BluefoxToday blog : September 2009

Sharon goes over plenty of critical stuff about appraisals. Take a look.

Charleston Heights August 2009 Real Estate Resale Market Report:

• Listings (9/15/2009):  98
• Under Contract (9/15/2009):  135
• Sold August 2009:  59
• Month's Inventory:  1.7

Since Last Month:  Listings are DOWN -7, Pendings are DOWN -13, Solds are DOWN -5

Why Las Vegas Pendings Are Not Closing

Last Month's Charleston Heights Real Estate Market Report

For More Las Vegas Communities and Reports Click Here

While consumers will are sure to benefit from recent changes enacted by The Federal Reserve, will the new lending rules put the squeeze on home sales? The changes amend Regulation Z, Truth in Lending, and are “intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting home ownership.”

The rules will now affect all mortgage lenders, not just state-chartered institutions, as was the case under the old system, and offer protections to those with weak credit. Establishing a new category called “higher-priced mortgage loans,” those first-lien mortgages with an annual percentage rate 1.5% or more above an “index” of average prime rate offers. The rules will also cover those subordinate lien mortgages, with an annual percentage rate of 3.5% above the index.

There are four key provisions in the regulations which will:

Prohibit lenders from making a loan without regard to borrowers’ ability to repay the loan from income and assets other than the home’s value.

Require creditors to verify the income and assets they rely upon to determine repayment ability.

Ban any prepayment penalty if the payment can change in the initial four years.

Require creditors to establish escrow accounts for property taxes and homeowner’s insurance for all first-lien mortgage loans.

The rules also address deceptive advertising practices by lenders; actions that encourage inflated appraisals; and abusive fees from loan servicers.

Set to take effect on October 1, 2009, with the exception of the escrow requirement, the new rules will offer some needed protections for the majority of consumers, but may actually limit the ability of some to obtain a mortgage. Not all “sub-prime” loans of recent years were fraudulent; and many whose income is difficult to verify—self employed, servers in restaurants, and others—will find it difficult or impossible to obtain mortgages under the new rules. We can only hope the benefits of these new regulations outweigh the deficiencies.

The Housing Guru: The one source for all your housing questions

The key home loan financier operating on the secondary mortgage market has seen much better days with its immense portfolio. Just like most other lending institutions it, too, has been slowly bleeding as foreclosures keep shaking its once solid foundation. So much so that Washington had to bail it out a while back. Yet, it's still doing what it was mandated to do, invest in mortgage paper.

Fannie Mae, to stem growing losses, is gradually hiking mortgage underwriting criteria, though. In the latest round of updates that'll go in effect November 1, the borrower's FICO has to be 620 or better for every home loan that complies with its Selling Guide. This date applies to manually underwritten and FHA and VA loans. Furthermore, for mortgages routed through Fannie Mae's Desktop Underwriter the start date is December 12, pushed there to get the software configured. Excluded from this FICO upgrade are Fannie Mae's Refi Plus products and manually underwritten loans with non-traditional credit. The minimum score now is 580 for most programs and government loans have none.

Southern Nevada - Las Vegas, Southern Highlands, Summerlin, Henderson, Mountains Edge, Anthem and Green Valley among the communities here - is trying to emerge from a deep real estate slump and these changes naturally will hamper that. The same goes for many other areas in the country, from Arizona and California across to Florida and elsewhere. Not in a major way, but still. The home loan guidelines are already tough enough, so another degree higher will put more squeeze to getting approvals.

On the other hand, as the national housing market continues to plod along unsteadily, Fannie Mae applying more prudent risk management in mortgage lending is understandable. It's already supported by the government. If it makes more risky loans and they increasingly default, it needs more money from Washington to stay in business. In reality, that means the taxpayer who was approved for a mortgage and subsequently goes bust ends up paying for it himself. Stopping the potentially self-defeating cycle at the first step seems to be the right thing to do.

To prevent loss of value on their OWN home.

And why should renters care?  Maybe if they are buying or considering buying a home across town or in their own area, they should care if they are going to use financing to purchase their home. 

Here is what is going on:  stuff is getting stolen that prevents financing of a home.  I am not talking refrigerators or little appliances or a ceiling fan here or there.  I am talking about pool pumps and air conditioners and water heaters ~ even entire large above ground spas.

It always seems to me that it happens in the 11th hour of a closing too, which is odd that the property can sit around vacant 5-6 months (or more) and then have something of value disappear.  Is someone trolling the MLS and looking for vacant property?  There also seems to be no eye witnesses to these shenanigans.  Is the someone who is taking this stuff a licensed contractor (with credentials on the side of the vehicle) or a former owner?

Why you could lose value if you are a homeowner? 

