By Kevin Chiu
Foreclosure activity is declining in the state of Nevada as the result of a new law that went into effect last year forcing mortgage servicing companies to prove the lender owns the home loan it’s foreclosing upon.
State Assembly Bill 284 makes it a felony for a party to foreclose on a property without first proving that it holds the mortgage and attaching legally notarized paperwork to the foreclosure filing to prove such. The law was implemented Oct. 1st after consumer outcries over mortgage holders being illegally foreclosed in the state.
Nevada has led the U.S. foreclosure crisis with the number of home foreclosures for five straight years. The Las Vegas area was the pinnacle of the foreclosure epidemic after a record volume of subprime and ALT-A mortgages were made in the region during the real estate bubble.
The new law was approved by Nevada state lawmakers after it was determined that many banks and mortgage lenders were formally foreclosing on homes, for which they lacked legal proof of ownership.
When the housing market imploded, construction workers and employees in every other sector of the local economy were laid-off in mass, sending the Las Vegas unemployment rate to be one of the highest in the nation and the region into an economic downfall.
Although formal foreclosures slowed after the new law went into effect, Clark County where Las Vegas is located still sustained 60,488 foreclosure filings during 2011, which represented one in every 14 housing units.
Washoe County, where Reno is located placed second in foreclosure activity in the state for the year. But the number of distressed properties in the foreclosure pipeline dropped nearly 72% in the last quarter of the year for the state as a result of the new law going into effect compared to 2010.
However, real estate experts say that despite the slow down in formal foreclosure activity, with the stricter recording requirements a back-log of foreclosures will develop to slow the state’s recovery from the real estate downturn. The back-up could lead to other problems for the state’s economy as it faces a growing volume of homes that are left vacant by mortgage holders leaving the area.