TARP Quarterly Report to

Congress Released

Some interesting criticism of the TARP (Troubled Asset Relief Program) leveled by the top independed inspector TARP Cop in it’s quarterly update to Congress. You can follow these quarterly reports by going to this Page.

From the Executive Summary of the Latest Report:

Well into its second year of operations, the Troubled Asset Relief Program (“TARP”) remains a vitally important part of the Federal Government’s response to the economic crisis, and the formal extension of TARP by the Secretary of the U.S. Department of the Treasury (“Treasury”) on December 9, 2009, makes it clear that this role will continue well into 2010. The focus of TARP has begun to shift, however, as the early TARP programs that invested huge sums in banks are now closed to further investments and most of the largest bank recipients have repaid their TARP funds. Treasury has stated that, going forward, TARP will focus on foreclosure mitigation efforts, small-business lending, and a continuation of support for the asset-backed securities (“ABS”) markets.

Actual Lending is still Decreasing:

Many of TARP’s stated goals, however, have simply not been met. Despite the fact that the explicit goal of the Capital Purchase Program (“CPP”) was to increase financing to U.S. businesses and consumers, lending continues to decrease month after month, and the TARP program designed specifically to address small-business lending — announced in March 2009 — has still not been implemented by Treasury. Notwithstanding the fact that preserving homeownership and promoting jobs were explicit purposes of the Emergency Economic Stabilization Act of 2008 “EESA”), the statute that created TARP, nearly 16 months later, home foreclosures remain at record levels, the TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation.

Institutions “Too Big to Fail” have become bigger:

To the extent that huge, interconnected, “too big to fail” institutions contributed to the crisis, those institutions are now even larger, in part because of the substantial subsidies provided by TARP and other bailout programs.

Sounds like if they have to be bailed out again… it’s going to cost a lot more. And allowing them to fail… is going to hurt a whole lot more.

Rewarding Reckless Risks:

To the extent that institutions were previously incentivized to take reckless risks through a “heads, I win; tails, the Government will bail me out” mentality, the market is more convinced than ever that the Government will step in as necessary to save systemically significant institutions. This perception was reinforced when TARP was extended until October 3, 2010, thus permitting Treasury to maintain a war chest of potential rescue funding at the same time that banks that have shown questionable ability to return to profitability (and in some cases are posting multi-billion-dollar losses) are exiting TARP programs.

Big Banks Report Fourth Quarter Losses due to Credit Problems

Transfer of Risk:

To the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices — as discussed more fully in Section 3 of this report — risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

The 224 page Congressional Oversight report is quite extensive but it gives a good look behind the scenes of what is really going on and the complexities involved of trying to correct a major bubble.

A recent article by The Motley Fuel gives a nice summary of the current relationship between the Government and your new home loan — especially in explaining why big banks are not lending their own money on Residential Lending. Home Loans that you would think are slam dunk common sense no brainers such as putting 50% down on a home that has decreased in value 50% from the peak … are still subject to government guidelines.

Government insuring 90% of current Residential Mortgages

The market share of current mortgage issuance is even more lopsided. Fannie and Freddie combined currently make up about 70% of new mortgage issuance, with the FHA taking up close to 20%, for a total of around 90% reliance on these three government-backed vehicles.

If private banks were the only issuers of mortgage funding, the cost (interest rate) would blow up in a big way. To compensate, housing prices would get nuked. For example, a 30-year fixed mortgage at 5% with a $1,500 monthly payment will finance around $275,000 worth of house. The same $1,500 mortgage at 9% will only finance about $185,000.

(By the way… that’s why you should laugh at sales campaigns that state you need to buy now before interest rates go up.)

The Motley Fool article also gives a real simple and easy to understand explanation of why those “Greedy Big Banks” are not lending their own money.

Why such reliance? The best explanation is that large banks — like Citigroup (NYSE: C), Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM), and Wells Fargo (NYSE: WFC) — don’t have the appetite to lend directly to homeowners after being sufficiently wrecked by housing over the past three years. Also, with the yield curve the way it is, it makes sense for banks with a long-term outlook (I’d like to believe they exist) to invest in short-term Treasury securities instead of longer-term assets like mortgages. Wells Fargo recently admitted it’s doing just that.

President Obama in his recent State of the Union Address stated that the worst of the crisis was behind us… but you really have to wonder if the problems were just transferred to a bigger credit card. Kind of like playing the Credit Card trap of transferring all of the balances from small cards to one big new shiny one. Feels good for a little while… but if basic financial fundamentals are flawed (such as spending more then you make), the inevitable is still going to happen.

Despite all of the efforts and Billions of dollars already spent trying to “save” the “market”, Defaults on the National Level are Not going down… In fact.. Defaults on Government Insured Mortgages are going up according to this latest report from Fannie Mae that you can read here.

In a recent article concerning Las Vegas Real Estate being undervalued by 41% by some leading forecasting companies, there is something in that report that really makes me wonder. I’ve been meaning to follow up with this concerning median home prices of the areas considered “OverValued” in that report and comparing these markets to housing markets such as Las Vegas that have already been decimated in value from the peak of the bubble.

