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Oct. 05, 2007
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Homeowners won't get state bailout

Gibbons urges banks to work on problem loans

By JENNIFER ROBISON
REVIEW-JOURNAL
Housing
Housing in Las Vegas
More Information


PLAN FOR RELIEF ADVANCES IN CONGRESS
WASHINGTON -- Financial relief for homeowners facing foreclosure or in bankruptcy advanced in the House Thursday as the House approved legislation to help financially strapped homeowners.

The bill passed by a 386-to-27 vote would give a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or reworking of a loan. The value of that forgiveness, which is now taxable as income, would become tax-exempt.

While the measure is anticipated to reduce the taxes of some strapped homeowners by $650 million, it also looks to help offset that by limiting a tax break available on the sale of second homes.

Another measure, narrowly approved by a House Judiiary subcommittee and opposed by Republicans on the panel has been sent to the full Judiciary Committee. It would revise the bankruptcy code to help homeowners facing default and foreclosure.

THE ASSOCIATED PRESS


Nevada official Charles Horsey, Nevada Gov. Jim Gibbons and Director of Business and Industry Mendy Elliott respond to housing summit questions on Thursday.
Photo by John Gurzinski.

Nevada homeowners facing foreclosure on their houses won't be getting any financial help from the state, but they could soon find that mortgage banks are more willing to renegotiate terms on problem home loans.

About 35 Nevada-based home-lending professionals from companies including Bank of America, Countrywide Homes Loans and Wells Fargo Bank held a summit Thursday with Gov. Jim Gibbons to discuss ways to ease Nevada's growing foreclosure rate. Their solutions revolved around reconfiguring delinquent loans and mounting a statewide consumer education effort. None of the ideas involved a bailout using state funds or grants to assist homeowners.

The state can't force private businesses to alter mortgage contracts with customers, Gibbons said, but lenders attending the summit said they're willing to re-examine the terms of mortgages on the cusp of foreclosure. One bank executive said his business would review 1,100 unconventional or subprime mortgages in the state to evaluate how company officials could tweak interest rates or mortgage lengths to help keep borrowers in their homes.

"Each situation is unique, and involves different people in different circumstances with a common problem," Gibbons said at a news conference following the closed summit. "Assistance available through lenders will be the catalyst to help buyers in trouble. Sometimes, a lender can make an adjustable-rate mortgage a fixed loan, or they can extend the years on the mortgage.

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    • "I'm convinced the way out is addressing each individual problem one at a time," Gibbons added.

    Rejiggering loan terms could be complicated in some cases because banks bundle home loans and sell them to investors on the secondary market. Gibbons said banks have indicated that some secondary-market investors are increasingly willing to grant latitude on changing loans to prevent defaults.

    Consumers in Nevada can also expect an informational campaign in coming weeks, as state officials and banks work to educate borrowers about their options.

    The state is preparing a Web site that will link to lenders and financial counselors. The site will also contain details on potential solutions for homeowners facing delinquency or foreclosure. A public-service announcement will direct borrowers to agencies and companies that can help them out of a mortgage pinch. The idea is to remind consumers that they should work with their lenders to keep their homes, and to educate them on keeping their budget problems from getting worse.

    "There's no silver-bullet solution," Gibbons said. "We didn't get into this overnight, and it won't end overnight. It will take us some months to get out of it."

    Gibbons will also assemble a task force of industry members and state and local officials to examine the foreclosure issue in more detail. Mendy Elliott, director of the state's Department of Business and Industry, said the task force should have its first meeting within about three weeks. Gibbons will also call a second summit that will include Realtors, contractors and credit counselors to discuss the wave of mortgage defaults in the state. The group should meet shortly after the task force has its first session.

    In addition, state officials are planning a series of "home-stay" fairs that would connect homeowners with mortgage troubles and lenders who could help them. The fairs will visit local high schools by year's end.

    Gibbons noted Sept. 20 in a speech to a local business group that the ailing housing market was beginning to affect the state's economy, and said he would convene a housing summit with Nevada's biggest lenders to discuss the issue.

    Data from California research firm RealtyTrac show that Nevada led the nation in mortgage defaults, with one foreclosure for every 165 households. That's three times the national average of one foreclosure for every 510 households.

    The jump in foreclosures and mortgage delinquencies, combined with the ensuing housing credit crunch, has bolstered unemployment and depressed taxable sales in recent months, Gibbons said last month.



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    Shawn wrote on October 07, 2007 05:17 AM: Even more disturbing, some landlords in this situation neglect to inform the tenant of the impending foreclosure and continue to collect rent as if everything was normal.
    Services such as RentalForeclosure.com give renters the opportunity to check their address against an online database of default notices. Knowing that their home could possibly be foreclosed on does not necessarily give them any more rights but it could however give them the advance notice to avoid having to move in as little as 24 hours.


    HomeinVegas wrote on October 06, 2007 10:29 PM: Gibbons is too busy being a yes man to the casinos. Forget bailing out the homeowner. Time to go after all the sleazy mortage brokers that ripped off the families purchasing these homes. These guys need to go the way of ENRON!!!

