The recent $25 billion foreclosure abuse settlement stemming from the robo-signing scandal and alleged improper evictions—a settlement hammered out between 49 states and five major banks—will yield $1.5 billion for Nevada.
That’s a good thing for morale and some pocketbooks, says Nasser Daneshvary, head of the Lied Institute for Real Estate Studies at UNLV. Of that chunk, about $1.3 billion will go toward long-term loan modifications that can include refinancing to lower interest rates and principal reductions to help people stay in their homes.
Some media reports have indicated that lenders will be contacting people eligible for the money, but Daneshvary recommends underwater homeowners not wait to call their mortgage servicers.
The impact on Nevadans lies in how the banks choose to distribute the money, says Brian Gordon, principal with Applied Analysis, a Southern Nevada economic research firm. One possibility is that the funds will be distributed equally over a certain number of people; another is that claims will be evaluated on a case-by-case basis. Regardless of the distribution method, some severely underwater borrowers may just be prolonging the inevitable if the principal reductions aren’t significant.
Daneshvary estimates that about 100,000 Valley homes have gone through foreclosure in the past four years and another 100,000 could still be coming down the pipeline as distress situations—any scenario where people are unable to make their house payment.
How many of those homes can be saved with these dollars is still anyone’s guess.