Nevada homeowners could get help from federal funding

Underwater and delinquent Nevada homeowners could see financial relief from the government's so-called "hardest-hit fund" by mid-August, a state housing division official said Wednesday.

The target launch date for nearly $103 million coming to Nevada was delayed by three weeks because contracts with the U.S. Treasury were not in place by June 1 as originally anticipated, said Lon DeWeese, chief financial officer of the Nevada Housing Division.

The Obama administration approved plans Wednesday for housing finance agencies in Nevada, California, Arizona, Florida and Michigan to begin using $1.5 billion in foreclosure prevention funding.

The money will help struggling homeowners by subsidizing mortgages for the unemployed, reducing principal balances on homes with negative equity, settling second liens, and facilitating short sales and deeds in lieu of foreclosure.

Nevada will create a mortgage modification program using a combination of forgiveness and forbearance with the goal of reducing principal to less than 115 percent of loan-to-value and lowering payments to 31 percent of debt-to-income.

The state will offer assistance to reduce or eliminate second liens with earned forgiveness over a three-year period. It will also provide allowances for appraisal and transaction fees, moving expenses, a legal allowance for up to three months, and incentives for borrowers and loan servicers to do short sales.

The federal funds must flow through an eligible nonprofit entity, not a state agency, with "huge oversight" by the U.S. Treasury, DeWeese said.

Nevada Affordable Housing Assistance Corp., created in 2003, will be handling the money here. Homeowners interested in applying for funds can find eligibility requirements and other information at NAHAC.org.

"It's the first time in my career that working with a federal bureaucracy has gone so smoothly," DeWeese said.

Sen. Harry Reid, D-Nev., who announced the funding during a February visit to Las Vegas by President Barack Obama, thanked Housing and Urban Development Secretary Shaun Donovan and Treasury Secretary Timothy Geithner for their help in providing resources for Nevadans.

"Now it's up to banks and credit unions to step up to the plate so that this $100 million will have the maximum benefit for homeowners to reduce principal amounts and provide lien relief," Reid said in a statement .

Kenny Young, acting assistant city manager who oversees housing programs for North Las Vegas, said city officials don't have a role in awarding the federal funds announced Wednesday.

One shortcoming of the proposal is that none of the programs appears to help the unemployed, who presumably are having more trouble making their next mortgage payment, Young said.

"I hesitate to say it (funding) is going to help everyone because, obviously, that is not going to be the case, but I do see it having some impact on homeowners who the banks are willing to work with," he said. "The problem is that we have unemployed people who are about to lose their home. If you don't have a job, it's hard for them to refinance a loan if there is no revenue stream coming in."

States approved for the first round of funding each experienced a decline in average home prices of 20 percent or greater. Las Vegas home prices dropped more than 50 percent from their peak.

Nevada leads the nation with one foreclosure filing for every 66 households, Irvine, Calif.-based RealtyTrac reported. First American CoreLogic showed some 70 percent of Las Vegas homeowners are underwater, owing more than their home is worth.

Treasury Department reviewed each state's proposals to ensure compliance with the Emergency Economic Stabilization Act, the umbrella program for the hardest-hit funds.

The business plan had to be written within the rules of the act, approved by the nonprofit's board of directors and sent to the Treasury, which reviewed legal issues, eligibility issues, and fraud and abuse issues, DeWeese said.

"This is the end of the application process. Now we move into implementation," he said. "There's going to be a readiness audit of the eligible entity and a test of the system and controls for underwriting before the doors officially open."

Using the funds for mortgage forgiveness and reduction of principal will help provide long-term stability to Las Vegas' housing market, said U.S. Rep. Dina Titus, D-Nev., whose district is home to some of the nation's hardest-hit ZIP codes in the foreclosure crisis.

"It is critical that the state moves swiftly to implement this important plan and put these funds to work," she said in a statement. "With too many families at risk of losing their home, we don't have a moment to lose."

Review-Journal writer Frank Geary contributed to this report. Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.