• Price reductions to compensate for the loss.  Case in point of the stolen LARGE above ground spa.  Buyer may get a price reduction which will reflect on the value of your home but doesn't hinder financing.
• Transactions are "cash only" to reflect the loss of systems (water heater, pool pump, air conditioner, entire kitchens, etc.)  Many times these transactions are recorded as cash only without detailed information about systems missing so when a bank owned home is listed (or any other home for that manner,) that sold value appears to be a solid value.

Why would you care if you are a renter that is looking to buy?

• Your escrow across town could be subject to theft and that other renter that lives next door looks the other way.  This could affect the financing on your own home or make your escrow extra lengthy.
• Your appraisal can come in low because the appraiser used the cash only comp without knowing it was cash only because of major systems missing.
• You can lose out on a dream home because it is cash only due to missing systems.

With so many vacant homes in the valley we all feel pretty helpless about the situation and I have a feeling that people look the other way when they see or hear shenanigans.  Let me present it this way:  Right now we need to be vigilant and fight back against those shenanigans just to protect the value of our own homes. 

On Thursday I had an escrow that had missing systems (that affect financing) stolen in a 24 hour period (was there just the day before) and now we are scrambling since this an 11th hour situation and we are waiting for a re-inspect from the appraisal so we can have docs delivered.  BOOO!  This is the THIRD time something like this has happened to one of my escrows in less than a 1 year period.

I went to craigslist to find that piece of missing equipment and I was flabbergasted.  I shouldn't be surprised and I am sure many others have seen this before me.  I do suspect that people with credentials on the side of their vehicles (it only costs $30-100 to have credentials put on the side or backs of your vehicles) are taking these systems!

Here is what you can do to combat this!

On a bank owned home many times the list agents will post a "NO TRESPASSING" sign on a window like this:

When you live near one of these vacant homes, please take the time to go write down the numbers.  MANY times they have both the list agent's number AND the servicing company's number.  DON'T WAIT UNTIL IT IS TOO LATE!  Do it as soon as you see it!  Also, not all vacant homes are bank owned so when a sign goes up, write down the name of the list agent's number on the sign.

Many times in REO (Bank owned, foreclosed) property, there is an abundance of activity.  There are rekeys, trash outs, pool maintenance, lawn maintenance, contractors for systems (heating and a/c), etc.

At this point, I would suggest that we all be busy bodies and get descriptions of the vehicles, license plate numbers, and humans going in and out of these properties.  Also, if possible take photos with a digital camera from the comfort of your own home. 

I do not suggest confronting these individuals (although I have been confronted by neighbors when I am entering pre-market REO listings, I am not really threatening at 5'2" and 115 lbs.)  I always have a good conversation with the neighbors who are genuinely concerned about the property.  So I do have faith that there are vigilant people here in Las Vegas.

I would take any information and contact the list agent and servicing company also (whatever info is on that window sign).  Maybe what appears (remember from above, fake credentials are easy and cheap to obtain in the form of magnets on cars) to be a licensed pool or HVAC company just stole some systems.

Ask them, to please let you know who is authorized to be in that home, and let them know that you care because you are a neighbor.

HVAC and pool companies and landscaping companies usually do not work after the sun goes down so please call 911 if you are seeing shenanigans in the middle of the night, and do not forget to get descriptions of vehicles and people that are in the vicinity.

My three escrows that ended up with missing systems has happened ALL over town so no one should think their area is immune or this is going on in just a certain area of the valley.

Even though this home may belong to the bank (and many people have the "screw banks" mentality) we still need to help them look out for their assets, and PROTECT OUR OWN VALUES IN OUR HOMES!

The U.S. housing industry is very dependent on how the secondary mortgage market is doing. That's where a large share of mortgage-backed bonds generated here are traded. In the recent past the private investor class purchased about 60% of the home loan paper for sale, the rest mostly being gobbled up by Fannie Mae and Freddie Mac. Now, after the angry tsunami swooped in a few years ago to decisively maul the real estate market, the private sector has all but disappeared from the scene. It's licking its wounds while trying to deal with the losses the devastation left behind.

The mortgage regime would have been severely handicapped had the Fed not moved in to fill the void. It's presently providing the liquidity that the limping housing sector sorely needs to function as well as can be expected under the circumstances. But the Fed can't be the solution for ever. The private investor has to return and again make a meaningful mark there.

The American Securitization Forum, or ASF, is doing something that will help convince them to look at mortgage paper again. ASF is a trade group for investors, issuers and servicers in the securitization business. It has created LINC, or Loan Identification Number Code, a 16-digit number that'll identify the mortgage loan type, its origination date and country of origin.

