Sunday, May 19, 2013

Nevada Supremes: Little Downside For Banksters Engaging In Mediation-Associated Bad Faith; Trial Judge's Failure To Impose Loan Modification OK; Well Within Court's Discretion To Limit Lender Sanctions To Simply Withholding FMP Certificate & Granting $3,500 In Homeowner Attorney's Fees

From US Law:

  • Homeowner attended a first Foreclosure Mediation Program (FMP) mediation with Citimortgage, after which Defendant was denied a loan modification. The district court subsequently ordered a second mediation.

    PennyMac Corp. later obtained beneficial interest in the deed of trust and promissory note and attended the second mediation.

    The mediator determined that PennyMac failed to bring the promissory note, deed of trust, and other documents to the mediation and that PennyMac's representative lacked authority to negotiate.

    Homeowner filed a petition for judicial review, requesting sanctions, attorney fees, and a judicially imposed loan modification.

    The district court imposed sanctions against PennyMac but declined to impose a loan modification or monetary sanctions beyond the amount of attorney fees.

    The Supreme Court affirmed, holding (1) Homeowner had standing to challenge the district court's order on appeal; and (2) the district court acted within its discretion in denying an FMP certificate and in determining sanctions.(1)
Source: Opinion Summary - Jacinto v. PennyMac Corp.

For the court ruling, see Jacinto v. PennyMac Corp., 129 Nev. Advance Opinion 32 (May 2, 2013).

(1) From the Nevada Supreme Court ruling:
  • A deed of trust beneficiary seeking an FMP certificate must attend the mediation, participate in good faith, bring the required documents, and if attending through a representative, the representative must have authority to modify the loan or have access at all times to such a person. NRS 107.086(4), (5); Leyva, 127 Nev. at ___, 255 P.3d at 1279.

    If the district court finds noncompliance with these requirements, the bare minimum sanction is that an FMP certificate must not issue. Holt v. Reg'l Tr. Servs. Corp., 127 Nev. ___, ___, 266 P.3d 602, 607 (2011). In the absence of factual or legal error, the choice of any further sanctions in addition to withholding the FMP certificate is committed to the district court's sound discretionPasillas v. HSBC Bank USA, 127 Nev. ___, ___, 255 P.3d 1281, 1287 (2011).

    In Pasillas, we set forth a nonexhaustive list of factors for the district court to consider in weighing the appropriate sanctions to impose when a party has violated the FMP requirements. 127 Nev. at ___, 255 P.3d at 1287.

    Relevant to this matter is "whether the violations were intentional, the amount of prejudice to the nonviolating party, and the violating party's willingness to mitigate any harm by continuing meaningful negotiation." Id.

    Here, the district court found that PennyMac violated NRS 107.086(4) by failing to bring certified copies of the promissory note and deed of trust, although it did provide noncertified copies, and the district court found that PennyMac failed to provide an appraisal, violating FMR 11's document-production requirements. The court further concluded, consistent with the mediator's findings, that PennyMac's representative lacked sufficient authority to negotiate a modification. The district court found that PennyMac was a flagrant violator of the document-production requirements, and concluded that PennyMac had participated in the FMP process in bad faith.

    It therefore granted Jacinto's petition for judicial review, denied an FMP certificate, and imposed additional sanctions of $3,500, which represented the attorney fees incurred by Jacinto for the second mediation and hearing on the petition for judicial review, but the district court denied Jacinto's request for a loan modification.

    Having reviewed the record and considered the parties' arguments, we conclude that the district court made sufficient findings and conclusions, it properly considered the nonexhaustive Pasillas factors, and it acted within its sound discretion in determining the amount and nature of sanctions. Pasillas, 127 Nev. at ___, 255 P.3d at 1286-87.

    The district court found that PennyMac acted in bad faith and violated the document-production requirements. Based on those findings, it ordered the FMP certificate withheld as required, but it also imposed monetary sanctions against PennyMac, thus imposing more than the minimum sanction. Holt, 127 Nev. at ___, 266 P.3d at 607.

    We perceive no abuse of discretion with regard to the district court's decision to decline Jacinto's request for the imposition of a loan modification or with regard to the amount of monetary sanctions imposed against PennyMac. Pasillas, 127 Nev. at ___, 255 P.3d at 1286-87.

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