Nevadans miss chance to avoid foreclosures

Jeanne Bullock parted with her grand piano. Now, she might lose her home.

The longtime local musician, who said she performed at Siegfried & Roy's New Year's Eve parties and once accompanied Kenny G at the Hard Rock Hotel, was forced to ship her beloved piano to a music store in Maryland owned by her brother. Like others facing foreclosure, she is short on cash.

"I got a gig for Valentine's Day, but that is not going to save me," Bullock said. "I perform about once a week these days. I used to play six nights a week. If I could get back to playing more, that would save me."

After failing to meet the terms of a temporary loan modification to her mortgage, Bullock found a foreclosure notice on the door of the home where she lives with her longtime boyfriend. He has been out of work for weeks.

"My bank said they would work with me on some options. Instead, I found this on my door," Bullock said earlier this month, foreclosure notice in hand. "I don't know what to do."

That same day, she joined about 20 others at risk of foreclosure. They attended a one-night class to prepare them to participate in the state's 2-year-old Foreclosure Mediation Program, going toe-to-toe with their bank to negotiate an alternative to losing their homes.

After finishing the class, Bullock decided to seek mediation; the bank's representatives then sent her paperwork so confusing she asked Legal Aid of Southern Nevada to help her understand it. Legal Aid workers said one of those documents wouldn't be acceptable on an application for mediation; she had to get a recorded copy from the Clark County recorder.

"They send you papers but don't even tell you those papers aren't good enough," Bullock said. "They act like you're somehow just supposed to know it."

With help from Legal Aid she has completed the application and is awaiting a response.

Bullock is among thousands of Nevada homeowners who have exercised their legal right to, at least, request a mediation to negotiate an alternative to foreclosure, such as a loan modification or a short sale, depending on each homeowner's income, the amount on the loan, additional debts and other circumstances. By the end of December 2010, which marked the program's 15th month, 13,710 homeowners had entered the program.

While some familiar with the it say it's not working well for homeowners, most insist mediation is crucial. It assures homeowners a last-ditch effort to save their homes, or to simply buy them time while they look for work or await some sort of government assistance or favorable revisions to fast-changing federal and state foreclosure laws.

Program administrators and advocates insist homeowners should apply for the state-supervised mediation. They said it may be the only opportunity homeowners are given to actually talk to their lender in hopes of saving their home. Banks, who otherwise may never speak with a homeowner, are compelled by state law to mediate in good faith. If they don't, the state can revoke the foreclosure and force the lender to start over again.

However, attorneys for homeowners and banks -- on opposing sides -- say the state program is unfair to the side they represent. Homeowners' attorneys said homeowners are unjustly facing foreclosure as a result. Bankers, on the other hand, said unnecessary bureaucratic delays are preventing lenders from taking control of foreclosed homes as quickly as they would like.

By law, mediations are secretive even though foreclosure filings are public records. Homeowners, banks, their consultants and even the state-appointed mediator are prohibited from recording the negotiation, said Michael Sommermeyer, spokesman for the Foreclosure Mediation Program. Homeowners and lenders are permitted to take notes during the mediation. Mediators can make notes only to help them prepare the formal statement on the outcome of the mediation, he said.

"We want the statement to reflect the mediation," Sommermeyer said. "They can keep track of what happened, but the statement is the record of what happened."

Given the confidentiality, coupled with the fact that program administrators have yet to compile detailed data, little is known about the success rate of the closed-door mediations.

Nevada's program is far ahead of those in other states, some of which haven't approved legislation to establish a program, and it was applauded by Vice President Joe Biden late last year, said Barbara Buckley, the former Assembly speaker who authored the 2009 law that led to the mediation program.

She expects problems will be addressed this year by the state Supreme Court or by lawmakers during the legislative session that starts next month.

"The program office is trying hard. They are being flooded with requests for foreclosures, and they are being flooded with requests for mediation, and an occasional mistake can occur," Buckley said. "Overall, the program has helped four in six Nevada homeowners stay in their home. ... When we consider various revisions, the program will be even better."

The Foreclosure Mediation Program is fielding more requests than a year ago, in part because a larger percentage of homes foreclosed last year were owner-occupied, Sommermeyer said. Earlier in the real estate crash, from 2007 through 2009, almost two-thirds of homes foreclosed were not primary residences.

