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CARSON CITY, Nev.
As overgrown yellow lawns and unlit windows dot vast suburban neighborhoods in Nevada, legislators hope new laws they passed this session will make a dent in a foreclosure crisis that is still hitting this desert state the hardest.
Measures to encourage short sales rather than foreclosures, prevent banks from "robo-signing" and shorten the time secondary lenders can pursue claims against homeowners should help upside down families avoid losing their homes, according to lawmakers who carried the bills.
But they acknowledge they fell short of their ambitions, and there's no one law to fix problems that have lingered through three legislative sessions.
"What concerns me most of all is that there's really no significant difference in the number of potential foreclosures," said Assemblyman Marcus Conklin, D-Las Vegas, who sponsored several pieces of foreclosure-related legislation. "We're still seeing a sizeable amount of homes in default."
In May, 1 in every 103 housing units received a foreclosure filing, keeping Nevada at the bottom of U.S. states for the 53rd month in a row, according to real estate data company RealtyTrac. The furious pace has slowed from March 2009, when 1 in every 56 homes received a foreclosure filing, but analysts aren't celebrating yet, saying banks are just trying to play catch-up on processing all the properties in default.
Banks also face a glut of inventory -- about 62,000 Nevada properties were in foreclosure or belonged to banks in May, according to RealtyTrac. Processing more foreclosures could sink home prices further.
State mediators who counsel families in foreclosure say fewer Nevadans in their program are making their home loans work, and more are opting to bow out gracefully through short sales -- an option that new laws will make easier.
One law cracks down on banks dragging their feet on short sale offers, which are often a homeowners' last hope for staving off foreclosure. The new law, which took effect mid-June, requires banks to respond to a short sale offer within 90 days, or face a misdemeanor.
Months of delays can jeopardize a sale, and many homeowners get a rejection notice when it's too late to find another buyer.
"The longer this process continues, the harder it is to get out," said Mike Young, president of the Nevada Association of Realtors.
Another law removes potential obstacles for short sales by shortening a statute of limitations. Current law gives the primary loan holder six months to collect a debt not covered by the proceeds of the foreclosure sale. But many borrowers took out a bundle of two or three loans, and the secondary loan holders have up to six years to collect a debt.
Conklin said the secondary lenders often block short sales, rejecting low offers because they might get higher ones four, five or six years down the road when the economy and home prices bounce back.
The new law, which takes effect July 1, will give all lenders six months to go after the debt.
A third law requires banks to confirm they own a mortgage before they issue a notice of default on it, and takes effect Oct. 1. In the height of the crisis, banks were selling loans to each other at a breakneck pace, sometimes wrongfully foreclosing on loans they no longer owned.
Conklin says it will restore confidence in the process after the "robo-signing" controversy in fall 2010, where banks were accused of skirting reporting requirements and signing reams of foreclosure papers without reviewing them.
Homeowners will notice some of the new changes -- especially the law that requires banks to certify they own a loan, according to mediation program manager Michael Sommermeyer. But he added that most of the new laws make technical changes and are a far cry from solving the problems many homeowners face.
At the beginning of the crisis, state legislatures around the county started with payment assistance programs that padded the initial impact of giant mortgage payments, according to Heather Morton, an analyst who tracks state bills with the National Conference of State Legislatures. The trend moved toward developing foreclosure mediation programs like Nevada's, which bring borrowers and lenders together; about 20 states have those in place.
But as the struggle wears on, it's getting harder to keep people in their homes. In its first nine months, Sommermeyer's mediation program helped 46 percent of participants stay in their homes. After 15 months, that rate is down to 37 percent.
Nevada is still plagued with a stubbornly high 12.1 percent unemployment rate -- the highest in the nation. Families with job loss find they can hardly shoulder a mortgage payment at all, even if it's modified.
"There's not a program for that," Sommermeyer said.