Homebuyers should review preliminary title report

Q: My uncle recently bought a foreclosed home and now we read about the illegal robo-signing. Is there a chance that my uncle might have his house taken back?

-- Pam M., Las Vegas

A: This is a good and increasingly common question. With all the discussion and news coverage surrounding these so-called robo-signing scandals, there's no doubt that this is a serious issue for us here in Nevada.

The Nevada Legislature addressed this issue in its last session, primarily by passing Assembly Bill 284, which went into effect Oct. 1, 2011. Many parts of this new state law play into whether your uncle's house is at risk.

For example, most property sales come with title insurance, and if he hasn't read his title insurance policy, he should definitely do so. It tells you what is covered and what is not.

Most likely, if new financing was a part of his purchase, the new lender would make sure that its interests were protected.

And that should protect your uncle's interests as well. So, I suspect your uncle, like most local homeowners in his situation, is not in immediate danger of having his house "taken back."

Keep in mind that this sort of thing is a rather new scenario for all of us and that we continue to learn more about this issue as this story and the extent of this problem unfolds.

AB284 requires the foreclosing party to provide an affidavit stating that they are in possession or know the whereabouts of the original paperwork related to a mortgage loan before they can file what is called a notice of default in a foreclosure proceeding.

As you may have heard, one of the most obvious results from AB284 has been that far fewer notices of default have been filed in Nevada since the law took effect Oct. 1.

Unfortunately, many banks across the country went into receivership, and their loans and paperwork were often transferred, lost or misplaced.

With the larger banks that do great volumes of mortgage loans, some keep and service their own loans, while others package and sell such loans to the government-sponsored enterprise of Fannie Mae and to other investment portfolios.

Either way, the possibility of paperwork getting lost is a very real problem.

During the escrow period you go through when buying a home, you are given a preliminary title report. This report will disclose what liens, if any, are on the property and other recorded documents.

The report also will tell you what the title policy will cover and what is exempt from coverage.

Every homebuyer should read this report and ask questions on anything that is not clear to them. Their Realtor or the title and escrow officer should be able to answer such questions.

Thanks again for your question. For more information about buying or selling homes and related issues, visit lasvegasrealtor.com.

Kolleen Kelley is the 2012 president of the Greater Las Vegas Association of Realtors, and has worked in the real estate industry for more than 30 years. GLVAR has nearly 11,500 members. To ask her a question, email her at ask@glvar.org.