Nationstar Mortgage, LLC v. Eldorado Neighborhood Second Homeowners Association

Opinion

3 4 Nationstar Mortgage, LLC, et al., Case No.: 2:15-cv-00064-JAD-BNW 5 Plaintiffs

6 v. Order Granting Summary Judgment 7 Eldorado Neighborhood Second Homeowners in Favor of Plaintiffs Based on Association, a Nevada non-profit corporation, Federal Foreclosure Bar 8 et al, [ECF Nos. 70, 83, 84] 9 Defendants 10 ______________________________________ 12 13 Nevada law holds that a properly conducted nonjudicial foreclosure sale by a 14 homeowners’ association to enforce a superpriority lien extinguishes the first deed of trust. But 15 when that deed of trust belongs to government-sponsored lender Freddie Mac, and the 16 foreclosure sale occurs while Freddie Mac is under the conservatorship of the Federal Housing 17 Finance Agency (FHFA) and without that agency’s consent, federal law shields that security 18 interest from extinguishment. That shield is known as the Federal Foreclosure Bar. 19 The FHFA, Freddie Mac, and its loan servicer Nationstar Mortgage, LLC bring this 20 quiet-title action to determine the effect of a 2014 nonjudicial foreclosure sale on the deed of 21 trust securing the mortgage on a home. Because plaintiffs haveshown that the Federal 22 Foreclosure Bar prevented that sale from extinguishing the deed of trust, I grant summary 23 judgment in theirfavorand close this case. 1 Background 2 The Federal Home Loan Mortgage Corporation, better known as Freddie Mac, whichhas 3 been under the conservatorship of the FHFA since 2008,1 purchased the mortgage on the home 4 located at 1838 Fighting Falcon Lanein North Las Vegas, Nevada, in 2007, along with the deed 5 of trust that secures it.2 The deed of trust has been assigned several times to various nominees

6 acting as Freddie Mac’s loan-servicing agents. Nationstarcurrently services the loanandhas 7 since March 2012.3 The home is located in the Eldoradocommon-interest community and 8 subject to the Eldorado Neighborhood Second Homeowners Association’s codes, covenants, and 9 restrictions (CC&Rs), which require the owners of property within this planned development to 10 pay certain assessments.4 11 The Nevada Legislature gave homeowners associations (HOAs) a superpriorty lien 12 against residential property for certain delinquent assessments and established in Chapter 116 of 13 the Nevada Revised Statutes a nonjudicial foreclosure procedure for HOAs to enforce that lien.5 14 When the owners of this home, Sean and Shawna Roberts,fell behind on their assessments,the

15 Eldorado HOAsold it toSaticoy Bay LLC Series 1838 Fighting Falconin such a nonjudicial 16 foreclosure sale on July 11, 2014.6 The sale recorded nearly two weeks later.7 17 18 1 I take judicial notice of this well-known fact, which no party disputes. 19 2 ECF No. 84-2 at 5, ¶ 5(d). 20 3 Id. at ¶ 5(c)-(i); ECF No. 84-3 at 1–5. 4 ECF No. 84-1 at 12 (planned-unit-development rider). 21 5 Nev. Rev. Stat. § 116.3116; SFR Invs.Pool 1 v. U.S. Bank(“SFR I”), 334 P.3d 408, 409 (Nev. 22 2014). 6 ECF No. 84-3 at 9 (Notice of Default and Election to Sell); id. at 12 (Notice of Trustee’s Sale). 23 I take judicial notice of all recorded documents in the record. 7 Id. at 15. 1 As the Nevada Supreme Court held in SFR Investments Pool 1 v. U.S. Bankin 2014, 2 because NRS 116.3116(2) gives an HOA “a true superpriority lien, proper foreclosure of” that 3 lien under the non-judicial foreclosure process created by NRS Chapters 107 and 116 “will 4 extinguish a first deed of trust.”8 But the Federal Foreclosure Bar in 12 U.S.C. § 4617(j)(3) 5 creates an exception to that rule.9 This safeguard is containedin the Housing and Economic

