Will the mortgage officer really process it: One of the questions I ask every new mortgage person I talk to is whether they will handle loans in this price range. In my experience, no reliable mortgage person will. It’s simply too much work for too little commission — and too little chance that it will close. I have dealt with some mortgage people from the “big banks” that say it’s no problem, but something bad comes up every single time. And why is that?

It comes down to condition: I’ve tried to make these transactions work in the past. Really, I have. Usually in the last week before closing, appraisal conditions come back. You probably knew that your mortgage company won’t commit to lending you the money until after the appraisal. They want to make sure the place is really worth that much. But maybe you didn’t know that the appraisal can come back with a list of things that must be fixed before closing! Sometimes these things are simple, like a new smoke detector. Sometimes they are big and expensive, like replacing broken windows or replacing the roof! Since most properties in this price range are either bank owned or short sale, odds are very good that the seller will not make any repairs prior to closing. This leaves the buyer with a choice: pay to fix the problems before closing (if it doesn’t close, you lose the money, if your workers break something, you’re liable); put a lot of money in escrow towards making repairs (usually 2-3 times the estimated repair cost); or walk away.

And a bonus half a reason, The HUD Condo List: it shouldn’t be any shock that there are more cheap condos than cheap houses. Many lenders won’t lend to purchase in a community that isn’t on the “HUD list” of FHA approved condos. There are very strict criteria to get on this list. As of today, there’s only 283 communities in the entire state of Nevada that qualify, 192 of them in Las Vegas.

It never feels good to tell someone that their dream of owning a home just isn’t going to work out right now. However, sometimes it is the honest thing to do.

Let’s talk about some of the reasons why foreclosures are really down.

Delinquent Mortgages Are Down: In fact, delinquency hasn’t been this low since 2008. In other words, more people are paying their mortgages on time! While economic experts still think this number is way too high, the fact is that fewer delinquent mortgages quite naturally leads to fewer foreclosures, which in turn leads to fewer bank owned properties available. Part of the reason that delinquency is so low is that mortgages are taking less of a bite out of a typical paycheck (and don’t forget to look at the end of that article, which points out that “Prices for bottom-tier properties have improved since 2011….”).

Banks are under Pressure to Complete Short Sales and Modifications: The foreclosure fraud settlement included guidelines designed to shorten the time needed to approve a short sale, and recent changes at Freddie Mac and Fannie Mae are in line with that.  The timeline is even smaller than the one required (but rarely followed) under Nevada law! The settlement also demanded some mortgage modifications — including principal reduction. All this is over and above Federal efforts to directly encourage refinancing and short sales outside of the settlement. This paragraph is why I think doom-and-gloom theories about shadow inventory are nothing more than Chicken Little screaming about how the sky is falling.

Banks are under Scrutiny: The robosigning mess left an environment where everybody is watching the banks: customers, consumer watchdogs, the press, lawmakers, courts, Attorneys General, even the Consumer Fraud Task Force. They want to be very careful not to do something that might bring any of these watchers crashing down on them.

Banks Must Answer to Wall Street Too: By keeping homes out of foreclosure, they don’t have to admit that they will never, ever see the money that was lent out. Bank of America reported a huge profit last week, and they could not have done that if they were honest about their loan portfolio.

And finally….

It’s an Election Year: When this was pointed out to me, I thought it was beyond cynical. But there is a germ of truth here. The banks want politicians to work for them, not against them. A rash of new foreclosures would give Congress a quick way to improve their polling numbers by doing something. Come to think of it, 2008 was an election year too.

So here’s my prediction: short sales will continue to pick up this year, Congress won’t have time to extend the tax breaks for short sales before they adjourn at Christmas (they may well remember to fix this come January), a bunch of short sales will fall through early in 2013, there will be a slight rise in foreclosures in the first half of 2013, however there will be continued pressure to do anything but foreclose. Bookmark this one so you can see how far off I am this time next year.

The time it takes to complete a foreclosure is going up, but the number of delinquent loans is thankfully going down. It’s sobering to think that something like 1 in 12 mortgage payers are behind and 1 in 25 is actually at some point in the foreclosure process.

Even though most of us won’t see any benefit, something between 4,000,000 and 4,500,000 homeowners who completed a foreclosure in 2009 and 2010 will actually have their cases reviewed. They won’t get their homes back, they won’t get their credit repaired, they won’t get their dignity back. There is a chance they may receive some “compensation,” but nobody knows how much that might be. The nice folks at Credit Slips accurately point out that for most of us, this means “bupkis.”

Las Vegas is tired of foreclosed homes sitting neglected and falling into disrepair (and so am I). A new proposal under consideration would force banks to register vacant homes they own and keep them up — or face fines and jail time!

Don’t forget that I’ll have more news on Friday when I bring you the Friday Figures!

We had a little bit of real estate news over the weekend: There’s talk about offering the banks a deal to get them out of the robosigning mess, but the banks don’t like it because it doesn’t limit their liability enough (maybe they should have thought about liability before forging and/or falsely signing thousands of documents!); meanwhile, FHFA is suing 17 banks including J.P. Morgan and Bank of America over Mortgage Backed Securities, but J.P. Morgan actually has a bigger problem, a RICO case (that means the plaintiffs are alleging that the whole company is a criminal enterprise); and the Feds are mad because they’ve been left holding the bag on almost a quarter million foreclosures.

But the most important thing either way, consult a lawyer who specializes in asset protection.

Here’s a little bonus for you: a bunch of news stories about where we are in the foreclosure crisis.

I’ve got a few little news items to add for now. First off, today’s big news is that nationwide, 28.4% of homes with mortgages are “underwater.” Needless to say, that percentage is much higher in Nevada!

Fannie Mae wants another $8,500,000,000 from Uncle Sam, bringing their bailout to near $100,000,000,000. Amazing!

And finally, for those of you considering a mortgage modification, you must read the fine print! You may be signing away important rights, such as the right to sue the bank for any fraud they may have committed regarding your mortgage! While at least one bank promises that was a “mistake” and things are “under review,” you should still make sure that you review documents very carefully and seriously consider having them reviewed by a licensed attorney.

Seriously, a simple question at a party sparked most of an episode of Getting REAL.

Bonus material: things buyers shouldn’t do; the Feds may actually be trying to get short sales moving, maybe; unexpected home expenses (or, sometimes water heaters die); on average, sellers wait 79 days before a price cut; and what is up with B of A?

Just for fun, maybe you’d like to check out these real pictures from foreclosed homes.