Catherine Cortez-Masto may have some competition for her future gubernatorial bid as Bruce Breslow is trying to woo the hearts of Nevada residents.
Bruce, Director of the Nevada Department of Business and Industry, is putting together a little program to dent the shadow inventory issue.
Media articles can be read here... RGJ.com, LVRJ.com, LasVegasSun.com. The articles are pretty good overviews but the actually press release gives the most information. View the press release by clicking the picture below.
How It Works
The State of Nevada creates a non-profit that will use $150 million in funds from the National Mortgage Settlement to give certain home owners the opportunity to refinance out of their current loan to a current market value loan. The underwater loans will be obtained in pools at 70 cents on the $1.00. Should the owner not want to participate or if the property is vacant the program will put the home on the resale market available only to owner occupants.
Why It's A Bad Idea
- The State Won't Have To Obey It's Own Laws: The reason we have so much shadow inventory is because Cortez-Masto created AB 284. The bill required more documentation and created a hurdle for foreclosing banks. Hence, lot's of homes being lived in without the owners making payments. The press release says, "The program may need legislation to create a fast track foreclosure path for homes in this program that are empty, abandoned, or where a homeowner is refusing to make payments or enter this fair new program. Meaning, the State of Nevada sponsored program will not have to obey current foreclosure laws like every other lien holder, bank, and mortgage servicer. I'm never a fan of our government making a law they don't have to obey. (Press Release 1/30/2013)
- 700-800 Homes: Breslow predicts the program will help 700-800 homes until the newly created loans are paid down and replenish the program's trust account. Really, the best use of this $150 million is to randomly pick 700-800 homes (some of which may be vacant). They better be doing their homework about the homes they're purchasing. (RGJ.com 2/9/2013)
- Straight To Distressed Sale: Any vacant home or occupied home with an owner that doesn't want to participate will be foreclosed upon and sold as a distressed resale property. Think REO/Bank Owned. Well... that was going to happen anyways. Why waste the time and resources buying a home you're going to foreclose on? (Press Release 1/30/2013)
- The Unqualified Refinance: Home owners in the program will already be seriously delinquent on their homes. Delinquency creates credit problems. Low credit will get your refinance denied. Not even HARP allows delinquent borrowers to refi. See eiligibility here. So.... the state is going to have to create a special refinance program (or subsidize a current one) that allows delinquent borrowers with low credit scores to refinance their loan. This sounds an awful lot like how they created the loans that got us into this mess. Who is going to buy these loans if they aren't under QM rules? Fannie and Fredddie can't.
- Terrible Keynesian(ish) Economics: RGJ quote from Breslow, "It’s not a panacea,” he said. Still, “Doing nothing doesn’t help our situation." Ahhh! Didn't we learn from AB 284 that government intervention isn't always needed? 284 went through in October of 2011 and the banks still haven't gotten around it. That's 1 year, 4 months, 1 week, and 1 day further away we are from getting out of this mess than if the bill wasn't passed. Many states are having an actual recovery; not a mini bubble. Get out of the way and let the market correct itself. All you're doing is delaying the inevitable. Added Bonus: Check out Hayek vs Keynes videos... Part 1 Part 2
- Just a funny quote: RGJ quote from Breslow, "Banks also are stymied by a “moral hazard clause,” which prevents them from helping one homeowner without helping another equally, Breslow said. A nonprofit would be able to bypass that hurdle." Pretty funny that the state allowed text of them acknowledging they don't have to be fair to all residents.
Okay I'm done ranting. What do you think?
Questions or want to know more about buying or selling in Reno and Sparks? Contact Broker Ricky Beach at (775) 750-1437 or Ricky@Resnv.com
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