6 Recovery Act (HERA, codified at 12 U.S.C. §4511 et seq.), which went into effect in 2008, 7 established the FHFA, and placed Freddie Macunder that agency’s conservatorship.10 Under 8 HERA’s Federal Foreclosure Bar, when Freddie Macis the beneficiary of the deed of trust at the 9 time of the foreclosure sale and Freddie Macis under the conservatorship of the FHFA, the deed 10 of trust is not extinguished and instead survives the sale unless the agency affirmatively 11 relinquishedthat interest.11 12 Freddie Mac, Nationstar,12 and the FHFAsueSaticoy Bay,13 assertingtwo causes of 13 action, one entitled “declaratory relief” and the other “quiet-title.”14 I find that these claims are 14 duplicative,and Iconstrue the complaint to assert a single quiet-title claim seeking a declaration

15 16 8 SFRI, 334 P.3d at 419. 9 See Berezovsky v. Moniz, 869 F.3d 923, 927n.1(9th Cir. 2017). 17 10 Berezovsky, 869F.3d at 925. 18 11 Id. at 933; Saticoy Bay LLC Series 9641 Christine View v. Fed. Nat’l Mortg. Ass’n, 417 P.3d 363, 368 (Nev. 2018) (“Because Fannie Mae was under the FHFA’s conservatorship at the time 19 of the homeowners’association foreclosure sale, the Federal Foreclosure Bar protected the deed of trust from extinguishment.”). 20 12 Both the Nevada Supreme Court and the Ninth Circuit have held that loan servicers also have 21 standing to assert the Federal Foreclosure Bar. See Nationstar Mortg., LLC v. SFR Invs.Pool 1, LLC, 396 P.3d 754, 758 (Nev. 2017); Bank of Am., N.A. v. ArlingtonW. Twilight Homeowners 22 Ass’n, 920 F.3d 620, 624 (9th Cir. Apr. 3, 2019). 13 Although the original complaint contains claims against the HOA and the Robertses, too, those 23 claims have been dismissed. ECF Nos. 64, 71. 14 ECF No. 38. 1 that the foreclosure sale did not extinguishthe deed of trust for various reasons including the 2 Federal Foreclosure Bar. This claim is the typerecognized by the Nevada Supreme Court in 3 Shadow Wood Homeowners Association, Inc. v. New York Community Bancorp—an action 4 “seek[ing] to quiet title by invoking the court’s inherent equitable jurisdiction to settle title 5 disputes.”15 The resolution of such a claim is part of “[t]he long-standing and broad inherent

6 power of a court to sit in equity and quiet title, including setting aside a foreclosure sale if the 7 circumstances support” it.16 8 Saticoy Baycrossclaims against Nationstar, similarly asserting an equitable quiet-title 9 claim.17 It seeks a declaration that Saticoy Bay bought the property free and clear of the deed of 10 trust. 11 Discovery has closed,18 and plaintiffs move for summary judgment,arguingthat the 12 Federal Foreclosure Bar savedFreddie Mac’s deed of trust on this property from 13 extinguishment.19 Saticoy Bayopposes that motion20 and moves both to dismiss plaintiffs’ 14 claims21 and for summary judgment in its own favor.22 It argues primarily that Freddie Mac’s

15 interest is unenforceable because it was not recorded, that plaintiffs havenot sufficiently proven 16 17 18 15 Shadow Wood Homeowners Ass’n, Inc. v. New York Cmty.Bancorp,366 P.3d 1105, 1110– 1111 (Nev. 2016). 19 16 Id. at 1112. 20 17 ECF No. 82. 21 18 ECF No. 67. 19 ECF No. 84. 22 20 ECF No. 87. 23 21 ECF No. 70. 22 ECF No. 83. 1 that Freddie Mac owns the deed of trust and that Nationstarhas a loan-servicing relationship 2 with it, and that the statute of frauds bars plaintiffs’ claim.23 3 Discussion 4 A. Summary-judgment standard 5 Summary judgment is appropriate when the pleadings and admissible evidence “show

