TGIF Legal Tip: Mediation Option for Nevada Foreclosures

FORECLOSURE

NEVADA PERSONAL RESIDENCES

AS OF JULY 1, 2009

 

 

A follow up to the April 27, 2007 Foreclosure / Deficiency blog. 

IMPORTANT FORMS

• Election to Mediate
• Mutual Agreement to Mediate (if NOD filed prior to July 1, 2009)
• Trustee Brochure
• Rules of Mediation
• Assembly Bill 149

 CREATING THE PROGRAM

Assembly Bill 149  was passed by the Nevada Legislature during the 2009 session and signed by Governor Jim Gibbons.  Its purpose is to address the foreclosure crisis head-on and to help keep Nevada families in their homes.

This law establishes a Foreclosure Mediation Program for owner-occupied residential properties that are subject to foreclosure notices – formally known as a Notice of Default and Election to Sell – filed on or after July 1, 2009. 

WHAT IS MEDIATION?

Mediation is an alternative method to help parties resolve disputes by agreement with the help of trained mediators.  Mediating a foreclosure action has its advantages.  It is fast, inexpensive, and offers a flexibility that more formal processes do not.  Home foreclosures impact both the homeowner and the lender.  Homeowners do not want to lose their homes and mortgage lenders do not want to be in the real estate business.  Both sides may benefit through foreclosure mediations.

WHO IS ELIGIBLE?

The home must be your personal residence, be located in Nevada and you must occupy the property.  Timeshares are not covered, converted mobile homes are.

WHAT IF I AM TRYING TO SELL MY HOME IN A SHORT SALE?

The rules address this and require the Lender to bring to mediation an estimate of “short sale” value of the residence that it may be willing to consider as a part of the negotiation if loan modification is not agreed upon.  So it may be a good idea to participate to assist your Short Sale along. 

WHY SHOULD YOU MEDIATE?

You can play a major role, with the help of a trained mediator, in deciding the outcome of your individual dilemma.  Mediation is a give-and-take process in which the parties work to reach a mutually acceptable resolution to a mutual problem.  Resolutions reached through foreclosure mediations are compromises that offer advantages to lenders as well as homeowners. 

If you have the ability to meet the other party half way, everyone may benefit. 

• Can you, as a homeowner, make your mortgage payments if your home loan is modified? 
• Can you, as a lender in today’s real estate market, modify a loan to the extent that the homeowner can perform?

If the answers are YES, the Foreclosure Mediation Program may be able to save A Nevada home.

WHAT ARE MY DEADLINES?

The owner of the property (title holder) must, not later than 30 days after the service upon him or her of the notice of default deliver the Election/Waiver of Mediation Form  and deliver the form the trustee, by certified mail, return receipt requested & you must mail a copy of the Election/Waiver of Mediation to the Administrator. 

WHAT IF MY NOTICE OF DEFAULT WAS SERVICE PRIOR TO JULY 1 209?

You may only participate if the Lender agrees in writing, and you must provide the Administrator a copy of the agreement.  Example agreement located HERE. [attach].

WHAT DO YOU BRING TO MEDIATION?

Homeowners must bring:

1. A Financial Statement and Housing Affordability Worksheet to include the information set forth in forms provided by the Administrator. (Form does not exist yet).
2. Confidential nonbinding proposal for resolving the foreclosure.
3. Perhaps You Should Bring?
   • Your own CMA, comparative price analysis, or a BPO , broker price opinion, from your Prudential, Americana Group, REALTOR® to indicate the current value of the home.
   • Proof you are involved in a short sale listing, if you are.

Lenders must bring:

1. The original or certified copy of the deed of trust, the mortgage note, and each assignment of the deed of trust and the mortgage note.
2. Most current and appropriate appraisals that it has.
3. An estimate of “short sale” value of the residence that it may be willing to consider as a part of the negotiation if loan modification is not agreed upon.
4. Confidential nonbinding proposal for resolving the foreclosure, including the evaluative methodology use in determining the eligibility or non-eligibility of loan modification.

Both parties can bring lawyers, friends, interpreters, relatives, to support you at the mediation.

WHAT ARE THE COSTS?

$200 for each ‘side.’  If you are married and own the home with your wife, it is still only $200 for your side.  Each party must pay $200 by certified check at the time the election to mediate is mailed in.

A lawyer is not required to be present with you in the mediation process, but each side is welcome to have an attorney represent them.  If you want an interpreter, you must pay for this on your own.