When you start comparing some of these markets that were not allowed to naturally correct before all of the Government subsidies kicked in.. you really have to wonder how long it’s going to take for homeowners in these areas to realize how much cheaper it is to own a home in cities such as Las Vegas… and for those that can… make the move.

(Actually.. I already see it happening with the amount of requests coming in for Las Vegas Real Estate from people who state they are going to eventually make the move.)

Essentially, creating less demand in those areas and prices falling — continuing the cycle of a natural market correction that is inevitable when the economic factor (Jobs, Incomes, etc..) is considered.

Bailouts can’t be relied on forever.. and as the Top Tarp Cop states in the Executive Summary:

Stated another way, even if  TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.

That certainly does not sound like it’s going to get any easier to get a home loan anytime soon to me..

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate
702.592.3058

Latest Article on Real Estate

Values from CNNMoney ranks

Las Vegas as most Undervalued

in Nation

From first to worst to first… Las Vegas always seems to be Number 1 at something. This time… it’s the most undervalued real estate according to the newly released 2010 report compiled by IHS Global Insight and PNC Financial Services that you can read by clicking on the following link:

America’s Most Overvalued Cities

“These judgments are determined by comparing median home prices, local interest rates, population densities and income, plus historical premiums or discounts that areas have exhibited over time.”

Shhh…. Don’t tell anybody… Serious Real Estate Investors have known this for the past several months. Let’s keep the imitators away this time so we don’t repeat previous mistakes.

Paul Francis, CRS
Prudential Americana Group – Realtors
Las Vegas Real Estate
702.592.3058

Does Anybody in the United

States NOT know that Las Vegas

is one of the Foreclosure Capitals

of the World?

From Channel 8 News:

LAS VEGAS – Nevada leads the way when it comes to foreclosures. But while the northern part of the state got close to $21 million in federal money aimed to help struggling communities, Southern Nevada got nothing.

The program is called the Neighborhood Stabilization Program. The money would ultimately be used to buy foreclosed homes to be resold or rented out to income-eligible families.

From the Las Vegas Sun:

Mayor Angry, Reid Disappointed Las Vegas Denied More Federal Aid for Foreclosures

Rather than help people who were in danger of foreclosure, the money was given to the city to help purchase the homes that were already in foreclosure so they wouldn’t become blighted and allow the city to provide affordable housing, he said.

Some 6,500 homes are going to hit the market in the Las Vegas Valley “and we can’t afford to buy any of them because we don’t have this money,” he said, slamming the grant list down on the podium.

Visit Las Vegas... A city not wasting your Federal Tax Dollars..

The real story here is not how somebody did not know what they were doing when applying for the Federal Money under the new “Neighborhood Stabilization” program and Southern Nevada getting zilch in the current round of payoffs .. its a question of common sense, what the actual program really is, and who authorizes payments in the first place.

Really now… does anybody not know that Las Vegas has had a pretty significant foreclosure problem for the past several years? Is somebody that much out of touch with what is going on?

From the News Story:

Those working on the deal in Southern Nevada now believe they asked for too much money — $368 million.

“$368 million is a lot of money, but when you look at the direct impact of foreclosures for City of Las Vegas alone, 20,000 to 25,000 foreclosures a month, that hardly makes a dent to the foreclosures,” said Steve Harsin with the Neighborhood Services Department.

Officials now say they may have been too ambitious and asked for too much money. The funds from the first round of distributions were supposed to go through non-profits selected for the job, but many admit it’s been a bit of a struggle rolling out the program in Las Vegas and they’re trying to learn from the successes of others areas.

What is the Neighborhood Stabilization Program?

Let’s go straight to the source — Neighborhood Stabilization Grants

The Neighborhood Stabilization Program (NSP) was established for the purpose of stabilizing communities that have suffered from foreclosures and abandonment. Through the purchase and redevelopment of foreclosed and abandoned homes and residential properties, the goal of the program is being realized.

The Nature of the Program:

NSP is a component of the Community Development Block Grant (CDBG). The CDBG regulatory structure is the platform used to implement NSP and the HOME program provides a safe harbor for NSP affordability requirements.

NSP grantees develop their own programs and funding priorities. However, NSP grantees must use at least 25 percent of the funds appropriated for the purchase and redevelopment of abandoned or foreclosed homes or residential properties that will be used to house individuals or families whose incomes do not exceed 50 percent of the area median income. In addition, all activities funded by NSP must benefit low- and moderate-income persons whose income does not exceed 120 percent of area median income. Activities may not qualify under NSP using the “prevent or eliminate slums and blight” or “address urgent community development needs” objectives.

This is for the reader to decipher and form your own opinion of what it means.

And hey… if you have more questions.. feel free to read the 57 page Q&A section here. Once again… another relief program spelled B-u-r-e-a-c-r-a-c-y.

