A quarter of Nevadans in foreclosure could pay but walked away

Nearly one-fourth of Nevada homeowners in foreclosure walked away from their mortgage obligation despite having the ability to pay, the Nevada Association of Realtors reported Tuesday.

Many of the 23 percent who walked away said they were advised by trusted confidants that a so-called "strategic default" was in their best financial interest, the association's "Face of Foreclosure" report found.

The survey conducted by national research firm SGS also found that most homeowners facing foreclosure were not aware of federal and state programs designed to help them.

The Realtors' group will use the findings to help the public, the real estate industry and lawmakers struggling with the foreclosure issue that continues to plague Nevada's economy.

"It was pretty glaring to see such a high number of strategic foreclosures," said Devin Reiss, vice president of the association's legislative committee and owner of Realty 500 Reiss Corp. "I've heard of people doing it. I know people who've done it. Oftentimes, people went to foreclosure because they had something happen in their life -- the loss of a job or the death of a family member -- but to see a high number discontinue paying even though they could ... it was pretty startling to see that."

While few Nevadans in foreclosure knew about programs such as the government's Home Affordable Foreclosure Alternative, even fewer found them helpful. The report cites a "clear disconnect between what programs are being offered and what is needed and used by those facing foreclosure."

Sixty-one percent of those surveyed who had experienced or narrowly avoided foreclosure had never heard of HAFA. Only 3 percent said they used Nevada's foreclosure mediation program or were helped by it in any way.

That's another number that surprised Reiss. He questioned why the state hasn't done a better job of advertising the mediation program.

Another issue that needs to be addressed is deficiency judgments, he said. Lenders have six months to pursue the judgment in a foreclosure and six years in a short sale, or home sold for less than the principal mortgage balance.

"You can see if someone is given the option between a short sale and foreclosure, why not take the foreclosure? It shouldn't be an advantage to go the foreclosure route over a short sale," Reiss said.

Other findings highlighted in the report include:

■ Rural Lyon and Nye counties had the state's highest foreclosure rates, with one out of 49 homes in Lyon Country and one in 66 homes in Nye County receiving a foreclosure notice through October, according to RealtyTrac foreclosure listing service. Clark County was next with one in 70 homes.

■ Many Nevadans faced two or more "life-altering events" that increased their risk of default. The report found that loss of a job and unexpected medical bills were the most common "plus-one" events triggering a foreclosure.

■ Homeowners statewide were far more likely to blame banks and lenders (46 percent) and the government (20 percent) than homebuyers (13 percent) for foreclosures.

■ Short sales have proved to be a "moderately" helpful tool in avoiding foreclosure, with the report showing that 10 percent of those surveyed believed a short sale helped them.

SGS compiled its data from leading sources, held two focus groups in Las Vegas and interviewed more than 1,000 Nevadans by telephone, including 500 who had either experienced or narrowly avoided foreclosure. A full copy of the report is available online at www.nvar.org.

The research provides valuable information for Nevada, which continues to lead the nation in foreclosure rates, Nevada Association of Realtors past-president Linda Rheinberger said.

"As for solutions, there may not be a single cure-all, but this report suggests that we can do more to make distressed homeowners aware of the free and low-cost resources available to help them," she said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.