WHAT ARE TIME FRAMES:

Mediations are limited to four hours and require that mediations be conducted within 90 days of a foreclosure notice being filed.  Also all decision makers must be present for the mediations.  That means, if an agreement is reached, it can be finalized quickly.

AT THE CONCLUSION OF THE MEDIATION …

Within 10 days of the mediation, the mediator will prepare the necessary Statement of Agreement or Non-agreement and serve it on the parties.  The original will be filed with the Foreclosure Mediation Program Administrator and the mediation will be closed.  If there is an agreement, the parties will execute the appropriate documents.  If there is no agreement, the parties will be free to pursue other legal remedies.

 

CIC Unpaid Delinquent Dues And How They Affect REO Listings

DUES THAT ARE PAST DUE AND WHAT TO DO

CIC Past Dues vs. the Banks Round #2

Changes Effective October 1, 2009

 When listing an REO property the seller (bank) is often in a legal dispute with the Common Interest Community on what past due fees can be charged.  Upon foreclosure all dues from that point on are the bank’s responsibility.  But what of the past due dues, which are also in arrears (not paid)?  NRS 116.3116 covers this under Liens.

The lien (claim) from the CIC is prior to all other liens except for a few exceptions (discussed below).  “Prior,” is a key word in law, coming from the phrase under the doctrine of “first in time, first in right,” as coined in the 1827 Missouri case  concerning the sale of a home which had liens filed against it.  The first lien recorded takes precedence over those filed ‘after’ or ‘later in time,’ also known as ‘junior.’  This is known as the ‘doctrine of priority liens’ as described in the Nevada homestead case of In re Contrevo.

 The Exceptions (aka the CIC Protection Act)

 The lien from the CIC for assessments takes limited priority over the first security interest on the unit.  The CIC lien gets to take precedence over and must be paid by the foreclosing bank for assessments for common expenses which would have become due during the immediately preceding six (6) months (nine (9) as of October 1, 2009)  of the foreclosure trustee sale.

 

TGIF Legal Tip: Loosening of Rental Restrictions in Nevada

This is a follow up to Rental Restrictions within an Association.

 

As you know many associations were adding rental restrictions and affecting the rights of Unit owners after the close of escrow.

Click on the dated that it is effective for a reading: October 1, 2009, NRS 116.  A summary of the modifications are: 

Rental Restrictions Cannot Be Added After Purchase of Unit:

The modified rule is now if at the time you purchased your unit there is NOT a restriction on rental; it cannot be restricted in such a manner.  Similarly, if a restriction to ask for approval to rent is not in place at the time of the purchase of a Unit, the rule to ask for approval cannot later be placed on the Unit.

Restrictions May be Waived by Board

If your Unit has such a restriction, the owner may by law, “may seek a waiver of the prohibition from the executive board based upon a showing of economic hardship, and the executive board may grant such a waiver and approve the renting or leasing of the unit.”  This allows the Board to approve a rental, above the maximum, by law, without necessarily violating the Declarations.

The Calculations of Number of Rental Units Shall Not Include Owner Inquiring

And finally, “if the declaration contains a provision establishing a maximum number or percentage of units in the common-interest community which may be rented or leased, in determining the maximum number or percentage of units in the common-interest community which may be rented or leased, the number of units owned by the declarant must not be counted or considered.”  What?  I think it means that if the current number of units already rented is the maximum but if you own a unit, you may still rent, as you may calculate the percentages and exclude your unit(s) in the calculation.  So when calculating the person seeking to rent may count all of their rentals as one (1) unit.

 

TGIF Legal Tip: The Rules on BPO, Effective July 1, 2009

This is a follow up to my January 2, 2009 An Update on BPOs in Nevada  and the October 26, 2007 Broker Price Opinions (BPOs) in Nevada.

 

 **Effective July 1, 2009**

BPO - A BPO is defined as a, “written analysis, opinion or conclusion that a real estate license prepares for a person relating to the estimated price for a specified parcel of real property.”

Real Estate Licensees  In Nevada Are Allowed to Perform BPOs.

A real estate agent may, “prepare and provide a broker’s price opinion and charge and collect a fee” for this service.

BPO Files

BPOs (even those submitted electronically) must be stored for five (5) years.

Broker Responsibility. 

The broker is responsible for all activities of a licensee who is associated with the broker and with the preparation of a BPO.