Back to the Original Article from Channel 8 News:

 ”Basically, the non-profits are fairly young here. They’re not used to being involved with government, as far as spending the money. That was one of the criticisms leveled at us by the undersecretary,” said Las Vegas Mayor Oscar Goodman.

There may be some reorganization in Southern Nevada to improve and learn from past mistakes. There will be another round of funding coming soon.

Sorry Las Vegas and Southern Nevada… but you don’t know how to spend $368 Million dollars like we do in Washington D.C… Lots of Laughing here. I think that’s more of a compliment then criticism.

On the surface it seems to be unfortunate that there is a money grab going on out there and Southern Nevada / Las Vegas is not getting their fair share. There is truly no Doubt that if Federal Taxpayer Dollars are going to be used to “stabilizing communities that have suffered from foreclosures and abandonment” that Las Vegas / Southern Nevada should receive something… even if the people responsible for filling out tons of paperwork asked for too much or don’t know how to spend it like the government. It’s just a matter of common sense.

Who Really Benefits from the Program?

We really have to dig below the surface and think of who this program REALLY benefits. Las Vegas homes (or anywhere for that matter) that have been foreclosed on are pretty much owned by the Banks. What that sales price will be will probably fall along the lines of “Spending Money Like the Government” instead of being determined by natural market forces set by the private sector.

So, here we have a program using Federal Taxpayer Dollars to buy homes from the Banks and relieve their responsibilities of upkeep, paying property taxes, HOA dues, etc, etc… and putting the burden on the Government. (If I have to explain where the Government gets its money, then please use your computer to learn something today.) 

Just ask some of the thousands of the active buyers for Las Vegas real estate out there what they think about the Government buying homes after they’ve lost out on trying to buy a Bank Owned home a couple of times. Ask private real estate investors what they think about competing with the Government for tenants. Ask potential renters that will not qualify under the program what they think about paying more for rent due to subsidized programs.

And then ask yourself if the people making the actual award decisions have enough common sense to get into the complicated world of real estate and manage taxpayer dollars effectively? (Well… actually, it’s borrowed money at this point but taxpayers will eventually get stuck with the bill.)

Could the Real Story be in the Grant List? Just to share some of the lucky Winners in the $1,930,000,000 lottery.

$11,000,000 to Alameda County. $299,000 is the cheapest house I could find in Alameda for sale. If there was no demand, I would think that prices would be lower.

$22,249,980 – (Bizarre Number) to Long Beach, California. The cheapest home I could find on this Long Beach Real Estate Search was $250,000.

$100,000,000 to Los Angeles. No Comment.

$23,000,000 to the City of Sarasota. LOTS of LAUGHING Here when you search for Sarasota Real Estate for sale.

$18,150,000 to Evanston, IL. - Do a search for homes here. Evanston is in the North Shore where you can find some of the priciest homes in Chicagoland. If you’ve lived in Chicago, it really makes for a good laugh.

I could take this a step further… but I’m not and end it here. People who can think for themselves have a good understanding of what it all really means.

The Blight of Foreclosures Issue

Which brings us back to the “Blight” issue. Instead of Pandering for Federal Taxpayer dollars in programs being run where there are plenty of questions that can be raised concerning the effective management of these dollars, perhaps City and County Officials should be thinking more like the City of Indio when they took the bull by the horns.

City of Indio Fines Banks for Blighted Foreclosures

There are Homeowner Associations across Las Vegas that have gotten pretty aggressive in policing their own neighborhoods. I know from the several short sales that I have listed that some of the better managed HOA’s that actually do something for paying into them have taken a proactive approach to the problem and fining anybody that owns a home that appears to be blighted. There is a reason why there is a big set of Community Covenants & Rules (CC&R’s) provided to new homeowners in such a type of community and it’s not so the Management Company can collect fees for making copies.

As far as actual management of Bank Owned Homes… There are some Asset Management companies and REO Listing Agents representing some certain banks that do an absolutely wonderful job of maintaining the upkeep on their properties. And… there are some that should not be managing or listing homes for anybody in the first place.

Regardless… there is nothing stopping the City of Las Vegas or Clark County from establishing a simple set of standards to prevent blight… and to fine and penalize those that don’t want to follow it. Truly abandoned homes? There is a procedure for a local government to legally take ownership to these homes. Keep in mind… I’m specifically talking about true abandonment and not homeowner neglect. Big Difference.

Some 6,500 homes are going to hit the market in the Las Vegas Valley “and we can’t afford to buy any of them because we don’t have this money,” he said, slamming the grant list down on the podium.

Is this Program really just about blighted homes or is there more to the real intention of the program? Should Federal Taxpayer Dollars be used by who knows who to purchase private real estate owned by banks? Should Las Vegas take it as a compliment that they don’t know how to spend money like the Federal Government?

There are some Clever minds creating very entertaining commercials for Las Vegas… Somewhere in all of this, I think there is an idea in here for a new one.

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate
702.592.3058

* Paul Francis is an Independent Contractor specializing in Common Sense Las Vegas Real estate. Opinions formed in this post are his opinions and may not reflect the opinion of Prudential Americana Group – Realtors® or Prudential Real Estate Affiliates, Inc.

