Working with HUD and the Treasury Department, the state of Nevada plans to purchase “severely delinquent underwater loans” from the Federal Housing Administration and refinance the homeowners so they are no longer in a negative equity position.
“To qualify for this program, the homeowner’s loan must be among the pool of loans acquired by the state from FHA or other program partners. Homeowners will be notified and invited to refinance their current mortgage,” according to a press release.
Nevada’s Department of Business and Industry will use a portion of the National Mortgage Settlement to fund the $150 million program.
Called the “Home Retention Program,” the state will create a nonprofit entity to administer the program and purchase delinquent underwater loans at a 30% discount to the current market price.
“The Department of Business and Industry is working with FHA to identify a qualified pool of these mortgages in Nevada,” the press release says.
In refinancing the borrower, the amount of the mortgage will be reduced to the current market value of the property. Qualified borrowers will end up with a 30-year fixed-rate mortgage at the current rate. Once the loans are seasoned, the state plans to sell them to investors.
In cases where the delinquent homeowner does not want to participate in the program or the property is vacant or abandoned, the department hopes the legislature will create a fast-track foreclosure process.
Such legislation would allow the Home Retention Program administrator to quickly clean and repair the homes so they can be sold to first-time homebuyers and owner-occupants.
Too many foreclosed properties are sold to investors and converted into rentals, which typically don’t improve property values, according to the Nevada department.