Countless Las Vegans fell behind on their mortgages when the housing
market collapsed, but many stayed put in their homes, living for free as
banks struggled to seize the properties. Now, years later, many remain in the homes. And odds are, the banks won't toss them out anytime soon. Although lenders start the foreclosure process on thousands of homes a year, they seize only a small percentage of them. The state is ripe for foreclosures.
Seven percent of borrowers were at least two months behind on their
mortgage payments as of Sept. 30, almost double the national rate,
according to TransUnion. But lenders have foreclosed on an
average of 454 valley homes a month this year, down from 992 a month
last year and 2,542 a month in 2011, according to RealtyTrac. Why the drop? Nevada’s robosigning law
took effect in fall 2011, forcing banks to provide more paperwork
before they seize homes from delinquent borrowers. That drastically
slowed the foreclosure process. Wealthy investors also are
increasingly snapping up properties pending foreclosure at auction.
Third-party buyers have picked up an average of 204 local homes a month
this year at auction, up from 50 a month last year, according to
RealtyTrac. But even as banks refrain from seizing properties,
they still regularly file more than 1,000 default notices a month to
start the foreclosure process. The default notices serve as a warning to
let homeowners know they have to do something to fix the situation or
they will lose their homes. This year, an average of 1,392
default notices have been filed a month against valley homeowners, up
from 1,014 a month in 2012, according to RealtyTrac. “Nevada has been on a bit of a roller coaster ride,” RealtyTrac Vice President Daren Blomquist said. Lenders also prefer to do short sales,
which are a cheaper way than foreclosure to unload distressed homes,
said David Stiff, principal economist at CoreLogic Case-Shiller, a
housing-data group. When a bank seizes a house, it has to pay
taxes, insurance, maintenance and homeowners association dues on the
property, Las Vegas lawyer Rory Vohwinkel said. It usually takes more
than a year to complete a foreclosure, and if the homeowner skips town
before it’s done, there are no mortgage payments coming in, making the
process costlier. In a short sale, a bank agrees to sell a house
for less than what’s owed on the mortgage. Owners are upside down but
still might be making payments. They also must manage the sales process —
finding a real estate agent and clearing any outstanding liens. What’s more, debt relief in a short sale counts toward banks’ compliance with last year’s $25 billion national mortgage settlement, giving them another incentive to avoid foreclosure. “Banks don’t want to take the house back,” Vohwinkel said. However,
some believe that banks are avoiding foreclosure to limit the valley’s
inventory of homes for sale, which in theory leads to rising home prices
and helps bankers collect more money when they do repossess and sell
properties. “They’re just stacking them up,” real estate lawyer Benjamin Childs Sr. said. Two new laws could upend the situation. Senate Bill 321, dubbed the Homeowner’s Bill of Rights, aims to make it easier for residents to avoid foreclosure and Assembly Bill 300 relaxed the robosigning law to make it easier for banks to foreclose on homes. Noah
Herrera, vice president
of the Greater Las Vegas Association of Realtors, anticipates that banks
will continue filing more default notices. Lenders are adjusting to the
Homeowner’s Bill of Rights, which took effect Oct. 1, and “now have a
clear pathway of what they can and can’t do," he said. The days of living at home without paying a mortgage are over, according to Herrera. “Things are going to start moving,” he said.
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