There are Always two ways

to look at something…

From today’s Las Vegas Review Journal:

Welcome to the RainForest Cafe

Las Vegas Housing Market Still Looking Gloomy, Analyst Says

“

Driven mainly by investors buying foreclosed homes, sales of existing homes in Las Vegas jumped 47.2 percent in 2009 to 44,885 closings, the second-highest number on record, Home Builders Research reported.

On the flip side, new-home sales plummeted to 5,271 in 2009, about half the number from 2008 and an incredible fall from a high of 38,957 just four years earlier.

You’d have to go back to the 1980s to get to 5,000 (new-home sales),” Home Builders Research President Dennis Smith said Wednesday. “Now, how soon will it be until we get to 10,000? Let’s just say it’s going to be a while. It’s going to be years.”

The Las Vegas housing analyst said he doesn’t know of any possible scenario that would suggest things are going to improve drastically over the next year. There are too many negative factors and not enough positives, he said.

Hmmm… well quite honestly… I’m surprised Las Vegas New Home builders sold that many new homes to begin with when you take in the big picture. There was no shortage of inventory for Las Vegas for the first six months of 2009 and New Home builders certainly were not competitive in pricing. I would bet right here that the majority of those new home sales started up in the second half of the year as the Bank Owned homes Inventory started dwindling and Quality Bank Owned homes were gone within hours of being listed for sale.

So… is it really an “incredible fall” from 38,957 just four years earlier? Or was that period of time Overbuilding to begin with? My money is on the overbuilding fueled by lax lending standards and false appreciation hopes.

Now… ask the majority of those New Las Vegas Homebuyers why they bought brand new in 2009 and you’ll pretty much get a resounding

Because We Got Tired of Losing Out on our Offers on the Bank Owned Homes or Tired of Waiting for Las Vegas Short Sales to be Approved.

I don’t think I had one request in 2009 to look Just for New Homes unless it was from a couple of investors who wanted to do bulk deals at a significant discount. Ok… let’s go on.. from the Article:

Some analysts predict prices will drop further in Las Vegas when banks release their so-called shadow inventory of foreclosures, or homes in default that have yet to go to trustee sale.

Las Vegas Realtor Robin Camacho doesn’t buy into the “double-dip” theory. She expects to see real estate-owned, or bank-owned, home prices remain flat for the next three to four months.

I agree with Robin here. If the Banks are holding on to this so called shadow inventory there is no shortage of buyers for Las Vegas Real Estate from all over the country to buy it. I’m wondering how many trees were wasted today on offers that will not get accepted from the bank. I think I wiped out an entire forest in December writing up offers. Sorry… blame it on the banks for the 90% of the offers that did not get accepted. (And they were good offers.)

Here are where my out of state requests for information on Las Vegas homes came from just today:

• 

  Welcome to Fabulous Las Vegas

  Hawaii

• Alberta, Canada
• California
• Chicago, Illinois
• Mexico

Who knows if they will actually buy… but they are certainly looking and that’s a start.

“Las Vegas may see a slight drop in overall prices over the next few months, but this is because the price of short sales and privately-held homes are coming more in line with the price of recent REO sales,” Camacho said. “Since appraisals are based to a large degree on recent sales and the majority of sales are REOs, this is holding down values.”

This is one of those interesting statements concerning REO (Real Estate Owned, aka Bank Owned) homes… when over 60% of the sales are REO homes… are they bringing down the value or are they priced at market value? Just because it is an REO home… does not mean it’s going to sell. It’s all about the price… Banks are getting multiple offers on their nice properties priced right… trust me and the forest I wiped out in December. Buyers are determining market values at this point of the game which is why you’ll more often then not… hear a new Las Vegas Homebuyer say they bought new… because they could not get an accepted offer on a REO home. REO homes bring down values when there is no market activity and the asset managers give the order to whack the price down until the home does sell. One of the great things about real estate is there is always a price that will sell it as long as it’s not radioactive.

Now.. I certainly know there are so many factors going on with New Las Vegas Homes keeping them from having the ability to really price their homes competitively but I can certainly guarantee you if it was not for those outside factors and if they could price their homes even more competitively … we certainly would not have a gloomy headline created from what somebody paid by New Home Builders says.

Because… it’s all about the price when it comes to dynamic cities such as Las Vegas. Just like I Said way back in November of 2007 when it came to New Home Development in Lake Las Vegas.

Something else to Consider

Just for giggles… Let’s say prices do go down another 5% from Decembers Median Resale Price of $123,000… that equates to a loss of a $6,150.  Quite a big difference from the days when the median sales price was around $300,000 or what would equate to a $15,000 loss on a 5% drop.

So a buyer decides to wait because they think prices will go down 5% for a home they like that’s priced at $123,000. They hit the jackpot with their thinking and the asking pricing drops to $116,850.. all financing scenarios the same… this equates to a win of saving around $33 on their monthly mortgage. Let’s say they get really lucky, hit the jackpot and the price drops 10% from the $123,000 price to $110,700… all financing scenarios the same… looks like they’ll save around $66 a month taking that chance. (Keeping it simple.)

