Legal Options for Nevada Homeowners

Since October 2011 the foreclosure world in Nevada has been in upheaval, and while there are many theories as to why foreclosures stopped, why inventory dropped, and how the real estate market has changed over the past two years, what all seem to agree upon is there are tens of thousands of homeowners who are more than 90 days delinquent on their mortgage payments and at some point a foreclosure action is inevitable. Various sources have reported anywhere between 60,000 homes and 120,000 homes still in default with no pending foreclosure trustee sale on the horizon.  Ultimately these homeowners will be faced with either a judicial or non-judicial foreclosure to address the default status and likely will seek legal counsel as a result.  In the foreseeable future there are two issues every attorney should consider when meeting with a client about home loan default and possible legal options: taxes and deficiency.

Retention options:  To Keep or Not to Keep a Home?

By now everyone in Nevada is familiar with loan modifications, but there is still a gap in understanding as to how the various tiers of the Making Home Affordable (“MHA”) program works, including the most prominent Home Affordable Modification Program (“HAMP”) and the hidden variable of “who” actually owns the loan which dictates which programs a loan could be eligible. (Most servicers at present offer in internal modification that mimics one of the MHA programs if the homeowner is not eligible for HAMP) Some provisions of MHA allow for principal reduction, but it depends on who the investor is and NPV test results.  It is still rare for principal reduction to be offered, but it occurs more frequently now than it has in the past as a result of the National Mortgage Settlement. 

The servicers who agree to participate in HAMP are required to send out loss mitigation packages with HAMP request documents whenever a loan is in default, and now with the Homeowner Bill of Rights in effect in Nevada, at least 30 days prior to initiating a foreclosure, all servicers must provide homeowners with information regarding loss mitigation options regardless of whether or not the servicer participates in HAMP/MHA. See SB 321 State of Nevada 77^th Legislative Session. The real challenge will be educating homeowners to open the mail and respond to the loss mitigation packages. Homeowners receive such a litany of mail after going into default they often stop opening the mail or assume the package is yet another foreclosure scam or the 15^th copy of the same letter they opened the day before. 

HAMP will still be the primary loan modification program most homeowners are offered by a majority of the servicers over the next two years, especially when the parties end up in foreclosure mediation. (MHA programs expire December 31, 2015)  But there are very limited situations where the loan modification makes sense financially for the homeowners in both a long and short term setting.  While most HAMP modifications reduce the monthly payment for the homeowner, after the first five years, the interest rate adjusts up from the typical 2% in 1% increments per year till it caps at the market rate.  As the past four years have shown, redefault rates are in high percentages before the first interest rate adjustment even occurs, which means the loan modification is simply a band aide on a hemorrhaging problem: income is down, expenses & unemployment are up and nearly all homeowners are still underwater.  So long as the loan to value ratio is underwater, there is no escape hatch for a homeowner who experiences financial hardship to sell the property in satisfaction of the debt.  As the monthly payments begin to go up for homeowners under the terms of the modification, if they have not been able to increase their income or reduce their expenses, inevitably they will default on the HAMP modification creating a cyclical foreclosure wheel. 

As will be discussed below, if mortgage forgiveness is included in any loan modifications after December 31, 2013, there could be tax implications for homeowners who accept principal reduction if the Mortgage and Debt Relief Act (“MDRA”) is not extended.  So for many, the question isn’t simply will the bank let the homeowner keep the house, but should the homeowner keep the house & at what cost when looking at the totality of the circumstances..

A short sale is not typically a retention option, but there is a provision in the MHA-HAFA program that allows a non-profit to purchase a house via short sale, and then resell the property back to the former owner, but it does not apply to mortgage loans that are owned or guaranteed by Fannie Mae or Freddie Mac, insured or guaranteed by the Veterans Administration, insured or guaranteed by the Department of Agriculture’s Rural Housing Service or the Federal Housing Administration. See MHA Supplemental Directive 12-07.  The program is only allowed IF the loan is non-GSE, IF the non-profit is approved and IF the servicer AND the investor agrees to it.  As of the date of publication, this author has not been able to find an example of where a short sale closed under this HAFA exception, nor could a short sale approval from a major servicer be located that doesn’t require an arms-length affidavit.  Neither Freddie Mac nor Fannie Mae permit a short sale in this manner and according to their Servicing Guidelines, all short sales must be at an arms-length. There was fervor in the Nevada legislature this past year about a provision in SB 321 which would allow a homeowner to short sell without the requirement of “arms-length.”  And while the enrolled bill contains a provision that Nevada state law does not require a short sale to be at arms-length, it doesn’t change the policy of the vast majority of servicers and investors to require an arms-length transaction in order to approve a short sale with a waiver of deficiency.  Misrepresentations in the short sale request or failure to disclose the relationship between the buyer and seller could result in a homeowner being pursued for deficiency down the road.

