Official says lenders may renege on promises

Some banks and other lenders will agree to modify home loans during mediation but then renege on the agreements, said a legislative leader who sponsored a bill on foreclosure mediation.

Assembly Speaker Barbara Buckley. D-Las Vegas, made the comment late Tuesday during a hearing before the Nevada Supreme Court in Las Vegas.

The Supreme Court is considering revisions to the state's foreclosure modification program rules.

Cameron Asgarion, a staff worker with Rep. Dina Titus, D-Nev., agreed that some lenders aren't standing behind their commitments to modify loan terms.

"Many consumers sign a modification agreement only to never hear from a lender again," he said.

Other times, lenders agree to a modification only to return later with revised modification terms.

The new law, which took effect last year, requires home mortgage lenders to participate in mediation hearings if requested by the homeowner. The program gives struggling borrowers an opportunity to ask the lender to reduce the principal amount owed, lower the interest rate or lower monthly payments so the borrower can avoid foreclosure.

Meeting participants told the court that attorneys representing lenders at the hearings often lack authority or information about the home mortgages. Instead, mediators said participants frequently gather around the attorney while he speaks on a cell phone to a banker in another state who ultimately says little but "yes" or "no" after keying numbers into a computer.

"These people typically do not have authority to negotiate," mediator and lawyer Bob Apple said. "They do the number crunching by phone."

Buckley and high court justices also expressed concern that some mediators were permitting lenders to show up for mediation sessions without the necessary documentation, including new appraisals.

"The statute requires that the documents be brought (to mediation meetings)," she said. "If you don't follow the rules, then, guess what, they are not going to be followed."

Mediators can refuse to certify a mediation if they determine that the lender didn't participate in good faith.

Apple acknowledged that he initially didn't require lenders to bring all of the required documents as long as they were trying to negotiate. The mediator said he now demands that lenders bring required information and documents.

However, lender attorney Michael Brooks said some homeowners fail to provide requested documents.

Michael Joe, a lawyer at the center, suggested that consumers need help preparing to represent themselves in mediation.

Legal Aid Center of Southern Nevada conducts free seminars on foreclosure mediation in cooperation with the William Boyd School of Law at the University of Nevada, Las Vegas.

But Joe criticized loan modification services for taking advantage of homeowners in foreclosure.

"I don't say (home-loan modification consultants) are all bad, but a lot of them are," he said. "Homeowners are desperate and scared. They don't know who to turn to."

Ian Hirsch, president of Fortress Credit Services, a licensed loan modification consultancy, objected to a provision that might prohibit him from representing homeowners at mediation sessions although he often spends more than a year helping homeowners negotiate modifications.

"For us this is one step in a journey that sometimes takes over one year," Hirsch said.

Fortress Credit charges 1 percent of the loan amount but nothing additional to participate in mediation, he said.

Christy Sinsara, president of Consumer Advocacy Group, said her organization charges $250 to attend mediation sessions. She also questioned the rule that could ban mortgage modification consultants from participating in mediation meetings, saying they were better equipped than many lawyers.

"It's a numbers game," she said.

Contact reporter John G. Edwards at
jedwards@reviewjournal.com or 702-383-0420.