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Nevada Supreme Court Rules Lender Had No Authority to Negotiate Loan Modification - Bergenfield v. Bank of America

June 20, 2013

Our neighbors in Nevada have a foreclosure mediation program that Vincent Howard and our Redlands foreclosure defense lawyers believe has done some good. Among other things, the program requires loan servicers to arrive at the mediations prepared to negotiate in good faith, as demonstrated by sending someone with the authority to negotiate and bringing all the relevant documents. Failure to negotiate in good faith can lead to sanctions, which is one of the issues underlying Bergenfield v. Bank of America. Marcia Bergenfield met with representatives from Bank of America at the mediation, but the bank was only the holder of her note--it was not the beneficiary of the home's deed of trust. The trial court found this immaterial and declined to sanction the bank, but the Nevada Supreme Court disagreed.

Bergenfield, like many others who got into financial trouble over the past decade, bought her home from Countrywide. Her note was in Countrywide's favor; the deed of trust named Countrywide as lender and MERS as beneficiary. MERS assigned the deed to HSBC Bank, but the deed, endorsed in blank and thus payable to the holder, stayed with Countrywide and was acquired by Bank of America along with the now-defunct company. After Bergenfield fell into foreclosure, she elected for a foreclosure mediation with Bank of America as beneficiary of the deed of trust and ReconTrust as trustee. Documents produced there showed that the deed and note had been split. No agreement was reached at the mediation, but the mediator's statement didn't fault either side. Bergenfield filed for judicial review, arguing that Bank of America's counsel, appearing at the mediation, lacked authority to negotiate and therefore participated in bad faith. The district court denied it.

On appeal, Bergenfield contended that splitting the documents rendered Bank of America without authority to grant a loan modification, which made its participation in bad faith. Nevada permits the documents to be split without affecting the right to foreclose, the Nevada high court said, so it is legal for Bank of America to hold the note but not the deed. But state law requires that they be united before lenders may proceed with a non-judicial foreclosure on an owner-occupied home, the court said. If the beneficiary of the deed of trust--the entity with a lien on the home--fails to attend the foreclosure mediation, the court said, it was not in good faith. The high court found the language of the statute unambiguous: when a deed and note are separated, they must be reunified before participation in the mediation program or this type of foreclosure. Thus, it agreed that sanctions against Bank of America are mandated, and directed the trial court to take up the case.

Vincent Howard and our Mission Hills foreclosure defense attorneys especially appreciate that sanctions automatically trigger against lenders who don't have the authority to negotiate when they come to foreclosure mediations. Arriving without the proper authority wastes everyone's time, and also suggests that any foreclosure to be filed near the same time might be without authority as well. And foreclosing without authority is generally a cause for the foreclosure to be dismissed and, sometimes, for the bank to be sanctioned. Because someone's property rights are at stake, courts take proven wrongful foreclosures very seriously. Vincent Howard and our Perris foreclosure defense lawyers vigorously represent people seeking to prove wrongful foreclosure.

Howard Law, P.C., represents clients across California who are fighting a foreclosure they believe could have been avoided, or was caused by predatory lending. To learn more about us and tell us your story, call us today at 1-800-872-5925 or send us a message through our website.

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