Submitted by Michael E. Buckley on behalf of the Real Estate Finance Committee ("REFC") of the Real Property Section, State Bar of Nevada ("Section").

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1 PROPOSED AMENDMENTS AND COMMENTARY TO SB 321 (First Reprint). Submitted by Michael E. Buckley on behalf of the Real Estate Finance Committee ("REFC") of the Real Property Section, State Bar of Nevada ("Section"). May 1, 2013 A. Overview. SB 321 proposes to add additional borrower protections for Nevada residential mortgage loans. Most of these protections are based on the California Homeowner Bill of Rights enacted in July, 2012 (the "California HBR"). 1 While the Section's Bylaws prohibit it from taking positions on matters of policy, the REFC is proposing suggestions that enhance the clarity of the bill, reduce or eliminate possibly confusing language and better integrate the proposals into existing Nevada laws, which include the affidavit required under NRS (2)(c) (the "AB 284 Affidavit") and the Foreclosure Mediation Program ("FMP"). Suggestions include: Using terminology based on terms already defined in Nevada law, such as "person" and "mortgage." Eliminating overbroad language. For example, the bill prohibits "the enforcement of any other right" unless the foreclosure prevention alternatives are considered. This would prevent lenders or servicers from taking routine or prudent actions to protect and preserve abandoned or uninsured property. Pointing out areas in which language in SB 321 may be inconsistent with existing law or other legislative proposals. For example, AB 330, a consensus proposal from several interest groups, proposes to modify the AB 284 Affidavit. SB 321 and AB 300 should use similar terminology and require consistent formats rather than requiring different forms with the same information. Also, SB 278 provides for expedited foreclosures for abandoned properties. SB 321 should take these types of properties in account. Technical, corrective language changes. The following is a list of specific amendments to the Bill, with explanations, followed by some general observations on the bill (Part C) and an overview of the Nevada foreclosure process (Part D). Certain capitalized terms are defined in Part D. 1 SB 900 and AB 278 effective 1/2013; see These statutes are now codified in the California Civil Code's ("CC") mortgage foreclosure statutes, Section MBUCKLEY/

2 B. Proposed Amendments to SB Section 4: Foreclosure prevention alternative means a modification of [a loan secured by] the most senior [mortgage or deed of trust] residential mortgage loan on the property [that is the subject of the notice of default and election to sell] or any other loss mitigation option. Explanation: The definition is somewhat confusing and can be improved. Mortgage or Deed of Trust: NRS provides that "Except as used in chapter 106 of NRS and unless the context otherwise requires, 'mortgage' includes a deed of trust." 2 SB 321 amends NRS Chapter 107, therefore the term "mortgage" includes both. Moreover, since "residential mortgage loan" is defined to include a mortgage loan, there is no need to refer again to the security. Notice of Default. As written, "foreclosure prevention alternative" refers to property already subject to a nonjudicial foreclosure, but not a judicial foreclosure (a judicial foreclosure would be subject to a lis pendens). Not only is this confusing, but the main focus of SB 321 is on procedures required before the foreclosure starts. 2. Section 6. Mortgage servicer means a person [or entity] who directly services a residential mortgage loan, or who is responsible for interacting with a borrower, managing a loan account on a daily basis, including, without limitation, collecting and crediting periodic loan payments, managing any escrow account or enforcing the note and security instrument, either as the current owner of the promissory note or as the authorized agent of the current owner of the promissory note. The term includes a person [or entity] providing such services by contract as a subservicing agent to a master servicer by contract. The term does not include a trustee under a deed of trust, or the trustee s authorized agent, acting under a power of sale pursuant to a deed of trust. Explanation. The phrase "person or entity" is identical with that used in the California HBR. 3 The term "entity" refers to someone other than an individual, but is not necessary in view of the broad definition given the term "person" in Nevada law. Under NRS 0.039, "Except as otherwise expressly provided in a particular statute or required by the 2 The two terms are used interchangeably herein. 3 CC (a). MBUCKLEY/ W-2

3 context, person means a natural person, any form of business or social organization and any other nongovernmental legal entity including, but not limited to, a corporation, partnership, association, trust or unincorporated organization. The term does not include a government, governmental agency or political subdivision of a government." 3. Section 7. Residential mortgage loan means a loan which is primarily for personal, family or household use and which is secured by a mortgage[, deed of trust or other equivalent, consensual security interest] on owneroccupied housing as defined in NRS Explanation. As noted earlier, the term "mortgage" includes a deed of trust. The reference to an "other equivalent consensual security interest" unnecessarily complicates and confuses the definition. As noted in the bill's preamble, the abuses occurred in the institutional residential lending area. There is no suggestion that other forms of security need protection or even what they are. Moreover, the bill refers many times to the deed of trust and mortgage procedures but not to procedures for the enforcement of such an other device. Therefore, even if such other security were nominally included in the definition, the bill's requirements might not even apply if enforcement of the security does not involve customary mortgage or deed of trust foreclosure procedures. 4. Sections 8(2), 10(1), 10(1)(c), 10(1)(e)(3), 10(2), 11(1), 11(5), 11(6), 13(1), 13(4), 15(1), 18(1). Sec In addition to the requirements of NRS and , the exercise of a trustee s power of sale pursuant to NRS with respect to a deed of trust securing a residential mortgage loan is subject to the provisions of sections 2 to 16, inclusive, of this act. 2. In addition to the requirements of NRS to , inclusive, an action for a foreclosure sale pursuant to [the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan secured by a mortgage or other lien upon real estate that is not barred by] NRS is subject to the requirements of sections 2 to 16, inclusive, of this act. Explanation. As presently written, SB 321 prohibits "an action" for "the enforcement of any right" under a residential mortgage loan without complying with the bill's new requirements. This language comes directly from Nevada's one action rule, NRS , which provides in part that "there may be but one action for the recovery of any debt, or for the enforcement of any right secured by a mortgage or other lien upon real estate." MBUCKLEY/ W-3

