Abusive debt collection practices cost us all more than you think

THE HOA SALE WAS UNFAIR & IT COST ALL SCA OWNERS

The HOA did not provide the owner the required notices, hearing or appeal prior to the sale, declared default prematurely, exaggerated the default with unauthorized fees, and sold the home without notice at a commercially unreasonable price to a speculator, depriving the owner of an opportunity to keep the property or to benefit from a sale at fair market value to a bona fide purchaser.

The debt collection practices in this case may have disregarded the rights of the lenders more blatantly than in other Nevada cases in that, in this case, the HOA’s debt collector RRFS:

  • refused the BANA’s tender of the $825 super-priority amount when the account was only nine months delinquent.[i]
  • refused Nationstar’s 5/28/14 offer of $1,100[ii] (12 months assessments) on 7/2/14[iii], a month before the HOA sale extinguished the deed of trust
  • sold the property without giving the lender requested notice, despite RRFS’s knowing a short sale process was in progress.
  • sold it on 8/15/14 when there was a $375,000 signed offer pending on 8/1/14.
  • sold it for the commercially unreasonable price of $63,100 which was 16% of the $389,000 principal remaining on the deed of trust.[iv]
  • did not interplead or distribute $57,282 of the sale proceeds the lender could claim pursuant to NRS 116.31164(3)(c)(4).[v]

[i] BANA’s rejected tender of super-priority

[ii]  5/28/14 offer of $1,100 to pay one year of assessments (Nationstar)

[iii] SCA000278-308 SCA documents re denial of Nationstar $1,100 offer

[iv] 7/15/04 Western Thrift Deed of Trust

[v] NRS 116.31164 (3)(c)(4)

Facts leading up to the sale

  1. In this case, the debtor was not a deadbeat. He was dead.
  2. He died after the housing market crashed and the banks were in disarray.
  3. Although his payments on the loan were current when he died, the property was under water, and so the executor listed it immediately[i] for a short sale.
  4. The executor paid the HOA dues for two quarters (ending 6/30/12)[ii] but unknowingly, failed to submit the third quarter check, written on 8/17/12, when she submitted the check for her own home in the same HOA.
  5. On 9/13/12, HOA’s management company (FSR f/k/a RMI) referred the account to its debt collection subsidiary (RRFS)[iii] and started piling on unreasonable fees.
  6. The check for the third quarter assessments was submitted on 10/3/12,[iv] three days after the end of the quarter, RRFS unreasonably did not bring the HOA account current through 9/30/12 by applying the payment first to assessments, and demanded $496.36 to remove it from collections.[v]
  7. Even though the trivial delinquency was cured immediately, the payment for assessments was improperly applied to unauthorized collection fees instead of assessments in violation of NRS 116.310313[vi] and NRS 116A.640(8).[vii]
  8. Erroneous and unauthorized fees were applied, and the timing of the default was never corrected, resulting in the false deed recital that no payments were made after 7/1/12.
  9. The lien,[viii] recorded on 12/14/12, inaccurately claimed $926.76 was due as of 12/5/12, when a $25 late fee became due on 10/31/1,the first day $275 for the quarter ending 12/30/12) were past due.
  10. ALL statutorily-required notices were inaccurate and the rescinded 3/12/13 Notice of Default (NODES)[ix] or the cancelled 2/12/14 Notice of Sale (NOS)[x], were both erroneously cited to claim compliance with the statutes.
  11. The combination of all these procedural failings rendered the recitals on the foreclosure deed[xi] to be false, and so the owner’s right of redemption was not lost pursuant to NRS 116.31166 (2013).[xii]
  12. The executor was seeking an alternative to foreclosure via a short sale after the homeowner had died, and she asked the HOA to handle collections through escrow and work with Proudfit Realty.[xiii]
  13. From the executor’s perspective, there was zero risk that SCA wouldn’t be paid as the executor and all the real estate agents were long-time SCA resident homeowners working in good faith to sell the house and ensure that the HOA was paid in full in the process.
  14. The HOA was ill served by a management company that also doing business as the HOA’s debt collector and foreclosure trustee.
  15. The HOA agents were fully aware there were multiple offers to purchase the property at fair market value.
  16. RRFS responded to pay off demands on 12/20/12, 1/16/13, 5/29/13, and 3/28/14 from Title companies.
  17. Over a two-year period, escrows opened on four contingent sales, all of which were at, or over, then-current appraised value; All were approved by the executor, but all were declined by the lender.
  18. SCA Board, or its agents, refused two tenders from lenders of the super-priority amount or above, that should have stopped the HOA from foreclosing:
    1. BANA tendered $825 (nine months assessments) on 5/9/13[xiv] when escrow hadn’t closed and only nine months of assessments were due as of 4/30/13, but it was rejected by HOA agents.
    1. Nationstar offered the twelve months of assessments, $1,100.00, on 5/28/14,[xv] but it was not accurately characterized by RRFS to the SCA Board,[xvi] and it was rejected on 7/2/14.
  19. Not only was this policy of refusing the super-priority in violation of NRS 116A.640(9)[xvii], it created litigation in over 50% of twelve 2014 SCA’s foreclosures and well over $100,000 in legal fees.[xviii]

