While banks adapt to new law, Nevada foreclosures plunge
Last month, Gov. Brian Sandoval signed a bill that is supposed to make it easier for banks to foreclose on delinquent homeowners.
So far, things haven’t quite worked out that way.
A mere 249 notices of default were filed statewide last month, down 88 percent from 2,108 notices in May, according to a new report from Irvine, Calif.-based RealtyTrac.
Notices of default start the foreclosure process. Although it’s not entirely clear what caused the plunge in filings, it helped improve Nevada’s overall foreclosure rate. One in every 720 housing units statewide had a foreclosure-related filing in June, down 58 percent from May, RealtyTrac reported. Filings include default notices, scheduled auctions and bank repossessions.
Nevada’s foreclosure rate was fifth-highest in the country last month, compared to second-highest in May.
Sandoval on June 1 signed Assembly Bill 300, which changed a key provision of Nevada's "robosigning law." Under that bill, which Sandoval signed in 2011, banks were forced to prove they have the legal right to foreclose on a home before they take action. Using the threat of criminal or civil penalties, it required bank employees to sign an affidavit saying they have personal knowledge of the property’s document history.
The law took effect in October 2011, and afterward, the foreclosure process in Nevada practically ground to a halt, crimping the inventory of homes for sale. In September that year, 4,684 notices of default were filed statewide. The next month, there were only 80.
AB300, meanwhile, took effect the day Sandoval signed it. Under that law, a bank’s affidavit can be based simply on a review of internal lending records and either title paperwork or filings with the local county recorder.
With the legal barrier from the robosigning law pushed aside, it’s now “entirely upon the banks” whether they seize more homes, Las Vegas Valley real estate agent Keith Lynam said.
“They have no more bogeyman to hide behind,” said Lynam, the 2013 legislative chairman of the Nevada Association of Realtors, which pushed for the changes to the robosigning law.
Nevada Bankers Association CEO Bill Uffelman said lenders must rewrite their foreclosure policies to adapt to AB300, as that might explain the drop in default notices.
However, he cautioned against reading too much into one month’s worth of data, saying he wants to see numbers for July and August before determining a new trend has taken hold.
“I wouldn’t use one month’s stats to say life has changed,” he said.