4 The purpose of the broad language in NRS is to make clear that Nevada law requires a single judicial "action" for the enforcement of mortgages, i.e., a judicial foreclosure. While the term "action" is commonly understood in legal circles to mean a judicial action, i.e., a lawsuit, the much broader dictionary meaning of "action" could refer to any kind of action. Because of this concern, NRS (6)(a) through (p) contains a number of exceptions to what constitutes an "action," including an action "which does not include the collection of the debt or realization of the collateral securing the debt." 4 Without adding additional clarifying language to SB 321, the phrase "enforcement of any right" could be interpreted to prohibit such lender actions as insuring or securing abandoned property. Since SB 321 focuses on foreclosure prevention alternatives, not other lender actions that may be in the best interests of the lender, borrower or even the neighborhood, there is no need for the bill to use such broad terminology. 5 Moreover, since the bill defines the term "foreclosure sale" in Section 5, there is no need to bring in all of the exceptions to the one action rule set forth in NRS (6). Rather, the bill should simply refer to a foreclosure sale pursuant to the statute, since that is the event the bill is designed to prevent or forestall. While only the Section 8 changes are set forth above, the attached amendment shows the changes to the other referenced sections of the bill. (It is worthwhile observing that the California HBR, set out in Footnote 5 above, refers only to non-judicial foreclosures. Nevada's existing FMP also only applies to nonjudicial foreclosure sales. In addition to imposing the foreclosure prevention alternative procedures in judicial foreclosures, SB 321 requires that judicial foreclosure sales follow the FMP process. While the REFC does not advocate policy positions, we do observe that a judicial foreclosure is, as its name implies, a proceeding that occurs under the control and supervision of a judge and that there presently exist, in a judicial foreclosure, borrower protections through due process requirements, the Nevada Rules of Civil Procedure and Nevada statutes governing the admissibility of evidence. ) 5. Section 9(2)(a). 1. Any duty of a mortgage servicer to maximize net present value under a pooling and servicing agreement is owed to all parties in a loan pool, or to all investors under a pooling and servicing agreement, not to any particular party in the loan pool or investor under a pooling and servicing agreement. 4 NRS (6)(m). 5 Compare CC (a), which focuses solely on the foreclosure itself: "A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent may not record a notice of default pursuant to Section 2924 until " MBUCKLEY/ W-4

5 2. A mortgage servicer acts in the best interests of all parties to the loan pool or investors in the pooling and servicing agreement if the mortgage servicer agrees to or implements a foreclosure prevention alternative for which both of the following apply: (a) The residential mortgage loan is in payment default or payment default is reasonably foreseeable. (b) Anticipated recovery under the foreclosure prevention alternative exceeds the anticipated recovery through foreclosure on a net present value basis. Explanation. The above change is consistent with the language in the California HBR. 6 The existing language in SB 321 is overbroad and would require foreclosure prevention alternatives when they might not be appropriate. A mortgage contains numerous covenants, the breach of which results in default and, possibly, foreclosure, though other lender remedies, such as receivership, are also available to a lender. For example, a borrower is required to maintain the property in good condition, insure the property and refrain from committing waste. Foreclosure prevention may not be appropriate in these cases. Presumably violations of non-payment mortgage covenants would be accompanied by a breach of the payment covenant, but in cases in which the loan is current but the borrower has breached the other covenants, it makes good sense to permit the lender to take such steps as may be necessary to protect the collateral. Note on Section 10(1)(c): If the foregoing amendment is approved, Section 10(1)(c)'s required "statement of the facts establishing the right of the mortgage servicer, mortgagee or beneficiary of the deed of trust" to foreclose may be unnecessary and duplicative, since it would simply describe the payment default described in Section 10(1)(b). 6. Section 10(1)(b)(2),(3) 6 CC (a)(1). At least 30 days before recording a notice of default and election to sell... the mortgage servicer, mortgagee or beneficiary of the deed of trust shall mail, by first-class mail, a notice addressed to the borrower at the borrower s primary address as indicated in the records of the mortgage servicer, mortgagee or beneficiary of the deed of trust, which contains:... (b) A summary of the borrower s account which sets forth:... (2) The present amount of the principal obligation under the residential mortgage loan; MBUCKLEY/ W-5

