Credit Crunch Puts Squeeze on Specialized Mortgages

While the fact is that this is a buyer's market and a great time, especially, to invest in housing in Las Vegas, it is no fiction that lending has changed due to recent downturns and challenges in the banking industry. The LA Times had a great article yesterday discussing ways in which mortgages have changed in the past couple of years.

Highlights:

In a move scheduled to take effect for all loans delivered after Aug. 8, Freddie Mac will restrict financing to second-home and investment purchasers who already have "individual or joint ownership" interests in multiple properties. In the case of second-home buyers, they will be ineligible for new mortgages through Freddie if they have ownership interests in more than four properties securing debt, including the one they propose to finance.


Why the continuing rollbacks, and how long could they continue? Lenders and insurers are carefully studying the sources of their greatest losses from mortgage vintages between 2003 and 2007. In the areas where they see inordinate risk, they are reacting by eradicating that risk. Some of those high-loss loan products -- mass-marketed option ARMs with minimal down payments and "stated" incomes, for instance -- probably never will be seen again. Others are likely to return only with tougher underwriting standards and higher fees tied to credit and geographic risks.

Cyber-Shopping Revolutionizing Real Estate

Nothing short of a revolution is occurring in Real Estate. In the past few years, homebuyers have discovered the Internet and now most of them turn to cyberspace to start their home searches.

Henderson, NV (PRWEB) April 11, 2008 -- Clouded by headlines of bursting bubbles, subprime crises and economic stimulus packages, one may not have noticed that nothing short of a revolution is occurring in Real Estate. In the past few years, homebuyers have discovered the Internet and now most of them turn to cyberspace to start their home searches.

The largest and most visited site is Realtor.com®, which, according to Alexa's web statistics, sees an average of 500 million visitors a month. Las Vegas and Henderson zip codes are among the most searched on that site as well as a number of other sites available for home searches, with an average of 4.9 million homes viewed per month for Henderson/Boulder City alone.

"We have changed our advertising significantly in the past few years. It is a global economy now. Las Vegas is a place of major interest around the world and the Internet is where investors and homebuyers from all over the world can narrow their search and find the agent who can help them understand the local market," says Dulcie Crawford of Windermere Prestige Properties, recipient of Realtor.com®'s "Real Estate Online Marketing Award of Excellence."

The Award of Excellence recognizes top agents who consistently provide great marketing services on behalf of their buyers and sellers.

"There are always some real estate agents who distinguish themselves from other agents by doing a little more for their sellers. In particular; when the home they are selling is placed on a well trafficked site such as the 1st ranked REALTOR.com®, even simple efforts like having more photos displayed, crafting better descriptions or adding a full motion video, can make a home stand out from competing properties," says Max Pigman, Vice President of REALTOR.com®.

Pigman presented the excellence award to Crawford and other Las Vegas area Agents at a recent real estate marketing and technology seminar that demonstrated cutting edge techniques for leveraging the Internet and technology in real estate marketing.

"The extra steps agents like Dulcie are taking on behalf of their clients is the reason we thought it worthwhile to call out the effort we have seen these agents make online and to recognize them for providing these added value services," says Mr. Pigman.

"Internet marketing can make all the difference for sellers who are facing stiff competition in the current market," says Crawford, a native Las Vegas, who has had over 10 years experience in Real Estate. "My job has always been to help buyers and sellers find each other so that they both can benefit from the transaction. Buying and selling homes can be overwhelming at times, but when the right buyer finds the right home, the transition for both seller and buyer can be smooth and satisfying. A tool like Realtor.com® makes that job easier for me because it opens up the possibilities for both the seller and the buyer."

For more information on the award: http://www.rdcworkshop.com/

Feds are Lowering Rates, Again

Treasurys fall on rate cut, bank earnings
Bond prices sink as Wall Street cheers fed rate cut, stronger-than-expected earnings from beleagured banks.

NEW YORK (CNNMoney.com) -- Bond prices fluctuated Tuesday after the Federal Reserve cut interest rates and surprisingly strong earnings from Wall Street banks coaxed investors back into the stock market.

Read article here.

Fact Sheet: The Mortgage Forgiveness Debt Relief Act of 2007

President Bush Signs Legislation Protecting American Families From Higher Taxes When They Refinance Their Homes

"When your home is losing value and your family is under financial stress, the last thing you need is to be hit with higher taxes. So I'm working with members of both parties to pass a bill that will protect homeowners from having to pay taxes on cancelled mortgage debt."
─ President George W. Bush, 9/1/07

Today, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which will help Americans avoid foreclosure by protecting families from higher taxes when they refinance their home mortgages. This Act will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.

This Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes.