Program administrators estimate that 11 percent of Nevada homeowners foreclosed on in 2010 participated in the program, and that the percentage climbed to as high as 17 percent in October and November, Sommermeyer said.

However, he said, the estimates don't provide a good measure of how many could take advantage of the program but are failing to do so. That's because they are based on a total number of foreclosures. They include not only owner-occupied residences, which are eligible for mediation, but also ineligible properties such as investment homes, commercial property, apartment complexes, vacant land and other property types.

Although they have foreclosure data from the county recorder, program administrators can't distinguish how many of the foreclosures represent eligible property owners, Sommermeyer said.

Edward Marshall, a Las Vegas attorney who was Clark County district attorney in the early 1960s, said he is representing 25 to 30 homeowners in foreclosure cases. Only one is involved in the Foreclosure Mediation Program.

Marshall said most clients don't pursue mediation because, based on discussions with friends and neighbors as well as horrible personal experiences trying to modify their loans, they know banks are not adjusting loans and mediation is unlikely to change that behavior.

"Banks don't have a good history of making concessions. They have dealt very tightly with these people. The banks have not been very helpful, and they know it," Marshall said. "If we had honest statistics from the Foreclosure Mediation Program, we would find that the banks are not negotiating in good faith."

Cena Valladolid, chief operating officer for Consumer Credit Counseling Service in Nevada, a nonprofit agency which provides financial counseling, said clients do not pursue mediation for a variety of reasons, but that they should at least schedule a mediation while simultaneously pursuing other remedies to foreclosure.

"Mediation is not the best option. It's an option," Valladolid said. "Even though you may be working on something on the side with your lender, take advantage of mediation. It's one more recourse. ... If you can't bring your servicer to the table, and it has been 90 days, the mediation is going to bring them to the table."

Some Consumer Credit Counseling Service clients have negotiated favorable loan terms without the formal mediation process, and those don't qualify for further reductions through mediation, Valladolid said.

A loan modification typically might involve changing a variable interest rate to a fixed rate, lowering an interest rate or lowering monthly payments by extending the life of the loan. Doing so can bring a loan current, and give the homeowner a fresh start, she said.

In most cases in which a homeowner declines mediation, the home is worth far less than the loan on it, the bank has already refused to lower the terms and the homeowner knows a mediator can't compel a lender to do so, Valladolid said.

Other homeowners are under the mistaken impression they are ineligible for mediation because they agreed to a temporary loan modification, failed to live up to the more merciful terms and were accordingly foreclosed on.

Others simply don't want to face reality, she said. They presume they will get kicked out of the house sooner or later no matter what, and miss the deadline for mediation.

"Many people are too discouraged to fight to keep a home that is worth 60 percent of what is owed, and some people don't even open their mail because they don't want to face it. They don't realize that there may be something (included with the foreclosure notice) to help them, like the mediation form," Valladolid said. "Many don't know what mediation is or that it is available. And others talk to their neighbors and to their family members about mediation, and sometimes there is a message that there is no use in going to mediation."

However, Valladolid said mediation is saving homes, especially for clients who never were lucky enough to get a phone call through to somebody at their bank authorized to help them.

"We have seen where mediation has been a great tool," Valladolid said. "Nobody who wants to keep their home from going into foreclosure should dismiss mediation as an option."

Longtime Las Vegas attorney Dave Crosby, who said he has counseled clients at four to five mediations a week for much of the past year, said many homeowners don't believe mediation will save their home because they are so upside down on their loan.

"There are people who are out of work and whose spouses are out of work," Crosby said. "There are more issues at work than what happens with their foreclosure. They have no money."

However, he said, mediation has worked for many clients. In fact, he said, lenders at three mediations last month agreed to lower the principal on clients' loans. Previously, most lenders had agreed only to lower interest rates or extend the term of a loan.

"You have to know what you are doing, or the banks will beat up on you. We stop a lot of foreclosures because the bank doesn't show up with documents, or proper authority or is found to have negotiated in bad faith," Crosby said. "Most of what the banks give you (in concessions) doesn't make sense, but it might buy you more time. ... If I can buy you time, I might be able to buy you a solution."

Contact reporter Frank Geary at fgeary@reviewjournal.com or 702-383-0277.