6 (3) The date through which interest on the borrower s obligation under the residential mortgage loan is paid; Explanation. The existing language is somewhat confusing. If the intent of the statute is to promote a common "language" of loan amounts due in order to assist borrowers, the statutory language should not permit multiple interpretations. Subsection (2) refers to "the principal obligation," which can refer to two different amounts: the original principal amount, i.e., the face amount of the note, or the present unpaid balance of principal. Presumably the borrower is most interested in the amount of unpaid principal. The meaning should be clarified. The term "borrower's obligation" is also confusing in the context of the "date through which [it] is paid." The borrower's obligation includes the agreement to pay principal and interest. The importance of a date through which the obligation is paid (rather than just an amount) applies only to interest. Payoff amounts are often requested and given with information on the date to which interest has been paid. Since the principal balance of the loan is already required under subsection (2), subsection (3) should be clarified to refer to the date to which interest has been paid. 7. Sections 10(1)(e) and 18(3). At least 30 days before recording a notice of default and election to sell... the mortgage servicer, mortgagee or beneficiary of the deed of trust shall mail, by first-class mail, a notice addressed to the borrower at the borrower s primary address as indicated in the records of the mortgage servicer, mortgagee or beneficiary of the deed of trust, which contains:... (e) A statement that the borrower may request: (1) A copy of the borrower s promissory note or other evidence of indebtedness; (2) A copy of the borrower s mortgage [or deed of trust]; (3) A copy of any assignment, if applicable, of the borrower s mortgage [or deed of trust].... Explanation. As noted previously, except in NRS Chapter 106, the term "mortgage" includes a deed of trust. Accordingly a reference to the two terms is unnecessary. A similar correction should be made to subsection 3 of Section Section 11(1)(a). 1. A mortgage servicer, mortgagee, trustee, beneficiary of a deed of trust or an authorized agent of such a person may MBUCKLEY/ W-6

7 not record a notice of default and election to sell pursuant to subsection 2 of NRS or commence a civil action for the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by NRS until: (a) The mortgage servicer, mortgagee or beneficiary of the deed of trust has satisfied the requirements of subsection 1 of section 10 of this act; Explanation. The reference to Section 10 should be limited to subsection 1of that section, since subsection 2 of Section 10 refers to actions that take place after the foreclosure has been commenced. 9. Section 12(2)(c). 2. The mortgage servicer, mortgagee or beneficiary of the deed of trust shall include in the initial acknowledgment of receipt of an application for a foreclosure prevention alternative:... (a) A description of the process for considering the application, including, without limitation, an estimate of when a decision on the application will be made and the length of time the borrower will have to consider an offer for a foreclosure prevention alternative; (b) A statement of any deadlines that affect the processing of an application for a foreclosure prevention alternative, including, without limitation, the deadline for submitting any missing documentation; and (c) A statement of the expiration dates for any documents submitted by the borrower. The underscored words in subsection (2)(c) are confusing. Subsection 2(b) refers to the lender's deadlines. Subsection (2)(c) refers to the lender's notice having to state expiration dates for documents the borrower is submitting. The meaning of this subsection is unclear. 10. Section 14(6). 6. As used in this section, single point of contact means [a person] an individual or team of personnel each of whom has the ability and authority to perform the responsibilities described in this section. MBUCKLEY/ W-7

8 As noted above, NRS defines "person" to include both a natural person and business entities. The bill language would appear to refer to a natural person and the meaning should therefore be clarified. 11. Section 16(1) through (3).. 1. If a trustee s deed upon sale has not been recorded [pursuant to subsection 9 of NRS ], a borrower may bring an action for injunctive relief to enjoin a material violation of sections 2 to 16, inclusive, of this act. If a sheriff has not recorded the certificate of the sale of the property pursuant to [subsection 5 of] NRS , a borrower may obtain an injunction to enjoin a material violation of sections 2 to 16, inclusive, of this act. An injunction issued pursuant to this subsection remains in place and any foreclosure sale must be enjoined until the court determines that the mortgage servicer, mortgagee, beneficiary of the deed of trust or an authorized agent of such a person has corrected and remedied the violation giving rise to the action for injunctive relief. An enjoined entity may move to dissolve an injunction based on a showing that the material violation has been corrected and remedied 2. After a trustee s deed upon sale has been recorded [pursuant to subsection 9 of NRS ] or after a sheriff has recorded the certificate of the sale of the property pursuant to [subsection 5 of] NRS , a borrower may bring a civil action in the district court in the county in which the property is located to recover his or her actual economic damages resulting from a material violation of sections 2 to 16, inclusive, of this act by the mortgage servicer, mortgagee, beneficiary of the deed of trust or an authorized agent of such a person, if the material violation was not corrected and remedied before the recording of the trustee s deed upon sale pursuant to [subsection 9 of NRS ] or the recording of the certificate of the sale of the property pursuant to [subsection 5 of] NRS A mortgage servicer, mortgagee, beneficiary of the deed of trust or an authorized agent of such a person is not liable for any violation of sections 2 to 16, inclusive, of this act that it has corrected and remedied, or that has been corrected and remedied on its behalf by a third party, MBUCKLEY/ W-8