6 there is no genuine issue as to any material fact and that the movant is entitled to judgment as a 7 matter of law.”24 When considering summary judgment, the court views all facts and draws all 8 inferences in the light most favorable to the nonmoving party.25 If reasonable minds could differ 9 on material facts, summary judgment is inappropriate because its purpose is to avoid unnecessary 10 trials when the facts are undisputed, and the case must then proceed to the trier of fact.26 If the 11 moving party satisfies Rule 56 by demonstrating the absence of any genuine issue of material 12 fact, the burden shifts to the party resisting summary judgment to “set forth specific facts 13 showing that there is a genuine issue for trial.”27 “To defeat summary judgment, the nonmoving 14 party must produce evidence of a genuine dispute of material fact that could satisfy its burden at

15 trial.”28 16 17 18 23 Saticoy Bay thrice urges its arguments: in both of its motions and in its response to the plaintiffs’ motion for summary judgment. To streamline this order, when referencing Saticoy 19 Bay’s arguments, I cite only to their location in its response to plaintiffs’ motion for summary judgment. ECF No. 87. 20 24 See Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986) (citing Fed R. Civ. P.56(c)). 21 25 Kaiser Cement Corp. v. Fishbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986). 22 26 Warren v. City of Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995); see alsoNw. Motorcycle Ass’n v. U.S. Dep’t of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). 23 27 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Celotex, 477 U.S. at 323. 28 Sonner v. Schwabe N. Am., Inc., 911 F.3d 989, 992 (9th Cir. 2018). 1 B. The Federal Foreclosure Bar saved the deed of trust from extinguishment. 2 In Berezovsky v. Moniz, the Ninth Circuit held that “the Federal Foreclosure Bar 3 supersedes the Nevada superpriority lien provision,”29 preventing a non-judicial foreclosure sale 4 under NRS Chapter 116 from extinguishing a Freddie Macdeed of trust while this lender is 5 under the FHFA’s conservatorship. The question here is whether plaintiffs haveshown that a

6 Freddie Macinterest in this property was protected from the legal effect of NRS 116.3116 by the 7 Federal Foreclosure Bar. The record supports that conclusion,leaving no genuine issueof 8 material fact. 9 1. The record establishes that Freddie Mac owned the deed of trust at the time of 10 the foreclosure sale. 11 There is no dispute that Freddie Mac was under the FHFA’s conservatorship at the time 12 of the 2014foreclosure sale. But Saticoy Bay challenges whether plaintiffs haveestablished that 13 the deed of trust belonged to Freddie Macat the time of the foreclosure saleand that Nationstar 14 is the servicer. Plaintiffs offer the affidavit of Freddie Mac’s Director of Loss Mitigation,Dean 15 Meyer,and corroborating documents to show that Freddie Machad a valid and enforceable deed 16 of trust on the property at the time of thesale—an interest that it purchased onor about May 25, 17 2007—andthat Nationstarhas beenits loan servicer since March 2012.30 Those documents 18 include printouts of computer records,31 which Meyerexplains in detail, and relevant portions of 19 Freddie Mac’s publicly available Servicer Guide.32 20 21 29 Berezovsky, 869 F.3d at 931. 22 30 SeeECF No. 84-2. 23 31 Id. at 9–20. 32 Id. at 22–141. 1 Ifind that Meyer’s declaration sufficiently establishes his familiarity with Freddie Mac’s 2 recordkeeping system and the authenticity of the printouts to lay the foundation required by 3 Federal Rule of Evidence 902(11). And it establishes—with no contradictory evidence from 4 Saticoy Bay—that the security interest on this property belonged to Freddie Macat the time of 5 the 2014foreclosure sale, as it does today. Although the deed of trust is held in Nationstar’s

6 name,33 Freddie Mac’s documents (including theGuide) showthat Nationstar is merely its agent 7 for loan-servicing purposes and that the beneficial interest belongs to Freddie Mac.34 The 8 Nevada Supreme Court found a similar record sufficient to support summary judgment in favor 9 of Freddie Mac based on the Federal Foreclosure Barjust last monthin Daisy Trust v. Wells 10 Fargo Bank, N.A.35 And the Ninth Circuit reached the same conclusion on near-identical records 11 in Berezovskyand Fed. Home Loan Mortg. Corp. v. SFR Investments Pool 1, LLC.36 12 Contrary to Saticoy Bay’s suggestion, plaintiffs need not produce a copy of the actual 13 loan-servicing agreement to garner summary judgment.37 As the en banc Nevada Supreme Court 14