[i] 2/12/14 Listing agreement Proudfit Realty

[ii] 1/31/12 RMI statement

[iii] FSR d/b/a RRFS debt collection license and W-9

[iv] 10/3/12 letter transmit 3rd quarter payment

[v] 11/5/12 RRFS ledger

[vi] NRS 116.310313

[vii] NRS 116A.640(8)

[viii] 12/14/12 lien

[ix] 4/3/13 rescission of 3/12/13 NODES

[x] Nevada compliance record of 5/15/14 cancellation of 2/12/14 NOS

[xi] 8/22/14 recorded foreclosure deed

[xii] NRS 116.31166 (2013)

[xiii] 10/3/12 letter executor to HOA

[xiv] BANA’s rejected tender of super-priority

[xv] 5/28/14 offer of $1,100 to pay one year of assessments (Nationstar)

[xvi] 7/2/14 SCA BOD rejected bank’s offer

[xvii] NRS 116A.640(9)

[xviii] 2017 SCA legal fees for 2014 foreclosures

The debtor was not a deadbeat. He was dead.

  1. Gordon Bruce Hansen died after Wall Street’s fraudulent mortgage-backed securities and collateral debt swaps brought down the world economy, leaving the banks and the real estate market in disarray,
  2. Bruce was current on his payments on the loan when he died, the property was under water, and so the executor listed it immediately[i] for a short sale.
  3. The executor paid the HOA dues for two quarters (ending 6/30/12)[ii] but unknowingly, failed to submit the third quarter check, written on 8/17/12, when she submitted the check for her own home in the same HOA.
  4. On 9/13/12, HOA’s management company (FSR f/k/a RMI) referred the account to its debt collection subsidiary (RRFS)[iii] and started piling on unreasonable fees.
  5. The check for the third quarter assessments was submitted on 10/3/12,[iv] three days after the end of the quarter, RRFS unreasonably did not bring the HOA account current through 9/30/12 by applying the payment first to assessments, and demanded $496.36 to remove it from collections.[v]
  6. Even though the trivial delinquency was cured immediately, the payment for assessments was improperly applied to unauthorized collection fees instead of assessments in violation of NRS 116.310313[vi] and NRS 116A.640(8).[vii]
  7. Erroneous and unauthorized fees were applied, and the timing of the default was never corrected, resulting in the false deed recital that no payments were made after 7/1/12.
  8. The lien,[viii] recorded on 12/14/12, inaccurately claimed $926.76 was due as of 12/5/12, when a $25 late fee became due on 10/31/1,the first day $275 for the quarter ending 12/30/12) were past due.
  9. ALL statutorily-required notices were inaccurate and the rescinded 3/12/13 Notice of Default (NODES)[ix] or the cancelled 2/12/14 Notice of Sale (NOS)[x], were both erroneously cited to claim compliance with the statutes.
