardless of who the lender or the mortgagee is regarding any real or personal property situated in the State of Nevada…” rather than just regarding property in which plaintiff has an interest. In the first amended complaint, plaintiff claimed that ReconTrust lacked standing to conduct business in Nevada, but plaintiff’s second amended complaint removed her allegation that ReconTrust did not have standing in Nevada to engage in non-judicial. Without that allegation, I cannot see why the court enjoined any ReconTrust from conducting any non-judicial foreclosures in Nevada.
Other than obtaining an injunction against ReconTrust (and only with respect to the current action), I would be surprised if the plaintiff is successful even if the case is not removed to federal court. At best, she has delayed the inevitable, although she possibly may get the court to dismiss some late fees and other costs IF (and that is a big IF) she can cure the default.
This does not seem to be as interesting a case as I thought it might be.
Edward
The plaintiff is pro se? Yea right. The plaintiff’s pleadings are obviously prepared by a lawyer.
So how do you suppose this so-called pro se plaintiff will do arguing in opposition to the defendants’ preemption argument in front of a federal judge?
John Newell
My initial reaction is to disagree with the conclusion that the pleadings were “obviously” prepared by an attorney. The style and language of the pleadings is lawyeresque, but the overall tone is just a bit off, especially with respect to the occasional personal, unsubstantiated statements peppered throughout the pleadings. It is very possible that they were written with the aid of an attorney or a paralegal, especially the first and second amended complaints, but I do not believe they were completely ghost written. However, a friend of mine reminded me today that I may just be biased against the pleadings because they are drafted in a style I dislike, and that I may be dismissing them as not professionally written because they are not drafted as I would draft them.
As for defendant’s preemption argument, I believe it is moot under the second amended complaint, in which the plaintiff dropped the allegation that defendant ReconTrust could not undertake a non-judicial foreclosure in Nevada because it was an unregistered alien business entity. The remaining causes of action (as dubious as they are) are not preempted by federal banking law, so I do not believe a federal question exists under the second amended complaint. I do believe that diversity jurisdiction is proper, so the removal will likely proceed despite the lack of federal question jurisdiction. Once the case is removed to federal court, I do not expect the plaintiff to prevail on any causes of action.
GreenNV
The second update Guy posted is an article on the federal case from a LV newspaper. They mentioned that North hired a paralegal to help draft her complaints, so good call John Newell. The paper didn’t have access to the case documents, so I had to send them the links to this blog – another RRB scoop!
There were several NODs filed in Washoe by ReconTrust, but all had MERS as the trustee.
Norton
I think you all are wasting a lot of bandwidth on this topic.
The exact same thing happened in Utah, and the federal court there dissolved the restraining order, which allowed BoA to proceed with foreclosures.
I suggest that of far more importance is the statistic released by the Nevada Assoc. of Realtors two days ago that says that last year almost 25% of all foreclosures in Nevada were “strategic defaults”, in other words, people who could afford the payment just walked away. That is of far more importance to the real estate market that some silly case coming out of Nye County.
John Newell
Norton,
The Utah case was not “the exact same thing.” The case in Utah was based on the claim that the trustee/agent of the trustee was neither a licensed Utah business entity nor a registered alien business entity and therefore could not proceed with a Utah non-judicial foreclosure. The US District Court found that federal banking law preempted state law on that issue.
The instant case is distinguished from the Utah case in that the plaintiff, in her second amended complaint, dropped the issue of the unregistered alien business entity. The temporary order was issued because ReconTrust was not substituted as trustee until after it had filed the notice of default. Thus, at the time the notice of default was filed, ReconTrust arguably lacked standing to pursue the non-judicial foreclosure on behalf of the beneficiary of the deed of trust. As the relevant NRS are designed to ensure that only parties in interest can bring a foreclosure, not to regulate business entities, and as federal banking law does not seek to directly regulate state non-judicial foreclosure procedures, federal banking law will (likely) not preempt Nevada law on this issue.
Having said that, I do think it likely that the federal court will overturn the temporary restraining order as it is overbroad, but the outcome will not be based on the same grounds as the Utah case. I also expect that the first notice of default filed will be found void and ReconTrust will be ordered to file a new notice of default. In that respect, I will agree that this case is a lot of smoke with very little fire.
