State lawmakers passed a plan they think will reduce foreclosures and keep more people in their homes. Under the program, a homeowner who gets a foreclosure notice July 1st 2009 or after can request a meeting with lenders and a mediator.
Homeowners who qualify must request the mediation through the Nevada Supreme Court within 30 days of the default notice being filed. At that point, the foreclosure is temporarily stopped and the lender cannot proceed to sell the home until the mediation is finished. The law makes it mandatory to participate in the mediation if the homeowner requests it.
The mediation cost $200 for the lender and $200 for the homeowner.
Ok, so will this new law work? In theory, this law sounds good. I believe for a very small number or people that actually want to save their homes this may help.
The problem is the vast majority of people that are facing foreclosure are upside down. In many cases people owe 30k, 40k, 100k, or more on their loan than the house is worth. Why would any logical person fight to save a house that is so far upside down? I know we can get into morals and right and wrong, but that is for a different discussion. The cold hard fact is most people don’t want to fight for a lost cause. Not to mention the fact that in many cases paying rent would be far less than a mortgage payment would be.
We already have a bunch of
different programs in place to help homeowners, and none of them are making a
significant impact on the foreclosure rate. Fannie and Freddie put moratoriums
on foreclosures during the holidays to give everyone time to figure out resolutions.
I fear this program we will do nothing
but delay the inevitable. The longer we delay the longer it is going to take to
recover. Instead of dealing with the problem and putting it behind us, we are
going to be stretching this out over the next 1-2-3 years or more.
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