Hardest-hit fund gains momentum in Nevada’s housing market

Nevada's hardest-hit fund has paid out nearly $17 million through the third quarter and is gaining momentum as the program rolls out principal reductions for qualified homeowners, said Candice Kelley, executive director of Nevada Affordable Housing Assistance Corp.

Funding has increased more than 50 percent from $11 million in the second quarter.

The number of principal reductions increased during the second and third quarters as a result of changes to the approval process by loan servicers, Kelley said.

There were 52 principal reduction approvals in the second quarter, doubling the number since the U.S. Treasury allocated $194 million in hardest-hit funds for Nevada in 2010. Third-quarter numbers were not available. First mortgage balances have now been reduced by $10.5 million. Nevada leverages its hardest-hit funds by contributing $1 for every $3 in first mortgage reduction.

More than $7.4 million of second mortgages have been extinguished by the hardest-hit fund and participating banks. Nearly $5 million in mortgage assistance has been paid to 962 Nevada homeowners.

"There's been a big shift in the third quarter in where the expenditure has gone," Kelley said. "Before, it was monthly mortgage assistance. In the third quarter, we rolled out principal curtailment. The third quarter was a big turning point for us and the program has gained so much momentum."

In conjunction with the Home Affordable Refinance Program, or HARP 2.0, Nevada's hardest-hit fund will contribute as much as $50,000 toward principal reduction. Lenders have to agree to participate in the program with matching funds, and that was the main obstacle to getting the program up and running from the time President Barack Obama announced it during a visit to Las Vegas.

Kelley said the state still has much of the money on hand and is accepting applications. At the end of the second quarter, Nevada Affordable Housing Assistance Corp. had received about 1,200 inquiries and 200 applications, she said. Application information is online at www.nevadahardesthitfund.nv.gov.

"We see the principal curtailment program having a significant positive impact on our goal of helping homeowners keep and afford their homes," Kelley said.

Steve, who asked that his last name not be used, said he received $30,000 in principal reduction from the fund and refinanced his home through HARP at 3.8 percent. His lender is One Nevada.

"It brought my payment down by $700 a month, which was considerable," he said. "From considering a short sale or bankruptcy or something like that, it makes me viable. I can now sustain living in the house. I don't have to look for other options."

But the program has at least one critic.

Victor Joecks, communications director for the Nevada Policy Research Institute, said there's a "huge disconnect" between what was promised with the fund and what's actually happening.

"Here you have a government that doesn't distribute tax dollars in a timely manner," he said. "Here's $200 million and they can't even give away $20 million by June."

Much of the money went to mortgage assistance for the unemployed, which won't help the 60 percent of Las Vegas homeowners who are underwater on their homes, Joecks said.

"The hardest-hit fund is a classic example of why the government shouldn't pick winners and losers in the housing market. There's a lot of negative consequences when you start rewarding people for taking on too much mortgage and going into foreclosure," Joecks said.

Programs available to homeowners through the hardest-hit fund are mortgage assistance, principal reduction, short-sale assistance and second lien relief.

A September Scorecard from the Obama administration said homeowners continue to benefit from "deep and sustainable" assistance from the Home Affordable Mortgage Program. More than 1 million homeowners have received a permanent mortgage modification, saving an average of $539 on their mortgage payments each month, or $15 billion to date.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.