Mediation law may have slowed default notices

By Brian Wargo (contact), In Business reporter

Fri, Aug 21, 2009 (3 a.m.)

Nevada set a record in July for foreclosures, but the number in the pipeline is slowing because of a new state law.

California-based RealtyTrac reported the 4,563 home repossessions in Nevada in July were the most in the state’s history and pushed overall filings up 4 percent compared with June.

The number of foreclosures had been held down for several months because of a moratorium on repossessing homes that ran through early March.

Once the moratorium ended, foreclosures started to increase and in July were about 800 more or 21 percent higher than June, RealtyTrac reported. That was in contrast to notices of default filed by lenders that fell 18 percent, said Rick Sharga, the firm’s senior vice president.

Sharga said the jump in repossessions in July may be a delayed effect of a slowdown in processing cases during the moratorium.

Nevada’s decline in default notices, however, may be because of a state law that took effect July 1 giving homeowners the right to seek mediation if their lender finds them in default, Sharga said.

Some lenders may have wanted to learn more about mediation program before filing the notices, Sharga said.

“That is pretty much what we have seen in other states when programs have been put in place,” Sharga said. “They sort of delay the proceedings with the hope that lenders and borrowers will find a better alternative.”

In other states, Sharga said it’s not uncommon to see a temporary drop in default notices before they spike to previous levels.

The spike in home repossessions in July will add to the inventory of foreclosed homes on the market that has fueled a buying frenzy by investors and first-time homebuyers looking for bargains.

Many real estate agents have pointed out that quality homes on the market have thinned and the new foreclosed homes will be in demand. Foreclosures have dominated the Las Vegas housing market, setting records in June and July.

Sharga said there’s no indication that foreclosure filings will slow soon and he expects them to remain elevated into 2010 because of the economy, more adjustable rate mortgages resetting and homeowners unwilling to stay in their homes because of plummeting values.

Nevada, which has led the nation in foreclosure filings since January 2007, had one filing for every 56 housing units. The filings were 94 percent higher than July 2008. California ranked second and Arizona third.

In Las Vegas, 16,798 foreclosures were filed in July or one in 47 households. That’s 7.5 times the national average and highest rate of any metropolitan area with a population of 200,000 or more. The city’s foreclosure filings were up 6 percent over June and 89 percent higher than July 2008.