As foreclosure mediation program winds down, plans circulate to revive it

Nevada’s foreclosure mediation program, created at the height of the housing crisis to give borrowers a last chance to hold onto their homes, will accept its last enrollments at the end of this month as it nears a legislatively mandated closure.

But lawmakers who say the program still has a place in a recovering Nevada are already making plans to ramp it back up again. Republican state Sen. Becky Harris, who has worked as a mediator in the program, said she’s working on a bill for this spring’s legislative session to keep the program alive.

“There are still families that are struggling with the housing issue,” said Harris, who represents a Las Vegas-area district. “I think it’s a valuable program that has merit and for now we should continue operating.”

The foreclosure mediation program was launched in 2009 to give borrowers and lenders a chance to sit down together and determine whether a loan can be modified before the bank retakes a home. While borrowers sometimes have trouble reaching the bank on their own for help with their case, the program requires bank representatives to come to the table or they can’t proceed with a foreclosure.

In its first year of operation, when Nevada counted 79,232 initial foreclosure notices, mediators were assigned 6,164 cases and helped 1,922 homeowners reach a loan modification agreement to keep their home.

But in the fiscal year that wrapped up this June, Nevada only saw 9,453 notices of default and the program prepared fewer than 1,800 cases. Out of those, 253 homeowners reached an agreement with their lender that let them keep their home, according to Nevada’s Administrative Office of the Courts.

Seeing a fraction of the previous caseload and citing a declining return on investment, lawmakers decided in 2015 to phase out the mediation program by the end of June 2017 and free the money for use elsewhere.

“We’re not helping very many people,” Republican Assemblyman Randy Kirner said about the mediation program at the time. “There’s a general sense that while things aren’t rosy in terms of foreclosure, we’re starting to curve up. The signs are positive.”

About 14 percent of mortgaged Nevada properties are underwater, meaning their owners owe more than the property is worth. That’s the highest percentage in the nation, but down dramatically from 2010, when more than two-thirds of properties were underwater.

Lawmakers budgeted about $3.6 million for the program during the current two-year period that ends in June. It’s funded by fees that lenders pay when they file a foreclosure notice and a $200 fee borrowers pay to enroll in mediation. It also gets funding from a settlement that Nevada struck with banks after the housing crisis.

Mediators earn $400 for each mediation they conduct, regardless of how much time is involved.

“Nobody’s making a lot of money,” Harris said. “This is a program that is from the heart.”

The program stops accepting applications on Dec. 31, and all mediations must be completed by April 30, 2017. The program officially ends on June 30, 2017.