BluefoxToday blog : August 2009

Las Vegas real estate market has undoubtedly seen better days. Anyone who knows something about the timely topic is well aware of that. Now there is an altogether new, bizarre twist to the notion.

National Association of Home Builders, or NAHB, convention comes to Southern Nevada every January to showcase the latest in their product lineup. It really is an impressive event and usually draws huge crowds year after year. One of the annual must-see displays is a model house, called The New American Home, which introduces the hottest new technologies available in home building. Domanico Custom Homes from Las Vegas is currently constructing this year's home, a 6,800 sq. ft. affair, using many energy efficiency features in it as well.

The project, however, has run into some mortgage loan trouble of late. Being about halfway done, the private finance source recently bowed out and no bank so far has been willing, or capable, to step in.

Usually mortgage lenders are more than eager to compete for a loan like this, as it gives them great exposure. This time things obviously are different. Most are still licking their wounds from the Wall Street meltdown, their books splattered with toxic home loan entries. Yet, thinking about it, this is not the average borrower who nowadays has to go through all the various underwriting hoops to get anywhere. This, if anything, is high profile.

Las Vegas valley - including Anthem, Sunrise Manor, Whitney, Henderson and Summerlin - also continues to top the chart for mortgage foreclosures, which of course casts a shadow on this case. In addition, the home is a custom effort, appraised a short time ago for $3.5 million, and values in the luxury segment here are very soft, so that, too, is a negative factor in the scheme of things. When this model was planned, perhaps a smaller version with fewer features should've been considered, knowing how volatile the local housing market still is.

Nevertheless, the builder is determined to finish it by early fall, and has also listed it for sale at $3.39 million.

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Since Thursday I have covered the first 4 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The fifth question on Declarations Section VII Of Loan Application states:

• e. Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?

This is another one of those questions that is not as easy to answer as it first might seem. That is because if a Bank files for foreclosure, even if a Homeowner transfers title in lieu of foreclosure, or avoids foreclosure by selling the house before the Bank forecloses on them, in all likely hood that Bank is still going to report it as a foreclosure on the Homeowners Credit Report. I have seen this several times lately, where the Homeowner sold the house before they were foreclosed on, even if it wasn't a Short Sale, and the Bank got paid in full, they still report a foreclosure on the Homeowners Credit Report.  This might seem very unfair, but that is what is happening, and as far as Automated Underwriting is concerned, if it is reported as a foreclosure, its a foreclosure.

The only hope that a Borrower has in a case like this is if they get the Bank to agree to stop reporting the NON FORECLOSURE as a foreclosure, or that their Credit Scores and Debt-To-Income Ratios are within the qualifying guidelines for a Manual Underwrite, where an Underwriter will actually look at what really happened.  If they can't meet the Manual Underwriting Guidelines, then they have to wait the same time period to purchase another house as if they really did have a foreclosure.

The sixth question on the Declarations Section VII Of Loan Application states:

• f.  Are you presently delinquent or in default on any Federal debt, or any other loan, mortgage, financialobligation bond or loan guarantee?  If "Yes" give details as described in the preceding question.

It is not good to be late on ANYTHING, but if you are going to be late on a financial obligation make sure that it is not a mortgage or Federal Debt.  The Automated Underwriting in many case will forgive recent lates on credit cards, car payments, and other similar debts, but it is not forgiving of mortgage late in the last 12 months.  Even if Automated Underwriting over looked a mortgage late in the last 12 months, the Underwriter will not, because it is unlikely that an Investor will purchase a loan that the Borrower had a mortgage late in the last 12 months.

A 30 day late payment or longer on a Federal Debt in the last 12 months is pretty much an automatic denial on FHA Mortgages.  So young Borrowers with student loans need to make sure that those student loans are paid on time.  Claiming that you did not know that the loans had gone into repayment, or that you were young and foolish is not a good excuse.

