You know, business is a lot like golf: every shot makes somebody happy and somebody sad. In the Nevada foreclosure game, Nevada policy has banks searching for a Mulligan.
Consider these recent shots banks have taken in the news:
* Bank of America's market value has plummeted from $179 billion to $71 billion in the past 18 months.
* On Sept. 9 BofA was sued by the Nevada attorney general for a second time for lying to homeowners about foreclosures for among other things; falsifying foreclosure documents, misrepresenting its authority to foreclose on homes; and reprimanding its own employees for spending too much time on the phone with distressed home borrowers.
* Wells Fargo was sanctioned $30,000 this summer by a Reno judge for bad behavior in foreclosure mediation.
The repeated bad behavior on bank home foreclosures even roused the Nevada Legislature. Documentation has been so suspect that a new law effective Oct. 1 mandates they record a sworn Power of Sale Affidavit before a Notice of Foreclosure and Election to Sell can even be recorded or commenced (Assembly Bill 284).
This seemingly minor detail has changed the landscape within the nation's foreclosure capital and could be a tipping point in the current real estate business-scape thanks to the emergence of a new cottage industry mediation lawyers and legal services.
Most cynics would snarl and say: "Ah those lawyers in the 'misery market' benefit from the banks bad news." And they would be right! But Realtors and homeowners benefit big time too.
Private lawyer fees for mediation are about as much as one or two house payments which the homeowner has because they've stopped making mortgage payments. Bank lawyers are happily paid well by the hour. With the thousands of mediations taking place each year in Nevada, lawyers doing two a day do very well.
Bank lawyers and representatives who mediate must have authority to make a deal or mediation is over and the bank has to start over again. Mediation is a great alternative to foreclosure.
You may ask: "How can foreclosure mediation benefit homeowners and Realtors?" Here's how:
Happy homeowner keeps house payments.
Homeowners must be in default to mediate. They must live in the home and cannot be in bankruptcy though bankruptcy is an option considered by mediation lawyers.
The banks cannot sell the home, file suit or do anything until mediation is completely finished and this takes months or years in some cases. Banks not receiving mortgage payments are not happy campers. They have incentive to make a deal in mediation. The more leverage homeowners have, the more incentive banks have to settle through mediation.
During mediation, no house payments are made for months on end. Mortgage money stays in a homeowner's pocket and goes into Reno's local economy. Meanwhile, homeowners stay in their home and live free of mortgage payments.
Think of it as a sort of "homeowner bailout" equity.
Smart Realtors get better short sale business.
A huge problem for realtors doing short sales has been bank approval delays that kill the short sale. I recently had a client who had received four short sale offers in the past four years. None were approved by the banks, except the fourth offer. With passage of Nevada Senate Bill 414, after June 2011 banks have just 90 days to accept or reject proposed short sales. This will help a little.
An even bigger problem for short sale proposals has been lack of "leverage" over the banks. Mediation changes that. In mediation, banks do not receive homeowner payments for months or years. Banks can't sell the house or take it away. Big factors.
A homeowner has 30 days after receiving a notice of default and election to sell to decide (elect) to mediate a new program in Nevada since 2009 intended as an alternative to foreclosure. The homeowner pays $200 to mediate. It is the cheapest and fastest way there is to sit a bank down at the table and in good faith make a deal that avoids foreclosure. Most mediations take about two hours and cannot exceed four hours.
Twenty-three other states now have mediation programs similar to Nevada's program.
So "shots" making banks unhappy ironically make lawyers, homeowners and Realtors happy. Foreclosure golf is a great game. Fore!
Greg Jensen is an attorney with Jensen Law Group, Ltd. in Reno. Contact him through www.JensenLawGroup-Reno.com or at 686-2411.
