Nevada Homeowners Should Weigh Mortgage Refinancing Options

By Richard Barrington
Local Lender Columnist
May 6, 2008
New legislation has secured $130 million to aid Nevada homeowners facing mortgage foreclosure, underscoring the fact that homeowners do have options such as refinancing that may help them avoid foreclosure. While there is no relief in sight from the real estate market itself, lower interest rates and government initiatives are providing homeowners with some opportunity to fight off foreclosure.

The most important thing is for homeowners whose mortgages are in trouble to take control of their financial destinies. Help is available to those who actively seek it, whereas those who sit back passively while failing to keep up with mortgage payments will find that foreclosure is inevitable.

Nevada Market Still Shows Signs of Weakness

Nevada homeowners are getting any relief from the real estate market. Mortgage foreclosures and declining property values are becoming an epidemic across the country, and Nevada is certainly showing all the symptoms.

Median home prices are down in several Nevada cities. Over the past year, the median home price has declined 7.5% in Reno, and 12.5% in Sparks.

As in any market, real estate prices are driven by supply and demand. The national mortgage crisis is tipping the supply and demand balance in favor of buyers in two ways. First, foreclosures force properties onto the market under distressed circumstances, artificially increasing supply. Second, reluctance to lend to all but the most qualified borrowers is keeping a tight check on demand.

Sources of Distress for Homeowners

There are several reasons for upswing in foreclosures. The following are some of the sources of distress for homeowners:

• The boom in popularity for adjustable-rate and balloon-payment mortgages in recent years. The result was often an unpredictable increase in monthly payments.
• Some homeowners gambled that real estate prices would rise continually. This led them to be over-aggressive in assessing what they could afford, and in assuming a rising market would bail them out of any difficulty they encountered.
• Rising home prices encouraged home equity borrowing. Some homeowners made the mistake of borrowing against home equity without budgeting properly for the monthly payments.

Options for Avoiding Foreclosure

Problems such as these require action, and fortunately, there are some avenues available to distressed homeowners. A low interest-rate environment has made refinancing an option for many mortgage holders. Besides lowering the interest rate, refinancing can also spread the remaining balance over a longer period to reduce monthly payments. Meanwhile, legislative initiatives have emphasized giving mortgage borrowers additional time to negotiate with lenders and seek counseling. For those who are willing to act, a few simple steps can often be enough to stave off foreclosure.

Source:
RNV News4

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.