PETE SOUZA / WHITE HOUSE
Thursday, June 25, 2009 | 2 a.m.
- Courts prep for wave of foreclosure mediation requests (6-17-2009)
- County, cities hammer out plans for foreclosure funds (6-16-2009)
- Smaller home price drop may signal bottom (6-12-2009)
- Affordable housing topic still relevant despite price drops (6-12-2009)
- Vegas economy shows glimmer of hope (6-12-2009)
- Foreclosures increase as Nevada keeps top spot (6-11-2009)
- Dead in the water: Your bailout (5-3-2009)
- Las Vegas counts on Obama housing rescue (2-27-2009)
President Barack Obama said Wednesday he is acutely aware of Nevada’s foreclosure crisis and is evaluating whether more can be done to help homeowners, including by redirecting unused bank bailout money for homeowner relief.
Obama warned that using a portion of the $70 billion returned from the banks may require help from Congress.
On a particular problem vexing Nevadans — the inability of many homeowners to qualify for refinancing because they have lost so much equity in their homes — the president would not commit to any changes. The question is under review, he said.
“There are folks who still find themselves having done all the right things, always made their mortgage payments, always been responsible, and are still suffering,” Obama said during a round-table with a handful of reporters in the West Wing. “This is something that we’re taking very seriously.”
The president said just days ago he asked Treasury Secretary Timothy Geithner for a top-to-bottom evaluation of the administration’s homeowner relief program, Making Home Affordable, to determine “what’s working and what’s not, and whether there’s more that we can do.”
Democratic Rep. Dina Titus, who had asked the administration to address shortcomings of the program, welcomed the review as a chance to continue pressing her case for changes.
“We always looked at the housing programs as works in progress and felt they would be modified and would be adjusted,” Titus said.
Announced in February, the Making Home Affordable plan has been the administration’s signature effort to help families avoid foreclosure. Nevada’s foreclosure rate has topped the nation every month since January 2007, according to RealtyTrac.
One part of the Obama plan is to help 3 million to 4 million homeowners at imminent risk of loan default by working with banks to lower the interest or principal on mortgages to less than 38 percent of homeowners’ income. The administration offered $75 billion to help lower interest rates. Bankers are paid for each loan modified.
The other part of the Obama plan is to help 4 million to 5 million homeowners refinance at today’s lower interest rates, which could provide relief by potentially shaving hundreds of dollars off monthly mortgage payments.
But it is this second part of the plan that has bedeviled Nevada.
The problem is this: To qualify for refinancing, homeowners must owe no more than 105 percent of the home’s current value — say, a $210,000 mortgage on a $200,000 home.
That’s increasingly difficult in Las Vegas, where housing prices have fallen by one-third in the past couple of years and equity has vanished.
Nevada has a greater rate of mortgages underwater — meaning the homes are worth less than the mortgages — than anywhere in the nation, according to the most recent data from First American CoreLogic for the final quarter of 2008. In one northwest Las Vegas ZIP code, mortgages are 20 percent more than home values.
Some homeowners say they would rather walk away from their homes than keep paying off a house that may take decades to recoup value.
The White House refinancing plan was an improvement in that previously loans backed by Fannie Mae and Freddie Mac needed to have 20 percent equity to qualify for refinancing.
Still, Titus, and more recently Senate Majority Leader Harry Reid, have urged the Obama administration to loosen the equity requirement, arguing that with unemployment now at 11.6 percent, refinancing could help avoid foreclosures.
Opponents, however, have warned that taxpayers will hold the bag if homeowners default on the refinanced loans. Fannie and Freddie are essentially backed by the government.
Plus, politicians risk populist unrest over bailout fatigue.
Obama was well aware of the problem facing Nevada’s underwater homeowners, but not ready to commit to its solution.
“I know one suggestion that has been made is to further drop the equity requirements,” Obama said Wednesday. “I don’t want to weigh in yet because I haven’t seen the conclusions from Treasury about how that would impact the program, if it would cost additional money to taxpayers in order for us to get the banks to play along with it ... I just want to see what works within the constraints of the resources that we have.”
Obama did indicate, however, that bank bailout money is being eyed for housing — a move supported by Titus, Reid and Rep. Shelley Berkley.
“If those resources are now available and can be recycled in even more help for homeowners, that’s something that is worth considering,” Obama said.
Last week Titus, Berkley and other House lawmakers sent a letter to Geithner saying the additional funding could “help more principal homeowners in severely affected areas to stay in their homes.”
The legality of reusing the funds has been questioned by other lawmakers who argue the bank bailout law was more narrowly drafted.
Obama seemed well aware of the potential battle ahead.
“We may need some cooperation with Congress if we end up doing that,” he said.
“One of the things that we’re having to struggle with is the magnitude of this recession. The depth of it — starting back in September but really picking up speed in the first of January — meant that a lot of the resources were used up very quickly.”
The Treasury Department could not immediately comment on when it will produce the president’s request for a program evaluation. It could also not say how many foreclosures have been prevented since the Obama housing plan was launched.