Existing Nevada law allows banks and lenders to foreclose on Nevada homeowners without any judicial process afforded to these homeowners. As such, Nevada ranks first in the nation in foreclosures. Nevada law makers have recently adopted new law which essentially changes foreclosures in Nevada. AB149 was signed into Nevada law and becomes effective July 1, 2009. The bill was sponsored by Assemblywoman Barbara Buckley and Senator Steve Horsford. This bill is in direct response to the foreclosure crisis Nevada homeowners are facing.

Approximately 67% of homeowners are upside down in their houses. Due to the rapidly declining real estate value. This is the highest percentage in the country. The average Nevada home has declined in value about 50% from the peak prices in December, 2006. The extensive use of "creative" mortgage instruments like interest only, negative amortization loans, or option ARMs coupled with nothing down financing only served to increase the severity of the problem with the downward spiral of the real-estate market.

With an estimated 70,000 to 90,000 homeowners either in foreclosure or pre-foreclosure status, AB149 is the legislature’s solution. AB149 only provides protection to a homeowner who occupies the home being foreclosed upon.

In Nevada, 99% of residential foreclosures are completed by a trustee exercising the power of sale provisions set forth in Nevada Revised Statute ("NRS") 107.080. This is referred to as a non-judicial foreclosure because the courts are not involved when a lender forecloses on property. A non-judicial foreclosure requires two written notices be recorded and served on the owner. The first "Notice of Breach" or "Notice of Default" is required to be served by certified mail. The homeowner has 35 days to cure the accumulated arrearage and stop the foreclosure process summarily by reinstating the loan payments. The second notice is the "Notice of Sale" which is recorded and served 21 days prior to the scheduled foreclosure sale and is required to be served by registered mail. Although a narrow reading of the statute does not require it, every legitimate foreclosure company serves both notices on everyone with an interest in the property as determined by a title report called a Trustee’s Sale Guarantee. The non-judicial foreclosure process takes a minimum of approximately four months to complete.

Thanks to AB149, non-judicial foreclosure is basically over for the homeowner who lives in the home a lender is trying to foreclose on. Now, the notice of default mailed to the homeowner must contain disclosure of contact information for (1) the investor or lender "with authority to negotiate a loan modification on behalf of the beneficiary of the deed of trust;" (2) a local HUD approved counseling agency; and (3) a form for the homeowner to use to request mediation and an enveloped addressed to the Mediation Administrator. The homeowner has 30 days to return the form to the trustee by certified mail. If mediation is elected, the trustee then has to notify, by certified mail, the beneficiary and all other interested persons or entities in the property which is recorded, so thus should be reported on the Trustee Sale Guarantee.

This law finally gives Nevada homeowners contact information for a local representative with authority for their lenders or investor. Many, if not most, original lenders, do not even know the identity of the current investor as the loan has been sold. When a loan is sold, the bank that originally executed the loan may have remained to service the loan in behalf of the new investor.

It is a no-brainer for every Nevada homeowner facing foreclosure to at least request mediation as provided under AB149. Once mediation is requested, the power of sale is on hold "until the completion of the mediation." The mediation process will be coordinated through a new government office patterned along the lines of the Nevada Supreme Court Settlement Program. How it will actually be implemented remains to be seen, although there are already 300+ mediators signed up eligible for training, with mediations anticipated to begin the middle of July. Most of these mediators will be licensed Nevada Attorneys.

One interesting requirement of AB149 is that "[t]he beneficiary of the deed of trust or his representative shall attend the mediation." Here’s the important part. "The beneficiary of the deed of trust shall bring to the mediation the original or a certified copy of the deed of trust, the mortgage note and each assignment of the deed of trust or mortgage note." Certified copy of a deed of trust is not a problem to obtain from the Recorder. But where does one obtain a certified copy of a mortgage note or assignment? These are normally not recorded. Who will be certifying to the authenticity of the a mortgage note?

If the homeowner elects mediation under this new law, the foreclosure sale cannot happen until the mediation is completed.

Benjamin Childs can be contacted at 251 000, ben@benchilds.com