Even though the foreclosure crisis seems to be winding down in some parts of the county, Nevada’s foreclosure level remains high. In fact, in the first half of 2013, the state had nation's second highest foreclosure rate (behind Florida).
When it comes to foreclosure, lenders and servicers have not always provided homeowners with a significant opportunity to obtain loss mitigation options to avoid foreclosure. To address this issue, on June 3, 2013, Nevada Governor Brian Sandoval approved Senate Bill 321, enacting a Homeowner’s Bill of Rights to better protect homeowners in foreclosure.
What is the purpose of this new law?
The purpose of the Homeowner’s Bill of Rights is to provide homeowners in the state of Nevada with better consumer protections, as well as fair and honest treatment in the servicing of mortgage loans in default, especially when it comes to the loss mitigation process.
Nevada Homeowner’s Bill of Rights: Key Provisions
The Nevada Homeowner’s Bill of Rights provides added protections for struggling Nevada homeowners facing possible foreclosure.
Provides Notice to Distressed Borrowers
At least 30 calendar days before recording a notice of default or starting a judicial foreclosure action and at least 30 calendar days after a borrower’s default, the mortgage servicer must provide the borrower a written notice containing (among other things):
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a summary of the borrower’s account, including information related to the loan (such as the total amount needed to cure the default, the principal balance, the date of last payment, and contact information to inquire about the loan)
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information about available foreclosure prevention alternatives
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contact information for one or more housing counseling agencies, and
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a statement of the facts supporting the lender’s right to foreclose.
Mortgage Servicer Must Reach Out to Borrowers
The mortgage servicer must contact the borrower in person or by telephone to discuss the borrower’s financial situation and to explore options to avoid foreclosure 30 days prior to starting a foreclosure. (Though if the servicer is unable to reach the borrower, it may proceed with foreclosure so long as it meets certain calling and mailing requirements.)
Lender Loss Mitigation Requirements
If the borrower submits a loss mitigation application, the mortgage servicer must:
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acknowledge the application no later than five business days after receipt, and
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either offer a foreclosure prevention alternative or deny the application within 30 calendar days after the borrower submits the complete application. (The servicer must give the borrower at least 30 days to submit any documents or information required to complete the application).
However, the servicer is not required to evaluate a loss mitigation application if the borrower has already had a fair opportunity to be evaluated for a foreclosure prevention alternative, unless there has been a change in the borrower’s financial circumstances since the previous application.
No Dual Tracking
Nevada’s Homeowner’s Bill of Rights bans the dual tracking of foreclosures. (Dual tracking is when the lender proceeds with the foreclosure while a loss mitigation application is pending). This means loan servicers must make a decision to grant or deny the application before starting or continuing with the foreclosure process.
What does this mean for homeowners? Once the homeowner submits a complete loss mitigation application, the foreclosure is stalled while the loan servicer reviews the application and makes a decision. Even if the lender denies the loss mitigation, it still cannot foreclose until any applicable appeals period (generally 30 days) has expired.
Lenders must provide a "Single Point of Contact"
In the past, homeowners who called their lender to get help with mortgage problems have had to explain their circumstances repeatedly, often to several different representatives.
Under the Homeowner’s Bill of Rights, the mortgage servicer must establish a single point of contact whose responsibilities including:
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communicating with the borrower about the process to obtain a foreclosure prevention alternative
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coordinating the receipt of all documentation needed to complete a loss mitigation application
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informing the borrower of the status of the application
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ensuring the borrower is considered for all foreclosure alternatives, and
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contacting the person with the ability and authority to stop the foreclosure process when necessary.
The contact person remains assigned to the account until all loss mitigation options are exhausted or until the account is brought current.
Mediation Available in Judicial Foreclosures
Under this law, homeowners in judicial foreclosure may elect to participate in foreclosure mediation as long as the property is owner-occupied.
Violations to the Bill of Rights? Homeowners Can Sue:
Homeowners may sue the lender or servicer for violations of the Homeowner’s Bill of Rights. Potential relief includes:
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injunctive relief, such as a halt to the foreclosure sale (if the foreclosure sale hasn't happened yet), or
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actual economic damages if the foreclosure sale has already occurred.
In addition, if the court finds that the violation was intentional, reckless, or resulted from willful misconduct by a loan servicer or lender, the court may award the borrower the greater of triple actual damages or statutory damages of $50,000.
Additional Issues
The Homeowner’s Bill of Rights also requires that a foreclosure action be dismissed (for judicial foreclosures) or the foreclosure documents rescinded (for nonjudicial foreclosures) and any pending foreclosure sale cancelled when:
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the borrower accepts a permanent foreclosure prevention alternative
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the notice of sale is not recorded within nine months after the notice of default is recorded, or
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the foreclosure sale is not conducted within 90 calendar days after a notice of sale is recorded.
The Nevada Homeowner’s Bill of Rights is effective for foreclosures where a notice of default is recorded (or a judicial action is started) on or after October 1, 2013.
Nevada Homeowner’s Bill of Rights, applies to:
The protections afforded to homeowners by the Homeowner’s Bill of Rights generally apply to first mortgage loans for properties that are:
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residential, and
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owner-occupied.
However, the protections do not apply to borrowers who have:
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surrendered the property (as evidenced by a letter confirming the surrender or the delivery of keys to the property to the lender), or
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filed bankruptcy (and the bankruptcy court has not dismissed the case or granted relief from the bankruptcy stay). (Learn more about bankruptcy.)
Institutions that foreclosed on 100 or fewer owner-occupied homes in the preceding annual reporting period, as established by their primary regulator, are exempt from the law.