Foreclosure mediation kept many in homes

LAS VEGAS - Nevada's foreclosure mediation program largely worked in its first full year, keeping nearly half its participants in their home and avoiding foreclosure in nearly nine in 10 cases, a former state lawmaker said Tuesday.

Former Nevada Assembly Speaker Barbara Buckley said at a University of Nevada, Las Vegas panel that just 13.2 percent of 6,021 mediations from mid-September 2009 through September 2010 resulted in foreclosures.

Buckley's comments came as panelists, including a UNLV professor, recommended steps they said would help slow foreclosures in the Silver State. According to RealtyTrac, 6.6 percent of all homes in Nevada received at least one foreclosure filing in November, a rate higher than any other state in the nation.

In the county that includes Las Vegas, nearly 7.7 percent of homes received a foreclosure filing in November.

Sin City led Nevada through quick growth during the first half of the last decade, but the state has spectacularly crashed the past three years as its gambling and construction industries faltered. In addition to foreclosure rates, Nevada leads the country in unemployment and bankruptcy rates.

Buckley pushed legislation that created the state program during the 2009 legislative session before she was termed out last year. Since then, she said nearly 66 percent of mediations resulted in agreements, with 47 percent of participants remaining in their home.

She said the law has worked because it requires lenders to meet in good faith with authority to make decisions, to prevent institutions and borrowers from having a nice meeting with no results.

"I call it mediation with a kick," Buckley said.

Program data showed 36.8 percent of mediated cases resulted in no foreclosure because lenders didn't appear, had no authority or didn't bring the necessary documentation to show they owned the loan.

UNLV economics professor Nasser Daneshvary said the average home in Las Vegas - once priced at $292,000 but now with an average of 19 foreclosed neighbors - is now worth $78,000 less in today's

market.

"They cause neighborhood blight," he said.

Buckley said she's working with current lawmakers to propose improvements to Nevada's program for the 2011 session, including removing incentives for lenders to choose one loan solution over another, and possible sanctions against companies that refuse to meet in good faith with lenders.

Joel Sarmiento, a senior vice president for Wells Fargo Home Mortgage, said 13 percent - 10,310 - of the home loans it is servicing in Nevada are not being paid on time. He said 37 percent of those homeowners are actively engaged in finding an option to work things out, while 11 percent didn't provide financials and 33 percent tried to work something out but didn't follow through.

Daneshvary recommended that banks consider short-selling homes to current homeowners, and create modifications that include reductions in principal.

During the third quarter of 2010, only 87 of 4,690 loans modified in Nevada - 1.8 percent - included reductions in principal, he said.