    Here are the facts on the real criminals in this passion play ..Mortgage brokers' sleight of hand http://www.boston.com/business/personalfinance/articles/2007/10/02/mortgage_brokers_sleight_of_hand/


    D wrote on October 05, 2007 03:45 PM: The danger of this Tsunami was clear!
    It was the fault of loose regulations, and fraudulent practices on the Appraisers, Loan officers, and Real state agents. Further fault lies in the "used car" Investment bankers that are smart enough to sell bridges to anyone, thus all of the money dumped into REITS and hedge funds. This cycle was just another Junk Bond, Savings and Loan, and Dot Com and now Real Estate Boom. Oil and certain stocks are now being speculated in the same manner.


    JJ wrote on October 05, 2007 11:03 AM: I am glad the hardworking taxpayers' money is not used to bail out greedy lender, greedy loan broker and greedy borrower. They break it and they fix it.


    GOD wrote on October 05, 2007 10:11 AM: Homeowners won't get state bailout---
    GOOD!


    Truth wrote on October 05, 2007 09:31 AM: Like a tsunami, no one saw this coming. It is a phenomena. It is not the fault of anyone in particular in "most" cases. There are some cases however, where the borrower lied about income, aided by the loan officer, and those loans must be foreclosed and the lying borrower can go back to where they were before. NV had many liars. An embarrassment, but not surprising in a State and town like Las Vegas that has a low percentage of college graduates (high rate of wildcats). It will repeat. Real Estate goes in cycles. All industries go up and down. I disagree that tax-funded agencies need to be set up to "remind" people they have a problem LOL. The Borrower and Servicer can communicate, and enter workout. We don't need more loan counselors! The lenders already have those in the services!!


    Anthony wrote on October 05, 2007 09:27 AM: Good! Not that the governor has a lot of tact about this (I believe he said something to the effects of people being uninformed - aka stupid - about getting into ARMs). But bailing people out just rewards irresponsibility. And if there is something society needs less of its rewarding irresponsible choices.

    Of course, the lenders were looking towards all the future costs of the loan - not only do they get a bigger cut for selling a bigger loan, but they'll also get more fees when the loan is refinanced to get out of the very high ARM rates.

    I went through this myself in 2004 when I bought a house. Lenders were pushing 3/1 and 5/1 ARMs and I stuck to my guns and got a 30-yr fixed. Yea I pay a bit more but I dont have to worry about refinancing later or having to deal with a bigger monthly payment.


    DT wrote on October 05, 2007 08:49 AM: Everyone has good points here. The prices went too high , and are still to high for people to realistically qualify & afford these homes, as Mr. Tully said below. The basic equation for qualifying is adding the minimum monthly credit card, auto and mortgage payments, and dividing it against the borrower(s) income. The ratio can't exceed 45% in most cases. It boils down to this: if home prices don't come down fast, we will have foreclosed AND locked out people from buying here, furthering an oversupply, and making living in Las Vegas unattractive to our predominantly blue collar labor market. I do believe in free markets, and I believe that the markets will correct themselves. It will be a little painful for all of us homeowners, and most likely be good for the long run. The financing got too extreme and this correction is much needed. I'm hoping that many people will be enjoying excellent buying opportunities when the dust settles.

    One more thing, I'm shocked that no news source has commented on the Payoption ARM / Negative amortization loans yet. I keep reading about "subprime is evil" but compared to the Payoption ARM....hahha well I'm just surprised we haven't read about those deals yet. Those are poised to be guaranteed failure....


    Shawn Shepherd wrote on October 05, 2007 08:28 AM: Many times when we think about real estate investors being foreclosed upon it’s easy to look at that as a victimless occurrence. It’s easy to say that the investor was in over their head and that’s what investing is all about, sometimes you win sometimes you lose and it’s easy to say that the lender should not have loaned them the money because they had poor credit and little or no money down in the first place. However the unfortunate fact is most of the time there is a victim. Most of these investors put no money down for the loan and had no money to make mortgage payments so they rented the homes out.
    Now we’re starting to see the collateral damage from the foreclosure fallout, the tenants. Almost on a daily basis we’re coming across good tenants being evicted because their landlord is in foreclosure. Some of these renters have received as little as three days notice to vacate the property once the bank receives title. This can be devastating for a family, many with children starting school this time of year, to have to find a new place to live and to move in a very short period of time.
    Even more disturbing, some landlords in this situation neglect to inform the tenant of the impending foreclosure and continue to collect rent as if everything was normal.
    Services such as www.RentalForeclosure.com give renters the opportunity to check their address against an online database of default notices. Knowing that their home could possibly be foreclosed on does not necessarily give them any more rights but it could however give them the advance notice to avoid having to move in as little as 24 hours.


    Doug wrote on October 05, 2007 07:56 AM: i'm glad to see the gov.is not bailing the investers out on our account, although I don't believe that the whole problem is with the investers.I remember several years ago when the lenders were doing just about anything to get the loans out.The home prices were soaring and everyboby was jumping on the band wagon.The greed took over peoples good judgement,and the lenders were climbing all over themselves to get the money out.I truly believe that they knew the market would cool down.So with all the foreclosuers and gloom and doom,they also know that the market will come back and they can all profit off all the foreclosures.It's a vicious circle out there.


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