Foreclosure starts down sharply in December

Foreclosure starts in Nevada dropped significantly in December, along with time to foreclose, which normally gets extended during the holidays, ForeclosureRadar.com reported Thursday.

In Clark County, notice of default filings fell to 923 in December, an 82.5 percent decrease from 5,277 in the same month a year ago, the Discovery Bay, Calif.-based online listing service reported.

Since a Nevada law took effect in October requiring lenders to prove they have authority to foreclose, default filings have hovered around 1,000 a month.

There were 3,140 notices of trustee sale during the month, roughly half of the 6,089 in December 2010.

Foreclosure sales were mixed across all Western states, down far less than expected given lender announcements of holiday moratoriums, ForeclosureRadar Chief Executive Sean O'Toole said.

Nevada's new foreclosure law, which caused default filings to plummet in October, is now trickling down to foreclosure sales as well, he said.

Foreclosure activity bounced back after lenders dealt with state law changes in the past, but it's less clear that such a recovery will happen soon in Nevada, O'Toole said.

"Nevada's new foreclosure rules appear on track to bring a near-complete halt to foreclosures in that state," the foreclosure expert said Thursday. "The only foreclosures you have now are homeowner association liens. There may be a few others, but as we look through December, the vast majority are foreclosures by HOAs, not lenders."

O'Toole said he hopes the rules lead to better lender accountability, as intended, but he said he fears they will instead lead to higher unemployment and less certainty as to when the cloud of "shadow inventory" hanging over the state will be lifted.

In the near-term, the law will certainly help homeowners who were facing foreclosure, eviction and potentially deficiency judgements. Longer term, O'Toole said, there will be unintended consequences for the state as business declines for real estate-related companies that service, resell and finance those foreclosures.

"The changes they put in place are pretty significant," he said. "Look at Bank of America with Recon Trust. They had to rebuild their whole foreclosure process because the trustee can't be owned by the lender."

Cancellations fell 60 percent to 1,083; back to bank, or actual foreclosures, fell 43.6 percent to 925, and sales to third party increased 10.6 percent to 447.

Pre-foreclosure inventory, or homes with a notice of default, stood at 21,340 in December, including 10,009 real estate-owned, or bank-owned, homes.

Banks may be moving through the foreclosure process a little faster in Nevada now that default filings have slowed, O'Toole said. The foreclosure timeframe was 330 days in December, 13 days shorter than November.

"If you're a homeowner who wants to move on and repair your credit, that's a good thing," O'Toole said.

"If you want to stay in your home, it's bad. Just like these laws are a good thing or they can be a bad thing. It's not clear," he also said.

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