If you are planning to purchase a house in the near future, make sure that all your financial obligations are paid on time, but especially your mortgage and Federal Debts, or you could find yourself waiting several months before you can purchase that new house that you fell in love with.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Thursday I began this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated Thursday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4. Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Yesterday I covered the first 2 question on Declarations Section VII Of Loan Application, and today I will cover the next 2 questions, and continue to explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The third question on Declarations Section VII Of Loan Application states:

• c.   Have you had property foreclosed upon or title or deed in lieu thereof in the last 7 years?

This question may seem easy to answer at first, but it is not as simple as it may appear.  The reason why it is not as easy as it appears is because many people who are foreclosed on consider not owning the house from the point that they were evicted from the house.  This eviction can place many times when the bank holds a Foreclosure Auction, but this not the date of the foreclosure, so technically the owners still own the house.  In fact they are considered the owners of the house up until the bank completes the foreclosure process which could be several months later.  Even the date on the "Foreclosure By Sale Committee Deed" is not the date of the foreclosure.  This date is just the date that the Foreclosure Committee (usually a committee of one) approved the foreclosure, but it is not the final date of the foreclosure. That date could be 3 to 6 months later, and it is at that point that the owners of the house have been foreclosed on and no longer own the house.

So as you can see a question that seems easy to answer is not so easy after all.  Because of the confusion that this process can create, it is important to fully investigate all foreclosures if the Borrower answers YES to this question.

FHA requires three years from the time of the foreclosure before a Borrower can qualify for an FHA Loan again, and Conventional (Fannie Mae & Freddie Mac) requires five years.  If a Borrower honestly believes that three years have past since they were foreclosed on, because that was when they were evicted form their house, and foreclosure documents are not requested in the beginning of the loan process, everyone could be in for a big surprise at the end.

The forth question on the Declarations Section VII Of Loan Application states:

• d.  Are you a party to a lawsuit?

I always thought that it would have made more sense to have this question as the sixth question after the next two questions which continue to deal with foreclosures and delinquencies on mortgages.  But higher powers then me determined that it should be placed at this point.

This question like all the others, if answered incorrectly can create major problems late in the loan process.  A Borrower can quickly go from being in great financial shape, and their Debt-To-Income Ratios falling in place, to no longer qualifying because their Debt-To-Income Ratios are now to high.  Just like foreclosures, more questions need to asked if the answer to this question is YES.

If the Borrower is the one who has brought a lawsuit against someone else, it needs to be explained, but it most likely will not create their Debt-To-Income Ratios to change.  But if they are the ones that a lawsuit is being brought against, there is a risk of an additional financial obligation that could easily put the Borrower over the qualifying Debt-To-Income Ratios for a Loan Program.  The potential risk will in a lot of cases cause a loan to be rejected, and it is something that is better explained sooner than later.

Just as I stated before about previous questions, if a Borrower answers NO to this question and it is discovered they do have a lawsuit pending against them. not only will the loan be denied, but they could face criminal charges for lying on the Loan Application.  This is because at the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

I am going to end this blog with these two questions because the next question "e.  Have you directly or indirectly been obligated on any loan which resulted in foreclosure transfer of title in lieu of foreclosure or judgment?" of the Declarations Section VII Of Loan Application will require a lengthy explanation of the problems that it can create.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Yesterday I began a series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" which is a follow up to a blog I did on Tuesday about the need for Buyers to be Pre-Approved for a loan "Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter", and the process that should be followed. In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, they have to complete a full Loan Application (1003). Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

As I stated yesterday one of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4.  Each question on the Declarations Section VII Of Loan Application only requires a YES or NO answer, and maybe that is why it does not seem to be given the same level of attention as other parts of the Loan Application.

Today I will start to go through each questions and explain why these Questions Must Be Asked On The Declarations Section VII Of Loan Application and there importance. The first question on Declarations Section VII Of Loan Application states:

• a.  Are there any outstanding judgements against you?