Disclaimer: Of course, I could be completely wrong in my analysis of the preemption issue. It certainly wouldn’t be the first time a court disagreed with my analysis of an issue. 😉
Norton
yada yada yada John……..lawyers have to be the most argumentative people in the world. All over a case that is an irrelevancy in the larger scheme of things.
Donna
Norton,
Just hope the other lawyer, the Emperor of Incline, does not join the discussion. Then no doubt a real testosterone contest can ensue over who is the Smartest Guy on the Blog.
Lurker
Donna,
I think Smarty might be gone for good. Ever since the Elitist of Incline was roasted for disparaging “liberal elitists”, he has been silent. Must have hit a nerve.
Stan
Norton, you have to understand that lawyers live in their own self-absorbed myopic world where they struggle greatly over who can argue the best. All they do for a living is argue, and most of them have no ability to shut it off outside the office. They all regard themselves as grandiose word merchants (witness the above) and they can’t pass up an opportunity to cast their pearls of knowledge before lesser people.
It is not necessary to have a personality disorder to practice law, but it helps.
bob_c
scrolling the closed sales methinks the median gunna be pretty bad this month, but
the comps don’t look too bad–there seems a (seasonal?) absence of sales from 89511,89509,89519
i don’t understand this foreclosure mess significance–its just delays the inevitable (i’m sure there are a few real victims that need restitution–but no system is perfect)
and BTW not only am i the smartest ..i am also the most humble on this blog
for good financial insight read tyler durden at zerohedge
MVP/RRBVIP
Wow. In the last few weeks, this blog has reached a new high (low?) in anti-intellectualism. Last week it was bob_c leading the charge with ad hominem attacks and anti-teacher/public employee rhetoric, and this week it is ad hominem attacks coupled with lawyer bashing. Personally, I wonder why anyone with any expertise would subject themselves to the kneejerk backlash that is the hallmark of this blog these days. I certainly would never do it under my real name (Mike/GreenNV, John N, etc., no offense, but you guys are either fools or gluttons for punishment for using your real names).
Personally, I would find this blog considerably less worthwhile without smarten, RI (I wonder why RI has not commented here – he has shown interest in these types of topics in the past – perhaps he does not want to endure the malevolence of the masses), Sully, Skeptical, Grand Wazoo, Commercial Lender, Sane Economist, MikeZ, etc. providing their comments. This was once a great source for knowledge and discussion about real estate and real estate related issues. Now it has fallen to depths that place it only a notch or two above the invective laden comments that blight every RGJ.com news story.
And for those of you who will claim that Bantering Bear was worse than the current crop of contrarians, even when BB was at his surliest, his ad hominem attacks lacked this current thread of anti-intellectualism.
MVC/RRBVIP
Sigh… I keep anointing myself MVP instead of MVC. I am sure that is evidence of some type of personality disorder (likely narcissism). Oh well, one does not have to be a narcissist to be an intellectual, but it helps…
I think I will just change my moniker to ‘Gadfly’, as that is the role in which I envision myself (likely a result of delusional self-aggrandizement).
John Newell
I use my real name because there is nothing I write on here that I would not say to someone face to face. If I used a fictional name, I might be tempted to forget that.
And I am not concerned about “lawyer bashing.” I expect a certain amount of it, and it is certainly not the first time it has happened on the RRB. Furthermore, these days I am insulated enough from contact outside the judicial system that it is instructive for me to remember that people have strong feelings about lawyers, many of which tend to the negative, and that many times they have good reasons for such sentiments. Besides, I have been told much worse to my face. If I were to let myself be upset by it, it would reflect more negatively on me than on those who engage in the “lawyer bashing.”
MVP/RRB--m-o-u-s-e
Hiders always destroy a message board and the reek of cowardice.
You need a b**ch slapping. LOL
Guy Johnson
Norton,
Thank you for bringing the foreclosure report to this blog’s attention. I found the entire report, The Face of Foreclosure – Analysis of the Nevada Foreclosure Crisis, on NVAR’s site.
As you point out, one of the key findings in the report: “Nearly one-quarter (23%) of those surveyed admitted that they “strategically defaulted” or “walked away” from their home.”
