Administration to extend homeowner aid program

The U.S. Treasury Department announced Friday it would extend the Obama administration's Home Affordable Mortgage Program another year through Dec. 31, 2013, in an effort to help struggling homeowners stay in their homes.

The program, now set to expire in December, has helped more than 900,000 homeowners permanently modify their loans, saving them about $500 a month, the Treasury Department reported.

An additional 1.1 million homeowners were able to stay in their homes through Federal Housing Administration loss mitigation and early intervention.

The extended deadline also applies to the Home Affordable Refinance Program, or HARP.

The refinance program, which was revamped during President Barack Obama's trip to Las Vegas last year, hasn't been viable for Nevada because of the 125 percent loan-to-value ratio, said Michele Johnson, president and chief executive officer of Financial Guidance Center in Las Vegas.

Median home prices have fallen more than 60 percent from their peak, leaving about two-thirds of Las Vegas homeowners with negative equity, or owing more than their home is worth.

"I'm sure some have taken advantage of it, but we haven't seen a substantial impact in Southern Nevada," Johnson said Friday.

Another government program that hasn't had much success in Las Vegas is the Home Affordable Foreclosure Alternative, designed to help homeowners avoid foreclosure through lender-approved short sales and deed in lieu of foreclosure.

While the refinance and short sale programs have come up short, HAMP has been successful to some degree, said Johnson, whose nonprofit agency assists homeowners in loan modifications.

"I think lenders are more prone to use internal programs for loan modifications than federal programs," she said. "To the consumer, it doesn't matter, as long as they have the ability modify the mortgage and maintain their home."

Jed Kolko, chief economist for ForeclosureRadar.com, predicted the government will do little when it comes to any meaningful housing policy in 2012. He predicts a new wave of foreclosures, even though delinquencies will drop.

"The robo-signing settlement should bring more clarity to the housing finance industry and should result in loan modifications and some cash compensation, plus clearer rules for how to handle foreclosures going forward," Kolko said. "Lenders will then deal with the backlog of delinquent loans that has built up and will move more homes through the foreclosure process."

Las Vegas leads the nation in foreclosures per capita with approximately one in 180 households in some type of preforeclosure.

Nearly half of the 48,000 home sales in 2011 were real-estate owned, or bank-owned, the Greater Las Vegas Association of Realtors found.

HAMP eligibility requirements will be expanded to reach a broader pool of distressed borrowers, Treasury spokeswoman Andrea Risotto said late Friday from Washington, D.C.

The new rules ensure that borrowers struggling to make ends meet because of debt beyond their mortgage payments can participate in the program. If a borrower's mortgage-to-income ratio is below 31 percent, they're ineligible under the current program. Yet many of those below the 31 percent threshold are buried by other debt such as second liens and medical bills.

The expanded program has more flexible income-to-debt ratio for those struggling with secondary debt. It also applies to investment properties for rent, Risotto said.

The Treasury is increasing incentives for mortgage modifications that would help borrowers rebuild equity in their homes.

HAMP currently includes an option for loan servicers to write down the borrower's principal balance to current value, which would reduce monthly payments and rebuild equity, though few instances of principal reductions have happened in Las Vegas.

The government will triple the incentives to encourage principal reduction. The owner of a loan that qualifies for HAMP today receives between 6 cents and 21 cents on the dollar to reduce the principal. The Treasury will increase that amount to 18 cents and 63 cents.

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