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July 30, 2014

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Nevada Legislature 2013:

Legislature approves plan to help homeowners with defaulted loans keep their house

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A foreclosed home is seen Thursday, April 28, 2011.

A legislative subcommittee has approved a $149 million program to help thousands of Nevada homeowners who became delinquent on their loans from 2002 to 2008.

Assemblyman Paul Anderson, R-Las Vegas, said he was initially concerned this might be competing with the private sector. But after getting more information, he said: “I’m very confident they can build a successful program.”

The state Business and Industry Department will be working with private companies to fashion the details. The goal is to identify underwater properties with defaulted mortgage loans before foreclosure has started.

The Home Retention Program would buy the delinquent property at a discount and resell it to existing occupants at current fair market value, thus providing a mortgage loan the homeowner can afford.

The department estimates it will acquire 4,600 mortgages with a goal of keeping 50 percent of these individuals in their homes in the next seven years.

Business and Industry Department Director Bruce Breslow said there will be only a handful of state workers to oversee the program that will be run by a nonprofit corporation.

It will be financed by $49 million from a national mortgage settlement fund and $100 million from the U.S. Treasury Department. Breslow said his staff is working with the Treasury Department to set the guidelines for what homes will qualify.

Financial experts for the Senate-Assembly Budget Subcommittee gave an example: A home with a value of $417,000 in 2007 may be worth only $200,000 today. But the balance due is $376,395 with monthly payments of $2,425. Under the purchase plan, the home would be refinanced at $200,000 with a monthly payment of $1,200.

The nonprofit would take possession of the home, rehabilitate it and sell it to owners who intend to live in the property. The home would not be sold to investors.

The homeowner must demonstrate income that can meet the reduced payments. For those unable or unwilling to take part in the program, there could be money to provide a security deposit for rent and two months of rental assistance on a case-by-case basis.

Any unspent money at the end of the seven-year project would be returned to the state.

“This can really help our folks,” said Senate Majority Leader Mo Denis, D-Las Vegas.

But he and others suggested that the department report periodically to the Interim Finance Committee on its progress.

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  1. Using their example.

    They are now going to sell this house to the homeowner for $200k. They are forgiven about $175k.

    In a few years when the house may be worth $250k these folks get to sell it and pocket the $50k profits.

    How about making sure any of those profits have to go back into the program to help others instead of letting people profit off of the program.

    I also don't understand only 50% ending up back in their homes. Why buy it in the first place if the homeowner does not want to live in it?

    Lots of details missing here. Have a feeling this program has not been thought out well.

  2. Is there anyone who went delinquent on their payments in 2008 and is still in their home now?

  3. Are these the same home owners who took out loans they could never ever pay back in the first place regardless of the direction of the economy?

  4. In response to Commenters Scott and Joan, I would fall into the category of being such a homeowner. I am still in my home, first purchased this property in 2005, had my job here in Clark County since 2004, and although I am gainfully employed, circumstances beyond my personal control has adversely impacted me, to wit: as a teacher, my salary has seen NO cost of living adjustments nor increases, and I have to "do more with less"; the economic crisis caused my property value to drop significantly; add insult to injury, the City of North Las Vegas and the powers that be (I shall reframe from being negative), built a waste water treatment plant about 500 feet from my property without my consent (and furthermore, they attempted to NOT inform those of us closest to that facility by sending incomplete public notices--that's another terrible story), which made it next to impossible to sell, rent out, or lease out this property with the presence of the waste water treatment plant...I and my neighbors have been harmed beyond all measure...living with the stigma, the constant noise, the bugs, the smell.

    Although I am and have avoided defaulting on my loan, it is a struggle, to say the least, and this plan to help homeowners would really be most appreciated by me and folks like me. I am not the type who takes out second and third mortgages to live lavishly. I live a very frugal existence. Hope this provides some insight. Thank you.

    Blessings and Peace,
    Star