Thursday, Aug. 23, 2012 | 2 a.m.
When the nation’s five largest banks reached a settlement with the federal government and 49 state attorneys general over their role in the national housing crisis, the banks agreed to give Nevada $57 million to address the housing crisis.
Now it’s time to spend the money.
At a legislative meeting today, Nevada Attorney General Catherine Cortez Masto will propose spending $33 million in the next three years to set up a one-stop call center for distressed homeowners, beef up community groups that provide housing assistance and launch an advertising campaign to promote it all.
“The goal is to help homeowners use the collective resources we have in the state, for free,” Cortez Masto said in an interview in Carson City on Wednesday.
The money will also be used to add staff to her office, including a coordinator to look at deceptive trade practices in housing and other industries, according to an attorney general staff report.
The rest of the money will be used for yet-to-be-determined housing programs that the Attorney General’s Office and community groups are still evaluating.
The program will be presented to the Legislature’s Interim Finance Committee today for consideration.
Cortez Masto said she expects the call center and community partners to help 30,000 homeowners in the first year. She said “distressed” homeowners include people at risk of losing their homes, wanting to do a short sale or concerned about how underwater their house might be. Counselors will direct them to programs, either through the government or as part of the multistate bank settlement.
Nevada has been among the states hardest hit by the housing market’s collapse in the late 2000s, after an exuberant run-up in prices. Coupled with a highest-in-the-nation unemployment rate, the state for months led the nation in foreclosures.
An estimated 60 percent of mortgages in Nevada are at least 25 percent underwater, according to real estate tracking firm RealtyTrac.
The agreement settled state and federal investigations into so-called “robosigning” — a practice in which banks servicing the loans routinely signed documents without knowing whether the facts they contained were correct.
Lawmakers declined to comment on Masto’s proposal until today’s meeting. Gov. Brian Sandoval’s office did not respond to a request for comment. But Sandoval has already committed to using the money from the settlements to help homeowners.
Five of the nation’s largest banks — Bank of America, Wells Fargo, Citi, Chase and Ally — entered into the multistate settlement that agreed to certain terms with states, such as setting aside money for principal reductions, short sales and relocation assistance.
It was through part of that deal that Nevada received $57 million to help “distressed homeowners.” Under a separate deal with Bank of America, Nevada received $30 million.
Cortez Masto vowed to protect Nevada’s foreclosure settlement money from being used to balance the state’s general fund. In the past five years, the Legislature and governors have taken money from other accounts, including tobacco settlement money that had been set aside for the state’s Millennium Scholarship, to help balance the state’s general budget.
Lawmakers also may question the effectiveness of the programs available to troubled homeowners. The existing federal programs intended to help the housing market initially were deemed ineffective, particularly in Nevada.
Cortez Masto said homeowners are frustrated about where to turn.
“Part of what I’ve seen is that homeowners don’t know where to go,” she said.
But as part of the national settlement agreement, banks have agreed to work more with homeowners, including forgiving principal, refinancing mortgages and offering relocation assistance. The one-stop center will help the state monitor compliance, Cortez Masto said.
The unspent money from the housing settlements will be part of the second phase of spending. Cortez Masto's office and housing groups are reviewing applications for programs.
The Financial Guidance Center, a nonprofit based in Las Vegas formerly known as the Consumer Credit Counseling Service of Nevada, will serve as the lead nonprofit in the effort.
The foreclosure settlement will fund a total of 73 positions for groups, including the Financial Guidance Center, Community Services of Nevada, Housing for Nevada, Chicanos Por La Causa, Nevada Legal Service and Legal Aid Center of Southern Nevada.
An existing hotline is expected to be fully staffed by the third week in September, Cortez Masto said. The public relations and advertising contract will be for about $950,000 and will include outreach and television ads. Masto said it’s important to advertise the project because homeowners might be frustrated.
“They’re fatigued,” she said.