I’m certainly not going to say it can’t happen… but at this point of the game… how much more is a buyer going to pay  in rent waiting to take that chance?

Is the reward worth the risk of waiting?

Paul Francis, CRS
Prudential Americana Group – Realtors
Las Vegas Real Estate
702.592.3058

Will New National Testing

Clean up the Lending Industry?

“Must be Pre-Approved with such and such Lender… “

Anybody going through the frustrations of attempting to purchase a Bank Owned Home in Las Vegas certainly knows all about this requirement.  A recent call from a prospective buyer frustrated with trying to buy a home in Las Vegas had three pre-approvals from different lenders… an obvious sign to me that they had unsuccessfully been chasing bank owned homes.

While the process of getting pre-approved with the REO Agents desired lender is certainly a nuance to me since I have my favorite long time loan officer who works for a local mortgage company and does what they say they are going to do, I certainly can understand the requirement since I’ve run into my share of less than knowledgable loan officers that will say anything just to lock up a potential loan.

So, this article from the New York Times highlighting the failure rates of the new federally mandated licensing exams certainly was no surprise to me:

31% of loan officers failing basic fundamentals test

Prospective licensees in 11 states began taking the exams on July 30, followed in late October by those in six more states and Washington. On Dec. 10, New York and New Jersey started offering the tests, which feature roughly 100 questions in the national version and about 50 for the state version.

The exam administered by the Conference of State Banking Supervisors varies from state to state and covers basic principles of the lending process including federal laws, general mortgage knowledge, the loan-origination process and ethics. Loan officers working for conventional banks do not need to take the test.

Licensing Requirements for Nevada

Read More at my Las Vegas Real Estate Website…

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate
702.592.3058

Las Vegas Home Sales

Rise in October

From the Las Vegas Sun

The Greater Las Vegas Association of Realtors® reported 3,535 sales of single-family homes in October, a 5.3 percent increase over September when there were 3,358 sales. Median prices rose nearly 1 percent to $139,100, the highest since it was $138,800 in July.

Sales of condos and town houses fell 1 percent in October to 850, but median prices rose 6.5 percent from $65,720 to $70,000, the GLVAR reported.

Demand for homes continues to be fueled by investors and first-time homebuyers. Cash buyers accounted for 42 percent of the sales.

The sales of foreclosed-upon homes declined in October, falling to 64.5 percent of the total. It was 67 percent in September.

The GLVAR tracks sales only on the Multiple Listing Service. It reported there were 20,998 homes listed at the end of October, about 1 percent higher than September. The GLVAR said there were 8,075 homes listed without offers, a 2 percent increase over September.

In October, owners listed 5,482 homes for sale, an 11 percent increase over September.

Partially fueled by the looming 11/30/2009 deadline of the $8,000 tax credit for buyers who have not owned real estate for the past three years, Las Vegas home sales surged in October. (The Tax Credit has been extended and expanded as of this past Saturday.. 11/07/2009.)

REO Homes aka Bank Owned Homes for sale declined in sales due to the dwindling supply of Las Vegas Bank Owned Homes or sale. No surprise here as there are reports that banks are keeping the homes off of the market in an attempt to space out the inventory to keep home values stable.

Of particular interest is the 11% increase of Las Vegas homes put up for sale over September. With the $8,000 tax credit extended (and expanded) it will be interesting to see what happens for the next couple of months since potential buyers have more time to shop around and be more selective in their purchases.

All but one of these four signs are now gone as these homes have all recently sold. Not shown is my sign behind the photographer on another home that is also now sold.

Signs of Stability for Las Vegas Real Estate?

For the past two years… November has been the month where I’ve noticed significant price drops for Las Vegas Bank Owned homes as banks look to unload inventory and get their losses off of the books. So far… it has not transpired this year which could be a combination of many factors such as prices already so low and the changes to Mark to Market accounting rules on reporting assets back in April.

Short Sale Opportunities for Sellers and

Buyers?

For Las Vegas Homeowners buried underwater and owe far more then their home is worth… the next couple of months may be an ideal time to Short Sale your Las Vegas Home as real estate agents are already heavily promoting the $8,000 tax credit extension / expansion.

Las Vegas Home buyers that want to take advantage of this now have the time to shop the Las Vegas short sales. From what I see with my Las Vegas real estate buyers… the bank owned inventory in Las Vegas has been pretty dismal and we’ve focused more on the great Las Vegas short sales available for sale…. that are listed by Las Vegas Real Estate agents who know how to do short sales in the first place. (The differance between Agony and Ecstasy.)

As always… comments are always welcomed and my contact information is below for Las Vegas Real Estate Services.

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate – Summerlin Homes
702.592.3058

State of Nevada Loan

Modification Companies

Approved

With all of the negative news that can be found about Loan Modification companies and the aggressive advertising behavior of some of them.. The State of Nevada’s Division of Mortgage Lending has released a list of Loan Modification companies that have applied to the State and approved to provide such services.