 

Non-Retention Options:  Let it Go Now or Later?

With MDRA set to expire at the end of this year and with a strong sense the act will not be extended again, many homeowners whose foreclosure won’t be completed until 2014 or who don’t close their short sales till 2014 are going to be shocked when they receive a 1099-C for cancellation of debt and are told by their tax advisor the cancelled debt is ordinary taxable income according to the IRS.  (Since 2007, most homeowners who have walked away from their principal residence or have participated in a short sale avoided tax liability as a result of MDRA)  There may be situations where the cancelled debt will not result in tax liability despite the expiration of MDRA, such as when the debt was discharged through bankruptcy or when the homeowner was insolvent just prior to the taxable event. 

But it’s important for legal practitioners to understand a taxpayer is insolvent when their total debts exceed the total fair market value of all assets; assets include everything owned, e.g., car, house, condominium, furniture, life insurance policies, stocks, other investments, or pension and other retirement accounts.  See IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.   Insolvency does not directly translate to liquidity and state law exemptions do not factor on an insolvency worksheet.  For many union and government employed homeowners with life insurance policies and pensions, despite having measly bank accounts and exempt assets which are beyond the reach of creditors under state law, they may not be insolvent and may face tax consequences as a result of a foreclosure or short sale. 

In a situation where the homeowner has assets, an analysis must be conducted by a qualified tax professional to determine if there will be any exposure to tax liability prior to the completion of foreclosure or short sale.  If the homeowner is solvent and likely to incur substantial tax liability, the client should be evaluated for bankruptcy relief.   In Nevada, state exemptions could allow the homeowner who is solvent on paper to retain their assets while discharging the home loan debt (if they are otherwise eligible to receive a bankruptcy discharge), and avoid tax consequences since the debt is being canceled in a title 11 bankruptcy case.  If the tax analysis is not done or if the homeowner is simply unaware of the potential tax consequences, walking away from the home or agreeing to a short sale could result in financial peril.  Most tax debts are non-dischargeable so by the time most homeowners find out about the ordinary income tax treatment of cancelled debt, it’s too late to use bankruptcy protection.

Lastly, there is the matter of deficiency.  While a majority of the servicers trended towards waiver of deficiency in either a short sale or deed-in-lieu resolution in the peak of the foreclosure crisis, it is probable servicers will eventually shift back to non-waiver policies with regard to deficiency.  There have been multiple investor suits filed for improper servicing and the MHA government incentives to waive deficiency will conclude by the end of 2015 (as well as the incentive to servicers subject to the National Mortgage Settlement) Eventually a reservation of right to pursue deficiency will be a greater incentive for servicers than to simply allow the homeowners to walk away.   Any homeowner relying on trends now with regard to cancellation of debt and deficiency waiver, may in the future find themselves caught in the foreclosure wake of creditor pursuit. 

Tara D. Newberry, Esq. is the Managing Partner at Connaghan Newberry Law Firm, where she practices primarily in the areas of bankruptcy and consumer protection. She has been an appointed mediator by the Supreme Court of the State of Nevada for the Foreclosure Mediation Program since its inception in 2009, and has participated in hundreds of foreclosure mediations. 

Finding a Life Line: How to Handle a Client’s Debt Collector During Protracted Personal Injury litigation

As a bankruptcy attorney, I am often referred clients who have extensive medical and credit card debt from the attorney’s that are pursuing a personal injury claim on their behalf.  While it would be ideal for the injury claim to be resolved prior to filing bankruptcy, often times the debt collectors harass a client to the point that a bankruptcy case is filed out of the client’s need to end the harassment, much to the chagrin of their  PI attorney.  (If this happens, it doesn’t have to be the end of your case, I will be writing on this topic in coming additions, so in the interim contact a bankruptcy attorney before you decide to withdraw)

Terms to Understand:

Original Creditor- allegedly owed a debt (i.e credit card company, medical provider, etc.)

Debt Collector: third party who purchased the debt or is collecting on behalf of the original

 

So what can you do for your client to stop the collection harassment while you are trying to settle or litigate the case? 

