Monday, March 30, 2009 | 9:49 p.m.
Beyond the Sun
Local housing officials say they fear some banks might not want to participate in a federal program to help low- and medium-income buyers purchase foreclosed homes because it mandates a 15 percent discount on already depressed prices.
But a regional director for the U.S. Department of Housing and Urban Development said most big national lenders already have committed to take part.
“It’s not going to be as difficult as people think it is,” said Ken LoBene, field office director for HUD in Las Vegas.
Through the program, HUD will provide Clark County and the three cities in the valley $18.5 million combined through the Neighborhood Stabilization Program. The program allows local governments to provide down-payment assistance and closing costs to buyers who fall just short of qualifying on their own to buy a repossessed house.
The county and cities crafted a plan to distribute the federal money through nonprofit home-buying agencies and met with those agencies on Monday to explain the process.
One provision of the program requires that sellers must give buyers at least a 15 percent discount on the assessed market value.
Homes, however, already are selling 35 to 50 percent lower than at the market’s peak, said Kathy Somers, neighborhood outreach manager for the North Las Vegas Office of Housing and Neighborhood Services.
The mandated discount could turn lenders away from potential buyers with the federal program and toward buyers willing to pay full market value without the government’s assistance, she said.
“Why should the seller — the bank — accept 15 percent less if the market is competitive and they’re getting all these offers?” said Kristin Cooper, a principal planner with the Clark County Community Resources Management Division.
That won’t be an issue, said LoBene, the HUD field office director in Las Vegas.
Most national lenders, including Freddie Mac and Fannie Mae, have already agreed to participate in the program because of the relatively small number of homes it will remove from the inventory, he said.
Clark County has identified 12,000 foreclosed properties in the valley. The four local governments received enough funds to help about 700 to 1,200 buyers purchase foreclosed homes.
Under the program, home buyers who qualify could receive up to $50,000 to cover down payment and closing costs. Part of that assistance would cover rehabilitation costs to bring homes up to code.
Qualifying buyers cannot own property or earn more than 120 percent of the area median income — $53,700 for an individual or $76,700 for a family of four.
The amount of assistance they qualify for depends on the individual’s personal finances.
The county and cities targeted low- and medium-income neighborhoods with numerous foreclosed properties with the intent of preventing blight and crime, Cooper said. However, the local government agencies didn’t want to concentrate too much of the money in one area because the 15 percent discount could drop surrounding property values lower.
“If it’s broad enough in enough neighborhoods, hopefully that won’t happen,” Cooper said.
In mid-April, the local governments will select the agencies that qualify to distribute the funds, which home buyers could start receiving this summer.
“We believe that in order to get the money out there, to get people assisted, we’re going to be needing to work with many different organizations,” Cooper said.
But smaller assistance agencies worry that the program contains no guarantees that they will be reimbursed for costs incurred while helping people through the process only to lose out to a buyer willing to pay full-market value.
The nonprofit agencies would lose their fees. They aren’t looking to make money but at least need to break even, said Margarita Rebo, director of Community Services of Nevada.
Her agency has just three employees who assist 25 buyers a year and hundreds more through educational classes. The stabilization program also would require her to hire more workers to handle the additional regulations and paperwork.
“The government wants the nonprofit to do all the work but does not want to pay for the administration that we need,” she said. “We could help a lot more people, but the funding is scarce.”