As of 11/03/2009, click on the following to view:

State of Nevada Approved Loan Modification Companies

Keep in mind… it is not mandatory to pay a service to ask your lender to modify your loan. The Making Home Affordable program has created all kinds of incentives for your lender to work with you and you can do this directly. For the most part… all you have to do is call them and they’ll tell you what you need to do. (Trust me… they handle these calls all day long.)

Granted.. Professional Services certainly do have their benefits.

Make sure you take a look at the Making Home Affordable website to see if you qualify for a loan modification in the first place with this handy reference tool. I’ve come across situations where homeowners who would have never qualified paid some hefty fees to services that just submitted paperwork with no results.

I do not do Loan Modifications

I do Short sales for homeowners who do not want to stay or homeowners who have applied for a Loan Modification with results that are less then favorable in getting back on track. Las Vegas Homeowners that wish to keep their homes but are under financial hardships that do not warrant continuing the current circumstances are highly encouraged to explore all avenues before short selling.

Whatever homeowners decide… just don’t walk away without exploring your options.

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Short Sales
702.592.3058

Part 1 of a five-month McClatchy Newspapers investigation is certainly the must read Real Estate related article of the day/week.

How Goldman Sachs Secretly Bet on the Housing Crash

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Part Two - Go After Homeowners to Collect

Since the economic collapse that swept millions of Americans out of their jobs and homes, Goldman Sachs has moved aggressively to recover losses. The firm is pursuing shaky borrowers into federal bankruptcy and state courts across the country and seeking to seize their homes. McClatchy examines one family’s multi-year attempt to get Goldman Sachs to admit that it had purchased their mortgages.

Certainly something very interesting is the amount of the claim that Goldman Sachs was going after:

In July, after U.S. Bankruptcy Judge Roger Efremsky of the Northern District of California threatened to impose “significant sanctions” if the firm failed to complete a promised settlement with the Beckers, Goldman dropped its claims for $626,000, far more than the couple’s original $356,000 in mortgages and $70,000 in missed payments. The firm gave the Beckers a new, 30-year mortgage at 5 percent interest.

Is my math a little off or was Goldman Sachs really adding another $200,000 in that claim?

Part Three – Secret offshore Meetings

Goldman Sachs and other Wall Street firms turned to secret Cayman Islands deals to draw overseas investors, including European banks and other foreign financial institutions, to invest hundreds of billions of dollars in securities tied to risky U.S. home loans. Unlike U.S. investors that lost money on the securities, however, these overseas institutions have fewer legal options.

Part Four – Associations with some

of the Biggest Junk Loan Originators

Goldman Sachs was among the last Wall Street giants to enter the lucrative world of subprime mortgages, but it didn’t take long before the elite investment house was cutting deals with high-flying firms whose lax standards would prove to be disastrous. Perhaps no lender was more emblematic of the subprime mortgage industry’s spectacular rise and fall than California’s New Century Financial.

Make sure you take a look at the pictures on the left hand side of the story with the classic captions such as:

Californians Irma Aninger and Melissa Toy, among risk analysts hired to review subprime mortgages before Goldman Sachs and other Wall Street firms bought them, said their supervisors routinely overrode their challenges to loans. Toy said she concluded that the reviews were mostly “for appearances,” because the Wall Street firms planned to repackage “bogus” loans swiftly and sell them as bonds, passing any future liabilities to the buyers. “There was nobody involved in this who didn’t know what was going on, no matter what they say,” she said. “We all knew.”

And…

“I don’t even know why I was there,” Aninger said, “because the stuff was gonna get pushed through anyway.”

Certainly interesting…. Contribute to home prices going up by providing junk loan originators with lax lending standards billions of dollars and then sell off the securities while betting on home values crashing.

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate – Summerlin Homes
702.592.3058

Spooky Real Estate Predictions

Doomsday Real Estate

There is no shortage of national media data crunchers giving bad news about Las Vegas Real Estate. The problem is… they don’t actually practice real estate and they seem to interview agents that really are not involved in day to day Las Vegas real estate in the form of representing buyers and real sellers.

Take a Look at the Las Vegas Bank Owned Properties for Sale compared to January of 2009.

Notice of Trustees Sales in Clark County, NV through July of 2009

Quite a significant decrease in inventory despite all of the reports of how Nevada leads the country in foreclosures. We probably also lead the country in the amount of offers that come in on a Bank Owned home for sale. I’m certainly not going to venture out and say the foreclosure crisis is behind us because I’m still trying to figure out where all of those foreclosures that were supposed to be on the way in the form of bank owned homes for sale went. Remember this Post about the Number of Trustee’s Sales filed in Clark County, Nevada through July?

The Notice of Trustee Sale is the next to final step in the lender actually taking the home back. Generally… the homeowner has 30 days of ownership left before the lender officially owns the home so you would think with the huge numbers filed in June and July… that they would have hit the market by now.