15 33 ECF No. 84-3 at 5 (assignment from BAC Home Loans Servicing LP to Nationstar). 34 See also Berezovsky, 869 F.3d at 932 (recognizing that “Nevada law thus recognizes that, inan 16 agency relationship, a note owner remains a secured creditor with a property interest in the collateral even if the recorded deed of trust names only the owner’s agent,” and concluding that 17 “[a]lthough the recorded deed of trust here omitted Freddie Mac’s name, Freddie Mac’s property interest is valid and enforceable under Nevada law”). 18 35 Daisy Trust v. Wells Fargo Bank, N.A.,445P.3d 846, 850–51(Nev. July 25, 2019). 19 36 Fed. Home Loan Mortg. Corp. v. SFR Investments Pool 1, LLC, 893 F.3d 1136, 1150 (9th Cir. 2018), cert. denied, 139 S. Ct. 1618 (2019)(“The district court based its finding that an 20 Enterprise had an interest in each Property on the fact that, in each case, a servicer acquired a beneficial interest in the respective Property’s deed of trust, and serviced the respective mortgage 21 loan on behalf of one of the Enterprises. Each acquisition of a Property’s deed of trust by a servicer occurred on a date prior to the respective HOA foreclosure sale. The district court thus 22 found that FHFA, which succeeded to the Enterprises’ assets per HERA, held an interest in the Properties prior to the sales. Accordingly, the named beneficiary under the recorded deed of 23 trust in each case is someone other than the note owner, one of the Enterprises.”). 37 ECF No. 87 at 12–15. 1 held in Daisy Trust, declarations confirming the servicer’s status, “combined with authorizations 2 in the Guide that are generally applicable to Freddie Mac’s loan servicers . . . [a]re sufficient to 3 show that” Nationstaris “in fact Freddie Mac’s loan servicer with authority to assert the Federal 4 Foreclosure Bar on Freddie Mac’s behalf.”38 Plaintiffs satisfied theirburdens of proof and 5 production on this point with the computer records and Meyer’s declaration explaining them.

6 Nationstar also has no obligation to show that it is acting based on “a power of 7 attorney.”39 Saticoy Bay claims that the Guide requires a power of attorney before Nationstar 8 can “execute documents on behalf of Freddie Mac.”40 Guide Section 8101.3, which Saticoy Bay 9 relies on, requires the servicer to “comply with all local recording requirements,” and NRS 10 162A.480(2), which Saticoy Bay further cites, requires a power of attorney be recorded only for 11 the conveyance of real property.41 Because Freddie Mac is not using Nationstar as its agent to 12 convey any real property, the absence of a power of attorney is irrelevant. 13 2. Freddie Mac’s failure to record its interest is inconsequential here. 14 Saticoy Bay’s additional argument that,to assert the Federal Foreclosure Bar against it,

15 the deed of trust had to have beenrecorded in FreddieMac’s name was also expressly rejected in 16 Daisy Trust. Like Saticoy Bay,the foreclosure-sale purchaser inDaisy Trust argued “that 17 Nevada’s recording statutes required Freddie Mac to record its interest in the loan.”42 But the 18 19 38 Daisy Trust, 445 P.3d at 850. 39 ECF No. 87 at 11–12. 20 40 Id. at 11. 21 41 Nev. Rev. Stat. §162A.480(2)(“Every power of attorney, or other instrument in writing, containing the power to convey any real property as agent or attorney for the owner thereof, or to 22 execute, as agent or attorney for another, any conveyance whereby any real property is conveyed, or may be affected, must be recorded as other conveyances whereby real property is 23 conveyed or affected are required to be recorded.”). 42 Daisy Trust, 445 P.3d at 849. 1 Court disagreed. It reasoned that, although the recording statutes currently require deed-of-trust 2 assignments to be recorded, the version in effect in 2007 when Freddie Mac acquired the Daisy 3 Trust property one was permissive, not mandatory, as it stated only that such an assignment 4 “may be recorded.”43 Thus, the Court held,“Nevada’s recording statutes did not require Freddie 5 Mac to publicly record its ownership interest as a prerequisite for establishing that interest.”44