– Guy
Gadfly
My dearest MVP/RRB–m-o-u-s-e,
Interesting comment. I am 90% certain it is chock-a-block full of unintended irony, but it is so cryptically crafted that I cannot be certain – you may have been trying to be intentionally ironic rather than just being hypocritical. Perhaps you can clarify some of your points a bit.
1) What is a “hider”? Do you mean folks who choose not to use real names? In that sense, about half the regulars are “hiders”. If we also include those who rely on given names and/or initials rather than full names, then almost everyone who posts here is a “hider”. Perhaps you meant something else entirely.
2) After you clarify what you meant by “hiders,” would you be ever so kind to elucidate how they can “destroy a message board and the reek of cowardice”? Perhaps you intended to write, “destroy a message board, and they reek of cowardice.” That would make a little more sense, but I since it is not clear what “hiders” are, we really do not have much sense of how they destroy a message board.
3) Did you intend the irony of using an ad hominem attack to defend accusations of ad hominem attacks, or were you just drunk posting?
I look forward to what I am sure will be intellectually satisfying clarification.
Your servant,
Gadfly
(The poster formerly known as MVC/RRBVIP)
Norton
Thank you Guy for posting the report in its entirety. I continue to believe that thousands and thousands of Nevada borrowers simply walking away from mortgages that they can afford to pay is a far bigger story than what some judge did in rural Nevada in a case that is sure to be reversed.
There is much very interesting information in the report.
Phil
I am a bit surprised that only 23% of all foreclosures are strategic defaults. I personally know 4 people who walked away even though they could have kept up with the payments. They did not want to go to mediation, they did not want to challenge anything in court, they simply wanted to be out from under the debt that was far greater than the value of the house.
With more than 60% of all Nevada homeowners with a mortgage owing more on the mortgage than the house is worth, I do not think this 23% figure is going to get any smaller. I think it is going to get bigger as more and more people tire of feeding the alligator.
Gadfly
To get serious, I agree with Phil. I am surprised it is as low as 23%. I had thought that it was as high as 40% at one point in Las Vegas, but I do not remember where I saw that, and I have not been able to find it. Anyone else remember a report of a higher number of strategic defaults for Las Vegas?
Gadfly
Of course, I meant higher percentage, not higher number.
MikeZ
…last year almost 25% of all foreclosures in Nevada were “strategic defaults”, in other words, people who could afford the payment just walked away.
Norton, I don’t think you understand the term: “strategic default.”
The term refers to voluntarily walking away from the mortgage obligation, regardless of affordability. It’s not just people who can afford the payments who choose a strategic default.
Move to Reno?
MikeZ, if somebody can’t afford to make their mortgage payment, what is so “strategic” about not making the monthly payment? If you ain’t got it, you ain’t got it.
Move to Reno?
Eventually, the demand curve will move up the supply curve. New Housing starts are at an all time recent low and living in a crappy rental or aging parents or room-mates gets old. Toss in affordability (cheaper to buy than to rent) and the only thing holding back a decent market is buyer psychology.
bob_c
23% admitted to a strategic default—adnitted being the operative word
Martin
MikeZ, I think you have it wrong. I suggest you google the term “strategic default” and you will discover that the term is used to describe the decision made by a borrower to stop making payments and thus default on a debt despite having the ability to make the payments. If somebody cannot afford the payment, then they default because they have no other choice. If somebody CAN afford the payment, but decides to stop paying anyway, then they have made the strategic decision to default when they do not have to.
This is clearly the definition used in the “Face of Foreclosure” report linked above by Guy.
Phil
On page 23 of the report it says:
“Industry Standard: Strategic Default–the decision by a borrower to stop making payments on a debt despite having the financial ability to make the payments.”
It is absolutely about affordability. The term refers to borrowers who default even though they can afford the payments.
doofus
Mea culpa, MikeZ? C’mon, you blew one. Cowboy up.
Anyone care to speculate what a price banding chart of strategic defaults would look like? 5510 Lausanne anyone?
MikeZ
MikeZ, if somebody can’t afford to make their mortgage payment, what is so “strategic” about not making the monthly payment? If you ain’t got it, you ain’t got it.
To get out of from under a long-term negative equity situation.
I see that the question asked by NVAR specifies ability to make payments. Mea culpa.
