Nevada Plan Targets Hard-Hit Homeowners

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RENO, Nev.-The Nevada Affordable Housing Assistance Corporation is preparing to work with credit unions on a new government-funded program designed to reach thousands of homeowners who are unable to pay their mortgages due to continuing high unemployment.

Nevada is one of several states that will be part of the "Hardest Hit Fund," to which the U.S. Treasury Department is allocating $1.5 billion.

Lon DeWeese, a board member for the Nevada Affordable Housing Assistance Corporation, said the private non-profit was selected by Nevada Housing Division to carry out this work as the money cannot legally pass directly from the state to homeowners. "There is $136-million available to help people who can't pay their mortgages due to unemployment-but not everybody and not the full amount," he said. "This includes a recently added $34-million that is strictly for the unemployed who have a reasonable chance to become re-employed and need assistance to help them over the bridge period."

The program has three elements, DeWeese told Credit Union Journal. The first manages first mortgage principle reduction on a matching basis to reduce principle for qualified borrowers. The second-in which credit unions may become involved-is a second lien release program that aims to eliminate second liens, up to $41,250, that are keeping borrowers from qualifying their first mortgage loan for modification. The third component is a short sale acceleration program, which will provide some of the transaction and moving costs for people who are trying to get a short sale accomplished.

High Percentage Of Second Loans Is Key

Credit unions, DeWeese explained, have a very high percentage of second loans, as opposed to carrying conventional first mortgages, which is why the Nevada Housing Division wants CUs involved in that part of the program.

"We have drafted contracts and will be reaching out through the mortgage lending division to Nevada-chartered institutions; both credit unions and banks," he said. "We will work with borrowers who come to us, and we think the institutions may be able to identify qualified borrowers."

Walk-ins who go to the NAHAC website or call the organization will go through screening to determine if they qualify for one of the three programs. The NAHAC will contact the appropriate servicer or lender to gauge its interest in the matching arrangement. The program will put cover 40%, leaving the CU or bank to put up 60% to extinguish the lien.

As lenders/servicers examine files, they might identify other borrowers who qualify, DeWeese continued.

"Credit unions have a pretty good idea who their problem second lien loans are. It is a matter of providing them with screening and qualification criteria."

The program is scheduled to commence in the second half of September.

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