Details of the foreclosure rescue bill passed by Congress and awaiting President Bush’s signature are coming out. Before we take a closer look, keep in mind we have 2.2 million vacant homes on the market, sales of new homes are plunging, and the trend of increasing foreclosure rates shows no sign of stopping.

Back to the bill. First, it won’t come into effect until October. If things continue as they are, there will be another 700,000-1,000,000 foreclosed homes on the market by then. The bill is estimated to help about 400,000 people (a little more than half the number of homes in the foreclosure process in the second quarter of 2008).

It will only apply to owner-occupied homes with mortgages dated 1/2005-6/2007 (one 30 month block). It will do nothing to help renters who dutifully pay rent and live in homes with defaulting mortgages. The homeowner has to prove that the mortgage payment is at least 31% of their monthly income, and that they won’t be able to afford paying it anymore.

Now, here’s the deal-breaker. The old mortgage company has to agree to write down the loan to 90% of the current appraised value and forgive the remainder. CNN correctly points out “that will mean a substantial loss for the lender.” A new mortgage company issues a new loan for that 90% (some sources are saying only up to 85% — where is our cash-strapped homeowner going to get that 5% difference?) and the old mortgage company has to accept it as full and final payment. One of the mortgage companies has to pay FHA a 3% insurance premium up front.

As for the homeowner, they will have to pay an insurance premium to the FHA every year of 1.5% of the principal. In addition, they will have to share any profit on the house with the FHA (100% the first year, declining to 50% after the 5th year, plus a 3% exit fee). The homeowner also must accept strict limits on equity loans.

For the sake of argument, let’s flesh out these numbers. If you own a median priced house in Las Vegas, the nice folks at HousingTracker say it’s worth $225,000. Scroll down for historical median prices. Let’s assume the mortgage originated in the middle of the 30 month window, March of 2006. Median prices then were roughly $325,000. For the sake of argument, say you had a 90% LTV, or a mortgage of $292,500.

Assuming you actually meet all the other qualifications, your mortgage company would have to agree to write down what you owe to 202,500 (lose almost $90,000 — the principal has come down a little since then unless you have an interest only loan). The local experts in bank-owned properties tell me that it costs a lender $60,000-80,000 to take a foreclosure to completion., so they really only have to bet that prices won’t decline another $10,000-$30,000 over the course of 6 months to come out ahead by refusing to play along. This bet becomes even better for your mortgage holder if you financed 95% or more of your home’s value.

But let’s also look at why this deal might be bad for you. First, somebody is going to pass the 3% FHA insurance origination fee on to you. That’s $6075. Plus there is the annual 1.5% insurance fee that will be tacked on to your payments, $3037.50 annually ($253.13 per month). And even if you sell your home 20 years from now, you will still owe the FHA half of any profits you may make on the place.

Rest assured, this deal is not a bailout. It doesn’t help much of anybody.

I’ll leave you with a couple of local interest items: 2 Nevada banks taken over by the Feds; and a Nevada court upholds term limits.

The NAR probably doesn’t like the fact that I don’t think everybody ought to own a house. Not sure if renting or owning is best for you? Let TheStreet.com help you with some advice and links to a “rent or buy calculator.”

Mark your calendars because the Hard Assets Investment Conference in September will be in Vegas.

Wachovia is closing its mortgage unit, so if you (or your clients!) have a pending mortgage with them, you might want to call your mortgage broker now. This page will still be here when you get off the phone.

Here’s a great commentary on the impact of the subprime and mortgage crises on minority communities.

Minyanville has a nice round-up on the economy, banking, and mortgage problems.

A trio of local interest items: getting rid of abandoned cars in your neighborhood, pet shelter closure means a bunch of cats and dogs need an immediate adoption, and gas prices dropping below $4 per gallon.

Make it a great day!

According to the Prof, Nick Cage is selling his Vegas home. Of course, Prof has a couple details off.  According to the listing as seen on remax.com, it’s 14,306 square feet on a 15,682 square foot lot.  It does have 7 bedrooms, but only 5 full baths, two 3/4 baths, and a half bath.  For $9.95M, Mr. Cage will throw in the furnishings.  In addition to a fabulous view, the MLS shows that the home features a sauna, steamroom, private movie theater, generator, and an elevator.

