Nevada Update: Amendments To Foreclosure Mediation Rules

By Michael R. Brooks, Esq., & Paul W. Melo, Esq., Brooks Bauer LLP

The Nevada Supreme Court has amended the Foreclosure Mediation Rules. Following is a summary of the amendments, which are effective June 1, 2010.

1. New Forms Required to Be Served With the Notice of Default

In addition to the Notice of Default and the Election/Waiver of Mediation Form, Amended Rule 5.5 requires two new forms to be served on the borrower at the same time the Notice of Default and the Election/Waiver of Mediation Form are served. The two new forms are financial information forms that the borrower must complete and submit with the Election/Waiver of Mediation Form if the borrower elects to participate in the Foreclosure Mediation Program.
Lenders/Trustees are now supposed to receive the borrower’s financial information at the
same time that they receive the election to participate.

The 3 required forms that must accompany the Notice of Default are as follows:

1. Election/Waiver of Mediation Form;
2. Financial Statement; and
3. Housing Affordability Worksheet. 

Along with the required documents, the Trustee must also provide two envelopes to the borrower as follows: 1) an envelope pre-addressed to the Foreclosure Administrator; and 2) an envelope pre-addressed to the Trustee.

From the time the Notice of Default and the required forms are served on the borrower, the borrower has 30 days to complete the forms and submit them. The borrower must send one copy of the completed forms to the Foreclosure Mediation Administrator and one copy to the Trustee.

From the time the Trustee receives the completed Election/Waiver of Mediation Form from the borrower, the Trustee has 10 days to complete the Trustee information and beneficiary information and send the completed Election/Waiver of Mediation Form to the Foreclosure Mediation Administrator.

2. New Triggering Event and New Time Period to Complete Mediation

Amended Rule 1.2 increases the time to complete the foreclosure mediation from 90 to 135 days.  Additionally, the 135-day time period begins at the time Foreclosure Mediation Administrator receives the fees and required documentation from the Lender/Trustee. (See Amended Rule 5.6(d) for “required documentation” from trustee.)  This is a two-fold change because the 90-day period was measured from the date the Notice of Default was served. This rule was changed to reflect the need for parties to negotiate a resolution without the time constraints imposed on previous matters.

3. Owner-Occupied Housing

Amended Rule 5.3 makes it clear that a Certificate is not required to be issued and recorded prior to a trustee's sale of any type of property except owner-occupied housing. (Note: the statute is clear on this issue; however, some believed the Rules created some ambiguity.)  If the property is not owner-occupied, foreclosure may continue without a Certificate from the Administrator.
The question that Lenders and Trustees will face is how to determine the occupancy status of a particular asset.  The difficulty in making that determination will likely result in a demand for a Certificate in nearly every residential foreclosure. Lenders are permitted to request a Certificate on any property.

4. Attorney Representation at Mediation and Personal Appearance 

In one of the more unusual changes, Amended Rule 5.8 provides “both parties to a mediation should appear in person.”  This is unusual because it is a recommendation rather than a requirement and it is unclear whether any sanction will apply for not appearing in person.   However, a party may be represented by another person as follows:

A. Trustee/Beneficiary: A beneficiary or its representative shall be physically present, or if approved by the mediator in advance, and for good cause shown, may participate in the mediation by telephone. The beneficiary or its representative must at all times during mediation have authority to negotiate and modify the loan secured by the deed of trust pursuant to which the foreclosure was commenced. Note that there is no requirement that the representative of the beneficiary be licensed to practice law or have any particular license.  The only criterion is the representative for the beneficiary have authority to modify the loan.

It is not clear what the Court intended by this rule change.  At most of the committee meetings on this matter, the Lender representatives successfully argued that the Lender representative was most useful at his/her desk and available by telephone.  The language adopted by the Court was not found in any of the proposed changes.

B. Borrower: If the borrower chooses to be represented at the mediation, the representative must be (i) an attorney licensed to practice law in Nevada, and/or (ii) a person licensed to provide the services defined in NRS § 645F.310,  which include financial counseling, debt counseling, and budget counseling.

5. Document Certification

In lieu of original documents, copies of the mortgage note, deed of trust, and each assignment of the deed of trust, may be presented at a mediation, but only if the mediator receives a statement under oath signed before a notary public.  Amended Rule 5.10 provides that the statement to certify a copy must now be notarized pursuant to NRS § 240.1655(2) which requires a notary to establish the identity of the person making the affirmation and swearing that the copies are true and correct.  The statement certifying a copy of a document must include the name, address, capacity, and authority of the person making the certification of the copies.  The person making the statement must also state that he or she is in actual possession of the original and the copy is a true and correct copy of the original.

6. Broker’s Price Opinion

There is still a requirement that the beneficiary produce an appraisal that was done within 60 days of the date of the mediation.  However, with the addition of Amended Rule 8.4, the mediator now has discretion to accept a broker's price opinion in addition to or in lieu of the appraisal.  The broker’s price opinion must comply with the provisions of NRS § 645.2515.

7. Recordation

Amended Rule 8.6 prohibits parties to the mediation from making an audio or visual recording of the mediation for the purpose of making a record for judicial review.

8. Petition for Judicial Review

Amended Rule 6.6 imposes a stay on any further proceedings upon the filing of a petition for judicial review.  A petition for judicial review must be filed within 15 days of the date of actual receipt of the mediator's statement.  Petitions for judicial review must be heard within 60 days of service of the petition.

The method for service of the petition is not clear.  Amended Rule 6.2 states that service of the petition must be done in accordance with the Nevada Rules of Civil Procedure, NRS Chapter 107, and local rules or administrative order adopted by judicial district, which means that personal service is required. However, Amended Rule 6.3 states that service on any party appearing at the mediation can be done by certified or registered mail, return receipt requested.

9. Temporary Loan Modifications

Temporary loan modifications are provided for by Amended Rule 10.  The parties can agree to a temporary loan modification and set an expiration date for the temporary modification.  If one party does not perform as agreed, the aggrieved party may file a petition for judicial review within 15 days of the expiration date of the temporary loan modification.