1.     Send a Cease and Desist Letter

 As soon as you are made aware of the collection attempts, and assuming that your representation includes negotiating the alleged debt, send a cease and desist letter citing FDCPA 1692b(6) and 1692c(a)(2) and requesting that all future communications be directed to your office.  Keep in mind, if the original creditor is calling, FDCPA may not apply and the original creditor is permitted to call despite your notice, however, most will err on the side of caution and cease its collection efforts upon receipt of an attorney representation letter.  Further, if the contact is being made by a law firm or general counsel, ethics rules prevent an attorney from having direct communications with a person known to be represented by counsel (Nevada Rules of Professional Conduct 4.2.) even if FDCPA does not apply. 

Once a debt collector is notified that the debtor is represented by counsel, they cannot call or send communications directly to the debtor.  Caveat-  If the collector contacts the retained attorney and the attorney does not respond, then direct communications may resume, so be sure and respond in writing as soon as practicable if this occurs. 

In the event that future contact occurs after the cease and desist, your client will likely have an FDCPA claim against the debt collector and may be entitled to statutory or actual damages as a result.  This claim is independent from the underlying debt, so pursuit of such a claim would not affect the status of unpaid medical bills subject to the PI litigation.  More importantly, a demand for violation of FDCPA will usually result in all collection efforts promptly ceasing, which ultimately is what you and your client want.

2.     Educate Your Client

Inform your client that if a debt collector contacts them, they should write down the date and time of the call, the phone number the call came from and a summary of the conversation.  Should there be a violation, a contemporaneous record of the contact will be very important.  Have them state “I have an attorney, Her name is___, she can be reached at ____ …..”  Most often the collector will hang up as soon as the client makes this statement, if possible, the client should also tell the debt collector not to call them again and to only communicate with counsel.  IMPORTANT!  Tell your client they should never provide any personal information such as social security number, date of birth, address, etc., to anyone that calls them directly.  Often debt collectors will claim that they need to “verify” that they are speaking with the correct person, the client’s response should always be “give me your name, phone number, company name, address and facsimile number and I will have my attorney respond to your request.”  There are scammers out there that obtain delinquent debt lists with the intent of stealing identity or perpetrating some other type of fraud, so it is imperative that such information not be given over the telephone to an unsolicited caller.  This rule of thumb also makes it more difficult for debt buyers to merge accounts among similarly named individuals, despite variations in personally identifying information.

3.     Empower Your Client  “Do you owe the debt collector, or does the debt collector owe you?”

Violations of the Fair Debt Collection Practices Act provide statutory damages for each proven violation.  Calls from a pre-recorded message or an “auto-dialer” to a cell phone are violations of TCPA, which also provides for statutory damages.  If either occurs, refer your client to a consumer rights attorney immediately.  (Example of pre-recorded message to a cell phone that violates TCPA and may also violate FDCPA:  “This message is for ‘client’, if you are not’ client’ please hang up, pause… ‘client’ this is an attempt to collect a debt, contact ABC collections at…”  Example of Auto-Dialer:  Client answers the phone and there is a delay while call is transferred to an actual person, or hold music until a live person is available)  Make sure to advise your client to keep all detailed phone records, as well as a copy of any voicemail messages as such proof will be needed should litigation become necessary.

Any person recording a conversation in Nevada must inform and get the consent from the person being recorded (NRS 200.620).  Often, a debt collector may not mention that the call is being recorded, or fail to provide the disclaimer until end of the call.  Failing to notify at the very beginning of the call creates a potential cause of action under FDCPA and NRS 649.250 against a debt collector.  There are many other provisions under FDCPA and Nevada Revised Statutes that protect consumers, the above is simply a highlight of the easiest to remember and most prevalent violations.

Lastly, have your client to go to:  http://www.consumer.ftc.gov/articles/0149-debt-collection so they can read an unbiased, layman’s explanation of what debt collectors can and cannot do.  You can also obtain client handouts for free go to: https://bulkorder.ftc.gov/ShowCat.aspx?s=cre-18  and give them to your client at their initial consultation.    Once your client has a better understanding of debt collection and knows that violations could lead to money damages for them, they will be less fearful of the calls, and will be more inclined to wait out resolution of their case.

4.     Negotiate… But Get it In Writing

If you are nearing settlement or trial, contact the debt collector and start negotiating.  Often, they will have limited delegated authority to settle, and if you have limited funds, they will need to get their client’s permission to settle for a lesser amount.  The sooner you start negotiating the better off you will be.