Even though judgments will show up on a Credit Report, they maybe reporting wrong, and need to be corrected.  A case may also exist that a Borrower just acquired a judgment, and it has not reported on the Credit Report yet.

In the first case it is important to correct a judgment that is being reported incorrectly immediately with the three Credit Bureaus (TransUnion, Equifax, and Experian), because no loan for a Mortgage can be done if the Borrower has an existing judgment.

In the second situation it is equally important for the Borrower to be honest and upfront about any recent judgments that might not be reporting yet on their Credit Report.  Just because it is not being reported on their Credit Report yet does not mean that it will not be discovered in the course of the Loan Process, or worst yet just before they are set to Close on the loan.  If it is discovered that they have a judgment and did not disclose it, not only will the loan be denied, but they could face criminal charges for lying on the Loan Application.  At the bottom of Page #4 Borrowers have to sign attesting to the fact that all of the information that they have provided is the truth to the best of their knowledge.

The second Question That Must Be Asked On The Declarations Section VII Of Loan Application is:

• b.  Have you been declared bankrupt in the past 7 years?

As in the case of judgments being reported on the Borrowers Credit Report, so are bankruptcies.  However, they are not always being reported correctly as to their status or discharge dates.  If a bankruptcy is reported on the Borrowers Credit Report, or the Borrower acknowledges a bankruptcy, it is important to immediately get a copy of their bankruptcy and discharge papers.  This is the only way that the actual dates can be verified, and documented.

If a Borrower has had a bankruptcy within the last 7 years, a loan can still be done, but the guidelines for this vary from FHA to Conventional Loans. for example:

• FHA requires that 2 years have past from the time a Chapter 7 Bankruptcy was discharged, and 1 year form the time a Chapter 13 Bankruptcy was discharged.
• In the case of a Conventional Loan (Fannie Mae or Freddie Mac Insured) the time period is 4 years for a Chapter 7 and 2 years for a Chapter 13.

The above time periods are from the time of application for a loan, and not when the loan is expected to Close.  It is very important to keep that in mind because a loan could be denied for a matter of a few weeks, if the application process is started to early.

There are exceptions to these guidelines but that will be the topic of another blog that will just focus on bankruptcies.  For now I will not go into detail on this matter, because the exceptions are few, and are far from the norm.

Just as in the case of the first question a Borrower could face criminal charges for loan fraud if they do not answer this question truthfully as a result of them signing at the bottom of Page #4 that all of the information that they have provided is the truth to the best of their knowledge.

The problems that these two questions create during the Loan Process, can be easily avoided if the Loan Officer does his/her job at the time of Pre-Approval, by taking a full application at that time and not ignoring the these Question That Must Be Asked On The Declarations Section VII Of Loan Application.

My next blog in this series Questions That Must Be Asked ............ Declarations Section VII Of Loan Application, we will cover questions c, d, and possibly e depending on the length of the blog.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Southern Nevada - like Green Valley, Summerlin, Henderson, Spring Valley and Eldorado - was rapidly pricing itself out of the housing market a few years ago. The recent unforgettable boom pushed home values way past the average household income, forcing many to buy property with flexible mortgages that they really couldn't afford, or leaving others out of the market altogether.

That was the flavor of the Las Vegas real estate scene then. Things, fortunately, have changed drastically from those days.

BusinessWeek.com and a research shop Reis made some advanced calculations to rank the top 20 cheapest housing markets in the whole nation. The study actually compared how much it costs to own and maintain a home vs. renting one. Reis put these figures together from its own second quarter rent statistics and from Zillow.com's second quarter home price records. And the envelope, please.

Vegas fought its way to the 11^th spot on the list. The own-versus-rent equation here has greatly narrowed now as prices have taken a major pounding, largely on account of oversupply and mortgage foreclosures, and home loan rates have remained nice and low. According to this report the own/rent ratio in Southern Nevada is 131%. If the figure is below 100%, it's cheaper to own a home than rent. In any case, at 131% it's a bit more expensive to own a place today, but the difference is now rather manageable.   