9 before the recording of the trustee s deed upon sale [pursuant to subsection 9 of NRS ] or the recording of the certificate of sale of the property pursuant to subsection 5 of NRS Explanation. Trustee's deed reference. The references to the precise statutory section describing the recording of the trustee's deed is unnecessary. Whether a trustee's deed is properly recorded or not, the bill's provisions should apply. Removing this language also makes the bill not only easier to read but easier to follow, by removing a cross reference to NRS , which grows longer and longer with each legislative session. Judicial foreclosure. Pursuant to NRS (4), a judicial foreclosure sale is conducted by the sheriff under the statutes applicable to real property execution. 7 While NRS (5) does require "the sheriff who conducted the sale [to] record the sale of the property," the terminology is somewhat obscure because the sale is governed by a number of provisions in NRS Chapter 21. Referring to the actual document delivered by the sheriff, a "certificate of the sale under NRS ," is more easily understandable Section 16(4). [4. A violation of sections 2 to 16, inclusive, of this act does not affect the validity of a sale to a bona fide purchaser for value and any of its encumbrancers for value without notice.] [New] Section 16.5: A violation of sections 2 to 16, inclusive, of this act or NRS does not affect the validity of a sale to a bona fide purchaser for value and any of its encumbrancers for value without notice. Explanation. The amendment would remove subsection 4 of Section 16 out of Section 16 and incorporate it as a new stand alone section in NRS Chapter 107. Section 16(4) offers valuable protection to a third party purchaser who buys a property for cash at a foreclosure sale without notice that the sale may not have been in compliance with the borrower protection requirements of SB 321. Similar borrower protections exist in NRS The benefits of Section 16(4) should not be limited to failure to comply with SB 321, but should be extended to violations of statutes, such as NRS , providing similar protections. 7 NRS et seq. 8 NRS requires that "The officer shall give to the purchaser a certificate of the sale." MBUCKLEY/ W-9

10 13. Section 18(1). 1. If an action for a foreclosure sale pursuant to [the recovery of any debt, or for the enforcement of any right secured by a mortgage or other lien upon real estate that is not barred by] NRS affecting owner occupied housing is commenced in a court of competent jurisdiction: Explanation. The term "owner-occupied housing" is defined in Section 18(11)(c), but not used in Section 18. The intent of Section 18 appears to require that judicial foreclosures apply to owner-occupied housing and so the reference has been added to subsection 1. C. General Comments. 1. Two "Mediation" Processes. SB 321 would enact provisions similar to those contained in the California HBR. As noted in Section 8 of SB 321, the process proposed in SB 321 would be in addition to the FMP. 9 The California HBR does not require post- NOD mediation as Nevada already does through its FMP. While the REFC does not take policy positions, we do believe that it is important to point out if legislative proposals create overlaps or conflicts. We also believe it is important that legislators understand the context in which a legislative proposal will operate. For example, while SB 321 will now require FMP in the context of a Judicial Foreclosure, where it is presently lacking, the bill may create a duplicative process for the lender seeking a non-judicial foreclosure. That is, if such a lender offers a foreclosure prevention alternative which is unsuccessful, the subsequent commencement of a Trustee's Sale proceeding requires mediation of the same loan upon the filing of an NOD. The Legislature should therefore consider means of better integrating the two different processes envisioned by SB 321 and the FMP so that, when one applies the other does not and vice versa. From a practical point of view, it might make more sense to focus on improvements to the FMP, which has a track record and is monitored by the Supreme Court, than to institute an entirely new process. 2. Sunset Provisions. Many requirements of the California HBR have sunset provisions. These provide the following or words to similar effect: This section shall remain in effect only until January 1, 2018, and as of that date is repealed, unless a later enacted 9 "1. In addition to the requirements of NRS and , the exercise of a trustee s power of sale pursuant to NRS with respect to a deed of trust securing a residential mortgage loan is subject to the provisions of sections 2 to 16, inclusive, of this act." MBUCKLEY/ W-10

