Just having possesion of the original title is not considered enough to claim a proper chain of title.Supreme Court of Nevada issued two opinions on July 7 2011 which finally compel foreclosing parties in Nevada to produce material documentation as the chain of title to the note and the deed of trust in order to permit a foreclosure action when mediation is requested.
This could be very significant to homeowners trying to negotiate with the banks. It will prevent the banks from claiming proper chain of title just because they claim they have ownership of the note and mortgage. NOW they will be required to show proof of chain of title with proper documentations and signatures. The banks must now provide endorsement and assignment
Separately, the Supreme Court of Nevada issued two opinions on July 7, 2011 which finally compel foreclosing parties in Nevada to produce material documentation as to chain of title to the Note and Deed of Trust in order to be permitted to continue with a foreclosure action when mediation is requested. in Leyva v. National Default Servicing et al., No. 55216, 127 Nev. Advance Opinion 40, the Supreme Court held that strict compliance is required with Nevada statutes governing the production of certain documents including any assignment of the Deed of Trust; that a foreclosing party’s failure to do so “is a sanctionable offense; and the district court is prohibited from allowing the foreclosure process to proceed”. Wells Fargo was also the culprit in this case.
Significantly, in discussing the transfer of the Note, the Supreme Court of Nevada cited to the recent In Re Veal decision from the 9th Circuit Bankruptcy Appeals Panel (which was previously discussed on this website), holding that the borrower “has the right to know the identity of the entity that is ‘entitled to enforce’ the mortgage note under Article 3 (of the Uniform Commercial Code).” The Court concluded that Article 3 “clearly requires Wells Fargo to demonstrate more than mere possession of the original note to be able to enforce a negotiable instrument”. The court found that there was no endorsement and no assignment, and reversed the District Court.
The opinion in Leyva cited to the Court’s opinion in Pasillas v. HSBC Bank as Trustee, No. 56393, 127 Nev. Advance Opinion 39 (also decided July 7, 2011), which also reversed the District Court and also cited to Veal , setting forth the requirements for production of evidence of chain of title to the note and Deed of Trust in a foreclosure.
The multiple citations to Veal, which is a Federal Bankruptcy appellate court opinion, by the state Supreme Court of Nevada, is more than important. It demonstrates that simply because a foreclosure issue is decided by a Bankruptcy court does not mean that it is not applicable to a non-Bankruptcy (or non-Federal) foreclosure case. Time and again, when we argue that an issue in a state foreclosure case has already been decided by a Bankruptcy court in the foreclosure context, attorneys representing foreclosing “lenders” and servicers argue “Well, Judge, that was a Bankruptcy case, and we are not in Bankruptcy Court”. Leyva and Pasillas have now put that argument to bed. If a Federal Bankruptcy decision is good enough for the Supreme Court of Nevada in two separate opinions, it should be good enough for any state court.