Amid a buffet of government-run mortgage relief programs that many struggling Nevada residents say they’ve heard nothing about, Bruce Breslow thinks he finally has a program that fatigued homeowners will pay attention to.
The proposed program would have the state create a $150 million nonprofit to buy up distressed mortgages en masse and refinance them. The newly appointed director of Nevada’s Department of Business and Industry thinks it could help chip away at the tens of thousands of mortgages in Nevada that are severely delinquent.
“I think the ‘shadow inventory’ is the main thing that’s keeping home builders from moving into Nevada,” said Breslow, whose department typically regulates business and administers bond programs to encourage business growth. “The threat of 52,000 homes marching toward foreclosure keeps it unstable.”
The Home Means Nevada Home Retention Program, named after the state song, would buy “pools” of underwater mortgages from the federal government at a 30 percent discount, using funds from the national mortgage settlement and federal sources, then work with the homeowner to refinance the house.
The homes would be pre-selected, and the state would inform homeowners whose mortgages are in the pool. The program would not be available to everyone who wants to opt-in.
Breslow said banks should be doing the work of dealing with properties in limbo, but they aren’t. He cites Assembly Bill 284, an anti-robo-signing state law that requires more paperwork for a lender to foreclose. The law, which took effect in October 2011, coincided with a steep drop in initial foreclosure notices in Nevada.
Banks also are stymied by a “moral hazard clause,” which prevents them from helping one homeowner without helping another equally, Breslow said. A nonprofit would be able to bypass that hurdle.
Breslow testified about his department’s plan during the first week of the Legislature, and a department spokeswoman said lawmakers have asked for a completed business plan before they draft a bill to put it in place.
The plan likely wouldn’t be finished until March or April, and Breslow estimates the program would be in place in six months at the earliest.
“We wanted to tackle what we believe is the final obstacle in the market,” Breslow said. “Home prices have stabilized. The concern from the housing experts is … shadow inventory.”
It’s not the first time the government has offered a hand to struggling homeowners. But whether those programs have done much to help Nevada’s hardest-hit housing market is debatable.
In a survey of 500 struggling Nevada homeowners who experienced or approached foreclosure, the Nevada Association of Realtors found 72 percent think government foreclosure prevention problems either aren’t having an impact or are making the situation worse.
In a similar survey in 2011, surveyors asked about four specific programs. Eighty percent of respondents said they had never heard of the Home Affordable Foreclosure Alternative, while 56 percent said they’ve never heard of the Home Affordable Modification Program, 55 percent hadn’t heard of the Nevada Foreclosure Mediation Program, and 65 percent had never heard of MakingHomeAffordable.gov.
Christopher Preciado, a community organizer with the liberal-leaning coalition Progressive Leadership Alliance of Nevada, thinks it’s a publicity issue.
“It’s a lack of marketing, and the program just isn’t out there in the community,” he said, noting that struggling homeowners are likely to turn to the bank first but don’t know where to turn if that doesn’t work. Government programs “don’t have the name recognition” that the banks do, he said.
Real estate experts say people who are seriously behind on their payments or have stopped paying altogether aren’t reading their mail and aren’t answering their phones, perhaps in an effort to avoid collectors.
Bill Uffelman of the Nevada Bankers Association is skeptical that such large numbers of people don’t know there’s help. He thinks many people with delinquent mortgages simply don’t see banks foreclosing on people who skip payments, and decide not to pay themselves.
“It’s amazing how many people say they don’t know these programs exist. The stories are there,” Uffelman said. “The reality is there are a lot of people in Clark County and Nevada saying, ‘I didn’t have to pay my mortgage for the past two or three years. You’re the dummy (for paying).’”
Breslow acknowledged that it won’t be easy to get the point across to every homeowner who is eligible for his program. He said he’d use any means necessary to spread the word, including personal visits to homes.
He also thinks the program’s effort to dramatically shrink someone’s mortgage — from, say, $400,000 down to $200,000 — sets it apart from smaller-scale relief programs.
“They reduce it slightly or put a dent into it,” Breslow said of government programs currently in place. “We’d refinance — not just give a little bit.”
His optimism aside, Breslow said the $150 million pot of money can only go so far. That might help 700 or 800 homes, until people whose mortgage the nonprofit buys can pay back into the fund and replenish it, allowing the program to bring in new underwater homes.
“It’s not a panacea,” he said. Still, “Doing nothing doesn’t help our situation.”