Las Vegas has become once again an affordable place to own a home in. Like it used to be not that long ago. First-time home buyers are having a time of their lives picking and choosing moderately-priced property from a huge inventory, often using an FHA mortgage loan that offers a low down payment option and reasonable underwriting criteria. They may also qualify for the first-time buyer's tax credit of up to $8,000.

By the way, the top three places on this most affordable list went to Detroit, Pittsburgh and Rochester. N.Y.

On Tuesday I posted a blog on the need for Buyers to be Pre-Approved for a loan  Mortgage/Loan Programs with Low or No Downpayment Still Available In Connecticut ..... Pre-Appoval Letter, and the process that should be followed.  In Pre-Approving a Buyer it is EXTREMELY IMPORTANT that the Loan Officer not just look at Credit and Income, or even collect documentation to verify the information that they were given, THEY HAVE TO, let me repeat that, THEY HAVE TO complete a full Loan Application (1003).  Without completing a FULL APPLICATION, mistakes are very likely to happen, because each page of the 1003 has questions if not answered can create surprises and huge problems later on.

One of the pages of the Loan Application (1003) that unfortunately does not get the full attention that it deserves, and taken for granted by many Loan Officers, is the Declarations Section VII of Page #4.  If you take the time to read Section VII you will quickly see the need to ask these questions, and the problems that can follow if they are not all answered.

I plan in the next several blogs to go through each of these questions, in a series titled "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" and explain the reason why they are there, and the problems that can possibly be created if each and everyone is not properly addressed.

Most of these question will only appear on Section VII of the 1003, and are a valuable resource in identify other parts of the Loan Process/Pre-Approval that might otherwise be overlooked, and require a more careful or even further review.  By fully utilizing Section VII of the 1003 we can avoid many of those last minute surprises that we all hate, and make the Home Buying experience a lot less STRESSFUL for everyone.

Starting tomorrow I will beginning this series "Questions That Must Be Asked ............ Declarations Section VII Of Loan Application" and go through each of these questions by covering two or three of them at a time.  I hope that by the end of this series of blogs everyone that follows them will have a much better understanding of the importance of these questions, and the need for a careful review of them.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Summerlin July 2009 Real Estate Resale Market Report:

• Listings (8/15/2009):  708
• Under Contract (8/15/2009):  591
• Sold July 2009:  175
• Month's Inventory:  4.0

Absorption is slightly higher than Las Vegas Valley.

Since Last Month's Report:

• Listings UNCHANGED
• Pendings UP +40
• Sold Units DOWN -27

Last Month's Summerlin Report

Most Current Summerlin Market Report

Real estate, they say, is all about location, location, location, and that is in a certain way backed up by a recent study commissioned by CEOs for Cities. It's a nationwide cross-sector group of urban movers and shakers from academic, business, civic and philanthropic fields committed to building and sustaining the next generation of strong American cities. They if anyone ought to have a finger on the pulse on this topic.

"Walking the Walk: How Walkability Raises Housing Values in U.S. Cities" is the report's title, prepared by Joseph Cortright from Impresa, a Portland consulting operation. Basically what was measured was how the proximity of homes to services like shopping, schools, libraries, restaurants, parks - even mortgage and real estate offices someone would throw in - affects values. To get this thing done researchers looked at 94,000 home sales in 15 different markets with the data supplied by ZipRealty. It discovered that in 13 of them residences within walking distance of general services clearly benefited from higher prices.

These neighborhoods are called walkable. No car needed to get around comfortably. The study generated a scoring system, named aptly Walk Score, from 100 to 0, the 100 indicating the highest score. Anything above 70 means that car use is not necessary in the area. According to Walk Score the gain per home in the top tier could be from $4,000 to as high as $34,000, depending of course on the particular housing market. That should make any future home buyer take careful note.

Las Vegas valley, including Henderson, Green Valley, Summerlin and Seven Hills, surprisingly, was one of the two real estate markets that showed a different result. Sin City has its share of nice neighborhoods that do have above average walkability scores and therefore ought to display decent premiums. But that failed to materialize in this study.

