Assembly bill would modify requirement said to delay foreclosures

An Assembly bill submitted in March would modify a controversial requirement that delays real estate lenders from foreclosing on properties secured by a residential loan.

Assembly Bill 300, introduced by Assemblyman Jason Frierson, D-Las Vegas, takes aim at one portion of a 2011 law intended to prevent illegal foreclosures and protect property owners’ rights.

The law currently requires lenders to provide a notarized affidavit of authority to exercise power of sale under a deed of trust. Anyone signing documents on behalf of a lender must have “personal knowledge” of who owns the promissory note on the loan.

The law essentially choked off the foreclosure process in Nevada, reducing default notices from about 4,000 a month to fewer than 1,000 immediately after it took effect in October 2011. Notices of default have since ticked back up to about 1,500 a month.

It also allowed delinquent homeowners to remain in their homes without paying their mortgage, waiting for the bank to schedule a trustee sale, which in some cases takes two years or more.

AB 300 would clarify the “personal knowledge” requirement, Frierson said Friday. It provides that certain information in the affidavit could be based on “direct, personal knowledge” that the person who makes the affidavit obtained from reviewing business records of the beneficiary of the deed of trust and information from the county recorder or title insurance issued by an agent authorized to do business in the state.

“It just clarifies what they’re able to attest to based on personal knowledge,” Frierson said . “Realtors, title companies, bankers and legal aid all came together and said this would satisfy their concerns about personal knowledge.”

Attorney Tisha Black Chernine, who worked on the 2011 law, said AB 300 is the “best and most practical result” of efforts to combine the sometimes competing interests of lenders, real estate agents and the title industry, while maintaining protection for real property records and consumers.

Changing the language of Assembly Bill 284 — which became known as the “robo-signing” law — could be the last legal stumbling block holding back foreclosure proceedings in Nevada, real estate agent Mark Rowley said.

Realtors blame the law for cutting off resale home supply, creating bidding wars among cash investors and knocking owner-occupants out of contention during a time when home prices are affordable and interest rates are at historic lows.

“The reality is if an agent puts a resale house on the market that is habitable, it will get double-digit offers on it within a 24-hour period,” Rowley said. “With a (large) percentage of the offers being cash, it is not a healthy market or even close to a healthy market. So the overwhelming amount of buyers over sellers is the classic supply-demand scenario that has caused the pricing pressure that we have seen over the last 12 months.”

AB 300 is among several bills that deal with Nevada’s foreclosure crisis.

Senate Bill 389 provides that the owner of a single-family dwelling may submit a written request to the servicer of the mortgage or deed of trust for a certified copy of the note. If the servicer does not provide the documents within 60 days, or if the documents indicate that the beneficiary does not have a lien on the dwelling, the owner may bring action for quiet title against the servicer and beneficiary.

Senate Bill 321 would enact a “Homeowners Bill of Rights,” similar to legislation passed last year in California. Among other things, it would provide that a borrower be evaluated for foreclosure prevention alternatives such as loan modification.

Marcus Conklin, the former assemblyman who authored AB 284, said the interesting thing about the bills currently floated in this legislative session is that they’re all related to the same chapter of Nevada Revised Statutes.

“What happens if one bill contradicts something in another bill? There’s a truing up that has to happen. You have to look at it as an aggregate to see how the pieces fit together,” said Conklin, now associate director at UNLV’s Lied Institute for Real Estate Studies.

Las Vegas homeowner Eric Long thinks the current law has some merit. He and his wife are suing Bank of America, claiming their home was illegally foreclosed.

Citing Edelstein v. Bank of New York Mellon, the lawsuit alleges that Bank of America lacks standing to foreclose because the current beneficiary of the deed of trust and the holder of the promissory note are not the same.

“We’ve been paying lawyers for two years,” Long said. “Bank of America, even though they do not have proof of the note, they’re capable of collecting on it because it was assigned to them through MERS (Mortgage Electronic System). Fannie Mae holds the note. This will open the floodgates to people suing Bank of America.”

Las Vegas real estate agent Philip Gusterson said amending the law may not solve Nevada’s housing problems: “It depends on a couple of things. It’s possible that quite a few of the homes that would have gone to foreclosure in the absence of (the 2011 law) have already hit the market as short sales.

“It’s also possible that banks now have a preference for releasing short sales into a supply-constrained market rather than foreclosing. This would limit the impact of any amendment.”

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.