REALTORS® in Nevada, one of the
nation’s hardest hit housing markets, are attracting national attention after
working with state lawmakers to pass a landmark new law that helps the state’s
distressed homeowners.
Supporters say the law, passed in June as AB273,
is sparking inquiries from lawmakers, REALTORS®, banks and collection companies
around the country who are just realizing how historic it was.
Background
AB273 was introduced by Nevada Assembly Majority
Leader Marcus Conklin, D-Las Vegas, after conversations and discussions with
the Nevada Association of REALTORS® (NVAR). Conklin said he was concerned about
the lingering impact that the foreclosure process is having on the real estate
industry and on Nevada consumers in general.
NVAR President Mike Young, a longtime local
REALTOR® based in Incline Village, Nev., said “the ideas and concepts behind
AB273 were culled together with preparation and research from our Face of Foreclosure
report,” a statewide research project conducted by NVAR, its NV DataMine and research
firm SGS. “We wanted to address the issue of foreclosure and its impacts on our
communities.”
What AB273 does
First, with respect to second lien holders
(these are typically banks, but could be other lending entities), supporters
say AB273 limits their ability to pursue a deficiency judgment and treats
second liens on a home no differently than the first liens (offering up to six
months to file a deficiency). Previously, Nevada law gave second lien holders
six years to pursue the deficiency. Furthermore, in a short sale situation, the
second lien holder falls under a similar timeframe to commence an action.
Second, should the right to collect on a second
lien be sold by a lender for less than the actual debt owed, the new owner of
the right to collect can only pursue the debt for what they purchased it for – not
for the full amount -- plus interest and reasonable costs.
Lastly, NVAR leaders say the measure ensures that
second lien holders and first lien holders can no longer “double dip,” or collect
on an insurance policy (purchase money insurance or a loss share agreement, as
in Bank of America’s purchase of Countrywide loans).
“AB273 has some other important components, but
these provisions have the greatest positive impacts on the consumer,” Young
said.
Why AB273 is important
NVAR leaders say the law is important for
several reasons. First, second lien holders were previously waiting for years
before pursuing homeowners for the deficiency owed on a mortgage. Before AB273,
second lien holders had upwards of six years to decide whether to pursue the
deficiency action. Now, Young said second lien holders must be an active
participant in the conversations, and must decide upfront how they will
proceed.
Second, Young said the new law “allows homeowners
who went through the foreclosure process to move on with their lives, and
perhaps re-enter the housing market sometime down the road, instead of having
this debt hang over their heads and debt collectors preying on them.”
Hopefully, he added, it will also encourage the
lending community to negotiate in earnest on short sale negotiations, thereby
helping to stabilize the housing market in Nevada, get people back into homes,
and strengthen local neighborhoods and communities.
Finally, as NVAR leaders point out, the Internet
is littered with information about Countrywide and Bank of America and their loss
share agreement. In a nutshell, Young explained that the loss share agreement
protects Bank of America and other entities from losing big on “bad loans” entered
into by Countrywide. He said AB273 still allows for these loss share agreements
to remain in place, but does not allow “double dipping” to occur.
AB273 does not affect a deficiency judgment that
has already been negotiated and litigated. Supporters of the law say the
Legislature did not intend to reopen previous deficiency actions judgments.
However, AB273 does impact those deficiency
actions which commenced on or after July 1, 2011. So, anyone who has yet to go
through the foreclosure process will benefit from AB273, Young added.
How AB273 helps homeowners
While consumers are not relieved of their
financial obligations in any way under this legislation, it does ensure that
they will be able to deal with the issue promptly, and then be able to move on
with their lives, instead of having to look over their shoulders for the next
six years waiting for a debt collection company to stalk them in pursuit of the
mortgage deficiency.
“It also ensures that the big banks and big
collection companies cannot line their pockets with insurance proceeds and
collect on the full amount of deficiency judgment,” Young said.
Are
other states pursuing similar legislation?
“We won’t know for sure until state legislatures
reconvene for their 2012 sessions,” Young said. “But our counterparts in other
states have been asking us about this.”
He said NVAR has just begun spreading the word about
its success to other state REALTOR® associations and their government affairs
departments across the nation.
As for how the law impacts REALTORS®, Young said “anything that helps
homeowners and helps our local housing market ultimately helps all of us.”
About
the NVAR
The Nevada Association of REALTORS® is
a professional trade association with nearly 14,000 members. NVAR is committed
to protecting, promoting and preserving our communities. Visit www.NVAR.org.
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