John Newell
I haven’t had the chance to read the order yet, but US District Judge Roger Hunt has dissolved the Nye County District Court temporary restraining order in the North case.
http://www.lasvegassun.com/news/2011/jan/31/8900-nevada-foreclosures-can-resume-after-judge-ov/
The order was not dissolved on preemption grounds (the grounds in the above mentioned Utah case), but on Nevada agency law grounds. From what I can gather, Hunt agreed with BofA that an agent of BofA could initiate non-judicial foreclosure without actual substitution of the trustee. According to Hunt’s order, “The ever-expanding body of case law within this district (of Nevada) holds that the Nevada law governing nonjudicial foreclosure does not require a lender to produce the original note nor does it require that ReconTrust be substituted as trustee under the deed of trust as prerequisites to non-judicial foreclosure proceedings.” I agree with the first part of the quote (the original note issue), but I am not aware of an “every expanding body of case law” in the district on the latter part (the substitution issue). I am aware that corts have found that an agent of the trustee can initiate proceedings on the trustee’s behalf, but here, from what I can tell right now, ReconTrust is the agent of the beneficiary (BofA), not of the then trustee, PRLAP, INC. Either this is an expansion of existing case law, or a piece of the puzzle (e.g., the exact relationship between BofA and PRLAP,INC.) was missing from the early documents. And from my experience, when things don’t make sense, usually at least one key piece of information is missing. I will know more when I can read the actual order from Judge Hunt.
So kudos to Norton – while the rationale was not the same as in the Utah case, the end result was identical. As I said in my disclaimer above, it is certainly not the first time a court and I have disagreed on a point of law, and I doubt it will be the last. 😉
Martin
Is it generally accepted now that the lender does not have to produce the original note to move forward with a nonjudicial foreclosure in Nevada? Are there not some court decisions in other states that have held otherwise?
It seems that the lenders can always eventually substitute the “right” party or agent or nominee to commence the foreclosure, and that is not a major problem for the lenders (which apparently Norton understood). But I think in many cases the lenders have no idea where the original note is. Any help would be appreciated.
Lis Pendends
A bit off topic, but did you all see where the U.S. Bureau of Labor statistics today announced that the “real” unemployment rate for Nevada in 2010 was 23.6%?
How can a real unemployment rate of 23.6% be anything but bad for a real estate market recovery?
John Newell
Martin,
Per my understanding, the original note issue has more to do with enforcing the promissory note than the power of sale under a deed of trust. Unless there is a legitimate dispute as to whether the beneficiary of the deed of trust is entitled to enforce the promissory note, courts seem to be allowing non-judicial foreclosures to proceed without the original note.
As you may recall, this issue was discussed on RRB with respect to MERS and the Mitchell bankruptcy case (https://renorealtyblog.wpengine.com/2010/10/mers-search.html). The issue in that case was whether MERS had standing to ask for the BK stay to be lifted in order to pursue a non-judicial foreclosure. The court found that MERS did not have standing for a variety of reasons, one of which it was not in possession of the note.
In other cases, especially in which the beneficiary is the lender or a successor in interest to the lender, courts mainly agree that the beneficiary does not need to produce the original note to proceed with a non-judicial foreclosure, although the note would be required if a deficiency action was brought against the debtor.
I am still somewhat troubled by the substitution issue. A trustee, by definition, is granted power of sale, on behalf of the beneficiary, by the grantor (the debtor). Allowing an agent of the beneficiary that is not the trustee to initiate the non-judicial foreclosure process subverts the trustee’s role as the entity with the power to sell the property. However, a friend of mine who works with mortgage modifications told me I was a little behind the times. A year ago, she would have agreed with me that an agent of the beneficiary that was not also an agent of the trustee could not have initiated a non-judicial foreclosure until a substitution of trustee was filed. However, her understanding now is that as long as the trustee is substituted before the notice of sale, then the non-judicial foreclosure can proceed.
billddrummer
I’m going to leave the discussion about the legal issues alone. I’m not an attorney, nor do I purport to be one.
I am curious about the legitimacy of the strategic default statistic. How can someone not privy to the thought processes of the borrower determine whether a default was strategic or not? If in fact a borrower has the wherewithal, but unwillingness, to pay the mortgage, who would know except for the borrower?
Or stated another way, are the data crunchers exalting themselves with knowledge they do not possess?