I sure would be curious what Mr. Cage has parked in that 16 car garage.

A developer is close to an agreement with both the City of North Las Vegas and the National Guard to build a hotel-casino next to the National Guard’s training area. The facility would have 1000 rooms in two 8-story towers.

Historically, a Vegas hotel-casino creates about 2 jobs per room within the facility itself, and a total of 5-7 jobs when including those created in the community.  That would include all the accountants, grocery store clerks, teachers, and other workers who will provide goods and services to the people working in and staying at the hotel itself.

In addition, this is frankly an area of town that could use some business development. North Las Vegas property values have traditionally lagged values in Las Vegas proper.

A new item in today’s USA Today tells us that real estate auctions are big.  In fact, there has been 5% revenue growth in the last year and a 47% increase since 2003.

But it’s not time to invest in auction houses just yet.  As many buyers are finding out the hard way, escrow does not close at the auction. Many of those “sales” never come to pass.  Just like the “reserve” prices on eBay, the seller may decide that the “winning” price is too low!  In fact, a current lawsuit charges “Many modern real estate auctions are nothing more than a bait-and-switch scheme to lure hopeful buyers to submit offers that can later be accepted or rejected by the lenders/sellers, despite the general public’s perception that once the auctioneer declares, ‘Sold,’ the property is in fact sold.”

If you have time and energy and a whole lot of patience, sure, you can get some deals on auction.  If you really need a place to live in, you are better off calling a reliable Realtor.

A couple of items to read:  gas and suburbia; and new federal mortgage rules.  I am of mixed opinions on these rules, as they may make it impossible for the self-employed to buy a home.  We will see how that shakes out.

Last night the FDIC took over IndyMac. I wrote more about that for The Moderate Voice this morning.

Seriously, if you have any business with them whatsoever, you’ll want to follow up and see where you stand Monday.

Here’s BondDad on Freddie and Fannie.

Or perhaps you’d rather read TheStreet.com on IndyMac (if you have any pending business with them, you’d better give somebody a call first thing Monday).

And memo to the Review Journal:  all of us around the office could do without you folks making up pessimistic figures! My “trained monkey” only got about 16,500 active listings.  Maybe some went contingent between monkeys?

Forbes Magazine has come out with a list of 10 Increasingly Affordable U.S. Housing Markets.  You can watch the slideshow outlining them all, but I have a little spoiler for you.

Number One is none other than Las Vegas!  Among the figures they use to back that up, 56% of our housing is affordable at median income; prices have dropped 20% since last year; and huge selection.

It must be nice to be a Congressman. They’re already out for the Independence Day holiday. Of course they left a few little things undone. Like, say, that bill that might have helped homeowners and mortgage companies prevent some foreclosures. Don’t get me wrong, the ideas on the table were far from perfect, but they were better than nothing.

Vacant homes — abandoned, foreclosed, or simply waiting to be sold — are now a serious problem in many communities across the nation. It’s no longer just an “inner city Detroit” sort of issue; even “nice” neighborhoods have boarded up homes that attract parties, drug use, vandalism, and theft.

However, even if we had enough buyers for these properties, there is the problem of getting the money to purchase (and renovate where needed) all those homes. We still have a “credit crunch” where many banks don’t have money to lend. Some of them over-extended credit to construction firms that were themselves overextended. Some of those builders have slashed prices just to raise capital, and in the process slashed market values in the neighborhoods they were building.

But today there is more to talk about than doom and gloom. Today in the Greater Las Vegas Association of Realtors (GLVAR) MLS, we have 21,390 available homes, 16,806 of them Single Family Residences. This level is high, but stable. In addition, we have 7,032 homes that are “contingent” or “pending”. These homes have signed purchase contracts, and the overwhelming majority of them will close within 30 to 60 days. However, the sale is not final yet. Of the available homes, 11,171 are currently vacant (54.7%); 5,809 are short sales (27.2%); 4,737 are REO/foreclosed/bank owned (22.1%). All those percentages are up over last month, and they represent “motivated sellers.” These figures must be taken along with these (courtesy of our friends over at Frothing Developer): taxable sales in the Valley are up (meaning economic growth, and the promise of more jobs); home sales are better than they were this time last year; and despite a regional “recession”, net new residents of 4,600 in May. That’s a slow way to fill those available homes, but it’s better than nothing.