State awaits approval for federal housing aid

Nevada has laid out its plans for spending nearly $103 million from the Emergency Stabilization Act, part of $1.5 billion in federal funding for the five hardest-hit states in the housing downturn.

Proposals for four programs were submitted to the Treasury Department by the April 16 deadline and are awaiting approval, Nevada Housing Division Chief Financial Officer Lon DeWeese said Monday.

About 55 percent to 60 percent of the money will be used for principal mortgage reduction, he said. Another 20 percent goes to reduction of second mortgages, 3 percent to 5 percent is allocated for foreclosure mitigation and roughly 10 percent is targeted at accelerating short sales.

The money is being distributed through the nonprofit Nevada Affordable Housing Assistance Corp., with "not 1 cent" coming to the housing division, DeWeese said. The earliest Nevada homeowners could see any relief is probably July, he said.

"It has to flow through an eligible entity separate from state government," the state official said. "We did extensive consulting with them. They did come up with a plan and there are certain elements that, until the Treasury signs off on it, I don't know how much we can talk about it. I know they are wrestling with budgetary constraints."

Funding was announced in February when President Barack Obama visited Las Vegas with Sen. Harry Reid, D-Nev.

The California Housing Finance Agency released its plan in late April for spending about $700 million, most of the money, including subsidized mortgage payments for the unemployed. Florida, Michigan and Arizona were the first states to unveil similar proposals.

California's housing agency would provide unemployed homeowners with a monthly subsidy of up to $1,500, or 50 percent of their current mortgage payment, for up to six months, with a $9,000 cap per household.

Another program would bring delinquent mortgages current. Each household would receive up to $15,000, or 50 percent of the past-due amount, with a dollar-for-dollar match required from the lender and borrower.

The Treasury has absolute and total power to change or tweak any of Nevada's programs and allocations, DeWeese said. Each of the Western states had a plan to reduce mortgage principal with a dollar-for-dollar match from Fannie Mae and Freddie Mac, government-sponsored enterprises that hold about half of the mortgages in Nevada.

"We've been told so far that neither Freddie Mac nor Fannie Mae nor their receiver has approved any kind of match, let alone dollar for dollar," DeWeese said. "That could hold it up for all the states that want to do that."

The government had best intentions of helping "underwater" homeowners, or those with negative equity, and unemployed workers , he said. A public hearing in March clearly expressed people's desire to implement a program that would bring mortgage balances closer to current values, DeWeese said.

"I think it's getting to the point where the government is getting frustrated," he said.

The funds are going to hardest-hit states that saw home prices drop at least 20 percent from their peak. Home prices in Nevada dropped 17.3 percent in 2009 from the previous year and 40.4 percent in the past five years, the Federal Housing Finance Agency reported. Nevada leads the nation with one foreclosure filing for every 69 households in April, reports RealtyTrac, an Irvine, Calif.-based foreclosure listing firm.

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