This Act Is A Good Step To Address The Housing Market, But Congress Has More Work To Do

Congress needs to complete work on responsible legislation modernizing the Federal Housing Administration (FHA). This bill will give FHA the necessary flexibility to help hundreds of thousands of additional families qualify for prime-rate financing.

Congress needs to pass legislation permitting State and local governments to help troubled borrowers by issuing tax-exempt bonds for refinancing existing home loans. Under current law, cities and States can issue tax-exempt bonds to finance new mortgages for first-time homebuyers.

Congress needs to pass legislation to reform Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae. GSEs provide liquidity to the mortgage market that benefits millions of homeowners, and it is vital that they operate safely and soundly. The President has called on Congress to pass legislation that strengthens independent regulation of the GSEs and ensures they focus on their important housing mission.

The Administration Has Moved Forward On Targeted Actions To Assist Homeowners That The President Announced In August

The President and his Administration have launched a new initiative at the Federal Housing Administration (FHA) called FHASecure. FHASecure expands the FHA's ability to offer refinancing by giving it the flexibility to work with homeowners who have good credit histories but cannot afford their current payments. By the end of 2008, the FHA expects this program to help more than 300,000 families refinance their homes.

Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson have assembled the private-sector HOPE NOW alliance. HOPE NOW recently mailed hundreds of thousands of letters to borrowers falling behind on their payments and is supporting a toll-free mortgage counseling hotline, 1-888-995-HOPE.

HOPE NOW has developed a plan under which up to 1.2 million homeowners could be eligible for assistance. The HOPE NOW plan will help subprime borrowers who can afford the current, starter rate on a subprime loan, but would not be able to make the higher payments once the interest rate goes up.

# # #

Nevada Mortgage Crisis Rebound Predicted

December 04, 2007 - CARSON CITY, Nev. —

Nevada's economy should be so strong by 2009 that a housing shortage may be the big concern rather than the current mortgage crisis and heavy surplus of homes for sale, an economist told lawmakers.

While Nevada now has the highest home loan foreclosure rate in the nation, Jeremy Aguero of Las Vegas-based Applied Analysis told a legislative panel studying the state's mortgage problems that it's "a great fallacy" to have doubts about another economic boom in the state.

With some $36 billion in megaresort construction occurring in Las Vegas in the next few years, Aguero said Monday the people holding new jobs created by the building activity will buy up homes now available on the market and probably need more.

"You won't have enough housing stock for all the jobs in the near-term pipeline," Aguero said after the legislative hearing, adding, "How many markets can you point to with a $36 billion investment in their core industry alone that have long-term housing problems? Very, very few."

While a turnaround is on the horizon, Aguero and other economists and experts told the legislators that Nevada's problems related to foreclosures and overbuilding are likely to get worse during 2008.

Douglas Duncan, chief economist for the Mortgage Bankers Association, predicted that the problems with Nevada's foreclosure rate and other housing industry woes won't bottom out until late October in 2008.

Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada, Las Vegas, added that a drop in building permits should continue in 2008. But he said the upcoming resort expansion should cut deeply into the number of vacant housing units _ more than 27,000 _ now on the market.

Mendy Elliott, director of the state Business and Industry Department, recommended against a state "bailout fund" to help deal with subprime loans. Former state Sen. Joe Neal of North Las Vegas agreed, but said a freeze on subprime loan rates would help consumers.

How Wall Street Stoked The Mortgage Meltdown

By Michael Hudson
From The Wall Street Journal Online

Email your comments to rjeditor@dowjones.com.
-- June 28, 2007

Twelve years ago, Lehman Brothers Holdings Inc. sent a vice president to California to check out First Alliance Mortgage Co. Lehman was thinking about tapping into First Alliance's lucrative business of making "subprime" home loans to consumers with sketchy credit.

The vice president, Eric Hibbert, wrote a memo describing First Alliance as a financial "sweat shop" specializing in "high pressure sales for people who are in a weak state." At First Alliance, he said, employees leave their "ethics at the door."

The big Wall Street investment bank decided First Alliance wasn't breaking any laws. Lehman went on to lend the mortgage company roughly $500 million and helped sell more than $700 million in bonds backed by First Alliance customers' loans. But First Alliance later collapsed. Lehman landed in court, where a federal jury found the firm helped First Alliance defraud customers.

Today, Lehman is a prime example of how Wall Street's money and expertise have helped transform subprime lending into a major force in the U.S. financial markets. Lehman says it is proud of its role in helping provide credit to consumers who might otherwise have been unable to buy a home, and proud of the controls it has brought to a sometimes-unruly business.

Now, however, that business is in deep trouble, and some consumer advocates and policy makers are pointing the finger at Wall Street.

