Saturday 12 November 2011

Nevada's New Anti-Foreclosure Law

Foreclosures in Nevada plunged 88% in Nevada in October after a new law was passed, the WSJ says in "Nevada Foreclosure Filings Dry Up After ‘Robo-Signing’ Law":
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. Banks suspended their foreclosure filings one year ago and have gradually restarted them after those and other improper foreclosure-processing practices surfaced....

Real estate agents and housing investors say the law could have unintended consequences if it hinders the ability of the housing market to clear. In hard-hit housing markets like Las Vegas, foreclosures have been among the fastest-selling properties. They accounted for around half of all home sales there during the third quarter, according to SalesTraq, a local real-estate firm....

Banks initiated foreclosures on around 10% of all mortgages that hadn’t made any payments in more than two months, double the historical lows from one year ago. That is still below the average 14% rate for the past decade.


Who gains and who loses? Is the law a good idea? How does this relate to market failure?

11 comments:

  1. The winners are those that have an abundant of cash reserves to buy up the foreclosed properties. These are probably large corporations that will make a large profit. The other winners are the banks that get the remove the toxic assists off their balance sheets. I'd say the losers are the people's whose properties are foreclosed so quickly.

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  2. This law is a good idea because it prevents the banks from signing off on bad legal filings. It ensures that they have to look at each individual case. Banks lose with this new law, but the state gains.

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  3. Bank regulation is a slippery slope, so I do believe that the law is a good idea; however, it is imperative that it be well written. The unintended consequences of a poorly written law could force banks' hands, and cause other problems.

    In places like Nevada that have had real estate troubles above and beyond the national average, these laws can help save home values, and lead to a quicker restoration of the economy.

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  4. THe law is not a good idea because foreclosures need to happen for the market to fix itself.

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  5. I think that there need to be laws to protect consumers from companies doing the wrong thing. There has been a problem with companies robo signing and forgining documents, but I think this needs to be done at a national level.

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  6. I believe that this law is a good idea. It seems to me that a lot of the problems with the financial crisis had to do with poor regulations, or poorly enforced regulations. Too many people were being careless and not facing the consequences of their actions. I think this law against robo-signing is a good idea and will help prevent more problems in the future. It seems like the people who will lose are people who have issues in their foreclosure documents because they will now be more carefully regulated.

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  7. I agree that the law is beneficial because it keeps banks from "robo-signing" and makes them look into the matter more carefully. This could help homeowners that have special reason/situations why they've defaulted on their debt. Foreclosures might in a way prevent market failure by punishing the lenders and home owners that didn't make responsible decisions, but having banks sign filings all willy-nilly isn't the right solution to the problem.

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  8. One thing nobody noticed is that a big loser from the law is people who want to buy houses. If a foreclosure occurs, somebody ends up buying the house, usually cheaply. Other losers are the governments which do not get paid the property taxes by the people in the houses who have quit paying on their mortgages. Still another set of losers are people who want to take out mortgages, since banks will charge extra fees or higher interest rates to make up for the extra difficulty of foreclosures and the extra likelihood that the borrower will decide to stop paying their mortgage.

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  9. My opinion is that this law is beneficial and a good idea. Many of the issues from the financial downfall were derived from gray areas of the law. Though this law will make it more difficult for home buyers, it puts reality into perspective and will force people to think twice before purchasing something out of their price range. Will laws like this hurt 'The American Dream'? I would argue no, I don't think it will hurt the American Dream of purchasing a great house with a white picket fence, I just think the American dream is changing. Because of the poor choices on credit that past generations have made, their American dream for us, is no longer a reality but these laws can possibly help it to be over time in the future.

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  10. Another party that might benefit here are people partaking in strategic defaults. They can stop making payments on their houses; and with the inability of banks to just sign-off on the defaulters, these parties will be able to hold onto their properties longer than they would have under the previous law. This might also prolong the drastic effect of foreclosures to Nevada’s economy, prolonging the poor state of the economy today, and spreading it over a longer period of time.

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  11. This law is certainly politically popular amongst Nevada residents that are on the verge of foreclosures themselves or those seeing property values drastically decreasing because of the amount of foreclosures in a community. Real estate agents are correct in saying that is delays the inevitable (assuming employment numbers and real estate values do not quickly reverse course), but it is viewed favorably when the electorate goes to the polls in November.

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