Preventing Las Vegas Foreclosures is something that is beneficial to all, our homeowners certainly, financial institutions and of our course the overall Las Vegas Real Estate Market. If you look out across the US approximately 7 million borrowers could lose their homes this year to foreclosure unless we see huge increase in property values or our lenders become much more flexible on cutting the principal amounts owned on mortgages – this data from Amherst Securities, conveyed to the U.S. House Financial Services Committee.
Of equal importance, a recent study from the Federal Reserve Bank of New York has shown that mortgage modifications that reduce the principal of a home loan are much more successful than those that just lower the payments – we believe the former would really help on preventing Las Vegas Foreclosures and the overall Las Vegas Real Estate Market.
Cuts in Principal Successful
Cuts in principal for the homeowner are successful as they help the homeowners avoid re-defaults because they reduce the negative equity and provide the homeowner (borrower) with a real incentive to stay current with their loan. The problem with a loan modification is that it only reduces the interest rate and does not have the impact that a reduction in principal has for the homeowner.
Possible FDIC Help on the Way
This perspective is now being embraced by the Federal Deposit Insurance Corporation. The Chair, Sheila Bair is weighing incentives to provide lenders to cut principal on approximately $45 Billion in Mortgages her agency has acquired the last few years from banks they have received.
She has stated recently: “We’re looking now at whether we should provide some further loss-sharing for write downs of principals, as we are now in a position where some good mortgages are going bad due to loss of jobs.”
One of the Chief Economists for Moody’s has suggested that banks receive Federal Matching Funds for every $1 for $2 in principal reductions they offer to distressed homeowners. This won’t necessarily get rid of all of the negative equity homeowners’ are facing but it might help them to recommit to staying in their homes.
Positive Impact for Las Vegas Real Estate
We think this new tact by the Federal Government (FDIC) could provide a tremendous amount of assistance to the Las Vegas Real Estate market and across the country. We would encourage any/all readers to contact their local representatives and ask them to support this perspective that the FDIC has made public!
