CARSON CITY — A conservative watchdog organization contended Monday that Assembly Speaker Barbara Buckley’s bill to reduce foreclosures will lead to lenders charging higher interest rates, pricing more people out of homes.
Geoffrey Lawrence, a policy analyst for the Nevada Policy Research Institute, said Buckley’s bill would force lenders "to take a hit" in negotiating with buyers for better deals on their mortgages. Then banks, to make up for reduced profits, would have no choice but to offer fewer loans or charge others more to secure their loans.
"In order for a mortgage company to remain profitable under such an incentive structure, the company would need to receive a return on investment that is large enough to compensate the company for the additional risk Buckley would force it to assume," he said. "That means that the Buckley plan would push interest rates on home loans up to unprecedented levels."
Lawrence said the Buckley bill, Assembly Bill 149, could induce existing homeowners who are not in default to stop paying so they could enter into mediation with the lender and secure a better mortgage rate.
But Buckley, D-Las Vegas, questioned his analysis on Monday.
"AB149 does not require a lender to do anything with the note," Buckley said. "But lenders are losing money on these foreclosures. If they take back a house, it won’t sell because of the glut of houses on the market."
Under her bill, those facing foreclosure could petition the Supreme Court for a mediation hearing. At that hearing, the lender or a representative must appear and decide whether to negotiate better loan terms with the buyer.
Buckley said lenders will reduce their losses by agreeing to new loan terms. She estimates that 17,000 Nevadans would keep their homes under her bill.
During a hearing, representatives from dozens of banks and lending companies endorsed the bill.
The Senate and Assembly Commerce and Labor Committee plans a new hearing at 1:30 p.m. Wednesday on other foreclosure bills, including one to reduce the blight in neighborhoods with empty houses.
"All of us are suffering because of foreclosures," Buckley said "Our houses are losing value."
Buckley said that because of dropping home values, 48 percent of Nevadans now are paying off mortgages that exceed the value of the house.
Lawrence argued that if Buckley’s proposal was so good, lenders already would have been mediating with buyers on new loan plans without any need for government interference.
"You would think banks already would have gone into mediation," he said.
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