Foreclosure victory pays little for Reno man

Source: Las Vegas Review-Journal
If you told Emiliano Pasillas that he would be making history when he bought his new house in 2006, he likely would have a different kind of history in mind.

"My family and I used to live in a condominium before we moved to our new home," Pasillas said. "So this was the first house that I ever bought. I just felt wonderfully happy when we first moved in. It's our dream house."

Five years after buying his Reno home, however, Pasillas made a different kind of history. In July 2011, the Nevada Supreme Court ruled in his favor after determining that lender HSBC Bank did not negotiate in good faith during two foreclosure mediation sessions with Pasillas.

Along with the case of Southern Nevada resident Moises Leyva, which also reached the state Supreme Court, Pasillas' case set a precedent for the Nevada Foreclosure Mediation Program.

More specifically, both cases affirmed the need for banks and lenders to do their due diligence during foreclosure mediations with distressed borrowers who are trying to keep their homes. Otherwise, they will face sanctions for negotiating in bad faith.

The mediation program was created in 2009 after Assembly Bill 149 was passed by the Nevada Legislature.

"It was one of two seminal cases" defining how the foreclosure mediation program works, Reno lawyer Geoffrey Giles said.

"Prior to those cases, all we had was a statute that was very vague and gave broad discretion to judges. We had no guidance, which these two cases gave us. They're really quite important and shifted the direction of the foreclosure mediation process."

HOLLOW VICTORY

Today, however, Pasillas' victory at the state Supreme Court rings hollow.

Before appealing to the Supreme Court, Pasillas' petition for a judicial review was denied by District Judge Patrick Flanagan, who authorized foreclosure proceedings to move forward against the homeowner.

After the state Supreme Court ruled in favor of the Reno resident, his case was remanded back to Washoe County District Court.

There, Flanagan reached a new judgment in November, ordering another round of mediation for Pasillas.

Flanagan also sanctioned HSBC to pay for all mediation costs plus an additional $2,500 to be payable to Washoe Legal Services, a nonprofit that provides legal services to low-income county residents. That meant Pasillas could not use the money to pay his lawyer.

The decision was just about the most lenient interpretation of the state Supreme Court opinion, which gave the District Court leeway to impose tougher penalties on the bank, Reno lawyer Keith Tierney said.

"That decision is not normal," Tierney said. "What's normal is to have the prevailing party request sanctions with attorney's fees going to the homeowner. At least that's what you see in the East Coast, where courts have been coming down strongly on the side of homeowners in cases like this."

Giles also thought the judgment against HSBC was lighter than he expected, given the latitude provided by the state Supreme Court decision for sanctions.

"The Supreme Court reversed the District Court decision and imposed sanctions" on HSBC, Giles said. "A new mediation isn't much of a sanction."

Pasillas' lawyer Terry Thomas was particularly critical of Flanagan's order. Such a light sanction won't serve as a deterrent for banks that do not negotiate in good faith at foreclosure mediations, Thomas said.

"This sanction is a perpetual do-over, plus a few bucks to charity, which (the lender) can deduct as a contribution to a 501c3," Thomas said.

"Paying $2,500 isn't even a slap on the wrist for the banks. This order means simply that banks may do absolutely anything in bad faith at the mediation ... because there basically are no sanctions. It makes mediation a farce."

NOT ONLY PRECEDENT

Flanagan made some history of his own in early 2011 after coming down hard on Wells Fargo in the case of a Reno couple, Duke and Tina Renslow.

Flanagan used a provision in Nevada's foreclosure mediation law to modify Duke Renslow's mortgage, setting his payment to $1,145 a month and reducing his interest rate for the life of the note to 2 percent.

It was the first time a Nevada District Court judge used the provision, which is being challenged by lenders as unconstitutional.

At the time, lawyers such as Giles and Tierney lauded Flanagan's decision, calling it a game-changer for the foreclosure mediation program.

With other mediation-related cases scheduled to appear before Flanagan in District Court, lawyers wonder what kind of judgment they will get: one more in line with Pasillas or one that's closer to the Renslow case.

"That's the $64,000 question," Giles said. "On what basis does it go either way?"

A MATTER OF FAITH

In court documents explaining his decision, Flanagan cited an extraordinary display of bad faith by the bank as the reason he modified the Renslow mortgage.

Duke Renslow said he was meticulous in keeping records, including records and correspondence from the bank that proved his claims.

Meanwhile, Pasillas remains stuck in a quagmire that started back in 2008 after he lost his job.

Later that year, Pasillas stopped making house payments because his lender said he couldn't qualify for a loan modification unless he was late on his mortgage.

These days, Pasillas works part-time at a church, Iglesia de Cristo Miel, where he is a pastor. Pasillas already has paid $3,000 to his lawyer for his initial case.

He intends to pay Thomas the remaining $3,000 in legal fees he owes him for the services provided during his appeal.

Pasillas is puzzled that he did not get his legal fees reimbursed after the state Supreme Court ruled in his favor.

Given that his first two mediations failed because the bank did not bring the required paperwork both times, Pasillas worries the same thing will happen in his upcoming mediation.

The mediation will take place either this month or in February.

For now, Pasillas' hope is to get his payments lowered to $1,400 per month. With his $340,000 mortgage debt ballooning to $450,000 after late fees and penalties, however, he is uncertain about his prospects.

Meanwhile, his wrecked credit will make searching for an apartment tough if he loses his home, Pasillas said.

All he wants is for his family to get a chance to stay in their home, Pasillas said.

"I got a wife and six kids and this is our first house. We love this house. We love this neighborhood. Hopefully, we can continue to raise our kids here."

URL to original article: http://www.housingwire.com/2012/01/09/foreclosure-victory-pays-little-for-reno-man

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