First, a little background:
Most large banks (Bank of America,
Wells Fargo, etc.) are members of MERS, the Mortgage Electronic Registration
System. This system allows a third party entity, like Recon Trust, to transfer
notes between members of the system without recording the deed of trust into
the new note holder’s name. So the name on the deed of trust and the name of
the new note holder do not match since MERS was not required to record these
documents. This made it difficult, if not impossible, for a homeowner facing
foreclosure to actually find out who was foreclosing on them and try to work
out an agreement. Many homeowners were foreclosed upon without ever being able
to contact the existing note holder.
So in light of these national “robo
signing” scandals, Nevada was among
11 states that enacted legislation to protect homeowners and regulate illegal
foreclosure activity. In Nevada, Assembly Bill 284 was passed which required
a bank employee to sign an affidavit stating that to the employee’s personal
knowledge all previous transfers of the note were correct before the bank could
start the foreclosure process.
Since there is no bank employee that
could possibly attest to previous transfers of a note, AB284 effectively
stopped the Las Vegas bank foreclosure process in Nevada, and foreclosure filings dropped from
around 6,000 per month to less than 1,000. (Not all banks were affected by
AB284 since they were not members of the MERS system.)
In October of 2012, however, the
Nevada Supreme Court ruled that banks using the MERS system would be able to foreclose on properties as long as the
note holder and the name on the deed of trust matched prior to the foreclosure
sale. This ruling will allow the third
party entities used by MERS to record a deed of trust in the name of the
current note holder and consummate the foreclosure process. Recording the deed of trust gives homeowners the opportunity to contact the note holder and work out a settlement, but doesn't allow them a "free ride" to stay in their homes indefinitely with no payment.
What this means for the Las Vegas real estate market:
The housing
inventory has been at an extreme low for the past eight months, with bank owned
foreclosures of Las Vegas single family homes accounting for only 10% of the active
listings at any given time. Active short sales account for about 20% of the
active single family listings and the rest are “real” sellers. It’s a “seller’s”
market, prices have risen steadily since January, there are multiple offers on
most listings within days of coming on the market, and buyers are finding it
difficult to make a purchase unless they bid above appraised value.
Banks have started the
foreclosure process again, and we do expect new inventory to begin hitting the market
after the first of the year, probably in or March or April. However, the banks
do still have very stringent hoops to jump through, and there is no huge wave
expected all at one time. Still, there should be more listings on the market,
allowing frustrated homebuyers the opportunity to finally get an offer
accepted. Hopefully we will get back to a more balanced market that remains
steady for the next few years. A balanced market is better for both buyers and
sellers and the local economy.
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