Nevada Legislature Considers Passing its Own Homeowner Bill of Rights

In 2011, and in response to the “robo-signing” scandal that would eventually lead to the National Mortgage Settlement, Nevada became the first state to do something legislatively that served to reduce the number of foreclosures dramatically.

The bill, AB 284, required banks to sign affidavits stating that the person signing had personal knowledge of all documents related to a foreclosure, and it provided for a monetary fine for recording false documents in the county recorder’s office… things like that… and immediately after the bill became law foreclosures across the state fell by something like 80 percent.

Nevada’s Attorney General, Catherine Masto, was applauded by homeowner advocates all over the country for having the courage to stand up to the too-big-to-fail financial institutions and protect middle class homeowners.

It was never intended to be, nor would it prove to be, any sort of permanent solution to the foreclosure crisis in the state, and by March of this year, RealtyTrac reported that Nevada had seen a 334 percent year-over-year increase in notices of default being filed… a 17-month high also representing the highest in the country in February.

California’s legislature had tried to pass legislation favoring homeowners at risk of foreclosure in 2009, 2010 and 2011… but the bills all failed after being killed by the banking lobby in their various committees.  Then in 2012, in response to what had emerged related to the National Mortgage Settlement, California’s Attorney General Kamala Harris threw her considerable weight behind a series of bills that became known as California’s Homeowner Bill of Rights… and the new laws went into effect in January 2013.

Basically, California’s Homeowner Bill of Rights codified into law, the same sorts of rules and standards the servicers had agreed to in the settlement with the AGs from 49 states, and provided for a private right of action and statutory damages, so homeowners would be able to turn to the courts for relief in certain cases where the rules were broken.  Among other things, the new laws prohibited dual tracking, which is the practice of initiating a foreclosure while a loan modification is still being considered.

AGs, Masto and Harris

And as a result, California’s AG was heralded by homeowner advocates across the nation for her courageous stance in favor of consumers.

Well, now Nevada’s legislature is considering adopting its own Homeowner Bill of Rights, and in fact, the bill… SB 321… has already passed the Nevada State Senate and is headed to the House.

Somewhat similar to California’s version, SB 321 would provide additional protections for the state’s homeowners facing foreclosure.  It too would prohibit “dual tracking,” require lenders and servicers to inform borrowers of possible alternatives, render decisions on loan modifications, and provide a “single point of contact” to work with the homeowner before filing a notice of foreclosure.  If you’ve been following the developments related to the foreclosure crisis, it’s nothing you haven’t heard before, but bankers are still opposed, saying that in light of the National Mortgage Settlement and given the new rules issued by the Consumer Financial Protection Bureau, the legislation is simply unnecessary.

It’s a predictable and familiar argument, and one that I could argue either side of, but the national settlement’s servicer standards only apply to the five largest servicers, so a new state law would expand the same sort of protection to all servicers, and I don’t think that’s such a terrible thing.

However, both sides agree that the new Nevada law won’t save everyone’s home from foreclosure.  The fact remains that loan modifications are and will remain voluntary… they are granted at the sole discretion of the servicer… no one can force the modification of a mortgage in any state in this country.  If the servicer or investor determines that someone can’t afford to make the monthly payments offered by the terms of the modification, then ultimately that’s the final word on the subject and the foreclosure will proceed.

Bills like the Nevada Homeowner Bill of Rights really just attempt to force servicers to properly consider borrowers for modification prior to foreclosure, preventing homeowners from losing homes without giving them a fighting chance to renegotiate some sort of alternative arrangement.

In an imperfect world, it’s the sort of legislation that goes in the “better than nothing” category, and it has helped to some degree, I think… although admittedly it would be hard for me to prove objectively.

I’ve pointed out on numerous occasions in articles I’ve written over the last four years that the foreclosure crisis is a crisis people only come to understand once it touches their personal lives.  Until then, most people just think homes are lost to foreclosure because people either bought irresponsibly or just can no longer afford the home for whatever reason and nothing can change the outcome of a foreclosure.

Well, interestingly, Nevada’s proposed new laws to protect homeowners are being sponsored by Assembly Representative James Healey (D-Las Vegas) and Senator Justin Jones (D-Clark County), both of whom were recently personally affected by the conditions that have created the foreclosure crisis.

Healey found himself struggling to refinance his own home that, no surprise here, had lost considerable value since the recession began.  He told his peers in the state legislature that his bank had given him the runaround… he never talked to the same person twice… that it went on for over a year before he was told that he did not qualify to refinance… that he was told to stop making his payments… and ultimately agreed to a short sale, which was a process that took another nine months.

Oh, poor baby… I feel his pain and outrage, don’t you?  Go get ‘em Mr. Assembly Representative… you go girl… throw some of that political weight around.

Speaking to other member of the Nevada House of Representatives, he said…

“These are the types of stories we as legislators should not stand for.”

Absolutely right… but the thing is… it’s 2013 and you guys could have paid a bit more attention to the situation… oh, I don’t know… I’m thinking FIVE OR SIX YEARS AGO… you know, instead of the rest of the state’s residents having to wait until you end up having to short sale your own homes.

Politicians, I’ve come to realize, have a special gene that prevents them from feeling embarrassment, shame or humiliation because if I stood by and did nothing for five years as my constituents lost homes as has happened in Nevada in a wholesale way, I’d be a little sheepish starting a fuss just because it finally happened to me.

I wonder if, before Mr. Healey gets behind any legislation for the benefit or protection of women, minorities or undocumented workers, we’ll have to wait for him to become a woman, a minority or an undocumented worker.

The other sponsor of the bill, Jones, is an attorney who, when his grandparents found themselves unable to make the mortgage payments on their retirement home they had bought in 1995, figured he would be able to help them refinance and save their home from foreclosure without… I don’t know… maybe helping them out by giving them a few bucks every month just as my wife and I, along with my two brother-in-laws have done for my in-laws the last 10 years.

Anyway, he says the stress on his “Nana Tai and Grandpa Paul was enormous,” and after their servicer filed a Notice of Default, they decided to sell the home… so obviously they must have had equity in the property.

Why that’s just outrageous… you don’t mean to tell me that an older couple found they could no longer afford to live in the home they had bought for their retirement years, so they had to cash out their equity and downsize?  Heavens that’s unheard of, Senator Jones.  I share your outrage… what happened to Nana and Papa was just wrong.

It’s also something that happens to the elderly in this country… hmmm… how about every single day and many times each day to boot.

Oh well… I suppose it’s better late than never for these guys.  Maybe once the foreclosure crisis has spread so far that it gets a chance to impact every one of our elected representatives at both state and federal levels, we’ll finally see some changes that force this crisis to be handled in such a way that it actually ends, which will benefit us all.

It’s going to be a while longer though, because the higher up the food chain you are, the longer it will take before you feel the water rising.  And by the time this crisis personally impacts those at the top, we will have fallen a lot farther down economically than we are today.

But, at least I can have hope for the future, because no one is getting out of this crisis unscathed.

Until then… see you in the soup lines!  And please, remember me fondly when we’re all there.

Mandelman out.


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