In letter to Sen. Conrad, Nevada Senator requests support for” underwater” homeowners in budget resolution

March 23, 2009

Washington, D.C. – Nevada Senator Harry Reid today sent the following letter to Senator Kent Conrad, the Chairman of the Committee on the Budget, requesting a provision in the budget to support troubled homeowners, including Nevadan homeowners with substantial negative equity in their homes. Recent statistics indicate 58 percent of Nevada homeowners owe more on their mortgage than their house is worth. Text of the letter follows:

The Honorable Kent Conrad

Chairman

Committee on the Budget

United States Senate

Washington, DC 20510

Dear Kent:

As you develop the budget resolution for Fiscal Year 2010, I am writing to request that you include a reserve fund for legislation to provide assistance to homeowners who are struggling to avoid foreclosure.

As you know, the housing crisis is affecting the entire nation and is hitting my own state of Nevada especially hard. The foreclosure rate in Nevada is the highest in the nation, and threatens to go even higher. Currently, according to the U.S. Department of Housing and Urban Development, more than 58 percent of Nevada homeowners suffer from negative equity – that is, they owe more on their mortgage than their home is worth. By contrast, that figure nationally is about 20 percent. Until homeowners in Nevada and other states get some relief, our economy will continue to struggle.

Given the housing problems we face in Nevada and elsewhere, I was pleased when the Obama Administration agreed to devote a significant portion of funding under the Troubled Assets Relief Program for a program designed to provide relief for homeowners. Unfortunately, the refinancing program developed by the Treasury Department, while very helpful in many parts of the country, will leave out too many Nevadans because their loan-to-value ratio is too high to qualify. Most of these Nevadans have done nothing wrong. Yet now they find themselves in severe financial distress with no assistance available, even while their tax dollars are being used to bail out many of the financial institutions that created this crisis. This is deeply unfair and wrong.

In my view, therefore, it is critically important that more be done to provide assistance to struggling homeowners, including those with substantial negative equity. For example, Congress needs to give homeowners more leverage in their efforts to seek loan modifications with lenders and loan servicers. That is why I believe we must eliminate the perverse discrimination in current law that allows owners of several luxury vacation homes to seek relief in bankruptcy, but that denies the same relief to working Americans who live in a single home. Ending this discrimination would give homeowners at least some leverage in negotiating with lenders, which could help produce results in many cases without the need to file for bankruptcy.

It also is important that we eliminate the threat of frivolous lawsuits, which now is discouraging many loan servicers from renegotiating mortgages. That is why I so strongly support legislation to provide such servicers with a so-called “safe harbor,” to allow them to modify a mortgage without fear of a lawsuit. In addition, we need to take other steps, such as improving the deeply flawed “Hope for Homeowners” Program, which for most homeowners is providing neither hope nor help.

To demonstrate our recognition of and support for addressing the housing crisis and to accommodate these and other pro-homeowner initiatives, I strongly urge you to include a housing reserve fund in the budget resolution. This reserve fund should be designed to accommodate a broad range of homeowner assistance initiatives, including those discussed above. While I know you and the other members face many competing demands this year, I hope you agree that expanding assistance to homeowners deserves to be a top priority. Not only because so many hard working Americans badly need our help, but because our entire economy depends on addressing the housing crisis, without which it will be impossible to put our financial system back on track.

On behalf of homeowners in Nevada and the rest of the country, thank you in advance for your serious consideration of this request.                                                                          

Sincerely,                                                             

Harry Reid