Last month, Nevada’s governor signed into law a bill that is supposed to make it easier for banks to foreclose on delinquent loans.
The Nevada bill changed a key provision in a 2011 law, which had forced banks to prove they could legally foreclose on a home by requiring bank employees to sign an affidavit saying they have personal knowledge of the property’s document history. If they didn’t they could face felony charges for making false representations.
Under the newly passed law, a bank’s affidavit can be based solely on a review of internal lending records and either title work or filings with the local county recorder.
Nevada law has unintended consequences
Why the change of heart? Well, it appears the Nevada bill passed in 2011 had some unintended consequences in that many lenders were pulling back on foreclosures leaving a dearth of inventory.
In a recent article, “Foreclosure squeeze crimps Las Vegas real-estate market,” reporter Nick Timiraos details how the 2011 law “backfired” and that instead of foreclosures working their way through the system and coming onto the market, the demand has pushed up prices making it harder for potential buyers to re-enter the market. With so few existing homes on the market, many builders are re-entering the market, but jacking up prices and making it difficult for many to buy.
Consequently, the only thing the Nevada law accomplished was to delay the recovery of the housing market.
Florida’s law mirrors Nevada
Why is this relevant to Florida? The Nevada law is just another example of how laws meant to resolve the foreclosure crisis are doing just the opposite. In the case of HB 87, there is a “show cause” provision that shifts the burden of proof from the lender who must show why they are entitled to foreclose, to the homeowner, who must now prove why the bank is not entitled to foreclose.
This would result in yet another unintended consequence by inviting further bank fraud and creating more problems by denying Florida homeowners their right to due process.
The Florida law also is riddled with numerous other potential constitutional issues such as illegal takings claims and allowing retired senior judges to continue to hear foreclosure cases without facing re-election or re-appointment.
While Florida’s law is still in its infancy, Nevada’s two-year-old law only goes to show that efforts to push foreclosures through the system rapidly instead might do little more than slow an already fragile recovery.
From The Trenches
Real estate attorney and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida, and is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.
The late comedian Henny Youngman was known for his rapid-fire, one-liners – and is probably best know for this one in particular: “Take my wife … please!”
That’s also the line a lot of folks were saying at the height of the real estate crisis, except they replaced “wife” with “house.” Unless of course they were divorcing, then ex-husbands might be heard to say: “Take both my wife and my house … please!”
But today, we are starting to see people looking for ways to keep their homes; a sure sign that the housing market, and the economy in general, are making a comeback.
RealtyTrac just reported that fewer U.S. homes entered the foreclosure process or were repossessed by banks in June, suggesting that fewer homeowners are having trouble staying current on their mortgage payments.
Even in Florida, one of the top foreclosure states in the nation, foreclosures are tumbling and filings were down more than 20 percent from a year ago. That doesn’t mean we are out of the woods yet, but we are moving in the right direction.
And CoreLogic just reported that fewer foreclosures were completed in May compared to a year ago, meaning that bad loans are working their way through the system and borrowers who are better able to pay are replacing them.
Bidding wars break out
This decline in new foreclosure filings and completed foreclosures is having a domino effect in that, with fewer available homes on the market, bidding wars are starting to breakout on those homes that are for sale.
That’s great news for sellers, but not so much for buyers, who also are seeing interest rates rise. In fact, mortgage interest rates have crept up in the last few weeks to their highest level in nearly two years.
Short sale turnaround
Another unforeseen benefit: Those who thought they would have to engage in a short sale are finding that home prices have gone up enough to sell their homes without the need to get their lender’s permission. For years these folks struggled as they watched their home’s value sink – eventually owing more than they paid. But now, as home values have risen, they have enough equity to sell, pay off the bank and move on with their lives.
And what does that mean to the divorcing couple and the future of their marital home? There’s a pretty good chance that it will become just one more asset to fight over, but now no one will be saying “Take my home … please!”
Real estate attorney and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida, and is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook .
This article was written for The South Florida Law Blog by Roy Oppenheim.
U.S. Attorney Eric Holder, the man charged with upholding the laws of this country, has finally recognized the elephant in the room.
During a Senate Judiciary Committee meeting this week, Holder finally admitted what the rest of us have been saying for a long time: There are banks in America that are too big to fail!
Ironically, American Banker, the very same publication read by those Holder criticized, was among the first to report the news.
Said Holder: “I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy.”
Sadly, he offers no solutions to what has become an epidemic of fraud that led to one of the worst economic crisis in our country. By allowing banks to perpetrate fraud by selling mortgage securities they knew were not worth the paper they were written on, the Justice Department, in a way can be considered just as guilty for failing to hold banks to the fire.
It’s like the courts saying a murderer can’t be prosecuted because he is 6’9”, weighs 400 pounds and is too big to jail. Holder’s argument is simply not defensible.