Obama to announce new foreclosure rescue program in Las Vegas

By Lisa Mascaro

Published Friday, Feb. 19, 2010 | 3 a.m.

Updated Friday, Feb. 19, 2010 | 8:57 a.m.

President Barack Obama will announce today during his visit to Las Vegas a new foreclosure rescue program, pumping $1.5 billion into Nevada and other hard-hit states to help housing agencies rework mortgages and save homes.

The president’s program, drafted at the urging of Senate Majority Leader Harry Reid, comes as Nevada’s housing crisis continues unabated while other regions show improvements, contributing to a dismal economic environment that is threatening electoral fortunes this fall.

Both Obama and Reid know that until the economy begins to show signs of improvement, Democrats, the party in power, will likely suffer at the polls in struggling states such as Nevada.

The program is also an acknowledgment that federal efforts have fallen short, as banks have been unwilling or unable to rework mortgages to keep families in their homes.

Under the program, state housing departments in Nevada, Arizona, California, Florida and Michigan will share $1.5 billion toward foreclosure aid.

The money will be divided by a formula based on the number of unemployed residents and the decline in home prices, which means California and the bigger states would likely get the lion’s share. Nevada is expected to receive at least $100 million.

The feds are unleashing the funds to encourage the states to tap innovative ways to help homeowners, saying states have expertise in local market conditions. A White House official pointed to programs under way in Massachusetts, Connecticut and Pennsylvania as possible models.

States could use the money to:

• Provide bridge loans, as is being done in Pennsylvania, to help unemployed homeowners pay the mortgage until they land jobs.

• Provide incentives to lenders to rewrite upside-down mortgages — when a homeowner owes more than the home is worth, as is the case in 70 percent of Las Vegas.

• Provide incentives for lenders to rewrite second liens, a common barrier for homeowners trying to refinance.

“President Obama recognizes the challenges facing our families in the nation’s housing markets, where local conditions vary considerably,” the White House said. “The legacy of price declines, together with the effects of high unemployment, means that many working- and middle-class families in these especially hard-hit areas are facing serious challenges, in many cases beyond what their families’ resources can handle.”

Julia Gordon, a senior policy counsel at the Center for Responsible Lending, said the extra money could help Nevada’s mediation program bring in more staffing and resources to help homeowners.

But she cautioned that while states can put the money to good use — states are doing innovative work to stem the crisis in local regions — the White House should still work to address the housing crisis on a national level.

“It’s certainly an acknowledgment that we need to do more, and we’ve long said this needs to be attacked on all fronts,” Gordon said.

“For these five states it’s a heck of a lot more than they have in their budgets right now,” she said. “But we do need to do something more at the federal level.”

Nevada’s homeowners have particularly struggled because home prices have fallen precipitously as unemployment skyrocketed to 13 percent.

Normally, if a bread-winner loses a job, a family could refinance or relocate, relying on their home equity to temporarily make ends meet. But with so many Nevadans upside down on their mortgages, they are trapped in their homes yet without paychecks to pay the mortgage.

Reid said the $100 million headed to Nevada “will go a long way toward helping to keep people in their homes and assisting those who are underwater.”

The money would go to the state’s Housing Division, the agency that offers housing counseling, low-income loans and down-payment assistance, often for moderate-income and first-time homebuyers.

In other states, housing agencies are running various programs to help homeowners through the crisis. Nevada last summer established a mortgage mediation service that is trying to provide homeowners another avenue for working with banks to modify or refinance their loans.

Democratic Rep. Dina Titus also has been pushing the Obama administration to do more to help homeowners in Nevada.

The congresswoman's Southern Nevada district has one of the nation's highest rates of foreclosures and she has repeatedly pressed the president, his Treasury secretary, Timothy Geithner, and Housing Secretary Shaun Donovan to improve existing rescue programs to better meet the demands for aid in Nevada.

"Southern Nevada, and the district I represent in particular, has been ground zero as Nevada has led the nation in foreclosures for far too long," Titus said.

“I have been working hard with Secretaries Donovan and Geithner to convey the depth of the housing problem in Southern Nevada, and I am pleased that President Obama is taking this important step to provide our community with additional resources that will help families remain in their home."