In response to the ongoing foreclosure crisis in this country, many states, like Nevada, have implemented mediation programs to assist borrowers in finding ways to avoid foreclosure. Read on to learn more about how Nevada’s mediation program works and how you can benefit from the process.
(To learn about other options for dealing with foreclosure, visit Nolo's Foreclosure section.)
What is Foreclosure Mediation?
Foreclosure mediation is a process that is used to help homeowners avoid foreclosure by coming up with an alternate solution that benefits both the borrowers and the lender. Mediation consists of a meeting between:
- the borrowers
- their lender, and
- an impartial third-party (the mediator).
At the meeting, the parties discuss the borrower's financial situation and try to negotiate a way for the homeowner to keep the home or give up the property without going through a foreclosure. By working together, the parties are often able to reach an agreement.
Potential outcomes of mediation include:
- loan modification
- forbearance agreement
- short sale, or
- deed in lieu of foreclosure.
(To get information about each of these options, see our Alternatives to Foreclosure area.)
Nevada law requires that borrowers who are in foreclosure be given the option to participate in mediation, so long as the property is owner-occupied. (Nev. Rev. Stat. § 107.086)
In Nevada, most foreclosures are nonjudicial, which means the lender does not have to go through state court to get one. Instead, the lender initiates the foreclosure by recording a notice of default and election to sell in the county land records. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
To learn about the specific foreclosure laws in Nevada, see Summary of Nevada's Foreclosure Laws.
Notice of the Availability of Mediation
After the lender records the notice of default, it must send the borrower a copy of the notice along with:
- an election/waiver mediation form
- a financial statement, and
- a housing affordability worksheet.
Starting the Mediation Process
To participate in mediation, the borrower must complete and return the forms to the mediation administrator, together with $200, within 30 days after receiving them. If the borrower waives his/her right to mediation or does not return the applicable forms, then mediation is not required and the lender is allowed to proceed with its foreclosure.
The trustee, who conducts the foreclosure process, must also pay $200. The mediation takes place within 135 days of the homeowner’s request for mediation, the submission of fees by both parties, and the production of required documents by the lender and homeowner.
Nevada’s mediation program requires that borrowers and the lender provide the mediator (and each other) with certain documents prior to the mediation.
The borrowers must provide current financial information and a proposal to avoid foreclosure.
The lender must provide:
- a recent appraisal of the property
- a net present value figure
- an estimated short sale value of the property, and
- a confidential, non-binding proposal for resolving the foreclosure.
Who Must Attend the Mediation
The borrower and a lender's representative attend the hearing. The lender's representative must have the authority to modify the underlying loan. This ensures that the lender’s representative can evaluate the borrowers’ situation, determine if there is a loss mitigation option available, and approve it on the spot. As a result, borrowers can walk away from the mediation with a loan modification or another loss mitigation option.
Because the lender is required to show up to the mediation prepared to make a deal, Nevada foreclosure mediations often succeed in helping borrowers. According to the Nevada judiciary’s foreclosure mediation program fact sheet, 46% of mediation agreements in the first year of the program resulted in homeowners keeping their homes.
This is in contrast to other state mediation foreclosure programs, which are often not as successful -- probably because they don't require the same level of preparedness as the Nevada program.
After the Mediation
Upon completion of the mediation, the administrator will issue a certificate of completion. If the mediation was successful and the parties have agreed on a loss mitigation option, like a loan modification, then the foreclosure is stopped. However, if the parties could not reach an agreement, the foreclosure will continue.
Should You Participate in the Foreclosure Mediation Program?
Even though participating in a Nevada’s foreclosure mediation program does not guarantee that a foreclosure will be avoided, it doesn't hurt to attend the meeting. The lender may be more likely to agree to a nonforeclosure solution at a mediation than if you approach it outside of the program. Or you might qualify for a loss mitigation option that you hadn’t previously considered. For more information on Nevada’s foreclosure mediation program, go to http://foreclosure.nevadajudiciary.us/index.php/about-program.