Extra staff to fight foreclosures

In a letter dated Monday, Secretary of Housing and Urban Development Shaun Donovan advised Reid that the department sent a three-person foreclosure rapid-response team that was to start immediately in Las Vegas. Another five employees are being sought for the office.

“This is an important move to help Nevadans who are struggling to stay in their homes,” Reid said in a statement.

“I think it’s encouraging. I think it’s a positive step in the right direction,” said Kenny Young, director of housing and neighborhood services for North Las Vegas.

In a statement, Rep. Shelley Berkley, D-Nev., said: “Having more experts on the ground will enable HUD and our local officials to better coordinate vital prevention efforts and to maximize the impact mortgage assistance programs are having in our community.

“A main goal of this effort will be to help local government fully utilize the foreclosure prevention resources provided through the first round of the Neighborhood Stabilization Program,” Berkley said. “When a family is facing the loss of a home, we need to look at every single available option to try and prevent a foreclosure.”

Young said high unemployment is the cause of many home foreclosures.

It isn’t clear what the rapid-response team will do to help alleviate foreclosure problems in Southern Nevada.

The eight new HUD employees in Las Vegas will include two workers in the Office of Community Planning and Development, which works with the Neighborhood Stabilization Program. Two others will work in the Office of Fair Housing and Economic Opportunity, which deals with cases of alleged discrimination relating to ethnic origin or race, said HUD spokesman Larry Bush. Those cases have been handled out of California, and Reid earlier asked HUD to assign Fair Housing workers to Las Vegas, he said.

The HUD field office in Las Vegas already employs 16 workers, including two representatives for the HUD inspector general’s office.

Donovan noted that Clark County and other local governments failed to receive money under the second round of the Neighborhood Stabilization Program, which provides for the purchase and redevelopment of foreclosed hopes to stabilize hard-hit communities.

Local officials were upset when HUD rejected Southern Nevada’s $367 million federal grant request in January, because the area has encountered more foreclosures than other cities.

Las Vegas led the nation in foreclosures last year, according to RealtyTrac of Irvine, Calif. The company reported that 12 percent of the housing units here received a foreclosure notice in 2009.

However, HUD determined that the local governments had not used all of the about $60 million they received in the first round and didn’t satisfy other program requirements, said David Cherry, a spokesman for Berkley.

In addition, HUD received requests for $15 billion in second-round money but only had $1.9 billion available for the grants, Donovan said.

“I have asked staff at HUD to explore methods by which we can make funding available to areas of the country — like Clark County — that have been particularly hard-hit by the foreclosure crisis but for which NSP 2 grant applications were unsuccessful,” Donovan said in the letter.

The Cabinet officer said HUD would report back to Reid within 30 days “on the approaches we believe make sense going forward.”

Donovan also discussed Reid’s comments about the prospect of getting lenders to reduce the amount of principal homeowners owe but said it has been difficult to get banks to do so.

Attorney Tisha Black-Chernine, founding partner at Black & Lobello, said reduction of principal is key to helping many homeowners avoid foreclosure.

People who bought at the top of the housing market a few years ago typically have seen their home values plunge 60 percent, she said.

These homeowners need some principal reduction to justify continuing to pay for homes, she said. Otherwise, the point when homeowners will get positive equity in a home is so many years away that many borrowers will stop making home-mortgage payments.

“You don’t want to put a fresh bowl of meat in front of a dead dog,” Black-Chernine said.

Only a few lenders, however, have been willing to forgive a portion of the principal amount owed, she said, mentioning GMAC and local banks.

Also, Black-Chernine said banks have been slow to promise borrowers that they won’t sue for the deficiency or shortfall if the borrower makes a short sale. In a short sale, the homeowner sells the home for less than he owes on the mortgage.

That leaves borrowers in purgatory, she said, and some ultimately let their homes go into foreclosure.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.