Many debt collectors will refuse to provide a written offer of settlement, so draft a confirming letter as to your conversation with the debt collector and send it via mail and fax.  Give them a timeframe to respond and dispute your recitation of the discussion and do not send payment until the timeframe has expired.  If they fail to respond or dispute, it will be persuasive evidence as to the terms agreed upon and again there are provisions under FDCPA that may be triggered if the collector deviates. 

Lastly, make sure you address credit reporting since the debt is in active collection.  Some debt collectors will claim that they cannot delete reporting, but that simply is not true.  If there are claims against the collector and a “settlement” is reached, then the entire collection account can be deleted.  To get a deletion, the collector will likely want more of a payoff, so it really comes down to the client’s needs and any bad action by the debt collector.

If the above tips seem daunting, or your office just does not have the capacity to handle these types of client issues, then have a referral list for consumer rights attorneys and/or bankruptcy attorneys that would be willing to assist your client with debt defense, debt collection violations and as a last resort, bankruptcy.   As I will explain in a future article, bankruptcy is not the end of your PI case no matter which side you are on, so reach out to the bankruptcy bar, ask questions and find an attorney who can be a “life line” when these issues come up.   

Startling IRS information regarding Short Sale, Foreclosure and Bankruptcy

At a recent luncheon for Las Vegas Bankruptcy Attorneys, a representative from the IRS gave a presentation on "up and coming" issues in bankruptcy with regard to the IRS.  Most of the presentation was not too "newsworthy" but the final topic literally had an entire room of bankruptcy attorneys and Chapter 7 Trustee's gasping.  The IRS informed that when a lender does not foreclose on a property or if a short sale of a property that is surrendered in a bankruptcy does not occur while the Chapter 7 bankruptcy estate is still open, there may be tax consequences for the debtors.  While the cancellation of debt does not create a tax issue as the IRS does not impose tax liability for discharged debt, the disposition of property post-petition could create a "gain" for tax purposes depending on when the disposition occurs.  (If it is your primary principal residence, then the exclusion of $250,000 single, $500,000 married would still apply for any perceived "gain"  BUT, for investment property, there could be a tax issue.)

What does this mean for Chapter 7 debtors?  To ensure that you avoid any post-petition disposition of real estate tax consequences, you should consider listing your property for sale and try to coordinate selling the home while the bankruptcy is still open.  This will  require the cooperation of the bankruptcy trustee as well as the loan servicer, as an approval of the short sale by the court or an abandonment by the trustee will be necessary in order for the sale to go forward while the bankruptcy case is still open.

Having called a trusted CPA immediately after the luncheon to discuss this issue, she advised that even if the disposition couldn't be completed while the bankruptcy case was still open, debtors should still try to complete disposition (short sale or foreclosure) during the same year that the bankruptcy is filed to minimize exposure.  She said in most cases, tax liability will not occur, but it is still something to be concerned with.  SO, for those debtors that are waiting for the bank to foreclose, it may be worth a call or appointment with your tax professional to see where you stand, and to see if you should try to short sell the house before the end of the year.  For those in contemplation of bankruptcy, make sure your bankruptcy attorney is aware of this issue and that you consult with a tax professional as well as an attorney with regard to the disposition of your property.  Like so many things in life, timing is everything, and it now seems that leaving it up to the bank to foreclose "whenever" could be a dangerous course to take.

2012 - The Year of The Short Sale

Many ask "Why would I want to short sale my home if I already surrendered it in a Bankruptcy, won't the bank eventually foreclose?"  There are several reasons a post petition debtor would want to short sale a home even if surrendering in a bankruptcy. 

#1  A Fresh Start toward Loanworthiness may depend on when debtor's name is taken off title.
At present in Nevada, foreclosure can take several years to be completed, so if the debtors ultimate goal is to get a fresh start on credit repair, until the house is no longer titled in the debtor's name, the fresh start may be delayed.  Many lenders start the waiting period for financing post bankruptcy based on when the foreclosure is completed or when the short sale closes, rather than the discharge date of the debt.  For a Nevada homeowner post bankuptcy looking to immediately improve their credit for future financing, a short sale is the quickest way to get the house out of the debtor's name and kick start the clock.

