August 13, 2010

The Honorable Barack Obama
President of the United States
The White House
1600 Pennsylvania Avenue
Washington, D.C. 20500

Dear President Obama,

It is my sincere belief that more must be done to help homeowners avoid foreclosure in areas of the United States that have been most affected by the foreclosure crisis. I was pleased that you travelled to Southern Nevada in February and announced the “Hardest Hit Fund.” It is imperative that your administration do more to ensure that lenders work with states to fully implement the plans that your Treasury department approved to maximize effectiveness.

I am concerned that the vast majority of modification programs provide “carrots” for servicers and investors, but lack the necessary “sticks” to ensure that servicers and investors are participating. My office has worked with hundreds of homeowners attempting to modify their loans. More often than not, the lender only agrees to modify the loan when it is in the lender’s interest. Unfortunately, it appears lenders usually are more willing to go through with a costly foreclosure process than work with homeowners to construct a payment structure that is fair.

As you know, last week the Department of Housing and Urban Development announced a change to the FHA refinance policy to allow homeowners who are “underwater” to refinance into a FHA insured mortgage. In order to participate, lenders must agree to forgive at least 10% of the current unpaid principal balance and the new modified loan must be no more than 115% loan to value. It is estimated that in Southern Nevada, 70% of mortgages are “underwater,” and for a long time I have emphasized how crucial principal modifications are in order to achieve long-term stability in the house market. This new program, entitled “FHA Short Refinance,” presents an opportunity for these homeowners to modify their loans in order to avoid foreclosure and to have a mortgage that more closely reflects the true value of their home. This program, however, perpetuates many of the problems that have made the “Making Home Affordable” initiative unsuccessful in the hardest hit areas.

This new program contains no “sticks” to require participation. Lenders will continue to only modify loans when it is in their interest, regardless of the financial situation of the homeowner. With the tremendous loss of value in Southern Nevada home prices, many homeowners are far from the eventual 115% LTV required by this program, and I am concerned their lenders will be unwilling to forgive a significant amount of the principal and refuse to participate. This problem will not be unique to Southern Nevada, but will also affect other areas that have been hardest hit. In these areas, the program, like too many others, will be ineffective. This program needs to be altered to provide different guidelines and “sticks” in the hardest hit areas.

It is crucial that your administration do more to help homeowners in the hardest hit areas. I am pleased to be one of the founding members of the Congressional Task Force on Housing Stabilization, which includes Members of Congress from some of the hardest hit areas of the country and was founded with the purpose of providing a unified voice for representatives of some of the areas of the country that have been most negatively affected by the foreclosure crisis.

Recently the Taskforce met with a group of top officials from HUD, Treasury, FDIC, and the Federal Reserve. During this meeting, Taskforce members were direct and clear with many of your top officials – the Administration’s response to the foreclosure crisis in the hardest hit areas has been dramatically insufficient. During this meeting, I took the opportunity to question the officials regarding a recent report for the Government Accountability Office which was highly critical of the government programs designed to prevent foreclosures for a number of reasons. One of the issues raised by GAO which I found most troubling was the lack of clear performance metrics for evaluating these programs, including goals for the number of homeowners helped. It is my hope that this meeting will provide these officials the opportunity to respond to such concerns. When I raised this issue at the meeting, I was very disappointed that my questions were met mostly with silence and non-answers. This is troubling and I hope that your administration will carefully review the GAO’s report and act immediately on the recommendations.

I look forward to your reply detailing how your administration will ensure that banks participate in the “FHA Short Refinance” program in the hardest hit states. Additionally, I look forward to learning more about how your administration plans to respond to GAO’s findings regarding current foreclosure prevention programs. Thank you kindly for your attention to these issues that are of serious concern to my constituents in Southern Nevada.

Sincerely,


Dina Titus
Member of Congress