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):
- 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)
- information about available foreclosure prevention alternatives
- contact information for one or more housing counseling agencies, and
- 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:
- acknowledge the application no later than five business days after receipt, and
- 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 forecl