6 Freddie Mac acquired its interest in this Fighting Falcon Lane property in 2007, the same 7 year it acquired the interest in the home at issue in Daisy Trust, so Nevada’s recording statutes 8 did not require Freddie Mac to record that interest. And although Saticoy Bay cites tothe 9 Nevada Supreme Court’s decision in In re Montierth45 to argue that Nevada law “requires 10 recording of an interest to be notice to third parties,”46 that case fails to support its proposition. 11 As the en banc Court confirmed in Daisy Trust, “consistent with . . . Montierth, the deed of trust 12 did not [even] have to be ‘assigned’ or ‘conveyed’ to Freddie Mac in order for Freddie Mac to 13 own the secured loan. . . .”47 The lender’s loan servicer “can serve as the record deed of trust 14 beneficiary on behalf of a lender and a lender’s successors such as . . . Freddie Mac in this case,”

15 as long as that record servicer “was at all times in an agency relationship with the note 16 holder. . . .”48 And here, the record shows without genuine dispute that Nationstar was in such a 17 relationship with note-holder Freddie Mac. Because Nevada law recognizes that it is an 18 acceptable practice for a loan servicer to serve as the beneficiary of record for the actual deed-of- 19 43 Id. 20 44 Id. 21 45 In re Montierth, 354 P.3d 648 (Nev. 2015). 22 46 ECF No. 87 at 13. 47 Daisy Trust at 849(citing Montierth, 354 P.3d at 650–51, and Edelstein v. Bank of New York 23 Mellon, 286 P.3d 249, 259–60 (Nev. 2012)). 48 Id. 1 trust beneficiary, Freddie Mac’s interest in the deed is not rendered unenforceable by the fact that 2 its name does not appear in the official record.49 3 Saticoy Bayalso contends that, by keeping Nationstar as the deed-of-trust beneficiary of 4 record, Freddie Mac has misled the general public, and NRS 47.240(2) conclusively presumes 5 “the truth” of that recorded fact that Nationstar—not Freddie Mac—is the beneficial owner.50

6 Thus, Saticoy Bay reasons, Freddie Mac is bound by that truth. But Saticoy Bay overstates the 7 application of this statutory presumption. It applies only in a dispute “as between the parties” to 8 a written document.51 Because Saticoy Bay is not a party to the assignment of the deed of trust 9 from BAC Home Loans to Nationstar, it cannot invoke this presumption. 10 Nor can Saticoy Bay invoke the statute of frauds to preclude plaintiffs from enforcing 11 Freddie Mac’s interest.52 “The defense of the statute of frauds is personal, and available only to 12 the contractingparties or their successors in interest.”53 Saticoy Bay, “as a stranger to” the 13 transfer of the loan and deed of trust, “is without standing” to invoke that defense.54 14 3. There is no evidence that the FHFA consented to extinguish the deed of trust.

15 There is also nolegitimate dispute that the FHFA did not consent to wiping out Freddie 16 Mac’s deed of trust through this foreclosure. The FHFAissueda statement datedApril 21, 2015, 17 “confirm[ing] that it has not consented, and will not consent in the future, to the foreclosure or 18 49 See also Fed. Home Loan Mortg. Corp. v. SFR Investments Pool 1, LLC, 893 F.3d at 1150 19 (“HERA does not require the Enterprises to have recorded their ownership of the liens in local recording documents for FHFA to have succeeded to those valid interests upon inception of 20 conservatorship.”). 21 50 ECF No. 87 at 10. 51 Flangas v. State, 760 P.2d 112, 113 (Nev. 1988). 22 52 ECF No. 87 at 7. 23 53 Harmon v. Tanner Motor Tours of Nev., Ltd., 377 P.2d 622, 628 (Nev. 1963). 54 Id. 1 other extinguishment of any Fannie Mae or Freddie Mac lien or other property interest in 2 connection with HOA foreclosures of super-priority liens.”55 Saticoy Bay offers no evidence to 3 suggest that the agency did consent. Instead, it argues that I“should imply Freddie Mac’s 4 consent to the” foreclosure because its failure to record its ownership of the deed of trust 5 “prevented” Saticoy Bay “from knowing that Freddie Mac’s consent was required.”56 But

