Leave it to Nevada to buck the trend.
Even as U.S. foreclosure starts fell to a seven-year low in the third quarter, default activity kicked into high gear in Clark County and across the Silver State, according to a report Wednesday from California research firm RealtyTrac.
First-time foreclosure filings plunged 39 percent nationwide year over year in the three months that ended Sept. 30. The opposite happened in Nevada, where initial filings spiked 36 percent in the same period, RealtyTrac reported.
September brought especially dramatic foreclosure gains in Nevada. Starts, or notices of default, nearly doubled year over year in the month, to 2,763 filings. Notices more than doubled in Las Vegas, jumping 109.3 percent, to 2,470 filings.
RealtyTrac’s analysis backs up recent findings from local real estate and mortgage experts, who reported Friday that local banks and title companies submitted nearly 1,000 notices of default on Sept. 30. That was a single-day record for foreclosure starts in Clark County.
Industry observers trace the September surge in initial filings to the state’s new Homeowners Bill of Rights law, which imposes new mandates on banks looking to foreclose. The law took effect Oct. 1, and first-time notices of default swelled as banks tried to beat the deadline.
Look for that trend to reverse: Filings fell precipitously the first two days in October, thanks in part to those new requirements. Banks now have to give homeowners 30 days’ notice before starting foreclosure, and they have to tell owners about alternatives to default.
The law also requires banks to assign a single contact person to a homeowner in foreclosure. Nor can banks try to foreclose while working out a short sale. And they must meet timelines for requesting additional paperwork and answering modification requests.
“Lenders are changing forms and paperwork to correspond to new laws, and they believe the foreclosure process will be dramatically slowed for the next several months,” said Craig King, chief operating officer of Reno brokerage Chase International.
Bank repossessions, or foreclosure completions, also gained in Nevada, jumping 29 percent from the second to the third quarter. Nationally, the rate ticked up 7 percent in the same period.
For all foreclosure activity, from first-time filings to bank repossessions, Nevada ranked No. 2 in the nation in the third quarter, behind Florida. In all, 9,033 properties in Nevada were in some stage of foreclosure in the quarter, RealtyTrac reported. That was up 10 percent from the second quarter and 21 percent from a year earlier. One in every 128 homes in Nevada was involved in foreclosure in the third quarter.
Las Vegas ranked No. 5 among metro areas, with one in every 109 homes in some phase of foreclosure.
For September alone, Nevada ranked No. 1 for foreclosure activity.
Daren Blomquist, vice president of RealtyTrac, said some states could continue to struggle with above-average foreclosure rates in coming quarters.
“These spikes in activity demonstrate that while millions of distressed homeowners have been pulled back from the precipice by foreclosure prevention programs over the past several years, once those programs expire or are exhausted, a percentage of those troubled homeowners are still susceptible to falling into foreclosure,” Blomquist said. “In addition, even slight economic downturns at the local or regional level can push these homeowners hanging on by a thread over the edge.”