Reid Urges Mortgage Servicers to Help Nevadans Keep Their Homes by Modifying Loans

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Washington, D.C. – Nevada Senator Harry Reid today sent a letter to mortgage servicers participating in President Obama’s Home Affordable Modification Program to request that they take more aggressive action to modify the mortgages of Nevada home owners.  The intent of the Administration’s program is to prevent foreclosures, stop the decline of home values and help Nevadans stay in their homes.  A copy of Reid’s letter is included below.

September 24, 2009

Dear Mr. / Ms.:

I am writing today to request that your company take more aggressive action to modify the mortgages of Nevada home owners who are eligible for the Obama Administration’s Home Affordable Modification Program (HAMP).

As the chief executive of a company that services mortgages on homes located in Nevada, you undoubtedly are familiar with the challenges facing our state’s housing sector and too many Nevada families.  The persisting foreclosure crisis continues to take its toll.  According to one oft-cited keeper of foreclosure data, one in every 7,527 housing units received a foreclosure filing, and more than 18,000 homes were the subject of some type of foreclosure filing in August alone.  The average home price declined by more than 32 percent over the prior 12 months, driven downward by the extraordinarily large share of foreclosed homes in the supply of homes sold each month.  In Las Vegas, for example, the median home price is now nearly $178,000 less today than it was three years ago. 

These price declines continue to increase the amount of negative equity in Nevada homes.  Some estimates place two-thirds of Nevada mortgage borrowers in a negative equity position.  This would amount to well more than 300,000 Nevada home owners who owe more – in many cases, far more – than their home is currently worth.  That figure is substantially larger than the total populations of Reno, Sparks and Carson City combined, three of Nevada’s largest communities. 

The best way to arrest the precipitous decline in homes values in my state that is wiping out billions of dollars in home equity, and contributing to a negative feedback loop that further increases foreclosures, is to prevent as many foreclosures as possible.  That is the intent of the Administration’s HAMP, and one I hope and expect you share given your company’s participation in this program. 

Unfortunately, the Administration’s “Servicer Performance Report” for the month of August calls into question whether this goal is in fact commonly held by the mortgage-servicing industry generally.  For all participating mortgage servicers, only 19 percent of home owners nationwide who were potentially eligible for a modification under HAMP were offered one by a mortgage servicer.  Only 12 percent of potentially eligible borrowers secured a trial modification.   

While I understand that the HAMP program is still in its early stages, these nationwide figures are unsatisfactory, particularly when viewed in light of the extraordinary taxpayer assistance that helped stabilize the financial-services sector.  And as a point of comparison, Federal Deposit Insurance Corporation data show that Nevada credit unions have modified more than 58 percent of their mortgage-loan volume.  The total number of mortgages owned or serviced by credit unions and their loan volume are both smaller, but this figure at least provides a picture of what could be possible when financial institutions aggressively pursue modifications in the interests of their customers without placing unacceptable stress on their own balance sheets.

In addition to my initial request above, therefore, I also hope that you can answer the following questions, which will help me gauge how effectively Nevadans are being assisted under the HAMP program, but also inform my work in Congress as we continue to search for ways to complement our prior efforts in confronting the foreclosure crisis.  Specifically, please inform me:

  • How many borrowers of mortgages on Nevada homes that you service would be eligible under the HAMP program?
  • Of the number of trial modifications offered by your company and accepted under the HAMP program, how many were accepted by Nevada home owners?
  • What steps has your company taken so far to increase its ability and capacity to complete the analyses required to determine eligibility under the HAMP program?
  • Of the trial modifications extended and accepted by Nevada home owners, how many of those modifications included a reduction in outstanding principal in order to place the borrower at the appropriate debt-to-income ratio?
  • How do you calculate the net-present-value test for a borrower, and do you provide that information to your customers who are eligible under the HAMP program?
  • Is it your company’s policy to suspend foreclosure proceedings on a mortgage that is being considered and analyzed by your company for a HAMP modification?  If not, what is the company’s rationale?
  • And finally, are you offering to your customers the option of participating in the Hope for Homeowners program?  If not, what obstacles are you encountering that prevent you from offering this option? 

I would welcome your prompt response to these questions.

I appreciate your efforts to date in committing to the HAMP program, but based on the August report and the Nevada housing data I provided above, more must be done for Nevada home owners.  I also understand that not every Nevadan will be eligible for a mortgage modification, but the pace of analyzing their eligibility and responding to them with a conclusion must quicken.  I am confident that your company’s success in achieving these objectives will thereby quicken the recovery of our nation’s and Nevada’s economy, as the housing sector and home prices stabilize.


United States Senator

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