Court takes up appeals from foreclosure mediation program

CARSON CITY -- Nevada's Supreme Court has begun acting on appeals filed by residents trying to avoid home foreclosures through assistance from the state Foreclosure Mediation Program.

In opinions issued Thursday, justices reversed District Judge Donald Mosley's decision and ordered sanctions against the Bank of America for failing to bring required documents to a mediation hearing for Clark County homeowner James Watson.

In another decision, they upheld Mosley and ruled for Bank of America and its right to foreclose against another Clark County homeowner, Paul Pilger. They noted that the bank produced all documents needed at the mediation hearing to show its right to foreclose. They said that both the mediator and Mosley had concluded that the loss of a high-paying job by Pilger made a loan modifications unrealistic.

That the court would be deciding in appeals from Foreclosure Mediation Program hearings now is not surprising because it has been about 2½ years since the program was established.

With the help of the Supreme Court, legislators in 2009 approved the foreclosure mediation program as a way to help keep some residents in their homes. Supreme Court members approved rules for the program and put it under the control of their Administrative Office of the Courts.

Because of their role in the program, justices may have to decide later this year whether to step aside and let another legal body decide appeals challenging the constitutionality of the program.

Under the program, residents facing foreclosure are allowed to appear before a court-appointed and trained mediator. The lender, bank or mortgage company must attend the hearing and produce necessary documents showing their power to make loan modifications. The law requires lenders to make a "good faith" effort to keep homeowners in their homes.

The U.S. Justice Department last month praised the program and recommended other states adopt similar programs.

Between September 2009 and September 2011, 13,813 homeowners facing foreclosure requested mediation. About 3,900 people obtained loan modifications and remain in their homes, while 2,000 others agreed to alternatives such as short sales. But in the other 8,000 cases, the bank or lender could not produce the necessary documents, and mediators ruled they did not have the authority to foreclose. The residents remain in their homes.

The move to create the program was launched by then-Assembly Speaker Barbara Buckley, D-Las Vegas, the executive director of the Clark County Legal Aid Society. During that session, Buckley estimated the program would keep 12,970 people in their homes.

She contended that the program would benefit lenders because foreclosed homes sell at far-reduced rates, and they would receive more money if they could agree to loan modifications.

In Watson's case, the court ruled 3-0 that Bank of America did not "bring the required documents" to the mediation hearing and its failure to do so was a "sanctionable offense." They ordered the District Court to determine appropriate sanctions. But in Pilger's case, justices ruled unanimously that Bank of America acted in "good faith." Because of Pilger's job loss and the amount of his indebtedness, a loan modification could not be created, they decided.

In both cases, the mediation officer's decision was appealed to District Court and then to the Supreme Court.