6 Freddie Mac and the Agency need not take any action to ensure that the Federal Foreclosure Bar 7 preserves a Freddie Mac deed of trust. As the Ninth Circuit stated in Federal Home Loan 8 Mortgage Corporation v. SFR Investments Pool 1, LLC, “the bar on foreclosure sales lacking 9 [the] FHFA’s consents applies by default.”57 Based on this feature of the Federal Foreclosure 10 Bar, the Nevada Supreme Court has expressly rejected the notion that inaction can be construed 11 as consent.58 I decline Saticoy Bay’s invitation to hold otherwise. 12 The remainder of Saticoy Bay’s arguments against the application of the Federal 13 Foreclosure Bar require me to ignore or misconstruethe holding of Berezovsky, which I decline 14 to do. I conclude that Berezovskyprovides the applicable legal principles for plaintiffs’Federal

15 ForeclosureBar theory, that I am bound by those principles, and that plaintiffs haveshown 16 through evidence not subject to genuine dispute that they are entitled to summary judgment on 17 theirquiet-title claim based on this theory. So, I grant summary judgment in favor of plaintiffs 18 ontheirFederal Foreclosure Bar claim and declare that 12 U.S.C. § 4617(j)(3) prevented the 19 2014foreclosure sale from extinguishing Freddie Mac’s deed of trust. And because I am 20 55 ECF No. 84-3 at 19; https://www.fhfa.gov/Media/PublicAffairs/Pages/Statement-on-HOA- 21 Super-Priority-Lien-Foreclosures.aspx, last visited 8/28/19. 22 56 ECF No. 87 at 16. 57 Fed.Home Loan Mortg. Corp.v. SFR Invs.Pool 1, LLC,893 F.3d at 1149. 23 58 See, e.g.,Saticoy Bay LLC Series 9641 Christine View v. Fed. Nat’l Mortg. Ass’n, 417 P.3d 363, 368 (Nev. 2018). granting complete relief on this theory, I need not and do not reach the merits of, or arguments 2\ challenging, any of the plaintiffs’ other quiet-title theories. 3 Conclusion 4 IT IS THEREFORE ORDERED that Plaintiffs’ Motion for Summary Judgment [ECF No. 84] is GRANTED and Saticoy Bay’s motion to dismiss and for summary judgment [ECF Nos. 70, 83] are DENIED. Summary judgment is entered in favor of the plaintiffs on their 7||claim and on Defendant Saticoy Bay’s counterclaim. Because 12 U.S.C. § 4617q@)(3) 8|| prevented the extinguishment of the deed of trust during the 2014 HOA foreclosure sale, 9}| plaintiffs are entitled to a declaration that Saticoy Bay LLC Series 1838 Fighting Falcon took the property subject to that interest. 11 And with good cause appearing and no reason to delay, IT IS FURTHER ORDERED 12}| that the Clerk of Court is directed to ENTER FINAL JUDGMENT in favor of plaintiffs Nationstar Mortgage, LLC, Federal Home Loan Mortgage Corporation, and Federal Housing Finance Agency DECLARING that: 15 the deed of trust for the property located at 1838 Fighting Falcon Lane, North Las Vegas, Nevada 89031, recorded as Instrument 16 # 20070423-00007 16 in the real property records of Clark County, Nevada, on 4/23/07, was not extinguished by the 7/11/14 17 foreclosure sale, so foreclosure-sale purchaser Saticoy Bay LLC Series 1838 Fighting Falcon took the property subject to the deed 18 of trust, and CLOSE THIS CASE. 20 Dated: August 29, 2019 21 *, Ye U.S. District Judge Sanifel(A) Dorsey 22 23