Mediation plan blamed for delays

Nevada’s mortgage foreclosure mediation program and similar programs in other states are delaying efforts to resolve problem loans, the top official at the Mortgage Bankers Association said Tuesday.

“We find it’s just slowing the process down,” said John Courson, chief executive officer of the Mortgage Bankers Association.

Courson spoke during a conference call from the association’s annual convention in San Diego.

Courson said programs like Nevada’s Foreclosure Mediation Program, which allows homeowners facing foreclosure to demand mediation, often result in the homeowner having to wait until after mediation to complete forms needed for the lender to approve a mortgage loan modification.

Tisha Black-Chernine, a real estate attorney, however, said mediation doesn’t slow the process unless the lender is found to be mediating in bad faith.

“I think (mediation) is doing what it was set up to do,” Black-Chernine said.

She said lenders are agreeing to reduce mortgage interest rates, although they are offering few principal reductions.

For instance, she said, one of her clients, had two mortgage loans, one for 10 percent and one for 12 percent. He was able to refinance the two loans into one, a 3.5 percent, 30-year fixed-rate mortgage that cut his payments from $2,500 to $1,118.

Assembly Speaker Barbara Buckley, D-Las Vegas, also disagreed with Courson’s statements. She noted that one of the state’s first mediation sessions was avoided after the lender negotiated with the homeowner.

“In Nevada, we’re ground zero for foreclosure in the nation,” she said. “To me, foreclosure mediation is an opportunity for these Nevadans who have not been able to reach their lenders to sit across the table from them. Legislators wouldn’t be initiating this law if the lenders were working with homeowners.”

The association, however, said that 75 percent of homeowners who seek mortgage modifications end up not returning the completed application forms.

The group reported that the industry has provided more 5.2 million workout plans since July 2007 to help delinquent borrowers avoid foreclosure. In more than 2 million of those, lenders have reduced the borrowers’ interest rates, lengthened their loan terms, added the delinquent amount to the mortgage balances, reduced the loan principal or some combination of those approaches.

Yet, Buckley said one Nevada mediator told her he has been stymied in scheduling mediation sessions when lenders keep referring him from one person to another. That makes her wonder how lenders were treating homeowners before the Nevada Supreme Court began appointing mediators.

Since July 1 when the program took effect, 2,664 homeowners have requested mediation sessions, according to the Nevada Supreme Court, which administers the program. Of those, 1,049 have filed documents and paid fees of $200 for the borrower and $200 for the lender to try to mediate new mortgage terms.

More than 70 mediation sessions have been held so far, the state’s high court said.

Association chief economist Jay Brinkmann said the industry has processed most of the delinquent subprime mortgage loans and now is working with people who had strong credit and have lost their jobs. These people defaulted on prime mortgages.

It’s difficult to modify mortgages to accommodate an unemployed worker with no income, Brinkmann said. However, he said government-sponsored mortgage lenders are granting forbearance, a temporary postponement of loan payments, for 12 months in some cases.

The economist said jobless rates and mortgage delinquency rates are tracking each other. Brinkmann expects national unemployment rates to increase to 10.2 percent by mid 2010. The federal government pegged national unemployment at 9.8 percent last month.

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