  10. The combination of all these procedural failings rendered the recitals on the foreclosure deed[xi] to be false, and so the owner’s right of redemption was not lost pursuant to NRS 116.31166 (2013).[xii]
  11. The executor was seeking an alternative to foreclosure via a short sale after the homeowner had died, and she asked the HOA to handle collections through escrow and work with Proudfit Realty.[xiii]
  12. From the executor’s perspective, there was zero risk that SCA wouldn’t be paid as the executor and all the real estate agents were long-time SCA resident homeowners working in good faith to sell the house and ensure that the HOA was paid in full in the process.
  13. The HOA was ill served by a management company that also doing business as the HOA’s debt collector and foreclosure trustee.
  14. The HOA agents were fully aware there were multiple offers to purchase the property at fair market value.
  15. RRFS responded to pay off demands on 12/20/12, 1/16/13, 5/29/13, and 3/28/14 from Title companies.
  16. Over a two-year period, escrows opened on four contingent sales, all of which were at, or over, then-current appraised value; All were approved by the executor, but all were declined by the lender.
  17. SCA Board, or its agents, refused two tenders from lenders of the super-priority amount or above, that should have stopped the HOA from foreclosing:
    1. BANA tendered $825 (nine months assessments) on 5/9/13[xiv] when escrow hadn’t closed and only nine months of assessments were due as of 4/30/13, but it was rejected by HOA agents.
    1. Nationstar offered the twelve months of assessments, $1,100.00, on 5/28/14,[xv] but it was not accurately characterized by RRFS to the SCA Board,[xvi] and it was rejected on 7/2/14.
  18. Not only was this policy of refusing the super-priority in violation of NRS 116A.640(9)[xvii], it created litigation in over 50% of twelve 2014 SCA’s foreclosures and well over $100,000 in legal fees.[xviii]

[i] 2/12/14 Listing agreement Proudfit Realty

[ii] 1/31/12 RMI statement

[iii] FSR d/b/a RRFS debt collection license and W-9

[iv] 10/3/12 letter transmit 3rd quarter payment

[v] 11/5/12 RRFS ledger

[vi] NRS 116.310313

[vii] NRS 116A.640(8)

[viii] 12/14/12 lien

[ix] 4/3/13 rescission of 3/12/13 NODES

[x] Nevada compliance record of 5/15/14 cancellation of 2/12/14 NOS

[xi] 8/22/14 recorded foreclosure deed

[xii] NRS 116.31166 (2013)

[xiii] 10/3/12 letter executor to HOA

[xiv] BANA’s rejected tender of super-priority

[xv] 5/28/14 offer of $1,100 to pay one year of assessments (Nationstar)

[xvi] 7/2/14 SCA BOD rejected bank’s offer

[xvii] NRS 116A.640(9)