A BPO can be prepared for a:

1.         An existing or potential seller for the purposes of listing and selling a parcel of real property;

2.         An existing or potential buyer of a parcel of real property;

3.         A third party making decisions or performing due diligence related to the potential listing, offering, sale, exchange, option, lease or acquisition price of a parcel of real property; or

4.         An existing or potential lienholder, except that a broker’s price opinion prepared for an existing or potential lienholder may not be used in lieu of an appraisal for the purpose of determining whether to approve a mortgage loan.

A BPO must include:

1.         A statement of the intended purpose of the broker’s price opinion;

2.         A brief description of the real property and the interest in the real property for which the broker’s price opinion is being prepared;

3.         The basis used to determine the broker’s price opinion, including, without limitation, any applicable market data and the computation of capitalization;

4.         Any assumptions or limiting conditions used to determine the broker’s price opinion;

5.         The date of issuance of the broker’s price opinion;

6.         A disclosure of any existing or contemplated interest of every licensee who prepares or provides the broker’s price opinion, including, without limitation, the possibility of a licensee representing the seller or purchaser;

7.         The license number, name and signature of every licensee who prepares or provides the broker’s price opinion;

8.         If a licensee who prepares or provides the broker’s price opinion is a real estate salesman or a real estate broker-salesman, the name of the real estate broker with whom the licensee is associated; and

9.         In at least 14-point bold type, the following disclaimer: Notwithstanding any preprinted language to the contrary, this opinion is not an appraisal of the market value of the property.  If an appraisal is desired, the services of a licensed or certified appraiser must be obtained.

BPO submitted electronically or on bank forms.

If a broker’s price opinion is submitted electronically or on a form supplied by the requesting party:
1.         A signature required by #7 above may be an electronic signature, as defined by NRS 719.100.

2.         The disclaimer required in #9 above may be transmitted in a separate attachment if the electronic format or form supplied by the requesting party does not allow additional comments to be written by the licensee. The electronic format or the form supplied by the requesting party must:

            a.         Reference the existence of a separate attachment; and

            b.         Include a statement that the broker’s price opinion is not complete without the attachment.

The attached BPO Rider Form has been created to incorporate all requirements from the new law (as of July 1, 2009).  Questions on filling it out? Here is an example filled out BPO Rider Form.  This would be uploaded as a separate attachment if sent electronically and simply forwarded with the BPO if sent in hard copy to render the BPO complete in Nevada. 

NOTE:  The NRED has information bulliten #14 which discussed this, but it now removed from the site.

 

Changes to the Nevada CIC Resale Package

**Effective June 9, 2009**

The majority of SB253 is effetive 10.1.09, but per AB 350, section 8 of SB253 is, “effective upon passage and approval”

 

This is a follow up to Nevada CIC Charges for Resale Packages  from January 30, 2009 which was a follow up to the REO and Resale packages  from November 9, 2007.

 

On June 26, 2009, I will discuss RENT RESTRICTIONS and CIC changes.

 

On July 3,  2009 I will discuss CIC liens for non-payment of dues and the foreclosing bank’s responsibility for past payments.

 

I.          Seller Responsible for Cost of CIC Package.

 

Effective June 9, 2009 (6.09.09  it has a nice ring) the CIC package shall be provided at, “at the expense of the unit’s owner.”

 

OLD language: What used to read as “a unit’s owner or his authorized agent shall furnish to a purchaser a resale package …,” which caused great confusion and discussion is deleted.

NEW language: The statute now instructs, “a unit’s owner or his authorized agent shall, at the expense of the unit’s owner, furnish to a purchaser a resale package …”

The debate is over – the seller must pay for it.  Now, that likely does not stop the listing agent from asking the Buyer to pay for it up front (like an appraisal) and be reimbursed at time of closing.

If the Seller refuses to provide and the escrow closes, the Buyer still (even in this new law) loses any right to claim damages.  If the Seller and Buyer agree (right or wrong) to simply not have the package delivered, this form will serve to keep your transaction folder complete, click on this title to retrieve it: Re-Sale’ Package Non Receipt Buyers’ Hold Harmless of Broker.

II.         Packages Must Now Contain Amount of Transfer Fees.

A resale package must now contain a, “A statement of any transfer fees, transaction fees or any other fees associated with the resale of a unit.”  NRS 116.4109 (1)(e).  This is helpful.  Many times the transfer fees were learned of after close of escrow.  This not the fee for the package, rather a fee to ‘join’ the association.

