The current national mortgage crisis that has been the topic of debate has put Nevada in the spotlight.   RealtyTrac (an online marketplace for foreclosure properties),  which  released its year-end data from its 2007 U.S. Foreclosure Market Report,  stated:

Nevada posted the nation’s highest state foreclosure rate for 2007, with 3.4 percent of its households entering some stage of foreclosure during the year — more than three times the national average. The state documented the highest monthly foreclosure rate in all 12 months of the year. A total of 66,316 foreclosure filings on 34,417 properties were reported in Nevada in 2007, an increase of more than 200 percent in total filings from 2006.

This is alarming news, because in 2006, Nevada had 21,045 foreclosures, which was nearly three times the number reported in 2005.   A closer look at statistics indicates Las Vegas is the area hardest hit by those 2007 foreclosures.  The foreclosure rate is an important indicator of the state of the housing market, because there is a direct correlation between foreclosure and mortgage loans that were obtained with fraudulent information. 

It is important to note that a significant rise in foreclosed homes brings additional problems to the area, such as neighborhood disrepair, lower property values, and increased crime.   In addition to these problems, pending foreclosures bring a wave of scam artists looking to take advantage of those desperately trying to save their homes.  These scam artists will try to lure their victims with false promises and hope, with the goal of cheating homeowners out of their homes, money, or both.  Scam artists claim they’ll provide a service sometimes called “foreclosure rescue.”  This service usually only worsens problems for a homeowner.  Often, a homeowner will unknowingly convey title to his home, thinking the foreclosure rescuer will help him.  Instead, the homeowner loses his home and any equity he had in it. 

To address mortgage fraud, state lawmakers passed AB440, which Governor Gibbons signed into law in June 2007.  AB 440 enables the State of Nevada to punish those who defraud a participant in a mortgage lending transaction as well as punish those foreclosure rescuers engaging in fraud.  Georgia, which previously held the top spot for mortgage fraud in the nation, recently passed similar legislation for mortgage fraud and subsequently dropped from first in the nation to third.  AB440 provides criminal penalties as high as a 20-year jail sentence and $50,000 fine for mortgage fraud.  It also allows a homeowner to seek to rescind a foreclosure reconveyance if the transaction turns out to be fraudulent. 

As was reported by the Las Vegas Police Department, the Las Vegas Metropolitan Police Department, which testified in support of AB440,  has indicated an increase of mortgage fraud reporting to the agency and has recently announced that the department is currently cross training all its fraud investigators in mortgage fraud, because the department is expecting its investigative workload to increase. 

AB440 makes it an unfair lending practice for a lender to make a home loan without determining that the borrower will be able to repay the loan.  The new legislation also prohibits a foreclosure consultant from collecting any payment for services rendered until the consultant has performed all services promised.  It also prohibits a foreclosure consultant from taking any wage assignment, lien on property, assignment of a homeowner’s equity or other interest in a residence in foreclosure or other security as compensation.  In addition, the legislation prohibits a foreclosure consultant from acquiring any interest in a residence in foreclosure of a homeowner for whom the foreclosure consultant has contracted to perform services.  These prohibitions are intended to ensure that a foreclosure consultant will act in the best interests of a homeowner who seeks his help. 

Mortgage fraud is a broad area that can involve elements of elder exploitation,  identity theft and securities fraud, which are all areas the Attorney General’s Office  has targeted as priority crimes for prosecution.  Mortgage fraud is a particularly egregious crime, because it can leave its victims homeless and financially destitute.  The Attorney General’s Office is working with state and federal authorities to pool its resources to aggressively prosecute all types of mortgage fraud in Nevada. 

By Attorney General Catherine Cortez Masto and Assemblyman Marcus L. Conklin