The on-going mortgage and real estate challenges in Las Vegas have brought on once-in-a- lifetime price erosion in the last few years that is probably skewing the study's results. It's hard to talk about gains right now when everything generally is on a down slope, regardless of the neighborhood. Still, for home buyers in Southern Nevada this is one bit of information they ought to keep in mind whenever they are heading out to look at property. Walkability.

The co-founders of $1.5 billion fund have long resumes highlighted with mortgage, FHA, Wall Street and financial regulation experience in executive positions. Richard Stewart Jr., CEO of Heritage Capital Resources and Peter Monroe, CEO of National Real Estate Ventures, have carefully assessed the turbulent state of the national housing market and decided to pool their talents to buy and sell distressed real estate. In doing so the plan is to "help return foreclosed homes to productive use, prevent many foreclosures and also allow us to work with banks, servicers and federal agencies to reduce evictions."

Their forward-looking joint venture has also formed a close strategic alliance with Partners in Action, or PIA, a non-profit organization that has for years helped first-time home buyers via the HUD-sanctioned Affordable Housing Program. Currently it is heavily involved in assisting troubled homeowners with loan modifications and lease-purchase options that would let them stay in their homes.

The REO, or real estate owned, fund is set to work together with Fannie Mae, Freddie Mac, FHA, FDIC and the Treasury to seek workable solutions to this financial calamity. Not only that, but it also aims to maximize returns for the investors on board.

This partnership is a good example of how a private enterprise can work together with the government in finding answers to common problems. When something like this is structured correctly it can turn out nice returns, monetary and otherwise, for both sides. From the looks of this fund it'll do just that.

Is the traumatized Las Vegas real estate market going to be one of the joint venture's priorities? At the moment no one knows, as a more specific plan of action is probably just now being put together. If it calls for heavy involvement in Southern Nevada - in communities like Henderson, Summerlin, Green Valley, Seven Hills and Eldorado - it would certainly help stabilize the still fluid situation here. Home prices have in many neighborhoods dropped below replacement cost, as several industry experts are saying, so that in itself offers excellent investment opportunity. Which ought to be incentive enough to give Sin City a careful look.

Mortgage-backed securities were some of the most-sought-after paper on Wall Street not so long ago, when the residential real estate market was still cruising along smoothly. The yields were solid and risk was seemingly minimal. Everybody and his nephew wanted at least some of them in their portfolios.

Then the mortgage securities business rolled right over the cliff, shoved there by the rapidly-deteriorating housing market. And the deep hurt was on, felt all across the industry. Now even well-qualified borrowers find it challenging to obtain a home loan, for refinance or purchase, as requirements have tightened considerably. The government had to step in and has been buying mortgage-backed securities to maintain some liquidity on the secondary market. The private money that used to participate there in a meaningful way just about disappeared altogether after absorbing huge losses on their prior investments.

The tide may be turning, though.

China Investment Corp., or CIC, is rather serious about investing in noxious, some prefer to call them toxic, mortgage-backed securities. It would happen under the Public-Private Investment Plan, or more affectionately PPIP, where the U.S. government creates public-private funds using taxpayer and investor money to purchase chunks of this nearly worthless paper from banks. CIC is for now planning to put in play about $2 billion, which really is only a couple of drops in the bucket.

The interest in mortgage securities is cautiously returning, obviously, is the important news here. Whether it comes from a Chinese entity or Las Vegas pension fund or someone else is immaterial. Somebody has to show the way and that in turn will attract others to at least come and sniff around.    

The real estate market is showing some signs of turning around, although in some areas more so than in others. That's what CIC is evidently betting on. It must've done its homework and feels that plunking down $2 billion at this stage is well worth the risk. If it's right, it'll be well rewarded. Undoubtedly the rest of the investment fraternity is watching, and deliberating, this with great interest.