Hardesty touts plan for mandatory mediation

Hardesty told the Assembly Ways and Means Committee that he expects mediation hearings will begin in August and that as many as 3,000 Nevadans a month will seek mandatory mediation to work out loan modifications that allow them to remain in their homes.

He spoke on Assembly Bill 149, the proposal by Assembly Speaker Barbara Buckley, D-Las Vegas, to require lenders to meet with buyers in danger of losing their homes to foreclosure to see whether they can agree on acceptable new loan arrangements. Similar laws are in place in 12 states.

Buckley estimated the bill would keep 17,000 buyers in their homes.

She emphasized that the bill isn’t going to help people who don’t have any money to pay for mortgages but will benefit those who can pay if their existing mortgages are modified.

Lenders would not be required to agree to loan modifications, but Buckley and others believe they will because home values have dropped and foreclosed home sell for less than the mortgage value.

Foreclosure proceedings were filed on more than 41,000 homes in Nevada between January and March, she said.

Last year 77,000 buyers in Nevada lost their homes to foreclosure.

Because of the glut of foreclosures, the typical Nevada home sells for $221,000, down 21 percent from a year ago, she said.

During Monday’s hearing, Las Vegas collection agent Michael Randolph criticized the bill, contending it “helps those who don’t live up to their word.”

“What this bill is saying to Nevadans, if you don’t pay on your mortgage, you will be rewarded with another mortgage,” he said.

But Buckley said the bill would require accountability by buyers. She said some lenders negotiated “exotic mortgages” that buyers cannot pay, but they can pay more traditional mortgages. Unless help can be found for these types of people, then she predicted chaos would continue in the Nevada housing market.

Lobbyists for banking organizations back the bill.

Under the bill, the Nevada Supreme Court would set up rules for mediation between home buyers and lenders. A person from a lending company with the ability to renegotiate the loan would be required to show up at the hearing.

If the lending company does not show up, then the case would be assigned to a district judge who would determine whether the lender acted in “bad faith” and could work out loan modifications. Buyers who do not show up would lose their homes to foreclosures.

Hardesty said buyers would have to pay a $50 filing fee to request a mandatory mediation hearing. He expects training programs for mediators will be conducted in June and July.

The cost of the mediation would be limited to $340, with the lenders and buyers sharing in the costs.

“If the borrower cannot pay $170, then they probably aren’t going to get a loan modification,” said Hardesty, contending the mediation charges are not too expensive.

Some of the mediations will last much longer, but the payments will be limited to $340, he added.

Under current law, default notices are filed on homes where the buyers have not paid their mortgage for 90 days. Then buyers receive foreclosure notices.

Hardesty said all 22 senior judges have expressed a willingness to serve as mediators or handle district court cases where lenders do not show up to mediation hearings.

With their assistance, he expects the program will not become a burden to the court system.

But Hardesty warned that the Legislature must replace $300,000 that he removed from the court’s budget as a cost-saving plan sought by Gov. Jim Gibbons.

He said without the funds, the senior judge program will end on July 1.

Senior judges are former judges named by the Supreme Court to continue to work on selected cases.

These judges will be needed especially in mid-September when Hardesty expects the court will begin to hear cases about lenders who did not show up to mediation hearings.

Hardesty also asked the committee to approve Assembly Bill 64, which would add 10 new district judges starting in January 2011. Nine would be based in Clark County.

The chief justice said the judges are needed in part because 446 medical malpractice lawsuits already have been filed over the hepatitis C outbreak in Las Vegas last year.

To help pay for their costs he proposed increasing court filing fees in Assembly Bill 65.

From the fee increases, he predicted $7.4 million would be raised annually in Clark County.

Art Ritchie, the chief judge in Clark County, said the number of cases in the county increased by 31 percent in March compared with a year earlier because of the medical malpractice lawsuits.

“When times are tough, folks turn to the court system,” Ritchie said.

Even with the fee increases, Hardesty said, the cost of filing a class-action lawsuit affecting 6,000 people would only increase to $250, compared with the current $151.

No action was taken on any bill during Monday’s hearing.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.