NRS 645F.400 – Nevada “Foreclosure Fraud” Laws

In this article, our Las Vegas criminal defense attorneys describe the Nevada crime of foreclosure fraud under NRS 645F.400. Continue reading to learn about what constitutes foreclosure fraud, how courts penalize it, and ways these charges may be defended against and defeated.

What is foreclosure fraud?

When homeowners face foreclosure, they may consider hiring a “foreclosure consultant.” Foreclosure consultants are people who try to stop or delay a foreclosure sale, and the homeowner pays them a fee in return for their services.

As with any profession, there are many laws governing the practice of foreclosure consulting. And sometimes a well-meaning foreclosure consultant violates the rules without realizing it. In Nevada, it is considered fraud for foreclosure consultants to do any of the following:

• to receive compensation or fees, or merely to charge compensation or fees, outside the terms of their contracts with a homeowner
• to take as compensation the homeowner’s wage assignment, a lien, an assignment of the homeowner’s equity, or any other interest in a residence or other security
• to receive money or property from any third party for services to a homeowner unless this transaction is first fully disclosed to the homeowner
• to take a homeowner’s “power of attorney” for any reason other than to inspect documents as provided by law
• to misrepresent any aspect of any covered service provided by the foreclosure consultant(s)
• to make any claim about the benefits or performance of any the foreclosure consultants’ services unless the consultants have “competent and reliable evidence” which backs up their claims¹

In short, a foreclosure consultant may be prosecuted for fraud if he/she acts dishonestly in any way with the homeowner with regard to his/her services, payment, and chances of success. Criminal defense attorney Michael Becker illustrates a classic foreclosure fraud scenario in Nevada:

Example: Jim, a foreclosure consultant, solicits Bob, a struggling homeowner in Henderson who does not have enough money to pay for Jim’s services. As compensation for trying to delay a foreclosure, Jim takes a lien on Bob’s home. If caught, Jim can be booked at the Henderson Detention Center for foreclosure fraud.

Note that it does not matter if Jim’s successful in delaying the foreclosure. Also note that it does not matter if Bob eventually pays Jim enough money to release the lien. Merely the act of taking a lien as compensation for foreclosure consulting services is a crime in Nevada.

Another common foreclosure fraud case in Nevada occurs when the consultants allegedly do not do any work. Criminal defense attorney Neil Shouse explains how this scam operates:

Example: John searches public records in Carson City to find out which houses have pending foreclosures. John then contacts the homeowners, claims he is a foreclosure consultant, and promises to stop the foreclosure in return for an upfront payment. John collects the payments without ever doing any work to prevent the foreclosure. If caught, he could be booked at the Washoe County Detention Center for foreclosure fraud.

Foreclosure consultants are vulnerable to criminal prosecution in Nevada whenever they do not perform all the services that they promised the homeowners. That does not mean that the consultants have to be successful in preventing foreclosure . . . they just have to have to try and to carry out the terms of the contract.

How do I fight the charges?

Nevada’s current foreclosure fraud laws were implemented only in late 2011. Therefore, there is little precedence for how prosecutors handle these cases. But this actually works to a defendant’s advantage because it allows defense lawyers to be creative when crafting a defense. The following are just three common ways to fight Nevada allegations of foreclosure fraud:

• Lack of evidence. The prosecution has the burden to prove that a defendant is guilty beyond a reasonable doubt before the court can convict him/her. So if the defense attorney can demonstrate that the state’s evidence is not sufficient, consistent and reliable enough to sustain a guilty verdict for foreclosure fraud, then the case should be dismissed.
• No fraud. When a foreclosure consultant fails to delay or stop a foreclosure, that does not necessarily mean he/she committed fraud. If a defense attorney can show that the consultant always abided by the law and was honest with the homeowner, he/she should not be held criminally liable.
• Illegal police search. Police may conduct searches and seizures of evidence as long as they do not overstep Constitutional bounds. If the police may have performed an illegal search in a foreclosure fraud case, the defense attorney would file with the court a motion to suppress evidence. If the judge then grants the motion and disregards all the evidence obtained from a faulty search, the prosecution may be left with insufficient proof and may drop the whole case.

