Citing the overhang of distressed homes as a major stumbling block to recovery, a Nevada official is proposing a new program for reducing it. According to the Associated Press, Bruce Breslow, Director of Nevada’s Department of Business and Industry, wants to use federal and other funds to purchase about $150 million in delinquent mortgages and substantially reduce the principal balance.
Under the proposed Nevada Means Home Retention Program (Nevada Means Home is the state song) would create a non-profit organization which would use funds from the national servicers settlement and the Hardest Hit Program to purchase pools of mortgages at a 30 percent discount and restructure them at a balance that reflects actual collateral value. Nevada is one of five states that gets Hardest Hit Funds and is already running several programs with the money including a modification program, and both principal reduction and principal curtailment initiatives.
The program appears to differ from those proposed recently by counties in California, Illinois and Massachusetts in that the loans would be purchased rather than taken through eminent domain and the state would hold the loans rather than immediately reselling them.
Breslow told a legislative hearing that the foreclosure inventory is keeping home builders from moving into Nevada and that current foreclosure prevention programs are not reaching many homeowners who tend to avoid answering the phone or reading mail once they become delinquent. He estimated there were some 52,000 homes in some stage of foreclosure in Nevada which, according to RealtyTrac, was the number one state for foreclosure activity for over 50 straight months. It still ranks in the top five. Breslow said banks should be dealing with these properties but are not doing so.
Homeowners could not choose to participate; the non-profit would buy loans in the same manner as other bulk purchasers and then inform homeowners of the program. Breslow said that unlike other programs the reductions in principal would be significant enough to make a difference in the homeowner’s carrying capacity. He estimated that there would be only enough money to help 700 or 800 homeowners initially but as those homeowners pay on their mortgages and replenish the fund the non-profit could increase its reach.
The legislature has asked for a more comprehensive plan for the proposed non-profit and Breslow estimates that the program, if approved, would not be in place for at least six months.
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