Nevada Real Estate >> Las Vegas Real Estate Specialist: Nevada: Las Vegas: Anthem Country Club

The home loan market has evolved over the decades into a colossal and thoroughly complicated system that is so hard to get one's arms around with any authority. One of the latest additions to it were the otherworldly subprime mortgages and their subsequent securitization that eventually grew so tricky that few, if anyone for that matter, can today decipher what they actually look like. A fair part of the blame for the current real estate collapse can be squarely allocated to this out-of-control creativity.

The White House put forth seven questions for public comment in its quest to overhaul the mortgage finance system and it has to be commended for seeking ideas from the trenches. A bunch of sharp minds earn their living in there and can truly bring valuable mortgage input to the table. How much do their opinions matter at the end of the day is a different argument. Anyhow, these questions are rather academic-sounding - perhaps shaped by some Harvard PhDs on a mission - and cover a wide range of territory, essentially the whole industry, it seems. Does the entire system need to be overhauled? Not really. Many sectors in it work rather well, maybe needing just some updating to meet today's rapidly-shifting mortgage landscape.

Let's give it a go then.

Streamlining the present finance regulatory structure would sharpen things up a great deal. If done with foresight and minimum political interference it could become a durable bedrock on which to anchor the mortgage and real estate markets for a long and successful run. 

Currently there appear to be somewhere close to a dozen federal regulatory agencies tasked to keep the system running as designed. It largely failed during the years leading up to the housing market climax. The structure is just too fragmented to be efficient. Too many players are involved in monitoring what goes on there. Often agency responsibilities overlap, leading to destructive turf wars and situations where nobody reacts because everybody figured the other departments were going to cover it. This is not the way to run a store as critical to the economy as it is.  

If anything, the present mortgage regulatory regime should be merged into no more than six existing agencies. It's much easier to control anything when the moving parts are under one roof, or just a few roofs. Along these lines, instead of eliminating Fannie Mae and Freddie Mac - as some inside and outside government are clamoring - they could be consolidated into one GSE, or Government Sponsored Enterprise. Their current mortgage playbooks are essentially copies of one another, so it could be done without too much grief.

This input covers parts of several questions put forth by the Obama Administration. Its theme is simplicity. Something rather far-reaching needs to be done to prevent future mortgage and housing collapses of this magnitude from happening again, whether Wall Street likes it or not.

As FHA's market share has soared over the past few years, thanks to the vacuum left by conventional mortgage lenders whose fortunes have suffered terrible setbacks in the ongoing real estate calamity. But it hasn't escaped the anger of the sinking housing market either. It has bravely insured mortgage loans with only the minimum 3.5% down all along and as prices have continued spiraling south these loans have gone underwater sometimes in a few months - particularly vulnerable were many Las Vegas mortgage borrowers, as well as those in Miami and many parts of California -  and that often spells trouble. That's one of the reasons to its climbing foreclosure rate.

FHA has been talking for a while about streamlining its risk management policy and now it's ready to act on it. The new regulations will be published in the coming days. Here are the highlights.

- All new lender applicants must have a net worth of $1 million, up from the present $250,000. This will ensure all FHA mortgage providers are properly capitalized to better meet testy real estate market conditions.

- Present FHA lenders have one year to comply with this $1 million requirement once the new rule goes live. And a category called Small Business lenders must have a minimum net worth of $500,000 also within one year.

- Three years after ratification of this regulation approved lenders and new applicants doing FHA's single-family programs must possess a net worth of $1 million and 1% of total mortgage loan volume over $25 million.

- Mortgage brokers won't receive any longer individual FHA eligibility approvals. They are able to originate home loans via their affiliations with FHA-approved lenders, though. This adjustment actually mirrors the relationships brokers now have with Fannie Mae and Freddie Mac. Those already approved can continue to sign up business through the year, but after January 1, 2011, they need a sponsorship from an FHA-backed lender.

Arguably these changes will strengthen FHA, and quiet its critics. At least for the short term. Some of whom were already suggesting the agency would soon be ripe for a government bailout similar to Fannie Mae and Freddie Mac. A sound FHA is one of the main factors that the housing market sorely needs now to pull it out of the gutter. Without FHA's mortgage insurance function it wouldn't have much of a chance. The new rules predictably will limit some lender participation but it should minimally affect mortgage applicants' access to its products.

Some good news are starting to sneak into the devastated real estate market from far-off directions. They may not mean all that much in the conventional big picture that usually chews over topics like foreclosures, short sales, home price drops and mortgage lender failures. Nevertheless, many small time indicators often give hints about which way the housing market is heading. One of these gems is the private mortgage insurance, or PMI, default rate.

Mortgage Insurance Companies of America, or MICA, keeps tabs on this and just released its latest report. In short, the trade group explains that 80,758 homeowners with PMIs in February made good on mortgages they had been late on, while 68,675 dropped into default. Numerically speaking the difference really isn't all that much. But, for the first time in nearly four years the recoveries outpace the distressed kind and that's where the significance lies. Somehow more property owners were able to find the means to catch up with their delinquent mortgage payments despite the weak economy. That's at least what happened in February and stocks at PMI companies promptly gained a few dollars on the good news.