#2.  While the debt may be discharged, the debtor is still liable as a landowner
As indicated above, if a debtor is waiting for foreclosure to occur, it may take years to be completed by the lender, and in the meantime the debtor is still responsible as a land owner for the property.  If the property sits vacant, there are numerous consequences that create liability for the debtor that have nothing to do with the loan obligation.  Cities and counties can impose health and building code fines should the property be deemed in violation. Squattors and/or others may take up residence in the vacant property and cause harm or nuisance to neighbors. Often home owner's insurance policies are void if the property is vacant for an extended period of time, and if the debtor informs the insurance carrier that the property is vacant, then an additional premium will have to be paid if vacancy coverage is offered, otherwise there may be no insurance coverage to protect the debtor for premises liability.  Without insurance, the debtor could now be in a situation where an event occurs post petition creating liability as a land owner, and a debt thus created that may not be dischargeable.

#3.  Potential Tax Issues may Occur with Post-Petition Disposition of Property
While the underlying debt is discharged in Bankruptcy and therefore not factored as "income" as would normally occur when debt is cancelled, there may be instances where tax liability could be created if it takes several years for the property to be transferred out of the debtors name.  This is a complex tax issue that requires the assistance of a tax professional to determine if there could be tax liability later on for the debtor.  If there could be a tax issue such as a gain for post-petition disposition of the property, then a short sale while the bankruptcy estate is still open would cause the "gain" to go to the estate, rather than the debtor.

There may be valid legal reasons for why the debtor would not want to sell the property post-petition.  In the past, many bankruptcy practitioners would advise against a "short sale" post petition because the debtor is entering a contract that could lead to post petition litigation as all real estate transactions have a certain level of exposure to lawsuits.  But given the choice of evils, a debtor may be better off to short sale as opposed to waiting for the bank to foreclose.

THE AMERICAN DREAM IS AN ALBATROSS FOR MOST IN NEVADA and specifically Las Vegas, is still in the midst of the foreclosure crisis. With almost 70% of all home values being upside down, unemployment at an all time high, and the financial strain that many adjustable rate mortgages have become, selling may be the best option for a homeowner looking for an answer to their financial stress. A short sale or short payoff occurs when a lender agrees to accept less than the outstanding loan amount in exchange for a release on the lien to the property (the collateral). Even if there is more than one lien on the property, a short sale may be possible if both lenders agree to accept less than the outstanding loan balance. Short sale may be best in situations where the following circumstances are burdening a borrower:

•Declining real estate values
•Unexpected health issues resulting in difficulty making mortgage payments
•Lending rate increases on adjustable rate loans
•Divorce
•Over-extended borrower with multiple mortgages
•Job loss or transfer

Short sales are more complicated and time consuming than an average real estate sale, making it important to retain an experienced attorney to oversee and negotiate the transaction.

Lenders Prefer Short Sales
Short sales are more beneficial to a lender than a foreclosure. Lenders prefer short sales because they are not in the business of managing and owning property, and short sales are less expensive than completing the foreclosure process. Lenders accepting short sales receive a substantial percentage of the outstanding loan amount due without waiting for a time consuming foreclosure, and they are able to avoid foreclosure and maintenance fees.

Short Sale is not for Everyone
There may be tax consequences and/or legal consequences for a seller in a short sale. I encourage anyone who is contemplating short sale to meet with both an attorney and a tax professional to fully evaluate whether short sale is right for you.

Buying a Short Sale

For buyers, a short sale may permit the purchase of a better home at a more affordable price. Many homeowners or squatters who take up residence in an abandoned home bound for foreclosure, cause intentional damage that may not be immediately evident or the shear lack of maintenance requires costly repairs, making some foreclosures a virtual "money pit." In most instances, when you buy a short sale, you are buying the home from the current homeowner who is most likely still  occupying the property. Even if the property is vacant, most homeowners are still maintaining the property and will be required to disclose any known defects, such as mold or other major repairs. While most short sales are "as-is", you still have the opportunity to have an inspection so that you know exactly what you are buying. The wait for approval may be long and there may be issues related to the lenders contracts and terms that complicate or may even frustrate the short sale process. But ultimately, buying a short sale as opposed to buying a foreclosure, will result in you having more information about the condition and less likelihood of ending up in a money-pit.

Whether your are a seller or a buyer in a short sale transaction, an attorney can help you navigate the complexity and minimize risk.

THE LEGAL PITFALLS OF FINANCIAL STRESS

THE LEGAL PITFALLS OF FINANCIAL STRESS:  Part II

Paralegals and others often offer to help individuals complete and file bankruptcy petitions at a much lower rate than a licensed attorney.  The problem is that many of these  “bankruptcy preparers” do not fully understand the Bankruptcy Code and make detrimental errors.  There are intriquite rules and complex statutes, if your petition is not prepared correctly, your case could be dismissed and if the correct property exemptions are not utilized, you could lose property that you are otherwise entitled to keep.  Unlike an attorney, there is no state regulation of paralegals or bankruptcy petition preparers in the State of Nevada, and there is no means of recourse when such errors are made.  Additionally, only an attorney can appear with you at the Meeting of Creditors and represent you in Court, which is an intimidating process to endure without counsel.  While a bankruptcy preparer may cost less up front, it could cost you a lot more if the work is not done properly.  A licensed and qualified attorney will ensure that you keep the most amount of property permitted under the law, and ensure that your petition is properly completed to avoid dismissal.

