Sudden Drop In Nevada Foreclosure Filings May Be Attributable To New State Anti-Robosigner Statute; Law Contains Threat Of Criminal Prosecution

The Wall Street Journal reports:

• Foreclosure filings in Nevada plunged in October during the first month of a new state law stiffening foreclosure-processing requirements. [...] Nevada’s state Assembly passed a measure that took effect on Oct. 1 designed to crack down on “robo-signing,” where bank employees signed off on huge numbers of legal filings while falsely claiming to have personally reviewed each case.

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• Among other steps, the Nevada law makes it a felony—and threatens to hold individuals criminally liable—for making false representations concerning real estate title. Individuals are also subject to civil penalties of $5,000 for each violation.



• Foreclosures have slowed sharply over the past year in many states where banks are required to foreclose on homeowners through courts. But slowdowns haven’t yet been as pronounced in non-judicial states such as Nevada, where foreclosures are conducted by an administrative process.



• To foreclose on homeowners in Nevada and most other non-judicial states, banks hire a “trustee” that notifies borrowers that they are in default and then carries out the foreclosure sale in accordance with state law if the borrower doesn’t become current on the debt.



• The Nevada law makes an important technical change to those rules by forbidding trustees from handling foreclosures if the trustee is a subsidiary of foreclosing bank. That change appears to strike a blow for Bank of America Corp., which uses a wholly owned subsidiary, ReconTrust, as its trustee for foreclosures in Nevada and other western states.

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• [A]dvocates of the bill say the measure will put the real-estate market on sound footing by ensuring that title defects don’t later lead judges to invalidate foreclosures—a step that has already happened in Michigan and Massachusetts.



• “This is not at all about preventing foreclosures. It is about helping end users,” says Tisha Black Chernine, a real-estate lawyer in Las Vegas who was part of a working group that helped draft the bill. In order to truly heal housing markets, “we need to make sure foreclosures are done properly,” she said. “People taking title pursuant to a bad foreclosure run the risk of having no title at all.”

For the story, see Nevada Foreclosure Filings Dry Up After ‘Robo-Signing’ Law.