Block on Trump's Asylum Ban Upheld by Supreme Court
In a tacit affirmation of another U.S. Ninth Circuit Court of Appeals decision this week, the U.S. Supreme Court left intact the appeals court's ruling that Nevada's lien law violated due process rights of mortgage lenders.
The Ninth Circuit said in Bourne Valley Court Trust v. Wells Fargo Bank last year that homeowners' associations should have to give notice to lenders before foreclosing on a property for delinquent dues. The Nevada law allowed the HOA to strip the bank's title without notice, unless the lender "opted-in" beforehand.
"How the mortgage lender, which likely had no relationship with the homeowners' association, should have known to ask is anybody's guess..." the appeals court said. "But this system was not just strange; in our view, it was also unconstitutional."
The decision was a welcome win for Wells Fargo, which has been reeling from unrelated legal actions after an expose that has cost the bank billions. According to reports, the bank pressured employees to create fake accounts to generate fees.
In the case from the Ninth Circuit, the bank had argued that the "opt-in" provision in Nevada's Revised Statutes, Section 116.3116, was unconstitutional. The statute allowed the HOA to foreclose without notice to the first mortgage holder unless the lender had previously asked to be notified.
The appeals court, in a 2-1 decision, said the statute violated due process under the Fourteenth Amendment. The court said it became a state action, subject to constitutional scrutiny, when the legislature passed the law.
The Nevada legislature amended the provision in 2015, but Wells Fargo pursued the case because of its impact in federal and state courts. Phyllis Gurgevich, president of the Nevada Bankers Association, said the Supreme Court's decision not to hear the case will leave uncertainties in the law.
"The Supreme Court decision not to hear the appeal continues the contradiction between state and federal interpretations on due process and regulatory taking," she told Bloomberg. "These types of uncertainties tend to increase costs to borrowers and decrease lender participation in the state."