Assembly Bill Slows Nevada Foreclosures

 

Nevada. Known for gambling, exciting nightlife, beautiful desert scenery and dry heat, is also known for being the worst state in the nation for foreclosures. In addition to one of the highest unemployment rates in the U.S., Nevada has suffered through several years of high-volume foreclosures on both residential and commercial property.

So why did the number of foreclosures suddenly drop in October? Did something magically happen to allow the state to turn the economic corner through a recovery of the housing market? Not even close.

October 1 marked the day Assembly Bill 284 went into effect. This law requires the assignment of a mortgage or deed to be filed in the county recorder's office within the same county where the home is located. Previously, the filing could be initiated at any MERS location in the state.

The law also mandates that notices of default include an affidavit spelling out the deed of trust, amounts due, possession of the note and deed as well as the authority to foreclose. Compliance with this law is mandatory and failure to follow it to the letter is subject to civil penalties. In Addition, making false representations has been upgraded for a class C felony.

This law had the effect of putting the brakes on mortgage lenders by forcing them to prove they have the proper authority to initiate foreclosure action. Nevada took the step to pass this law as a response to the unregulated Mortgage Electronic Registration System. MERS was initially set up by financial institutions. Experts say the system has been a primary contributor to the murky paper trail, common in the mortgage foreclosure process.

Using MERS rather than county recorders' offices had led to uncertainty over who actually had a beneficial interest in mortgage loans after they were packaged and sold to investors.

Assembly Bill 284 should be of help to distressed homeowners. With banks taking significantly longer to initiate foreclosure proceedings, homeowners will have time to pursue the short sale route. The state will also benefit from a reduction of foreclosures.

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