But… for those of us with Real Estate Investors patiently waiting for a bunch of good deals to come up on the Las Vegas REO market… it’s just not materializing. When we do find something worth purchasing… chances are there are going to be multiple offers on the property and more likely than not… it’s going to sell for more than the list price that attracted us to it in the first place.

There are certainly plenty of theories out there of what is taking place (and I certainly agree with some of them) but nobody has been able to provide substantial proof of where the Disappearing Las Vegas Bank Owned Homes for sale went.

Do Spooky Predictions Matter with current

Las Vegas Home Values?

I came across this post over at Dr. Housing Bubble concerning the nasty Option Arms coming up to reset in the next couple of years. There has been quite a bit of speculation on what this is going to do to further decrease home values but when you look at the % numbers of where the majority of these types of loans exist… it’s primarily in Southern California. According to the pie chart below… only 3% of these types of loans exist in Nevada.

3% of Option Arm Loans are in Nevada

However… you certainly need to respect the fact that the Las Vegas economy is certainly dependent on the Southern California economy. So the big question is… what effect will this have on the Southern California market? From what I hear.. they have a shortage of homes priced right also.

Something else very interesting that popped up in the Dr. Housing Bubble blog post:

And for those looking at the Case-Shiller or other data showing a minor move up in price, remember that prices are still dropping but the way the data is calculated, it does show minor moves up because of the shift in market sales.  Lower priced homes, that subprime and foreclosure wave, made up a bulk of sales for the past year.  Now, we are seeing more expensive homes sell but for cheaper prices thus the mix is moving up.

Keep that in mind when you see marketing reports released by the Greater Las Vegas Association of Realtors®. I primarily specialize in areas of Las Vegas where the average prices are over $200,000 and there has certainly been an increase in sales activity from what I see… which raises the median home prices of all sales.

So.. Do the Spooky Predictions Really Matter for Las Vegas Real Estate?

Very tough to say. Las Vegas real estate prices have already been decimated in value and all of the current programs in place (that have to eventually end) are benefitting (artificially propping up values) other areas of the United States… for right now. Our prices are already decimated and throw in the low tax environment (while other states/cities are raising taxes), and I see no shortage in the interest of people wanting to relocate to Las Vegas.

Case in point… the newest offer I wrote for a Lady who just sold her $460,000 condo with a $600 a month association fee in Hawaii to buy something three times the size in Las Vegas for $340,000. Oh.. it’s also 15 years newer and the association fee is $520 cheaper a month. She’s one of the lucky ones that gets to travel all of the time and the convenience of all the flights coming in and out of Las Vegas is certainly more convenient for her to set up home base in Las Vegas. (From what I remember… the buyers of her Condo are taking advantage of the $8,000 tax credit. See a relationship here?)

The big unknown is what happens if and when all of the subsidies disappear? $8,000 first time homebuyer tax credit expiring, extending, expanding… whatever. Primarily a so called need fueled by special interest groups and since over 70% of all transactions for Las Vegas have been bank owned properties Year to Date… you have to wonder who is really benefitting. (I don’t think all of these cash buyers for Las Vegas Bank Owned Homes need or are buying because of the $8,000 tax credit.)

Would if the Bank Owned Homes Magically Re-Appear for Sale in Las Vegas?

Not so Scary after all

Just ask all of the Las Vegas Real Estate agents representing buyers trying to buy one. I have not come across one Las Vegas Realtor® in the past several months complaining about the inventory surplus. If anything… I’m hearing nothing but complaints about the lack of quality inventory available.

Las Vegas real estate prices have attracted people from all over the world. Despite some of the recent negative news concerning the Las Vegas economy and predictions by some economy experts (where were you three years ago? -or – old news) concerning inventory… the reality is that if it’s priced right… there is ABSOLUTELY no shortage of interest. Key words.. priced right.

High Prices created from cheap and easy credit, increased inventory from overbuilding and a return to traditional loan products are what eventually killed Las Vegas real estate values.

It was unsustainable and Las Vegas Real estate prices were starting to drop long before the unemployment came. Just think about all of the jobs created during all of that building and that helps explain why the unemployment rate in Las Vegas is so high. You can’t have explosive growth forever… it’s never happened in the entire history of the world for any city and Las Vegas is no exception.

Wells predicts the housing market will suffer through what he calls the “W” effect with prices going up, down and back up again. The concern is what happens with the Federal Reserve and need to raise interest rates to keep inflation under control. That will keep a lot of buyers from the market, he said.

A “W” shaped Recovery (or W effect… LOL!) is certainly something to be leary of with all of the unsustainable Government subsidies in place such as the $8,000 first time homebuyers tax credit and purchasing of mortgage backed securities to artificially lower interest rates. Yes.. the Federal Reserve will need to eventually raise interest rates to take back in all of that printed / borrowed money being used to pump up the economy back  to the la-la land years but you really have to wonder who that is going to hurt the most when it does happen.

Wells said that homebuilders can’t compete with existing homes selling for $70 a square foot and that the lack of job growth will hinder that recovery going forward.

