Reid requested additional staff to help fight foreclosures in Southern Nevada
February 1, 2010
Washington, DC – Nevada Senator Harry Reid today received a letter from Shaun Donovan, the Secretary of Housing and Urban Development, following up their meeting about Nevada’s housing crisis and Reid’s request that HUD do more to help Nevadans keep their homes. In the letter, Donovan states that HUD will dispatch eight additional staffers to the Las Vegas office, including a three-person foreclosure rapid response team that will be deployed effective February 1, 2010.
“This is an important move to help Nevadans who are struggling to stay in their homes,” Reid said. “While there is more work ahead of us as we work to help people who are suffering from this economy, I thank Secretary Donovan for taking these steps to help meet Nevada’s needs.”
The letter from Secretary Donovan is below:
Dear Senator Reid:
I appreciated the opportunity to meet with you recently to discuss the second round of grants that were awarded under the Neighborhood Stabilization Program (NSP 2), along with the broader set of issues relating to the high levels of foreclosure in the Las Vegas area, and options for further action on the part of the Federal Government to address the problem. I also wanted to thank you for your recent letters on both NSP 2 and in support of augmenting the Making Home Affordable program to include a stronger principal write down component.
Your passionate advocacy on behalf of the people of Nevada for additional federal action to mitigate the foreclosure crisis is a clear reminder that I must continue working with my colleagues in the Administration to develop new tools aimed at addressing the problem. I can assure you that there are very active discussions under way within the highest levels of the Obama Administration on what we can do to address the foreclosure crisis more aggressively, and I have communicated to the participants in these discussions how important it is for you and your constituents that we make further progress in alleviating the high rates of foreclosure in the Las Vegas area, where negative equity is such a severe problem.
With regard to NSP 2, as we discussed in our meeting, I have asked staff at HUD to explore methods by which we can make funding available to areas of the country – like Clark County – that have been particularly hard hit by the foreclosure crisis, but for which NSP 2 grant applications were unsuccessful. As you know, given the fact that the NSP 2 grants were awarded on a competitive basis, it was not possible to come close to funding all of the applications (indeed, we received some $15 billion in request for a funding pool of $1.9 billion).
Regrettably, as a result of that imbalance between overall grant application amounts and available funds, many areas with severe foreclosure problems and large numbers of underwater borrowers submitted applications that did not rank high enough in the competitive grant process, in which scoring was based to a significant extent on a demonstrated capacity to manage a successful and innovative program. But, again, I recognize the importance of trying to find ways to provide much-needed financial assistance to hard hit areas that will not be receiving funds under NSP 2. We are reviewing options now, and we will report back to you and your staff within 30 days on the approaches we believe make sense going forward.
I also appreciate your request for an upgrade in the staffing levels at HUD’s Las Vegas office. I am pleased to be able to tell you that HUD is planning to add eight additional staff to the office in the first quarter of this year. First, a three-person foreclosure rapid response team will be deployed in the office effective February 1. Further, we will be adding two additional staff in the Office of Community Planning and Development and two in the Office of Fair Housing and Equal Opportunity. Finally, an additional administrative staff position in the office of the Director should be filled in the near future (the job advertisement closed at the end of January). We will keep you informed as all of these positions are filled, and we will continue to evaluate the staffing levels in the Las Vegas office, along with the needs of the community served by the office, in order to determine what additional personnel changes may be required.
Finally, I appreciate your thoughtful comments about the challenges facing the Administration’s foreclosure mitigation programs. The Administration shares your view that it is vital that we take strong steps to ensure that as many borrowers as possible who have entered the trial modification phase under the Home Affordable Modification Program (HAMP) are able to convert to permanent modifications. Furthermore, as you note, the high rates of negative equity (particularly in areas like Southern Nevada) and the fact that many of the borrowers facing the prospect of foreclosure are doing so as a result of unemployment, significantly complicate the work to address the crisis.
Indeed, as valuable as the program has been – with over 900,000 borrowers having been approved to enter into temporary modifications as of the end of December – as you point out, it is important for us to continue taking steps to reach more borrowers. You can be sure that we will continue doing all we can to improve the effectiveness of the program, and to move as many borrowers as possible into permanent, affordable modifications of their mortgages. In fact, as part of the effort to continue improving the effectiveness of HAMP, recently the Administration began a major campaign to step up the conversion of trial modifications, an effort that more than doubled the number of final modifications by the end of December.
With regard to principal write-down, it is one of the existing options available to lenders within HAMP, and lenders are eligible to receive the same financial incentives under HAMP for agreeing to a principal write-down as they would for reducing interest rates, extending payment terms or offering mortgage forbearance. However, this option has not been widely used, and the Obama Administration agrees that the Federal Government needs to take further steps to address the reality that, though HAMP has helped take foreclosure pressure off many troubled borrowers in this country, for those whose home values have faced extremely steep declines, it can be difficult to provide long term assistance without some fort of principal write-down. Again, we are continuing to discuss how best to respond to this situation, and I assure you that we will keep you apprised of any developments along these lines at the earliest possible date.
I would also appreciate your reference to the Hope for Homeowners program. While, as a result of congressional action through the Helping Families Save Their Homes Act, some improvements aimed at increasing its effectiveness have been made, we are continuing to press for further upgrades to the program that would help it mesh better with HAMP. In the case of Hope for Homeowners, and indeed the other programs mentioned in this letter, unemployment remains a challenging factor. The Administration, beginning with the Recovery Act, has made it a top priority to create jobs and expand the economy. I am proud of the fact that HUD has released a total of $13.6 billion in grant funding through the Recovery Act as part of that effort. We are continuing to explore new strategies with Congress to create jobs and keep the economy moving in a positive direction, and these efforts will remain at the top of the Administration’s agenda going forward. I would add that the Administration also supports balanced bankruptcy reform that will allow judges to modify mortgages to help those who may be having trouble meeting their mortgage payments as a result of factors like unemployment.
Thank you again for your thoughtful correspondence and for your valuable comments in our recent meeting. I would like to reiterate HUD’s commitment, and my personal commitment, to working closely with you and your staff as we focus on finding ways to make more federal resources available to address the foreclosure crisis in the Las Vegas area.