What are the penalties in Nevada?

The punishment for foreclosure fraud is the same as for mortgage fraud. it is prosecuted as a category C felony carrying a sentence of:

• 1 to 10 years in Nevada State Prison, and/or
• up to $10,000 in fines

But if the prosecutor believes the defendant has committed “a pattern” of foreclosure fraud, it is punished more harshly as a category B felony carrying a sentence of:

• 3 to 20 years in prison and/or
• up to $50,000 in fines

Note that in addition to criminal penalties, defendants convicted of foreclosure fraud face other penalties as well from the state, the alleged victims, and professional associations:

• Nevada’s Commissioner of Mortgage Lending may levy a fine of up to $25,000. (The defendant is entitled to an administrative hearing first to protest the fine.)
• The homeowners in a foreclosure fraud case may bring a civil action against the foreclosure consultant in order to recover damages. The court may also award punitive damages and reasonable attorney’s fees and costs.
• Foreclosure consultants may also lose their real estate and mortgage broker licenses.

Therefore, defendants who are accused of foreclosure fraud are encouraged to seek legal counsel as soon as possible. They may be able to resolve the case before the matter snowballs and to save the defendant’s professional standing in the community.

For additional help…

If you are being charged with “foreclosure fraud” in Nevada, phone our Las Vegas criminal defense attorneys for a consultation to discuss your options. We may be able to get the charges lessened or thrown out altogether. And we are also ready to take your matter to trial in pursuit of a “not guilty” verdict to keep your record clean.

In California? Read about California foreclosure fraud laws.

Legal References:

1. NRS 645F.400. The statute reads that:

    1. A person who performs any covered service shall not:

      (a) Claim, demand, charge, collect or receive any compensation except in accordance with the terms of a contract for covered services.

      (b) Claim, demand, charge, collect or receive any fee, interest or other compensation for any reason which is not fully disclosed to the homeowner.

      (c) Take or acquire, directly or indirectly, any wage assignment, lien on real or personal property, assignment of a homeowner’s equity, any interest in a residence or other security for the payment of compensation. Any such assignment or security is void and unenforceable.

      (d) Receive any consideration from any third party in connection with a covered service provided to a homeowner unless the consideration is first fully disclosed to the homeowner.

      (e) Accept a power of attorney from a homeowner for any purpose, other than to inspect documents as provided by law.

      (f) Make any representation, express or implied, that a homeowner cannot or should not contact or communicate with his or her lender or servicer.

      (g) Misrepresent any aspect of any covered service.

      (h) Make any representation, express or implied, that a covered service is affiliated with, associated with or endorsed or approved by:

             (1) The Federal Government, the State of Nevada or any department, agency or political subdivision thereof;

             (2) Any governmental plan for homeowner assistance;

             (3) Any nonprofit housing counselor agency or program;

             (4) The maker, holder or servicer of a homeowner’s mortgage loan; or

             (5) Any other person, entity or program.

      (i) Make any representation, express or implied, about the benefits, performance or efficacy of any covered service unless, at the time the representation is made, the person who performs any covered service, the foreclosure consultant or the loan modification consultant possesses and relies upon competent and reliable evidence which substantiates that the representation is true. As used in this paragraph, “competent and reliable evidence” means tests, analyses, research, studies or other evidence based on the expertise of professionals in the relevant area that have been conducted and evaluated in an objective manner by persons qualified to do so using procedures generally accepted in the profession to yield accurate and reliable results.

      (j) Obtain or attempt to obtain any waiver of the provisions of NRS 645F.300 to 645F.450, inclusive, or any regulations adopted pursuant thereto. Any such waiver is void and unenforceable.

      2. In addition to any other penalty, a violation of any provision of this section shall be deemed to constitute mortgage lending fraud for the purposes of NRS 205.372.