I’ll refrain from posting all of the news reports from 2004 of developers paying obscene amounts for BLM land for now. Besides that, My area of specialty is averaging over $100 a square foot which says something about carefully planned development anyways. As for Commercial real estate.. just hop on down to Town Square and see what kind of business a well planned development does. In other words… just another strip mall going down in flames is more of a casualty from lack of creativity and high development costs based on unsustainable numbers to begin with.

Federal Spendulous Funds

Nevada has actually received a very small share of the pump it up money so when it ends… it’s going to hurt the big beneficiaries such as California more. (Do they slash their spending or raise their taxes?) Las Vegas casinos did not get bailed out and they are still open so that should be a positive sign.

Confused Yet?

Making Homes Disappear is a Great Magic Trick

Good… so is everybody else who has a clue of what is currently taking place and trying to make future real estate predictions with the consideration of the magically disappearing Las Vegas bank owned homes for sale.

Regardless, The reality is that current Las Vegas home values are very affordable considering what Las Vegas has to offer and further price declines from this point are not going to BK any current buyers unless they were heading down that road anyways. (A 10% decline of today’s current median price is certainly much different then a 10% decline from the 2006 median price.)

Las Vegas real estate was certainly a much spookier concept in 2006 then it is today if you look at things the right way. I’m pretty certain that it’s much cheaper to Live in Las Vegas then Honolulu, San Francisco, Los Angeles, Chicago, Boston, New York, Washington D.C. and several other cities and at a time when you have millions of baby boomers retiring… Las Vegas is certainly in a position to capitalize if we can just forget about the la-la years and focus on a new destination.

Happy Nevada Day and Happy Halloween. Be Safe at all of the Great Halloween Parties taking place in Las Vegas.

Paul Francis, CRS
Prudential Americana Group – Realtors®
Las Vegas Real Estate – Summerlin Homes
702.592.3058

Did Countrywide’s VIP Program

Influence Lawmakers?

More to come on this as a House Oversight Committee has issued Subpoenas into Countrywide’s (Now owned by Bank of America) VIP “Friends of Angelo” program.

Despite multiple warnings that the Housing Market was overheating, influential lawmakers insisted that there were no problems brewing. Meanwhile, Countrywide was serving up exotic loans and pawning them off to Fannie Mae and Freddie Mac. My experience with dealing with these types of Las Vegas short sales has certainly been interesting to say the least.

Related Reading:

Congress looks to bail out Countrywide 06/18/2008

Campaigning in Lancaster, Pa., on March 31, Sen. Barack Obama blamed Countrywide’s CEO for “infecting the economy and helping to create a home foreclosure crisis.” Yet Rep. Barney Frank (D., Mass.) and Mr. Dodd have crafted a bill to provide $300 billion in new taxpayer loan guarantees to Countrywide and others. The bill will allow troubled financial institutions to foist the riskiest mortgages in their portfolios onto the Federal Housing Administration (FHA) — ultimately putting the American taxpayer on the hook for their bad bets.

Senator Chris Dodd and Countrwide 10/10/2008

Former Countrywide Financial loan officer Robert Feinberg says Mr. Dodd knowingly saved thousands of dollars on his refinancing of two properties in 2003 as part of a special program the California mortgage company had for the influential. He also says he has internal company documents that prove Mr. Dodd knew he was getting preferential treatment as a friend of Angelo Mozilo, Countrywide’s then-CEO.

Countrywide has Friends in High Places 06/12/2008

Besides the discounted interest rates reported by the Journal, Countrywide also waived points for Johnson, a former chief executive of government-sponsored mortgage reseller Fannie Mae. In 2003, Countrywide took 1.375 points, about $13,000, off a nearly $1 million loan to refinance Johnson’s Washington home. When he borrowed almost $1.3 million in 2003 that same year to refinance a 4,400-square-foot, Southwestern-style home with four bedrooms and five baths beside the second green of a golf course in Palm Desert, California, Countrywide waived 1.875 points, or about $24,000.

In 2004, Johnson borrowed $3 million to upgrade to a larger estate—a 5,875-square-foot house, with a guesthouse and pool—on the same course. Although the size of the loan exceeded Countrywide’s limit for a second home, Mozilo told an employee to “do the deal.”

Sweetheart Deals from Countrywide 07/27/08

Feinberg also told House investigators that Countrywide counted both of Dodd’s’ homes as primary residences.

“He was allowed to do both of those as owner-occupied, which is not allowed. You can only have one owner-occupied property. You can’t live in two properties at the same time,” he said.

There is certainly an easy argument to be made that the Sub-Prime lending behavior of companies such as Countrywide contributed to high home values due to lax lending standards…. eventually costing Homeowners across the country dearly.

While much of the damage has already been done… we still get to deal with the wave of Option Arms due to reset in the next year or two. Hopefully… buyer’s interest in cheap Las Vegas Real Estate will remain strong to help suck up the coming foreclosure inventory that will be on the way.

Will the subpoenas produce anything we don’t already know?

Paul Francis, CRS
Prudential Americana Group – Realtors
Las Vegas Real Estate – Summerlin Homes
702.592.3058