 

TGIF Legal Tip: Nevada Domestic Partnerships / Civil Unions

Effective 10.1.2009, any two persons can become Domestic Partners in Nevada.  A domestic partnership is one in which persons have registered a valid domestic partnership. (this form does not exist yet).

HOW IT AFFECTS YOUR REAL ESTATE CAREER?  Don’t wait for complications at close of escrow as whether you have the authority to list and sell.  Have each Partner sign.  When taking a listing, just like a married client, inquire if your client has a domestic partnership.  And ask about not only here in Nevada but any other state.  If they had one, but it is dissolved, they should provide title with the dissolution.  It’s simple really, just treat it like a marriage, escrow will assist you with the rest.

SOME QUICK NOTES ON DOMESTIC PARTNERSHIP TERMS:

Date of Domestic Partnership – The date of effective date is just like date of marriage, but it is referred to as “the date of registration.”

Out of State Domestic Partnerships are recognized in Nevada.

It is just like being married, it affects – 1. Community property; 2. Mutual responsibility for debts to third parties; 3. The right to seek financial support from the other following the dissolution; 4. Other rights and duties as between the partners concerning ownership of property.

To end a Domestic Partnership – 1. You file for divorce or ‘dissolution in family court’ under NRS 125; 2. Or…simplified termination by filing a one pager with the Nevada Secretary of State (this form does not exist yet), provided: a.) Partnership is not older than 5 years. (the five year itch has now been reduced to law); b.) No children created/adopted during; c.) There is no community or joint property or the parties have executed an agreement setting forth the division; d.) The parties waive any rights to support or the parties have executed an agreement setting forth support; e.) The parties waive the right to conduct a normal divorce in family court.

 

Eviction of Tenants In the Event of Foreclosure

 “Helping Families Save Their Homes Act May 20, 2009” (S. 896)

Effective May 20, 2009 federal legislation establishes protections for renters living in foreclosed homes.  Effective October 1, 2009, Nevada state law also protects tenants that have been foreclosed upon.  In the event of foreclosure, existing bona fide leases for renters are honored, except in the case of month-to-month leases or owner occupants foreclosing in which case a minimum of 90 days notice will be required.  This is a major change from normal Landlord Tenant law in Nevada per NRS 118A and NRS 40.  It appears that the Tenant would need to still pay rent and otherwise remain in good standing, otherwise normal eviction for nonpayment/nuisance would ensue per state law.  Also, if the Tenant desires this protection, I suggest the Tenant produce their lease agreement, as soon as they can, to the lender that has foreclosed.

A lease is bona fide only if:

(1)   the mortgagor under the contract is not the tenant;

(2)   the lease or tenancy was the result of an arms-length transaction; or

(3)   the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property.

The actual law is here.

Forms for eviction in Clark County  are here.

Unlike the House version (H.R. 1106) it does not contain cramdown — a provision empowering bankruptcy judges to reduce principals and interest rates for homeowners in bankruptcy.

There is a helpful Renters in Foreclosure Toolkit  from The National Low Income Housing Coalition.

The Nevada October 1, 2009 NRS 40 will also further protect tenants under what is known as the form NOTICE TO TENANTS OF THE PROPERTY,  in this new statute tenants now get a minium of 60 days to vacate.

 

TGIF Legal Tip: Checking Boxes Without Due Care

Loans standards are high right now.  Many standards being met were always there but are being adhered to on a more consistent basis.  I have had a number of questions lately about loans being held up at the last minute for missing information.  However, the information are items such as, “Termite/Pest Inspection,” located on page three of the RPA.  

Here’s the issue.  If you request the inspection on behalf of your buyer, the lender will seek that inspection out and ensure that it was gained.  This follow up by the lender is good, and for the benefit of the buyer.  But this type of follow up may not be something to which you are accustomed.  The Receipt & Acceptance or Waiver of items/information concerning Purchase  was created to assist you in minding your sale as a result of escrow and lenders not collecting information we felt you and your buyer should be concerned about. 

But note, if the inspection requested is not gained, the lender will now require you to have your buyer sign that they are waiving a right that they requested within the RPA.  This can case unnecessary delay. 

The more organized approach to a sale is to discuss with your client the inspections they desire.  If they want the inspection, or think they do, but do not perform later – fine – request the inspection and deal with its non-occurrence.  However, be careful not to simply check every inspection if your client did not request it.  Have a meaningful conversation with your client to discover which inspections she believes she will be gaining.  It can make their closing smoother.