$200 million from federal government was given to Nevada to avoid homeowners from losing their homes. Nevada had the highest foreclosure rate in the nation but a Reno Gazette-Journal analysis of the fund distribution confirms that the money was almost intact in the past two years.
Nevada only spent $21 million of the $194 million it was to be paid to homeowners facing foreclosure, this means only 11% of the money it received through the Obama administration’s Hardest Hit Fund, this is according to the most recent reports of the analysis of U.S. Treasury the third quarter of 2012
“This is government bureaucracy at its finest,” said Victor Joecks, communication director of think tank Nevada Policy Research Institute. “They can’t even give away $200 million. This program is a perfect example of why government shouldn’t pick winners and losers in the economy.”
According to Nevada Hardest Hit officials, just in January, the nonprofit gave $7.2 million in direct aid to help homeowners avoid foreclosure. A total of $28.4 million was given by the program since it began in mid-2010, which is only 5% of the allocation. More or less 25 % of what they have given out was given out in January.
Mortgage assistance and principal reduction are the two separate components of the state Hardest Hit Fund program that has much given the aid. 75 percent of the budget went to direct aid from July 2011 to June 2012; this is another analysis of yearly financial statements obtained directly from the nonprofit.
“We are getting more money out of the door than we have ever before in a much shorter time frame,” said Candice Kelley, Nevada Hardest Hit Fund executive director.
Federal help to hardest hit
Many have tried to attend to the greed and carelessness that caused the housing crisis, they are the Government programs, public policy changes and a closer eye on financial service providers yet there are still many homeowners suffering from the collapse of the housing market.
And Hardest Hit Fund was one of those who are concerned homeowner programs.
Hardest Hit Fund was launched in 2010 by the Obama Administration mainly to help distraught homeowners in places that suffers from deep home price declines and high unemployment. Nevada together with 17 other States and the District of Columbia are getting more than $7.6 billion to help homeowners prevent foreclosure. The program ends in 2017.
“What states have had to do through this program is really unprecedented,” said Andrea Risotto, spokeswoman for the U.S. Treasury Department. “They have created their own servicing shop so that they can directly assist homeowners, evaluate them for help, process their application and help them transition from one form of assistance to another.
Each state verifies what support their residents need, including mortgage assistance, short sales and unemployment programs.
Out of the $7.6 billion, Nevada was given $194 million. Nevada Affordable Housing Assistance Corp., a nonprofit organization, was selected to head the program for the Nevada Housing Division. Mortgage payment assistance, principal curtailment, short-sale assistance and second lien assistance, are the types of programs Nevada offers.
The objective is to lend a hand to more than 10,000 Nevada homeowners avoid foreclosure.
Kelley, the nonprofit’s executive director said that the program didn’t want to overextend its allocated fund and needed to process the applications it already had in the pipeline. This is because the nonprofit had to stop accepting new applicants in mid-December since of the increase in the number of Nevadans asking for aid.
She further added, the Hardest Hit Fund is aggressively working through the current applications, and the fund will reopen to new applicants.
Nonprofit and Treasury officials said when much of the first year of the Hardest Hit Fund’s existence was focused on setting up the infrastructure, staffing and marketing the program, many people, including mortgage companies and banks, were unaware of the program and its requirement, making it hard to help distressed homeowners.
“There are a number of states where we are still seeing homeowners really reluctant to reach out for help,” Risotto said.
Both Kelley and Risotto said that, also those homeowners who did apply early on were discouraged because they were rejected on eligibility requirements. After that, the program has altered its eligibility requirements more than a few times to comprise a wider range of people. Those who were formerly discarded now could meet the criteria if they reapplied.
Nationally, more than 100,000 homeowners were helped with $1.1 billion of direct assistance since the program began, Risotto said. About $1.7 billion out of the $7.6 billion has been committed or budgeted to homeowners for future payments.
California, with the highest allocation of almost $2 billion, has helped more than 22,000 borrowers. North Carolina, Michigan, Ohio and Florida follow, Risotto said.
Joecks, with the Nevada think tank, said the only people who benefit from the program are the politicians who use it to generate publicity. The institute is against the Hardest Hit Fund program because it believes it is unjust, he said.
“It’s a perfect case study of how the government promises something, and it doesn’t end up being delivered as promised,” Joecks said.
“The Hardest Hit Fund rewards those who make poor financial decisions at the expense of those who make good ones.”
Who did it help?
According to the latest quarterly performance report the state submitted to the U.S., there were more than 6,000 applicants in the past two-and-a-half years and more than 2,700 homeowners have been given assistance by the Nevada Hardest Hit Fund since they are the only ones who qualified. Nearly all borrowers made less than $50,000 and cited either unemployment or Sharon Logue applied for the program in August and was approved for principal reduction assistance in January.
