High FHA loan limits could mean help on the way for homeowners

Federal Housing Administration loan limits have been raised to $400,000 in Clark County as part of an economic stimulus plan that will enable more families to qualify for a safe, affordable mortgage, Housing and Urban Development Secretary Alphonso Jackson said Thursday.

He said the change will help an estimated 250,000 U.S. homeowners, many who are facing foreclosure.

Families in high-cost states have been priced out of FHA-backed loans, which created a vacuum that was filled by exotic subprime loans, Jackson said.

"This is going to be a substantial boost to the economy because they (lenders) will be able to make loans they couldn't make before," he said at the Greater Las Vegas Association of Realtors luncheon at Bally's. "Many people will receive help. That's the good news. Unfortunately, the new FHA loan limits expire at the end of the year."

That's why it's extremely critical to pass the FHA "modernization" bill that would take the ceiling to $413,000 in Nevada and make it permanent, Jackson said.

About one out of 10 homeowners nationwide is "under water," owing more than the house is worth, he said.

Foreclosures are a real problem and have hit Nevada particularly hard, the nation's top-ranking housing official said. In Clark County, one in 277 households was in foreclosure at the end of last year, about four times the national average, Jackson said.

The most important step to avoiding foreclosure may be to contact a housing counselor, he said.

There are more than 2,300 HUD-approved counseling agencies in the country, including 13 in Las Vegas, that provide free counseling, he said. In 2007, 96 percent of people who saw a housing counselor and completed the program avoided foreclosure.

"We found it's the key for them to stay in the house because they'll find what's affordable for them and what's not," Jackson said.

HUD has increased funding for housing counseling by 150 percent since 2001, when it was about $10 million. President Bush has allocated $65 million in his new budget proposal.

The budget contains an additional $180 million for HUD's nonprofit partner NeighborWorks.

"It's money well spent," Jackson said. "Studies show that homeowners respond more quickly to community and nonprofit groups than to lenders and banks."

Some people enter a state of denial about their financial problems. Instead of communicating with their mortgage company, they withdraw.

"Fifty percent of people facing foreclosure will not talk to their lenders because they're ashamed or they're scared," Jackson said. "Often, it's hard to know who to call with so many mortgages chopped up, sold or resold."

Last year, Jackson and U.S. Treasury Secretary Henry Paulson worked with the mortgage industry to create a private-sector alliance called Hope Now. It's designed to help subprime borrowers who are able to afford the current starter rate on a subprime loan, but will not be able to make higher payments when the interest rate goes up.

The hot line (888) 995-4673 receives more than 4,500 calls a day and the response rate has gone from 2 percent to 26 percent, Jackson said.

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