Lawyers say public has misconstrued mortgage default ads
Their television commercials about mortgage defaults ignited a debate about ethics and financial responsibility. Now, the two Las Vegas lawyers behind the ad campaign say people are misunderstanding their message.
The Haines & Krieger TV spots advise homeowners that their friends and family are staying in their homes without paying on their mortgages, and offer to show clients how to do the same.
But George Haines and David Krieger, the lawyers who appear in those ads, say the message is not that those homeowners with the means to pay should skip out on their mortgages. Rather, the commercials are offering a lifeline to people who might otherwise lose their homes through foreclosure.
"The ad campaign is geared toward empowering consumers with information they did not have," Krieger said.
The commercials have brought business to Haines & Krieger, a law firm offering mortgage modifications, bankruptcies and short sales. But that increased business is not just from those people looking to bail on their financial responsibilities, Haines said.
"These are people who are undergoing dire circumstances and need some time in their homes to get their lives together," he said.
Lenders, real estate professionals and consumer advocates have criticized the TV spots. Nasser Daneshvary, the director of the Lied Institute for Real Estate Studies at the University of Nevada, Las Vegas, worries about the devastating ripple effect of people bailing on their mortgages.
"When you dump your house, you increase the odds that your neighborhood will become blighted, or a rental community," he said. "You are in turn damaging Clark County and the greater community."
But the Haines & Krieger partners say their ads are simply letting distressed homeowners know they have options, and need not just sit and wait for eviction after receiving a foreclosure notice.
"Most of our clients really can’t afford their mortgages and need a modification," Haines said. "You have people who can’t afford their mortgages and can’t get the lenders to negotiate with them."
Krieger says many clients work out loan modifications and avoid foreclosure.
"We don’t advocate foreclosure," Krieger said. "It will ruin their credit."
Daneshvary is skeptical of the lawyers’ explanation. Viewers, he says, are smart enough to get the point of the TV spots.
"As for the ad itself, as consumers, we know what the message is, ‘Follow your neighbor by getting out of monthly payments,’ " he said.
Michele Johnson, president and CEO of Consumer Credit Counseling Service of Nevada and Utah, said she believes the Haines & Krieger spots are encouraging people to strategically default on their mortgages.
"I find it irresponsible advertising," she said. "I think it certainly attempts to legitimize defaults."
The number of people still living in their homes with delinquent mortgages is hard to calculate, Daneshvary adds. Because out-of-state investors bought multiple houses in Southern Nevada during the real estate boom, many foreclosed homes were never occupied full time.
However, Daneshvary estimates about 30 percent of Las Vegas Valley homes are now in some stage of loan delinquency.
The option of strategically defaulting on your mortgage has been gaining in popularity over the last few years.
A Nevada Association of Realtors report released in January found that 23 percent of those surveyed "walked away" as part of a strategic default.
Johnson points to the damage a mortgage default does to a person’s credit: About a 100-point drop in the credit score as a result of the first missed house payment, and another approximately 100 points off when the second mortgage payment is missed.
Nonprofit services, including Consumer Credit Counseling, will help people get loan modifications for free, she said.
In response to all the criticism, Haines notes that plenty of Southern Nevadans are already staying in their homes without making payments, regardless of Haines & Krieger’s commercials.
ForeclosureRadar.com, a Discovery Bay, Calif.-based tracker of distressed real estate, said recently the average number of days it takes to foreclose on a home in Nevada rose to 319 days, up from 239 days a year ago.
"Why are banks taking so long to foreclose? They don’t have their ducks in a row," Haines said. "It is a product of the banks."
Contact reporter Valerie Miller at vmiller@lvbusinesspress.com or 702-387-5286.