11 statute, that is enacted before January 1, 2018, deletes or extends that date. 10 SB 321 is a permanent alteration in Nevada mortgage law. Legislators should consider whether permanently mandating the procedures in SB 321 makes sense not only in light of the mortgage foreclosure crisis, but in terms of how future borrowers in a more normal market are affected by these changes. 3. Definitions in General. Many of the laws and bills affecting residential foreclosures use differently defined terms. For example, as noted above, NRS (12)(c) states that the FMP applies to "owner-occupied housing." SB 321 (Section 7) uses the term "residential mortgage loan." NRS (3)(a) limits deficiency judgments in the case of "real property is a single-family dwelling." NRS (5)(d) prohibits a guarantor from waiving the one action rule if a mortgage loan "Is secured by real property upon which: (1) The owner maintains the owner s principal residence; (2) There is not more than one residential structure; and (3) Not more than four families reside." By using different terminology for what is essentially residential mortgage lending, these statutes create the potential for ambiguity by suggesting that there may be a difference between the terms. 4. Section 3(2); Foreclosure Advisors. Section 3(2) refers to foreclosure advisors. The Legislature may wish to consider whether these ought to be persons or entities licensed to provide such services. The grammar is also subject to improvement: "has contracted with" such an outfit, could refer to a past arrangement rather than one presently in effect. 5. Abandoned Property. SB 278 "establishes an expedited procedure for the exercise of the power of sale with respect to abandoned residential property." 11 Assuming the Legislative policy is that lenders should be permitted to expedite a foreclosure of abandoned property, an exception should be added to SB 321 providing that the foreclosure prevention alternative procedures contemplated by this bill do not apply in the case of abandoned property, 6. Required Information; Section 10(1). Sec 10(1) requires that certain information be mailed to the borrower. The form of the statement, including this information, ought to be consistent with the information required in the AB 284 Affidavit (as proposed to be amended by AB 300) and any other statutory notices to a borrower related to foreclosure. Requiring standardized information and standard forms for different statutory requirements will help to reduce costs and should result in forms with which borrowers can become familiar, rather than requiring them, at different stages in the process, to become reacquainted with different forms containing that same basic information. 10 California Civil Code Sections , , , 2924(a)(5), , , , , , , (c), and each contains a "sunset" section. 11 Legislative Counsel's Digest, SB 278, First Reprint. MBUCKLEY/ W-11

12 7. Terminology and Clarifications; Section 15(1). Section 15(1) requires that an NOD be "withdrawn" under certain circumstances. Since the giving of the NOD and its mailing and recording are historical facts, the NOD cannot technically be "withdrawn." The Trustee's Sale proceedings can be terminated and an NOD is often referred to as being "rescinded." (See, e.g., NRS (3)(b)). The language here should be clarified. 8. Mortgage Servicers vs. Lenders. Certain of the foreclosure prevention alternatives are required to be administered only by mortgage servicers. The bill applies to all lenders. Not all may have mortgage servicers. The attached amendment highlights the two terms, i.e., the lenders vs. just the servicers. The bill should be analyzed to make sure that each reference is correct. D. The Foreclosure Process Nevada Foreclosure Process: Nevada mortgage loans are typically evidenced by a promissory note and, although sometimes referred to a "mortgage," a deed of trust. 12 Upon default, most lenders enforce their mortgage loans by a trustee's sale under NRS ("Trustee's Sale"), which is commenced by the mailing and recordation of a notice of breach or default and election to sell ("NOD"). By statute, three months after the recording and mailing of the NOD a notice of sale ("Notice of Sale") is given to the borrower and others with interests in the property. The sale itself may occur approximately three weeks after the mailing and publication of the Notice of Sale. The sale consists of a public auction of the property to the highest cash bidder, although the lender may credit its loan amount to its bid. The Trustee's Sale results in a final sale and extinguishes all rights of the borrower and junior lenders in the property. Nevada law also permits a mortgage loan to be judicially foreclosed under NRS (a "Judicial Foreclosure"). 13 A Trustee's Sale is a non-judicial process conducted by the trustee named in the deed of trust. In contrast, a judicial foreclosure is commenced by the institution of a lawsuit. The sale is conducted pursuant to court order by the sheriff, in the manner required for execution sales under NRS The buyer at a judicial foreclosure sale acquires the property subject to a right of redemption under NRS , pursuant to which the borrower and others whose interests in the property have been extinguished by the sale (e.g., junior lenders) have a period of one year following the sale within which to redeem the property from the purchaser (the "Right of Redemption") by paying to the purchaser the amount paid for the property together with interest and certain costs. FMP. Prior to 2011 most Nevada mortgage loans were enforced by Trustee's Sale. In 2009, Nevada enacted the FMP pursuant to NRS , which requires that lenders 12 As noted above, deeds of trust are often referred to as "mortgages." Although a mortgage is different than a deed of trust and governed by NRS Chapter 106 rather than Chapter 107, the two terms are often used interchangeably. 13 As used herein, the term "foreclosure" refers to both a Trustee's Sale and a Judicial Foreclosure. MBUCKLEY/ W-12

