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In what could be the stepping stone for a major change in U.S. law, the Nevada Supreme Court is hearing a case that could determine whether the non-judicial foreclosure process is unconstitutional if it is used by investors and speculators for purchasing homes at a fraction of their value by paying off liens held by homeowners associations (HOAs).
According to a Las Vegas Journal-Review report, the case before the court involves a residence acquired three years ago by Saticoy Bay LLC Series 350 Durango 104 for $6,900 in back association dues and related costs. The foreclosure sale was enacted by the HOA Angel Point Condominiums after the property’s owners fell behind on their association dues. Wells Fargo Home Mortgage loaned the owners approximately $82,000 in 1997, but the foreclosure sale effectively ended the mortgage. Saticoy went to Nevada’s Clark County District Court to assert it was the rightful owner of the property under state law, but the court ruled in Wells Fargo’s favor and declared Nevada’s foreclosure statute to be in violation of both the state and federal constitutions.
The Nevada legislature became involved in this case with a “friend of the court” brief that warned of tumult if the district court ruling was upheld. “Because the invalidated provisions have been effective for 25 years, the panel’s decision could adversely affect hundreds of HOAs and call into question thousands of foreclosures, which could cloud property titles and undermine the stability and vitality of Nevada’s real estate markets,” the legislators said it their brief.