In January the figures were quite different. That time there were only 61,196 rescues, while defaults stood at 98,685, the spread clearly being rather wide. And to massage more perspective into the discussion, delinquencies have in fact outperformed rescues every month from March 2006 on. That is nearly four consecutive years of deteriorating conditions for PMI firms, consistently pounding their bottom lines.

It's obviously premature to declare that the mortgage and real estate markets are turning the corner on this statistic. One month doesn't a pattern make. Once the cures manage to put together a string of several months of positive results a more or less permanent shift can be tentatively declared. Then again, the discriminating housing observers will argue that a long streak - and long it was - has been broken and that's how trends begin changing direction. The point is valid. These stats, however, are likely to yo-yo for months before eventually settling on a steady and positive path. That's what everyone is looking for anyway.

Las Vegas home loan recipients predictably had more of the default filings than the other kind because being underwater here is a serious problem and unemployment is well into double digits, hovering at 13.9% at last count. These two major imbalances soundly affecting the real estate market hardly will inspire and allow people to make up for late mortgage payments and stay current. MICA's February numbers are national in nature. It's reasonable to assume from the weak Southern Nevada housing market that PMI defaults here will go on outpacing cures for several more months. Arizona, California and Florida, the rest of the gang of four, are likely to be wallowing in the same mud pit.

Underwater - or upside down - home ownership got worse as the past year wound down. First American CoreLogic published a new research paper on the issue stating that over 11.3 million homes were upside down at the end of 2009, meaning that 24% of all residential real estate with mortgages was carrying that unwelcome label. At the end of the third quarter of 2009 there were 10.7 million houses underwater, so in three months about 600,000 additional properties got whacked.

To stay with the statistics, First American CoreLogic further reports that 2.3 million more homes were heading towards the famous freezing submergence, these being units that had less than 5% equity cushion at year's end. Put together with those already underwater, the picture becomes increasingly bleak, because it now translates to roughly 29% of all mortgages holding that classification.

Nevada continues to top the list of states with the most underwater mortgages, coming in at 70%. Las Vegas area - with communities of Mountains Edge, Summerlin, Anthem, Henderson, Canyon Gate and Rhodes Ranch - predictably hoards the majority of those on account of being the population center.

Underwater mortgage in itself is a serious problem. The homeowner is trapped. He can't sell the property unless he brings hard-earned money to the table to close a deal. He can't refinance either, for the same reason. Generally, no one will do that. This effectively removes a large segment of current mortgage borrowers from the real estate market, putting a sizable dent on the demand side.

Secondly, upside down homeowners are more liable to default on their mortgages. The more they are in negative equity, the more likely it is that they'll lose the property, be it a short sale, foreclosure or deed in lieu. As their FICO scores get dinged badly, they'll be unable to get mortgage approvals for a few years, dealing another heavy blow to the demand function.

Simply looking at what underwater mortgage can do to demand sends shivers down the spine of policy makers, home loan providers, real estate experts and other interested parties. A major headache indeed. Or worse.

 Photo by krossbow

Las Vegas Area Inventory may drop below 20K units in as little as a couple of weeks if this keeps up.  Pending units have gone up by over 1K and inventory has dropped by over 1K since my last pendings report.  I don't think we have been below 20K units of active inventory since April or May 2006.

We have been very busy with Las Vegas Buyers (hence the lack of blog posts recently.)  Buyers are ranging from first time buyers using FHA programs (and down payment assistance programs) to All-Cash Investors.

The new $8K tax credit (see your CPA for details on this one as I am not a tax advisor) should also help burn off some inventory along with historically low interest rates!

Look for my next report.  It will be VERY interesting!

 I want to edit to add:

Foreclosure inventory will continue to come online for quite some time.  We are just seeing an abundance of inventory go :poof: at the moment!  This type of activity can cause the market to stabilize very quickly, however.

copyright 2006-2011 Renee Burrows, REALTOR®, The Force Realty  702-966-2494

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So are you ready to get your search on?

Open houses are 1/17, 1/24 & 1/25 from 11AM-4PM

Auction is:  Jan 31 and Feb 2, 2009

Lots of properties available from your entry level condos to luxury homes!!!!!!!!

My buyer's agent, Hawley McIntosh will be at the auction representing our buyers.  Hawley has a record of closed transactions from auctions and loves the thrill of the auction as much as the buyer.  Representation is FREE to you, REDC pays US to represent YOU!  ALSO ~ Burrows Group at Nevada Realty Solutions DOES NOT CHARGE a transaction fee to buyers as most other brokerages do.  Call Hawley for more details and to get registered at:  702-445-0936

Our trusted lenders, Rey Gallegos & Aaron Gordon are also a preferred lenders for the auction.  Please feel free to contact them at 702-966-2494 ext 3 to get prequalified for the auction!

HAPPY BIDDING!

copyright 2006-2011 Renee Burrows, REALTOR®, The Force Realty  702-966-2494

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