The purpose of LINC obviously is to provide more transparency to a skeptical investor about a particular mortgage product he might be interested in. As the home loan crisis unfolded the investor class quickly learned that what disclosures they were given didn't often match the reality. They were badly burned and prefer not to be sorry victims again.  

Only time will tell how effective LINC will be in winning over the potential mortgage securities buyer. It'll at least be a step forward in the effort to draw him back in. The U.S. taxpayer should keep an eye on this because the Fed is really using his money to replace, hopefully temporarily, the no-show private mortgage player.

I have had a good number of astute real estate professionals recently ask me "why aren't your pendings closing?" on my market reports!

Here is just a peek at some market reports for one specific area (June, July and August Respectively):

What you are seeing here is that the Pendings (red) has been gaining ground and the Sales have been slowing down (green).  This doesn't make sense with rising pendings, you should see rising closings.

There several very good reasons and I am here to explain why this is going on.

When I got my license here in 2005 our 30 pending to close ratio was a good 60%.  Now (with market conditions) you have to use 60 day pending to close ratio (even with cash, HOA demands can clog up the system!)  Our current 60 day pending to close ratio is a dismal 27%!

Here are the challenges:

Short Sales:  Our system is bottlenecked with short sales.  The "short" part of a short sale doesn't mean it is a short escrow.  It means that the seller is seeking lienholder 3rd party approval to possibly forgive part of the loan or make it a "short payoff" upon successful contract and close.  These things can take a LONG LONG time for approval.  I would say 3-6 months is the "norm" depending on the lienholder.  Sometimes the approval process is shorter, sometimes longer!  Short sales have a pretty dismal list to sale history (although I feel this is changing at this VERY moment!)  You can view my last short sale market report here and I make clickable links to the last short sale market reports.  You can go back years and see that the closes have always been dismal.  You can also view the graph to the right of this paragraph and note the green (solds).  Very small sliver that never really changes from month to month.

Inventory Reduction:  As our "sellable" inventory (mostly REO) plummeted at the beginning of the year, (due to high buyer interest, low interest rates, moratoriums, etc), more buyers entered into short sales so we started seeing this curve:

As you can see I circled when the dispairity began to take shape between pendings (red line) and closings (green line).

Financing Issues:  We are constantly subject to new underwriting guidelines and changes.  Buyers are now asked to clarify more and more issues that have to do with their financials, et al.  If you ever see anyone that can close an FHA loan in less than a week, they are probably a liar (not saying it can't be done but it is highly unlikely.)  More government backed loans are being used these days and RISK FACTORS are taken into account with underwriting due to the high amount of foreclosures. 

Title Issues:  Distressed properties may have fines attached to the title from the HOA or city or county.  These need to be cleared and can sometimes take a while.

Property Stolen at the 11th Hour:  Yep, property is getting stolen in the 11th hour which can hinder the house's financing status.  Yesterday this just happened at one of my escrows that was due for it's final appraisal reinspection and ready for docs around the end of the month.  This is the third time it has happened to me in the last year and I am not a "big time" agent.  I will have another post about this coming out later today or tomorrow.

That's just a small synopsis on what is going on!  If you are considering buying a home in our market you may want to interview your Realtor closely to make sure they have been working in this market and can effectively deal with the challenges that you will face.  There is NOTHING "NORMAL" about a transaction these days!  Here is an ongoing series I am building to give buyers an idea of what is going on with the different types of transactions and the challenges each type presents in this current market!

So, why isn't NAR publishing all the stats? Read on. Lenn gives you some ideas.

Southern Highlands August 2009 Real Estate Resale Market Report (Homes For Sale/Pending/Sold):

• Listings (9/15/2009):  192
• Under Contract (9/15/2009):  220
• Sold August 2009:  42
• Month's Inventory:  3.7

Since Last Month:  Listings are UP + 42, Pendings are UP +18, Sold Units DOWN -13

Last Month's Report

For More Las Vegas Communities and Reports Click Here

The devil's in the details?  I don't know, the devil might be better at keeping track of his assets.

An article was in the news today about TARP's efforts at helping homeowners stay in a home and avoid foreclosure but getting derailed by inefficiencies.

Not that we are all that shocked. We know long waits over the phone abound for homeowners trying to tackle TARP. And processing times are delayed as we expect.

But my all-time favorite remains faxing the same document 7 times because the first 6 went where? 

Oh well, it just had the homeowner's social security number and birth date on it.

When the B-I-G banks were asked to rate their performance which they claim is improving, one biggie rated itself with a B. However community groups also asked to grade the same bank plunked down a D.

Too bad they are not held to the same standard as the consumer because I'm guessing there are quite a few homeowners right now wanting to say, "If you can't find my mortgage, well then, maybe I can't find my payment."

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