Since six years ago home prices skyrockets, she bought her Carson City apartment at the peak of the market because it’s all she could afford that time.
“I thought I was doing great, but then things just went downhill,” she said.
After another six years, her home is values 30 percent of what she initially bought it for. Her mortgage payments make up nearly half of her paychecks after a job change last year and decrease in salary.
“Right now, it’s paycheck to paycheck,” she said. “I can’t save any money because I don’t have any extra money. If there’s an emergency, whip out the credit card and take care of it later.”
Logue makes her payment every month and is looking into ways to stay in her home.
“Usually, I don’t ask for handouts,” she said. “I’m very stubborn and have my pride, but there are just some times you have to put those aside and ask for help to make life better.”
Her loan servicer was not able to help her either because of restrictions in her private mortgage insurance. You must get PMI when the down payment is less than 20 percent of the value or sales prices. Then she discovered Hardest Hit Fund in August.
“I didn’t want to foreclose,” she said. “To me, that’s not right.”
She found that the Hardest Hit Fund staff was helpful.
She was given $50,000 in January in principal reductions but she has run into the same PMI roadblock as she did when she tried to refinance. Every the bank representatives told her that she is blocked from any action because of who the PMI is with or the type of PMI.
Now she is finding other banks that might take on her loan.
“I’m at a block,” she said. “ … Something needs to happen or else I’ll be stuck.”
She is determined not to get foreclosure although she has until May to obtain the financing to use the Hardest Hit Fund.
“It’s like right there,” she said. “I have their certificate, but now, I’m stuck.”
Middle of the pack, but not for long
Even as Nevada spends its share of the federal money to help homeowners slowly, it falls in the middle of the pack for the 18 states and Washington, D.C., that also received money through the Hardest Hit Fund.
Oregon had spent about 40 percent of its allocation which is $88.7 million by end of the third quarter in 2012. This is the latest date provided by the U.S. Department of Treasury. Washington, D.C. Rhode Island on the other hand, according to the RGJ analysis, follows by using more than 30 percent of their money.
Arizona is the state slowest to spend, only $11.6 million was spent which is 4 percent of its $268 million. 6 percent of their share was spent by New Jersey, Georgia and Indiana.
According to the administration responsible for the money in Nevada, the said slowness of distributing the funds to responsible people who need the funds and stabilize the economy is sensible. But Joecks sees otherwise, they have had three years to develop a more efficient process.
Joecks also countered the program for only helping rareness of underwater homeowners in Nevada. That’s not enough to make a difference in the overall housing market, he said
According to the latest data released by real estate data provider CoreLogic in January, the total value of all U.S. homes with negative equity during the third quarter of 2012 was $658 billion.
“States have to make decisions about how to balance helping homeowners and protecting taxpayers because it’s a government-funded program,” Risotto said. “All the states have been looking closely at their data that they are gaining from the first months of their program implementation and trying to make smart decisions about who is still struggling in their state and how they can best reach them to prevent foreclosure.”
The Hardest Hit Fund is just one tool in a host of other offerings to help distressed homeowners, U.S. Treasury officials said.
“It is a targeted program to help address some of the needs struggling home owners are facing in these states,” Risotto said. “It is meant to complement many of the other efforts federal and state governments already have under way and that mortgage companies, themselves, are offering today, that they weren’t even offering a year ago.”
Lately, the help to distressed homeowners sped up, the nonprofit Nevada Hardest Hit Fund has its distribution of U.S. Treasury funds a bit more faster.
“We are trying to be appropriately conservative with administrative costs,” Kelley said. “We want to make sure we have the right people on hand so that we can quickly respond to these applicants.”
In answer to the boost in applications this year, the Nevada Hardest Hit Fund gave jobs to more than 40 people. It has nearly tripled that number through community partnerships to process the applications.
Before the application process was put on hold in mid-December for those already in the pipeline, the nonprofit was getting at least 800 phone calls a day, Kelly said. She was unable to say how many borrowers currently are in the application process.
With the current trajectory of funds being approved, she said, hey will allocate all of the $194 million before the 2017 deadline.
“We suspect that the future outlays for the months to come will continue to be more and more aggressive because the demand is there,” she said. “We have expanded out partnerships so that we can respond in a faster way.”
The participating states expect that they will have spent a majority of the allocated funds by 2014, three years ahead of schedule, Risotto said. Rhode Island closed its application process in January, because it already has committed all of its funds. Several other states are expected to close this year also.
“We are all very committed to getting the assistance out of the door as quickly as possible while the need is still so great,” she said.