Foreclosure fraud law
takes effect on Saturday
A new law that imposes stricter recording requirements on mortgage servicers takes effect this Saturday, providing homeowners with an extra layer of protection.
Assembly Bill 284, also known as the "Foreclosure Fraud Reform" law, requires mortgage servicers to show clear and complete documentation of a mortgage note's ownership before foreclosing on a property and selling it. The law was passed during the last session of the Nevada Legislature.
The law also requires parties seeking to foreclose in the state to file a notarized affidavit with the appropriate county so residents can access information about their mortgages. The required information includes the owner of the mortgage note. Finding out such information can be difficult for owners of distressed properties seeking a loan modification, especially for notes that have been securitized and resold several times.
"Nevada homeowners ... now must be told who really owns their house and whether they even have the power to sell it," said Greg Jensen, a Reno homeowner lawyer and owner of Jensen Law Group. "These changes -- coupled with the 2009 law allowing Nevada homeowners to elect foreclosure mediation -- provide greater transparency in foreclosures, prohibits trustees and banks from cheeky foreclosure arrangements, and now gives homeowners a new lawsuit remedy."
The question now is whether the law can be used to identify which parties have the authority to negotiate loan modifications on behalf of the mortgage note owner, said Keith Tierney, a Reno lawyer.
Tierney, a former mediator for the Nevada Foreclosure Mediation Program, says servicers who take part in mediation sessions despite a lack of negotiating authority have been a problem.
The law also could increase the court system's workload, Tierney added. Nevada is a non-judicial foreclosure state, which means foreclosures are addressed via state statute instead of going through the court system.
"The law will take Nevada closer to becoming a judicial foreclosure state, potentially clogging our district courts," Tierney said.
Nevada Assembly Majority Leader Marcus Conklin, AB 284's primary sponsor, says the law provides much-needed accountability in the state's foreclosure process.
Nevada led the nation for the 56th straight month in August with a foreclosure-related activity rate of one in 118 housing units, according to foreclosure tracker RealtyTrac.
"There have been widespread instances of foreclosures based on false, improper or incomplete documents throughout the nation over the past few years," Conklin said in a statement. "This new law is part of our ongoing commitment to prevent foreclosure fraud in our state and to ensure that the Attorney General has the tools necessary to prosecute those who defraud homeowners."