Las Vegas Real Estate Lending Practices Tighten

Two weeks ago , January 8 to be exact, Brent Jones of Brent Jones Services Inc. a leading Las Vegas appraisal service, informed us of a new lending issue for buyers and real estate agents to be aware of when a client is closing on a home loan. Since the Las Vegas real estate market has softened resulting from continued increase in residential home listings and a continued decrease in home prices, appraisers were identifying some areas of the Las Vegas valley as areas of declining value and oversupply. One check mark in this box on the appraisal can and has caused the buyer of that particular home to be required by the lender to increase the amount of their down payment by 5%. If the buyer does not  have the additional 5% to put down on the purchase of the home the lender will not approve the loan.

You can read more about the details here Maximum Financing in Declining Markets .

Last Friday Countrywide Home Loans distributed this information to their offices officially making the entire Las Vegas Valley a soft market, “Government Sponsored Entities have recently released soft market policies to protect themselves from high loan to value lending in areas that have declining values and/or have values projected to decline. Countrywide’s previous policy has been to reduce max financing by 5% ONLY if the appraiser notes the property is in a declining market. This policy is being enhanced to proactively identify soft markets and reduce max financing accordingly“. The result is that people purchasing a home in Las Vegas at this time will need to put 5% more down on the same house to get qualified for the same loan program.

On the surface this may appear as another nail in the real estate market coffin but in reality it is a protective position being taken on the part of lending institutions. This position is being taken in an effort to not only protect the lending institutions but also the buying public and should further reduce the risk of foreclosures and short sales in the market. In my opinion this is a move that will eventually strengthen the market overall. There are also several changes that are likely to happen that should offset any reduced purchases due to this policy.

First this policy does not effect FHA and VA loans. Second the President has a bill ready to be signed that will increase the FHA loan limits from $304,000 to $417,000 while at the same time reducing the required down payment from 3% to 1.5% on FHA loans. Third, the Federal Open Market Committee today lowered its target for the federal funds rate 75 basis points to 3.5 percent — the steepest cut since 1984.  Fourth, analysts expect the Fed to cut the federal funds rate again at its regularly scheduled meeting Jan. 29-30 by another 50 basis points, to 3 percent. Obviously the rate cuts are certainly good news for people who have mortgages, or are shopping for mortgages but also for those people with adjustable rate mortgages or home equity lines of credit that are indexed to the prime rate. Those people should see an adjustment in their interest rate on those loans right away (depending on the loan program). For those borrowers who are expecting to see interest rate resets on their current loans, those interest rate resets could be less than expected. 

It is my opinion that the changes being made, although painful now, will help strengthen the overall real estate market in the long term. For more information specifically about the Las Vegas and Summerlin Real Estate Markets go to these sites.

www.JoeLaliberte.com

www.OurLasVegasRealEstateAgent.com

Las Vegas & Summerlin Real Estate Mortgage Resets

In my past post I discussed how the new tax law could help homeowers that are forced to sell their home for less than what is owed on it because they cannot maintain the payments after the loan has adjusted. This post discusses the dollar amount and approximate number of loans that will be effected nationally. The following information was forwarded to me by a representative of a local lending institution. It illustrates the total dollar amount of loans that have adjustable rates that are going to be adjusted by month nationally in billions of dollars. Next to the dollar amount I estimated the number of loans that it will effect.

2007                    

January  $22 – 73,300

February $25 – 83,300

March  $35 – 116,600

April $37 – 123,300

May $36 – 120,000

June $42 – 140,000

July $43 – 143,300

August $52 – 173,300

September $58 – 193,300

October $55 – 183,300

November $52 – 173,300

December $58 – 193,300

2008

January $80 – 266,600

February $88 – 293,300

March $110 – 366,600

April $92 – 306,600

May $76 – 253,300

June $75 – 250,000

July $50 – 166,600

August $35 – 116,600

September $26 – 86,600

October $20 – 66,600

November $15 – 50,000

December $17 – 56,600

Assuming there will be some percentage of homeowners who are not comfortable with the new payment that occures when their home mortgage adjusts, and that some percentage of those homeowners owe more on their home than they can now sell it for, they will have two options. One to obtain approval from the lender to sell it for less than what is owned or two to allow the lender to foreclose on the home. If you believe these numbers and this trend then I interpret this information as an indication that the short sales and foreclosures will continue to be a driving force in the real estate market through the end of the year.

If you find yourself in this situation I have a program that can help. Call me at 702-499-1747 or visit my web sites listed below. I want to help you.

Las Vegas Real Estate

Summerlin Real Estate

The Vista’s Real Estate

Tax Relief on Foreclosure of Las Vegas Primary Residences

This is a follow up to the last blog posting I made and another positive step toward the recovery of the real estate market. As stated previously a new law was passed that according to the Las Vegas Review Journal, will enable foreclosed homeowners to avoid owing federal income taxes on any debt that was forgiven when their home was seized and sold this year.  

On December 14, 2007 Congress has passed legislation that can save many foreclosed homeowners tens of thousands of dollars in tax relief  ( see Review Journal Article of December 19, 2007 ). On December 19, 2007 the President signed the bill and it became law (H.R. 3648: Mortgage Forgiveness Debt Relief Act of 2007 ).

What this means is that if a homeowner is forced to sell their home for less than what is owned on it, and the bank agrees to accept less that what is owned on the home, the homeowner may no longer be obligated to pay taxes on the difference between what they owed on the property and what they sold it for. In the past, if a homeowner purchased a property at the peak of the real estate market for $300,000, put 10% down ($30,000) their loan would be $270,000. If the market went down and they were forced to sell at $250,000 they could be obligated to pay tax on the difference between $270,000 and $250,000 because it was a relief of their debt. Now under specific guidelines this debt may be relieved. Some of the specific guidelines are that the property must be owner occupied for some period over the past five years and not an investment property.  

This law will also have an effect on those homeowners who have adjustable rate mortgages that have adjusted and they find the payments to difficult to maintain and the lender forces foreclosure.