{"id":705,"date":"2019-07-15T10:37:46","date_gmt":"2019-07-15T14:37:46","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=705"},"modified":"2024-04-25T23:21:05","modified_gmt":"2024-04-26T03:21:05","slug":"nevada-clarifies-mortgage-law-but-what-about-deed-of-trust-lender-entry-provisions","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/nevada-clarifies-mortgage-law-but-what-about-deed-of-trust-lender-entry-provisions\/","title":{"rendered":"Nevada Clarifies Mortgage Law, But What About Deed of Trust Lender Entry Provisions?"},"content":{"rendered":"\n
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In May\u00a02019, effective<\/a>\u00a0October 1, 2019, Nevada passed\u00a0Senate Bill 382<\/a>\u00a0amending the law pertaining to deeds of trust, foreclosure sales, and homeowners’\u00a0associations.<\/p>\n\n\n\n

Among other\nthings, this is a change to Nevada Revised Statute \u00a7 40.050, whose\nlanguage states that a mortgage of real property is not deemed a\nconveyance. If a mortgage does not constitute a conveyance, the mortgage\nlender may take possession on the home upon the inhabitant\u2019s default, bypassing\na judicial foreclosure sale.<\/p>\n\n\n\n

Nevada employs\na deed of trust<\/em>\nbetween the home buyer and the lender. A deed of trust places the legal ownership<\/em> of a home\nwith a designated trustee until the buyer\u2014who holds equitable ownership<\/em>\u2014pays\noff the loan.   <\/p>\n\n\n\n

Of course,\nsome buyers do experience financial challenges and find themselves unable to\npay their mortgages.<\/p>\n\n\n\n

Here, we\nbriefly explore the ramifications, as seen through a case that shook\nmortgage lenders’ expectations in homes they held legally through deeds of\ntrust.<\/p>\n\n\n\n\n\n\n\n

Locked\nOut<\/h2>\n\n\n\n

A deed of\ntrust typically contains provisions permitting the lender to enter and secure\nthe home after a buyer default, so that the asset underlying the loan is\nprotected. Boilerplate language in deeds of trust contain such entry\nprovisions, which allows a servicer, at the lender\u2019s discretion, to go into the\nhome to repair the property, remedy code violations, board up the doors and\nwindows, change the locks, drain the pipes, and turn utilities on or off. <\/p>\n\n\n\n

A buyer who\ncomes home to a locked or boarded up door, without notice or recourse, is\nlikely to regard such an act on the lender\u2019s part as trespass, and may invoke\nthe state’s consumer protection statute and debt collection rules. That\u2019s what\nhappened in Washington, another deed of trust state.<\/p>\n\n\n\n

In 2016, the case of a locked-out resident named Laura Zamora Jordan went to the Washington Supreme Court. In the\u00a0 case,\u00a0Jordan v. Nationstar Mortgage, LLC<\/a>,\u00a0<\/em>the lender had\u00a0assigned the debt\u00a0to Fannie Mae, which in turn hired Nationstar as the loan servicer. Two months after Jordan\u00a0defaulted, the servicer had the lock\u00a0changed.<\/p>\n\n\n\n

The District Court allowed a class action<\/a> on behalf of Jordan and home buyers in Washington who signed a deed of trust or mortgage with Nationstar, whose\u00a0homes\u00a0were re-locked and weatherized, and who received bills for these actions. Plaintiff Laura Zamora Jordan represented\u00a03,600 locked-out homeowners.<\/p>\n\n\n\n

Washington’s\nSupreme Court held that \u201center, maintain, and secure\u201d provisions are\nunenforceable under state law. Language in a deed of trust cannot legally\nbind Washington home buyers to a clause that allows them to be locked out after\nloan default and before foreclosure. Nor is the boilerplate language in the\nFannie Mae and Freddie Mac Uniform Deed of Trust form, enabling lenders\nto \u201ctake possession\u201d by locking the homes, enforceable in Washington state.<\/p>\n\n\n\n

The court,\nthough, did not determine what particular remedies are available. It left\nleeway for lenders, and suggested that legally taking possession by court\norder and receivership before a foreclosure sale is legally acceptable. Unless\nand until there is a foreclosure, servicers should not relock (even\napparently vacant) homes.<\/p>\n\n\n\n

What\nthe Jordan Court Thought About Other Deed of Trust States<\/h2>\n\n\n\n

Other deed\nof trust states, said the Jordan court, \u201ccodified statutes that\nspecifically invalidate” entry provisions. Yet other states, Nevada\nincluded, uses entry provisions in deeds of trust.<\/p>\n\n\n\n

Before the\n2019 amendment, Nevada law stated that a mortgage “shall not be\ndeemed a conveyance, whatever its terms, so as to enable the owner of the\nmortgage to take possession of the real property without a foreclosure and\nsale.\u201d  This language is hardly a nullification of entry provisions\nin deeds of trust. To this day, Nevada remains vulnerable to consumer\nlawsuits. <\/p>\n\n\n\n

So, under Jordan,<\/em> and Nevada law as\nwell, a lender can petition for a receivership or for a judicial\nforeclosure, but these are costly and time-intensive, and may defeat the\npurpose of the deed of trust.<\/p>\n\n\n\n

Nevada’s\nAmendment to the Mortgage Language: A “Technical Correction”<\/h2>\n\n\n\n

The prepared testimony of Attorney Michael E. Buckley<\/a>\u00a0on behalf of the Real Property Section of the\u00a0State Bar of Nevada (April 2019) states that the Nevada amendments are \u201ctechnical corrections<\/a>\u201d to\u00a0clarify formerly ambiguous language. The bill:<\/p>\n\n\n\n