13 seeking to enforce mortgages on "owner-occupied housing" 14 must offer the borrower the opportunity to participate in mediation with the lender pursuant to rules established by the Nevada Supreme Court. As described by the Court, "The purpose of AB 149 was to directly address the foreclosure crisis and to help keep families in their homes. The FMP provides an opportunity for homeowners and lenders to discuss alternatives to foreclosure." 15 In its administration of the FMP rules, the Supreme Court has had the occasion to issue several published opinions involving interpretation of the FMP rules. 16 The Court has also issued orders, which, under Supreme Court Rule 123 "shall not be regarded as precedent and shall not be cited as legal authority," nevertheless offer guidance to lenders and borrowers alike. 17 The end result has been an unusual abundance of guidance from Nevada's highest court on recently enacted statutes. AB 284 (2011). During the Great Recession Nevada maintained one of the highest rates of foreclosures in the country. In 2011, at the urging of Nevada's Attorney General in response to perceived abuses in the Trustee's Sale process, in particular, "robo-signing," Nevada enacted AB 284 in Among other things, AB 284 amended NRS to require that a recorded NOD be accompanied by: "a notarized affidavit of authority [herein the "284 Affidavit"] to exercise the power of sale stating, based on personal knowledge and under the penalty of perjury...." Because of objections to language of AB 284, in late 2012 and early 2013 the Attorney General convened meetings of a "working group" which included representatives of lenders and their servicers, legal aid, title companies and the state bar. The work product of that group resulted in a consensus bill draft of changes to AB 284. That bill is AB 300. Among other things, AB 300 more carefully describes the information, both the information itself and its source, required in the 284 Affidavit. Federal Programs. The availability of home mortgages in the United States is facilitated by Fannie Mae, Freddie Mac, the VA and FHA, which have established guidelines and uniform forms for making residential mortgage loans. 18 These entities acquire or insure 14 "'Owner-occupied housing' means housing that is occupied by an owner as the owner s primary residence. The term does not include vacant land or any time share or other property regulated under chapter 119A of NRS." NRS (12)(c) 15 See: 16 For example, see: Leyva v. National Default Servicing Corp., 127 Nev. Adv. Op. No. 40 (2011); Edelstein v. Bank of New York Mellon, 128 Nev. Adv. Op. 48 (2012); and Einhorn v. BAC Home Loans Servicing, LP, 128 Nev. Adv. Op. 61 (2012). 17 For example, see: Surgeoner v. Credit Suisse First Boston, No , May 16, 2012; and Eli Applebaum IRA f/k/a High Desert Investment Group Defined Benefit Pension Plan v. Arizona Acreage, LLC, No , June 21, For example, while NRS provides for a nine month "super priority" lien for homeowner association assessments, it also provides that if Fannie Mae regulations require a shorter period, the super priority period is limited to such lesser period but no less than 6 months. MBUCKLEY/ W-13

14 mortgage loans, thus providing greater liquidity for home mortgage lending. 19 Thus, while enforcement of residential mortgages is governed by state law, it is important for the health of mortgage lending in the state that state law take into account the judgment of these agencies on the foreclosure process in the state. For example, according to The Wall Street Journal, the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, proposed to charge borrowers in states "where judicial and regulatory burdens prolong the process" a one time up-front fee. According to the Journal article, "The change would relieve borrowers in low-cost states from subsidizing those in high-cost states. FHFA would lower or eliminate the levy if states sped up their foreclosure processes, which would also speed up the housing recovery." According to its website, " From January 1, 2009 through December 31, 2012, Fannie Mae provided $3.3 trillion in mortgage credit, which enabled 2.7 million home purchases and 9.7 million mortgage refinancings." See: 20 "Senators for Housing Busts, How dare Fannie and Freddie try to charge for their risks." November 30, 2012, The Wall Street Journal. MBUCKLEY/ W-14

15 SB 321 (R1) AMENDMENTS Sec. 4. Foreclosure prevention alternative means a modification of a loan secured by the most senior residential mortgage loan on the property or any other loss mitigation option. Sec. 6. Mortgage servicer means a person who directly services a residential mortgage loan, or who is responsible for interacting with a borrower, managing a loan account on a daily basis, including, without limitation, collecting and crediting periodic loan payments, managing any escrow account or enforcing the note and security instrument, either as the current owner of the promissory note or as the authorized agent of the current owner of the promissory note. The term includes a person providing such services by contract as a subservicing agent to a master servicer by contract. The term does not include a trustee under a deed of trust, or the trustee s authorized agent, acting under a power of sale pursuant to a deed of trust. Sec. 7. Residential mortgage loan means a loan which is primarily for personal, family or household use and which is secured by a mortgage on owner-occupied housing as defined in NRS Deleted: mortgage or deed of trust Deleted: that is the subject of the notice of default and election to sell Deleted: or entity Deleted: or entity Deleted:, deed of trust or other equivalent, consensual security interest Sec In addition to the requirements of NRS and , the exercise of a trustee s power of sale pursuant to NRS with respect to a deed of trust securing a residential mortgage loan is subject to the provisions of sections 2 to 16, inclusive, of this act. 2. In addition to the requirements of NRS to , inclusive, an action for a foreclosure sale pursuant to NRS is subject to the requirements of sections 2 to 16, inclusive, of this act. Sec Any duty of a mortgage servicer to maximize net present value under a pooling and servicing agreement is owed to all parties in a loan pool, or to all investors under a pooling and servicing agreement, not to any particular party in the loan pool or investor under a pooling and servicing agreement. 2. A mortgage servicer acts in the best interests of all parties to the loan pool or investors in the pooling and servicing agreement if the mortgage servicer agrees to or implements a foreclosure prevention alternative for which both of the following apply: Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan secured by a mortgage or other lien upon real estate that is not barred by NRS (a) The residential mortgage loan is in payment default or payment default is reasonably foreseeable. (b) Anticipated recovery under the foreclosure prevention alternative exceeds the anticipated recovery through foreclosure on a net present value basis. Sec At least 30 days before recording a notice of default and election to sell pursuant to subsection 2 of NRS or commencing a civil action for a foreclosure MBUCKLEY/ W-15

