Mortgage servicers are slowly easing into the Nevada foreclosure process again.
Notices of default, the first step in the foreclosure process, plunged in October after a new law passed requiring servicers to file a copy of the deed of trust, the mortgage note and each assignment of the note.
Servicers filed roughly 5,000 default notices in September, then the new law went into effect, forcing new filings down to less than 40 statewide, said Verise Campbell, deputy director of the Nevada foreclosure mediation program, at a House subcommittee hearing Thursday.
But new foreclosure filings did increase to 400 in February, according to the most recent data from Campbell.
And servicers are planning to reboot the process soon, she said.
"Bank and beneficiary representatives have indicated in recent weeks they will soon begin filing notices of default again in Nevada after a review of their documentation and the announcement of the federal agencies and state attorneys general historical mortgage servicing settlement in February," Campbell said.
Various reports surfaced this week, one in particular from ForeclosureRadar, which said foreclosure starts in Nevada were still dropping by as much as 14% from January.
RealtyTrac showed foreclosures in Nevada were down 89% from February 2011. The state has held the highest foreclosure rate in the country for 62 straight months.
Janis Grady, director of the Nevada Association of Mortgage Professionals, testified about the state's still grim outlook. Where there were 2,200 mortgage broker shops at its peak, there are now roughly 161 licensed brokers today. More than 60% of Nevada homeowners are underwater with some in as much as 200% negative equity, meaning they owe twice as much on the loan than the house is worth.
Mortgage Bankers Association numbers released in February showed the amount of homeowners turning 90 days or more delinquent was growing, a sign the market was in serious need of a foreclosure restart.
According to Leonard Chide, of the nonprofit Neighborhood Housing Services of Southern Nevada, servicers will still need time to adapt to new requirements both under old federal programs and the wider foreclosure settlement guidelines.
Negative equity is so bad in the state, Chide said, modifications without principal reduction were no longer enough to keep borrowers from walking away.
"When the clients are informed the lender will not provide a principal reduction, they opt for a short sale instead of a modification," he said.