Program Aims to Help Underwater Nevada Homeowners

By: AP Email
By: AP Email

CARSON CITY, Nev. (AP) - A pilot program launched Friday in
Nevada aims to help struggling homeowners reduce loan amounts and refinance if they are current on their mortgage payments but owe
more than their homes are worth.

Under the program announced by Gov. Brian Sandoval, the state
will use federal housing money to provide up to $50,000 to
qualified borrowers who then refinance at lower interest rates
under the federal Home Affordable Refinance Program.

"Principal reduction combined with mortgage refinancing will
mean hundreds of dollars returning to the pockets of homeowners,"
said Terry Johnson, director of the Nevada Department of Business
and Industry. "This effort represents our continued focus on
combating the worst housing crisis seen in a generation and in the
state hit hardest by it."

The program comes after months of negotiations with federal
mortgage giants Fannie Mae and Freddie Mac, the U.S. Treasury
Department and the Federal Housing Finance Agency.

Previous discussions in Nevada to include loan reductions fell
flat because they required a dollar-for-dollar match by lenders,
said Lon DeWeese, chief financial officer for the Nevada Housing
Division.

So state officials proposed using some of the $194 million
Nevada received two years ago as part of the federal Hardest Hit
Fund - money to help states hardest hit by the Great Recession - to
write down loan balances.

DeWeese said about $75 million was set aside for principal
reduction, but the state could seek permission to use more of the
total fund down the road.

He projected the number of people eligible "will be far in
excess of what we will be able to fund."

The program is being launched in Clark County, ground zero for
Nevada's housing meltdown, where a once red-hot building boom went bust and thousands of construction workers lost their jobs in the
Great Recession. Regulators estimate 67 percent of homeowners there owe more on their homes than they are currently worth.

The program is limited to owner-occupied homes with mortgages
that originated before May 31, 2009 and are backed by Fannie Mae or
Freddie Mac.

A homeowner's mortgage balance must be at least 115 percent of
the value of their home and cannot exceed $729,750. Additionally,
family income cannot exceed 150 percent of median income for the
area. In Clark County that income threshold is $99,000 for a family
of four.

Homeowners who meet those criteria will receive an information
packet and application from the state.

"We are looking for underwater borrowers who have some sort of
stress maintaining their current mortgage," DeWeese said. "This
is not aimed at people who have a second or a third home that
they're trying to keep up with while they're having problems
keeping up on their own home mortgage."

DeWeese said according to CoreLogic, a company that analyzes
mortgage data, the average homeowner in Clark County is about
$50,000 upside down on their mortgage.

Those people, he said, would substantially benefit from the new
program.

"What we will not do is create equity for somebody," DeWeese
said, "but we will help them get closer to parity."


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