The foreclosure crisis has slowed, but many Las Vegans still face losing their homes — even as the state mulls the future of a mediation program that could help them
In 2009, when then-Assembly Speaker Barbara Buckley led the creation of Nevada’s Foreclosure Mediation Program, there was broad agreement that it was a good idea.
“Nevada was the foreclosure capital of the world,” Buckley, executive director of the Legal Aid Center of Southern Nevada, says today. “We all had so many friends and neighbors who, if they could talk to someone at their bank with a mediator, would benefit from this. Yet they couldn’t get anybody on the phone.”
Following the housing market collapse of 2007-08, in exchange for bailout funds, the federal government required banks to offer mortgage modifications, but homeowners were getting the runaround when they tried to negotiate the modifications themselves. State programs like Nevada’s tried to help solve this problem by requiring lenders to meet with homeowners in front of qualified mediators before foreclosure certificates could legally be issued. Each homeowner and his or her lender (or loan servicer) paid $200 to cover mediation expenses.
Now, with the Nevada Foreclosure Mediation Program sunsetting at the end of June, there’s some ambivalence about how well it has worked and whether it should be continued.
“It was underutilized, in my opinion,” says Becky Harris, a state senator who has championed the program and a bill that is before the Legislature to continue it, albeit with some tweaks. “I’m not sure what the factors were, but the families that I saw helped by the program were helped in profound ways. To the extent we’re stabilizing families, keeping children in their schools and preventing all the other disruptions that come with losing a home, it’s worth continuing.”
The program started with a bang, completing 4,212 mediations in its first year, which ended June 2010. Of those, 61 percent ended in an agreement — nearly half allowing the homeowner to remain in their home. Five years later, in fiscal year 2014, only 1,894 mediations were held, and 73 percent of them resulted in no agreement.
What’s happening? Consider the case of Constanza Areizaga. In 2006, she and her husband, Guillermo, had their dream home built for $805,000 in Centennial Hills. As co-owners of a successful production company, Everything Entertainment, they were able to put down $200,000 and take out a conventional mortgage. But the $4,800-per-month payments became difficult to make when the economy tanked and event business dried up.
“All of a sudden we had a home that was showing a value of $355,000 on Zillow,” Constanza Areizaga says. In 2008, she and her husband reluctantly stopped making their mortgage payments to trigger the foreclosure process so they could apply for a modification.
What happened next would be hard to believe if Areizaga didn’t have a three-foot-thick file to back it up. Over the past eight years, the couple has been through the foreclosure mediation process three times, most recently in March. Each time, a mediator determined that the lender (first, Bank of America, then Bank of Mellon) was acting in bad faith and that a certificate of foreclosure should not be issued. Yet the bank/servicer refused to modify the Areizagas’ mortgage. They’ve tried sending payments, which the bank returns, eventually initiating foreclosure proceedings anew. The couple even offered to buy their house from the bank at fair market value.
“At the meeting, they’ll tell us that they might consider a modification with a 40-year mortgage, but (that would mean) we’re going to pay more than $1 million for our home. They’re setting us up to be losers,” Constanza Areizaga says. “It’s not right.”
But the most frustrating part, she says, is the endless hours she and her husband have spent chasing down the right person to talk to, the right document to send them, the right hoops to jump through. They’ve paid thousands of dollars for attorneys, and still haven’t received a modification.
The Areizagas’ case is an example of why Buckley and Harris believe the Foreclosure Mediation Program should continue. They say that lenders who don’t act in good faith have to be held accountable — and their victims assisted — even if foreclosure rates have declined.
And even that decline is misleading to some insiders. RealtyTrac reports that Nevada currently has an average foreclosure rate of .09 percent, compared to the national average of .06 percent. So a tiny fraction of the overall housing stock is in foreclosure, and the rate of foreclosures has dropped significantly over the last year. At the same time, however, 7,799 homes are in some stage of foreclosure in Clark County, while 5,322 are for sale, according to RealtyTrac’s foreclosure inventory data.
And foreclosure alone isn’t the whole housing picture. In January, Zillow reported that despite rising home values, 17 percent of Las Vegas’ housing inventory still had negative equity — the third-highest rate among the country’s 50 largest metro areas. In February, mortgage analyst HSH put the area in its list of “10 least-recovered” in the country. In March, the Financial Times published an article titled, “Will Nevada ever recover from the housing bust?” The author looked at the state’s GDP, population debt balance, housing prices and employment rates to formulate his answer: “At this rate, probably not.”
“I think the idea that the foreclosure crisis is over is false,” says Judah Zakalik, a Peters and Associates attorney who represents homeowners in foreclosure mediation. “A lot of loan modifications that were given five or six years ago had step-ups in interest rates. … Those payments will be kicking in, too, which means we’re going to see more foreclosures.”
He and others agree that the Foreclosure Mediation Program might need its own modification, so that more people take advantage of it and more cases end in resolution. But to shutter it completely would be a mistake.
The committee on the judiciary, of which Senator Tick Segerblom is the chair, is still hammering out details of the current state bill to continue the program, but Harris expects greater judicial oversight, a higher administrative fee and a new online portal to streamline filing and tracking of paperwork.
“A judge would look at the case and help make sure things are going the way they’re supposed to,” she says. “The record of documents filed is online for everyone to see, so if something is missing or submitted late or incorrectly, the judge knows and can take care of it immediately.”
Immediate resolution is something the Areizagas would undoubtedly appreciate.