16 sale pursuant to NRS and at least 30 days after the borrower s default, the mortgage servicer, mortgagee or beneficiary of the deed of trust shall mail, by first-class mail, a notice addressed to the borrower at the borrower s primary address as indicated in the records of the mortgage servicer, mortgagee or beneficiary of the deed of trust, which contains: (a) A statement that if the borrower is a servicemember or a dependent of a servicemember, he or she may be entitled to certain protections under the federal Servicemembers Civil Relief Act, 50 U.S.C. 501 et seq., regarding the servicemember s interest rate and the risk of foreclosure, and counseling for covered servicemembers that is available from Military OneSource and the United States Armed Forces Legal Assistance or any other similar agency. Deleted: the Deleted: recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by (b) A summary of the borrower s account which sets forth: (1) The total amount of payment necessary to cure the default and reinstate the residential mortgage loan or to bring the residential mortgage loan into current status; (2) The present amount of the principal obligation under the residential mortgage loan; (3) The date through which interest on the borrower s obligation under the residential mortgage loan is paid; (4) The date of the last full payment by the borrower; (5) The current interest rate in effect for the residential mortgage loan, if the rate is effective for at least 30 days; (6) The date on which the interest rate for the residential mortgage loan may next reset or adjust, unless the rate changes more frequently than once every 30 days; (7) The amount of the prepayment fee charged under the residential mortgage loan, if any; (8) A description of any late payment fee charged under the residential mortgage loan; (9) A telephone number or electronic mail address that the borrower may use to obtain information concerning the residential mortgage loan; and (10) The names, addresses, telephone numbers and Internet website addresses of one or more counseling agencies or programs approved by the United States Department of Housing and Urban Development. MBUCKLEY/ W-16

17 (c) A statement of the facts establishing the right of the mortgage servicer, mortgagee or beneficiary of the deed of trust to cause the trustee to exercise the trustee s power of sale pursuant to NRS or to commence a civil action for a foreclosure sale pursuant to NRS (d) A statement of the foreclosure prevention alternatives offered by, or through, the mortgage servicer, mortgagee or beneficiary of the deed of trust. Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by (e) A statement that the borrower may request: (1) A copy of the borrower s promissory note or other evidence of indebtedness; (2) A copy of the borrower s mortgage; (3) A copy of any assignment, if applicable, of the borrower s mortgage required to demonstrate the right of the mortgage servicer, mortgagee or beneficiary of the deed of trust to cause the trustee to exercise the trustee s power of sale pursuant to NRS or to commence a civil action for a foreclosure sale pursuant to NRS ; and (4) A copy of the borrower s payment history since the borrower was last less than 60 days past due. 2. Unless a borrower has exhausted the process described in sections 12 and 13 of this act for applying for a foreclosure prevention alternative offered by, or through, the mortgage servicer, mortgagee or beneficiary of the deed of the trust, not later than 5 business days after a notice of default and election to sell is recorded pursuant to subsection 2 of NRS or a civil action for a foreclosure sale pursuant to NRS is commenced, the mortgage servicer, mortgagee or beneficiary of the deed of trust that offers one or more foreclosure prevention alternatives must send to the borrower a written statement: (a) That the borrower may be evaluated for a foreclosure prevention alternative or, if applicable, foreclosure prevention alternatives; Deleted: or deed of trust Deleted: or deed of trust Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by (b) Whether an application is required to be submitted by the borrower if the borrower wants to be considered for a foreclosure prevention alternative; and (c) Of the means and process by which a borrower may obtain an application for a foreclosure prevention alternative. Sec A mortgage servicer, mortgagee, trustee, beneficiary of a deed of trust or an authorized agent of such a person may not record a notice of default and election to sell pursuant to subsection 2 of NRS or commence a civil action for a foreclosure sale pursuant to NRS until: Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by MBUCKLEY/ W-17

18 (a) The mortgage servicer, mortgagee or beneficiary of the deed of trust has satisfied the requirements of section 10 of this act; (b) Thirty days after initial contact is made with the borrower as required by subsection 2 or 30 days after satisfying the requirements of subsection 5; and (c) The mortgage servicer complies with sections 12 and 13 of this act, if the borrower submits an application for a foreclosure prevention alternative offered by, or through, the mortgage servicer, mortgagee or beneficiary of the deed of trust. 2. The mortgage servicer shall contact the borrower in person or by telephone to assess the borrower s financial situation and to explore options for the borrower to avoid a foreclosure sale. During the initial contact, the mortgage servicer shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgage servicer must schedule the meeting to occur within 14 days after the request. The assessment of the borrower s financial situation and discussion of the options to avoid a foreclosure sale may occur during the initial contact or at the subsequent meeting scheduled for that purpose. In either case, the borrower must be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development to find a housing counseling agency certified by that Department. Any meeting pursuant to this subsection may occur by telephone. 3. The loss mitigation personnel of a mortgage servicer may participate by telephone during any contact with a borrower required by this section. 4. A borrower may designate, with consent given in writing, a housing counseling agency certified by the United States Department of Housing and Urban Development, an attorney or any other adviser to discuss with the mortgage servicer, on the borrower s behalf, the borrower s financial situation and options for the borrower to avoid a foreclosure sale. Contact with a person or agency designated by a borrower pursuant to this subsection satisfies the requirements of subsection 2. A foreclosure prevention alternative offered during any contact with a person or agency designated by a borrower pursuant to this subsection is subject to the approval of the borrower. 5. If a mortgage servicer has not contacted a borrower as required by subsection 2, a notice of default and election to sell may be recorded pursuant to subsection 2 of NRS or a civil action for a foreclosure pursuant to NRS may be commenced, if the mortgage servicer has taken all the following actions: (a) The mortgage servicer attempts to contact the borrower by mailing by firstclass mail to the borrower a letter informing the borrower of his or her right to discuss foreclosure prevention alternatives and providing the toll-free telephone number made available by the United States Department of Housing and Urban Development to find a housing counseling agency approved by that Department. Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by MBUCKLEY/ W-18