[xviii] 2017 SCA legal fees for 2014 foreclosures


The sale is void for statutory non-compliance

  1. The HOA agents did not conform to specific statutes controlling HOA foreclosures:
    1. NRS 116.31162[i] (a), (b)(1), (4)(a)(b)(c) (started collections prematurely, included unauthorized fees and charges in the “deficiency”, did not provide notice, pre-payment plan, hearing, appeal to BOD
    1. NRS 116.3163[ii] Did not provide requested notice prior to actual sale which was requested by both the lender and the listing agent
    1. NRS 116.311635[iii] The official record of the Nevada regulatory agency (Ombudsman) shows that the only published Notice of Sale[iv] was cancelled[v] and so all these steps pursuant to a second notice of sale were required, but were not done as there was no second notice published, unfairly excluding all parties with a known interest from bidding or an opportunity to defend their claimed interest.
    1. NRS 116.31164 (2)[vi] Compliance with this section is in dispute.
      1. Was the Notice of Sale cancelled as is reported in the official compliance record of the Nevada regulatory agency or was it merely postponed?
      1. Was it postponed more than three times?
      1. How did ForeclosureRadar.com get the notice of the sale date which the buyer alleged was how he knew the date of the sale?
      1. If it was postponed on 5/15/14 to 8/15/14, and both the listing agent and lender had requested notice and the Board was weighing the lender offer to pay 12 months of assessments, why were neither the lender nor the listing agent told of the 8/15/14 sale date?
    1. NRS 116.31164 (3)(b)[vii] RRFS did not deliver a copy of the foreclosure deed to the Ombudsman within 30 days (or ever)
    1. NRS 116.31164 (3)(c)(4)(5)[viii] RRFS did not distribute the proceeds of the sale
    1. NRS 116.31166[ix] Owner did not lose the right of redemption because the deed recitals were false, i.e., default did not occur as described, the cited 3/12/13 Notice of Default had been rescinded and had no legal force; there was no valid NOS in effect when the sale took place; the sale was not conducted in strict compliance with the timing and notice requirements of the statutes.
    1. NRS 116.1113[x] Agents, serving in the dual role of community manager and debt collector, did not act in good faith and unjustly profited by disregarding the interests of all parties with a known interest in the property.
    1. NRS 116.31031[xi] and CC&Rs 7.4[xii] defines the limits of Board authority to impose sanctions prior to procedural due process steps guarantees to all owners. By imposing the sanctions of 1) confiscation of a home (foreclosure) and 2) revocation of membership privileges for the alleged violation of delinquent assessments (CC&Rs 8.7) without providing the conforming to the procedural due process requirements renders the sanctions null and void.
    1. NRS 116.31085(4) [xiii] provides protections for an owner from a Board sanctioning the owner in secret. BOD did not hold a hearing prior to imposing the ultimate sanction of foreclosure for the alleged violation of delinquent assessments, and the sanctioned the owner was not even notified of the date and time when the Board would meet to make a decision to foreclose, and was thus the owner was unfairly precluded from requesting an open hearing by the BOD or from making an appeal.
    1. NRS 116.31085(4a)[xiv] BOD imposed the sanction of foreclosure and revocation of membership for the alleged violation of delinquent assessments without permitting the owner to attend all portions of the Board hearing, including the presentation of evidence and the testimony of witnesses, as is an owner’s entitlement.
    1. NRS 116.31085(4b)[xv] Owner was not provided with due process which must include without limitation the right to counsel, right to present witnesses and the right to present information relating to any conflict of interest of any member of the hearing panel (BOD).
    1. NRS 116.31085(5)[xvi] Subsection 4 (summarized above) establishes the MINIMUM protections the BOD must provide before it has legal authority to  impose ANY sanction for ANY alleged violation of the governing documents, but NONE of these minimum guaranteed owner protections were provided prior to imposing the severest penalty possible, i.e., confiscating without notice or appeal property valued at over $400,000 for the alleged violation of $2,200 of delinquent assessments.
    1. NRS 116.31085(6f)[xvii] The HOA is required to provide a copy of the minutes and decision to impose a sanction to the owner upon request, but SCA refused.[xviii]

[i] NRS 116.31162 (2013)

[ii] NRS 116.3163 (2013)

[iii] NRS 116.311635 (2013)

[iv] 2/12/14 Notice of Sale

[v] NRED compliance record Notice of Sale process

[vi] NRS 116.31164 (2013)

[vii] NRS 116.31164 (2013)

[viii] NRS 116.31164 (2013)

[ix] NRS 116.31166 (2013)

[x] NRS 116.1113

[xi] NRS 116.31031

[xii] CC&R 7.4

[xiii] NRS 116.31085(4)

[xiv] NRS 116.31085(4a)

[xv] NRS 116.31085(4b)

[xvi] NRS 116.31085(5)

[xvii] NRS 116.31085(6f)

[xviii] 6/2/16 CAM email re no hearing

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