CARSON CITY -- The Nevada Supreme Court weighed arguments Wednesday on whether U.S. Bank can foreclose on a Douglas County couple's home even though not all required documents were presented during mediation.
Lawyers involved in the case said the court's ruling could have wide repercussions on foreclosures in a state hard-hit by the collapse of the housing market.
Attorneys for Andrew and Lauretta Davis want justices to send the case back to Washoe County District Court for a hearing on whether documents handled by Mortgage Electronic Registration Systems, or MERS, were signed by an authorized officer and properly conveyed the Davis' mortgage from the now-defunct Ownit Mortgage Solutions to U.S. Bank.
The couple's attorneys claim MERS lacked the authority to assign the loan to the bank.
"The certification for this assignment was not produced," attorney Mark Mausert argued before six of the high court's seven justices. Chief Justice Nancy Saitta missed the session but is expected to listen to arguments before a ruling is handed down at a later date.
A lawyer for the lender countered that issues raised by the Davis' attorneys go beyond the scope of Nevada's Foreclosure Mediation program, and that disputes over the validity of documents should be addressed in a separate lawsuit.
"Courts across the country have repeatedly found MERS is in fact an appropriate entity to execute an assignment because that right is given to them in the deed of trust and agreed to by the borrower at the time the loan is originated," said Kristin Schuler-Hintz, a lawyer for the bank.
Robert Hager, co-counsel with Mausert, said the court's ruling could affect thousands of loans in Nevada assigned by MERS that are now in foreclosure.
At one point during Wednesday's arguments, Justice Mark Gibbons asked Schuler-Hintz whether any proof was offered during the foreclosure mediation that the person from MERS who assigned the mortgage to U.S. Bank was authorized to do so.
Schuler-Hintz said that issue was beyond the scope of mediation, bringing a testy response from Gibbons.
"I can tell you I wrote the rules. ... I know what they say," Gibbons said. "You're supposed to produce these documents and prove ownership here. You can't just blow off (that) certification means nothing. It means a lot. It means that these people who sign these documents have a right to sign them (and are not) fictional people forging names."
According to court records, the Davises fell into default on their Minden home in late 2008. A loan modification in early 2009 lowered their monthly payment from $2,400 to around $1,700 and reduced their interest rate from 7.75 percent to 4.82 percent.
Another notice of default was filed later that year when the Davises missed three monthly mortgage payments, and the couple entered Nevada's new Foreclosure Mediation Program, documents said. However, the two sides failed to reach an agreement after the Davises' lawyer disputed the validity of the assignment of the deed of trust to U.S. Bank.
In a report, the mediator said the beneficiary "failed to bring to the mediation each document required." The mediator noted that "from the documents presented by the beneficiary's representative, all assignments were not provided."
The bank filed a petition in state court in Washoe County seeking a judicial review of the mediator's findings, and Judge Patrick Flanagan subsequently ruled there was no "bad faith" during mediation on the bank's part, clearing the way for foreclosure. Mausert appealed to the Supreme Court.