Read whole article here.

'Subprime' Aftermath: Losing the Family Home

By Mark Whitehouse
From The Wall Street Journal Online

Email your comments to rjeditor@dowjones.com. -- May 31, 2007

For decades, the 5100 block of West Outer Drive in Detroit has been a model of middle-class home ownership, part of an urban enclave of well-kept Colonial residences and manicured lawns. But on a recent spring day, locals saw something disturbing: dandelions growing wild on several properties.

"When I see dandelions, I worry," says Sylvia Hollifield, an instructor at Michigan State University who has lived on the block for more than 20 years.

Ms. Hollifield's concern is well-founded. Her neighbors are losing interest in their lawns because they're losing their homes -- a result of the recent boom in "subprime" mortgage lending. Over the past several years, seven of the 26 households on the 5100 block have taken out subprime loans, typically aimed at folks with poor or patchy credit.

Some used the money to buy their houses. But most already owned their homes and used the proceeds to pay off credit cards, do renovations and maintain an appearance of middle-class fortitude amid a declining local economy. Three now face eviction because they couldn't meet rising monthly payments. Two more are showing signs of distress.

Read whole article here.

New Steps to Help Homeowners Avoid Foreclosure

President Bush Announces Steps to Help American Families Keep Their Homes and Reform The Mortgage Finance System

THE WHITE HOUSE
Office of the Press Secretary

August 31, 2007
Content updated September 4, 2007

The Following Steps To Help American Families Keep Their Homes


1. The President Calls On Congress To Pass Federal Housing
Administration (FHA) Modernization Legislation.

The President's FHA modernization proposal would lower downpayment requirements, allow FHA to insure bigger loans, and give FHA more pricing flexibility. These reforms would empower FHA to reach more families that need help – first-time homebuyers, minorities, and those with low-to-moderate incomes – and offer more options to homeowners looking to refinance their existing mortgage.

The Administration Will Also Launch A New FHA Initiative Called "FHASecure." The President has asked Secretary Jackson to pursue important administrative changes to give FHA the flexibility to help more families stay in their homes during this time of transition in the mortgage market. The FHASecure program will help people who have good credit but who have not made all of their payments on time because of rising mortgage payments. For the first time, FHA will be able to offer many of these homeowners an option to refinance their existing mortgage so they can make their payments and keep their homes. FHA will also charge mortgage insurance premiums based on the individual risk of each loan, using traditional underwriting standards, so it can expand access and help even more families.

Since 1934, FHA Has Helped Close To 35 Million People Buy A Home And Stay In Their Home. FHA is a government agency that provides mortgage insurance to borrowers through a network of private sector lenders. It also offers options to homeowners looking to refinance their existing loan. The President's FHA modernization bill was first sent to the Hill in April 2006, and it passed the House last Congress with over 400 votes. The President has once again asked Congress to send him a clean FHA modernization bill as soon as possible so he can sign it into law.

2. The President Calls On Congress To Change A Key Housing Provision Of The Federal Tax Code So It Does Not Punish Families Who Are Forced To Sell Their Homes For Less Than Their Mortgage Is Worth.

Current tax law counts cancelled mortgage debt on primary residences as taxable income. For example, if the value of a home declines and $20,000 of the homeowner's loan is forgiven, the tax code treats that $20,000 as taxable income. The President proposes temporary relief to ensure that cancelled mortgage debt on a primary residence is not counted as income.

The President Is Working With Congress In A Bipartisan Fashion To Make This Important Change. Senator Debbie Stabenow (D-MI), along with Senator George Voinovich (R-OH) and others, has introduced a bipartisan bill that would protect homeowners from having to pay taxes on cancelled mortgage debt. In the House, Representatives Rob Andrews (D-NJ) and Ron Lewis (R-KY), along with several of their colleagues, have introduced similar legislation. The President looks forward to working with Congress to reach agreement on a bill, so we can deliver this vital tax relief to American homeowners.

3. The President Announced That The Administration Will Launch A New Foreclosure Avoidance Initiative To Help Struggling Homeowners Find A Way To Refinance.

Housing and Urban Development Secretary Alphonso Jackson and Treasury Secretary Henry Paulson will reach out to a wide variety of groups that offer foreclosure counseling and refinancing for American homeowners. These groups include community organizations like NeighborWorks, mortgage lenders and loan servicers, FHA, and Government-Sponsored Enterprises like Fannie Mae and Freddie Mac. The goal of this initiative is to expand mortgage financing options, identify homeowners before they face hardships, help them understand their financing options, and allow them to find a mortgage product that works for them.

The President Supports Actions To Protect Homeowners And Prevent These Problems From Happening Again

Read more here.