Late night television and the internet is riddled with advertisements promising to eliminate debt through debt settlement.  I have had clients come to my office after paying a debt settlement company thousands of dollars, only to find out that the company had kept the money, had not paid any of their creditors, leaving them with no choice but bankruptcy.  Many times, had the client worked directly with their credit card company, they would have paid off their debt without filing for bankruptcy.  Again, be careful, anyone, including an attorney who makes a guarantee that they can reduce your debt or modify your loan without filing bankruptcy is not being straightforward.  Mortgages and credit cards are based on contract law, even if the terms are not favorable to you, unless a Court invalidates the contract or you have a valid legal claim to pursue in court to avoid the debt, you are liable for those obligations under the terms.  Now it is true that many banks and lenders would rather resolve an account than litigate, but there are no guarantees and you should be weary of anyone that promises you otherwise.

The best way to verify the reputation of a company or an attorney is to check with the appropriate regulatory agency (State Bar of Nevada, Mortgage Lending Division, etc. ) or the better business bureau.  An even better way to ensure you are hiring the right person for the job, is to get a referral from someone you know that can attest to their reputation.  If all else fails, trust your instincts.  With the present state of the economy and housing market, there are options available to help you with financial hardship, however there are many unscrupulous individuals looking to take advantage as well. 

With regard to a home loan, the options range from loan modification, short sale, deed in lieu, mediation, bankruptcy and foreclosure.  Each option presents possible negative consequences, so make sure you understand the legal implications, as well as tax implications of each before committing to a solution.  With regard to credit card debt and medical bills, you have the option of debt settlement, payment plans, interest negotiation and bankruptcy.  Again, any of the above options will likely have an impact on your credit score and some may expose you to future litigation or tax debt, so it is important that you consult with an attorney before making any decisions, so that you proceed in a manner that is in your total financial best interest.  It is also important to know that settling any debt for less than what you owe (short sale, deed in-lieu, foreclosure, credit cards, etc.) could result in tax issues, so you should always consult with a qualified tax professional or CPA prior to making a decision.  Most importantly, getting behind on bills is not the end of the world, don’t suffer in silence, just call for help.

The Legal Pitfalls of Financial Stress

Part 1: If it sounds too good to be true…

Many families are experiencing financial strain in Las Vegas. With so many companies cutting salaries and laying off personnel, almost every family has endured a reduction in income over the past two years. For some, the loss of income has been so devastating that they can no longer make ends meet. Some have stopped making payments on their homes, others have stopped making payments on credit cards and other bills, and some have done nothing but know that they are running out of options.

As a result, unscrupulous individuals seek to exploit people in such desperate circumstances, so it is important that you carefully select anyone to help you with loan modification, foreclosure, bankruptcy or debt settlement. As the saying goes, if it sounds too good to be true, it probably is. The first wave of exploitation came with “Loan Modifications” in late 2007. Former loan officers, bankers, brokers and realtors started loan modification companies, promising to save your home in exchange for $3,000 or $4,000. Many home owners relied on their promises to save their home, only to find themselves foreclosed upon, evicted and out thousands of dollars that they could have used to start building again. For two years, the loan modification companies ran unchecked and unregulated.

In 2009, the Nevada legislature instituted strict guidelines to get the loan modification companies under control. The vast majority of companies were shut down, and while some home owners received modifications, most did not. During the same legislative session, the legislature created the Foreclosure Mediation Program to fight the foreclosure epidemic and give homeowners an opportunity to meet with their lender and negotiate resolution with specific rules and guidelines to structure the process. The Foreclosure Mediation Program has allowed many homeowners to negotiate a modification and stay in their home. However, there are still unscrupulous ploys to dupe home owners out of a significant amount of money to “represent” them during mediation.

It is important to note that only an attorney can give you legal advice, and in the event that the lender does not follow the rules during the mediation, only an attorney can file a petition for judicial review on your behalf and represent you in court. If you have received a notice of default, you only have 30 days to elect mediation so do not delay.