19 (b) After mailing the letter required by paragraph (a), the mortgage servicer attempts to contact the borrower by telephone at least 3 times at different hours on different days. Telephone calls made pursuant to this paragraph must be made to the primary telephone number of the borrower which is on file with the mortgage servicer. A mortgage servicer may attempt to contact a borrower pursuant to this paragraph by using an automated system to dial borrowers if, when the telephone call is answered, the call is connected to a live representative of the mortgage servicer. A mortgage servicer satisfies the requirements of this paragraph if it determines, after attempting to contact a borrower pursuant to this paragraph, that the primary telephone number of the borrower which is on file with the mortgage servicer and any secondary telephone numbers on file with the mortgage servicer have been disconnected. (c) If the borrower does not respond within 2 weeks after the mortgage servicer satisfies the requirements of paragraph (b), the mortgage servicer mails by certified mail, return receipt requested, a letter that includes the information required by paragraph (a). (d) The mortgage servicer provides a means for the borrower to contact the mortgage servicer in a timely manner, including, without limitation, a toll-free telephone number that will provide access to a live representative during business hours. (e) The mortgage servicer posts on the homepage of its Internet website, if any, a prominent link to the following information: (1) Options that may be available to borrowers who are unable to afford payments under a residential mortgage loan and who wish to avoid a foreclosure sale, and instructions to such borrowers advising them on steps to take to explore those options. (2) A list of financial documents the borrower should collect and be prepared to present to the mortgage servicer when discussing options to avoid a foreclosure sale. (3) A toll-free telephone number for borrowers who wish to discuss with the mortgage servicer options for avoiding a foreclosure sale. (4) The toll-free telephone number made available by the United States Department of Housing and Urban Development to find a housing counseling agency certified by that Department. 6. If the property is subject to the requirements of sections 2 to 16, inclusive, of this act, a notice of default and election to sell recorded pursuant to subsection 2 of NRS or a complaint commencing a civil action for a foreclosure sale pursuant to NRS , must contain a declaration that the mortgage servicer has contacted the borrower as required by subsection 2, has attempted to contact the grantor or the person who holds title of record as required by subsection 5 of this act or that no contact was required. Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by MBUCKLEY/ W-19

20 Sec Not later than 5 days after receiving an application for a foreclosure prevention alternative or any document in connection with such an application, a mortgage servicer, mortgagee or beneficiary of the deed of trust shall send to the borrower written acknowledgment of the receipt of the application or document. 2. The mortgage servicer, mortgagee or beneficiary of the deed of trust shall include in the initial acknowledgment of receipt of an application for a foreclosure prevention alternative: (a) A description of the process for considering the application, including, without limitation, an estimate of when a decision on the application will be made and the length of time the borrower will have to consider an offer for a foreclosure prevention alternative; (b) A statement of any deadlines that affect the processing of an application for a foreclosure prevention alternative, including, without limitation, the deadline for submitting any missing documentation; and (c) A statement of the expiration dates for any documents submitted by the borrower. 3. If a borrower submits an application for a foreclosure prevention alternative but does not initially submit all the documents or information required to complete the application, the mortgage servicer must: Comment [F1]: Clarify meaning. (a) Include in the initial acknowledgment of receipt of the application required by subsection 2 a statement of any deficiencies in the borrower s application; and (b) Allow the borrower not less than 30 calendar days to submit any documents or information required to complete the application. Sec If a borrower submits an application for a foreclosure prevention alternative offered by, or through, the borrower s mortgage servicer or mortgagee or the beneficiary of the deed of trust, then the mortgage servicer, mortgagee, trustee, beneficiary of the deed of trust or an authorized agent of such a person may not commence a civil action for a foreclosure pursuant to NRS , record a notice of default and election to sell pursuant to subsection 2 of NRS or a notice of sale pursuant to subsection 4 of NRS , or conduct a foreclosure sale until one of the following has occurred: Deleted: the recovery of any debt, or for the enforcement of any right, under a residential mortgage loan that is not barred by (a) The borrower fails to submit all the documents or information required to complete the application within 30 calendar days after the date of the initial acknowledgment of receipt of the application sent to the borrower pursuant to section 12 of this act. MBUCKLEY/ W-20