Foreclosure mediation in justices’ hands

The Nevada Supreme Court today will hear the first legal appeal filed as a result of a failed foreclosure mediation, in a case that could have far-reaching implications for tens of thousands of distressed homeowners.

Veteran Nevada attorney David Crosby represents Moises Leyva, who bought a home from a third party in 2006. The seller provided a quitclaim but no deed.

Leyva continued to make payments on the home despite never being assigned the mortgage, according to a case summary provided by the high court. That makes Leyva's personal foreclosure story a bit different from the 79,000 others on record in Nevada because the lender questions Leyva's eligibility to even participate in the program.

In September 2009, District Judge Donald Mosley, in one of the first hearings after the law went into effect, denied Leyva's petition for judicial review and ruled the lenders did not act in bad faith.

In a brief filed with the state Supreme Court, Crosby said the lenders, National Default Servicing Corp., and Wells Fargo, "in bad faith refused to make any arrangements to help (Leyva) stay in his home. Instead, lender offered nothing but exit strategy."

Most importantly, he said the lender "failed to produce the required documents and completely failed to participate in the negotiation process."

When the Legislature in 2009 enacted the law that created the Nevada Foreclosure Mediation Program, lawmakers authorized district judges to sanction lenders financially if they are found to have acted in bad faith. Judges could even modify loans from the bench.

Crosby argues that Mosley, the only Southern Nevada jurist who reviews failed mediations, "failed to properly apply the statute and mediation rules."

In his appeal filed in May, Crosby asked the high court to reverse Mosley's ruling and declare that the lender did act in bad faith.

The high court must first determine what constitutes good and bad faith in relation to the mediation program, according to court papers.

The court also must develop a "standard of review" to help lower courts determine if a lender acted in bad faith.

The justices will have to determine if a lender commits bad faith by failing to provide documents it is required by law to bring to mediation.

Attorney Greg Brower, who represents third-party respondent Wells Fargo, challenges whether Leyva even qualifies to participate in the state program because he was never the legal owner.

Brower, who is also a state senator from Reno, said Leyva gave $7,000 to the original borrower, Michael Curtis Ramos, and agreed to take over the mortgage payments in exchange for a quitclaim deed.

Brower does not dispute the fact Leyva made the payments, but the property transfer was made without the lender's consent, as required in the mortgage.

Brower also argues the lenders fully participated in the September 2009 mediation "in good faith," and that Leyva was offered several alternatives to foreclosure. He disputes Crosby's assertion the lender's only suggestion was for Leyva to "walk away."

Other appeals regarding the foreclosure mediation program are anticipated as more judicial reviews are held.

Mosley was recently criticized by attorney Jacob Hafter after saying he would not modify a loan from the bench regardless of his authority to do so.

Mosley told the Las Vegas Review-Journal in October that he considers such a sanction an illegal government taking. Hafter has not filed an appeal.

Contact Doug McMurdo at
dmcmurdo@reviewjournal.com or 702-224-5512
or read more courts coverage at lvlegalnews.com.