Judges accused of ‘predetermining’ foreclosure cases

A lawyer accuses District Judge Donald Mosley and other judges of "predetermining" the outcome in foreclosure disputes in favor of the lenders, according to an appeal filed with the Nevada Supreme Court.

In the process, they have made a "mockery" of a program designed to rescue distressed homeowners, attorney Jacob Hafter says in court papers filed Wednesday.

A 2009 state law gives judges the authority to modify loans if lenders fail to abide by Nevada Foreclosure Mediation Program guidelines.

Hafter said Mosley -- and by implication the high court -- had previously discussed how Nevada courts would rule in these disputes. During a foreclosure hearing for Hafter client Carl Piazza, Mosley said he would never sanction a lender for bad faith by modifying a loan from the bench.

"That's something we resolved for, basically, since this program began, that the judges, and the Supreme Court was part of this discussion, are not going to, in this forum, start modifying loans; just would not do (it)," Mosley said during the October hearing.

"That would lead to a nightmare. I'd be here until midnight every night restructuring loans."

Mosley said he'd discussed the procedure with Washoe County District Judge Patrick Flanagan, who handles the foreclosure hearings in Northern Nevada.

"The judge up north, my counterpart, has agreed and as the Supreme Court agreed, we're not going to do that. So that's the way it is," Mosley said.

Defining bad faith

The Supreme Court appeal stems from a foreclosure dispute involving Piazza, a lawyer and former candidate for Family Court judge, and his lender, CitiMortgage.

Piazza had a $700,000-plus mortgage when he suffered a "massive" heart attack that left him bedridden. Piazza's once-thriving solo practitioner law firm faltered as he spent months recovering and unable to work.

Like many homeowners, Piazza was told his lender could not adjust his loan unless he stopped making the monthly payment, roughly $5,000. Instead of helping Piazza stay in the home, the bank filed a notice of default and began foreclosure proceedings, Hafter said during the October hearing.

In June, a mediator found that CitiMortgage failed to provide legally required documentation and ruled the lender was in noncompliance.

CitiMortgage appealed to Mosley, who sided with the lender and refused to find CitiMortgage acted in bad faith.

During that October hearing, Mosley also said he would never modify a loan from the bench, a statement that was followed by heated comments from Hafter. A marshal ordered Hafter to be quiet after loud exchanges with the judge.

"This statement is extremely concerning on numerous levels," Hafter said in court papers.

If what Mosley said is true, Hafter said, then the judiciary "has predetermined how it will rule on these cases. Such negates any value the program may have had for homeowners, not to mention makes a mockery of the impartiality of the judiciary in Nevada."

Attorneys for CitiMortgage told Mosley mediation failed simply because there was "no way to make the numbers work" that would keep Piazza in the home.

Hafter disputes that contention. But even if it were true, the lender still failed to follow the rules, he said, and that alone is sufficient for the judge to rule CitiMortgage acted in bad faith.

Oral arguments could be heard in the next few months. The Supreme Court is aware of the dispute between Hafter and Judge Mosley, and a court employee in October said he expected the high court to prioritize foreclosure-related appeals.

'Illegal taking'

While Mosley said in court that modifying loans would be a time-consuming inconvenience, he later told the Las Vegas Review-Journal that he considered such modifications an "illegal taking."

UNLV law professor Thomas McAffee said he thinks Mosley probably is right about the law being unconstitutional.

Giving judges unlimited authority to modify loans could intentionally or inadvertently harm lenders financially, which the professor said would be a violation of due process.

"It seems a judge could authorize a perfectly unreasonable sanction and violate the banks' rights," said McAffee, who teaches constitutional law at the Boyd School of Law at the University of Nevada, Las Vegas.

He said the Supreme Court probably would scrutinize the law to determine whether it could lead to arbitrary rulings.

Hafter said he believes judges should have the ability to modify from the bench, that sanctions have to be significant and bad faith findings simple to determine.

"The threshold is minimal," he said. Lenders must follow two rules: Bring all required loan documents to the mediation; have someone available who can approve loan adjustments.

Hafter argues failure to follow either rule is sufficient for such a finding. While the mediator found the lender failed to comply with the law, Mosley did not make a bad faith finding.

UNLV's McAffee believes the judge might have engaged in judicial activism in making that determination.

'So much power'

"It's bad policy to give a judge so much power," McAffee said of loan modifications. "But to just say you're not going to because it would be too big a hassle is certainly not at all deferential to the Legislature. I think it's judicial activism when a judge says, 'I don't like it. So I'm just not going to do it.' "

Lawmakers created the Nevada Foreclosure Mediation Program in 2009 and tasked the Supreme Court with implementing and managing the program, which continues to evolve.

The high court has tweaked the rules several times. The latest changes were announced Wednesday following a recent public hearing.

The new rules expand the time allowed to file for a judicial review of a failed mediation from 15 to 30 days. They give homeowners more control over their mediator and allow them to hire attorneys to represent them at mediations.

The endgame is to keep people in their homes -- and able to pay the mortgage.

Contact Doug McMurdo at dmcmurdo@reviewjournal.com or 702-224-5512.