If you are excited to read that headline, you aren’t going to like what follows.

For the rest of you, let me back up and briefly explain what “hard money” is all about. In short, hard money is a loan it would be “hard” to get anyplace else. According to eHow, “A hard money lender is a person or institution that offers loans, usually for real estate, with low credit restrictions but high rates and fees. Hard money lenders are often considered borrowers of last resort for those who are facing foreclosures or needing loans under abnormal conditions. Due to the high prices associated with hard money lenders, they are generally not a borrower’s first choice.” Wikipedia has much more on the topic.

The Las Vegas Review Journal reports that hard money lenders are in trouble here in Nevada. They’ve been stung so hard by foreclosures that they in essence want ways around state law and state regulations. Specifically, they want the right to manage real estate without either a real estate license and the additional real estate management permit required by law (NRS 118A), and they want to over-ride a privacy law prohibiting investors from having the contact information of other investors in a given project.

While I think it is probably a good idea for investors in one project to be able to communicate with one another, I think it would be a bad idea to let these investors (particularly out-of-state investors) manage property without a license. A good property manager not only knows the law and collects the rent, she or her staff is available to handle emergencies (NRS 118A.260), her actions prevent damage or degradation of the property, and in many cases she can even add value to a property through practices that maintain a high occupancy rate. This is good both for tenants and the investors. It’s even good for the neighbors.

Sure, it will cost some money to do the job right and follow the laws that were enacted to protect all Nevadans. That’s the cost of doing business.

Maybe you didn’t know that you can’t use an FHA loan to purchase a property that has been owned by the seller for less than 90 days. Or at least, that’s the rule until February 1.

The purpose of this rule is to prevent “flipping,” buying a property and then immediately turning around and selling it for more money, pocketing thousands of dollars in a couple of months with little actual work on the property itself. Of course, the market downturn put a stop to most of that but the rule remains.

There is one huge loophole already in this rule. It doesn’t apply to sellers who are stare or federally chartered banks, and it doesn’t apply to HUD itself. So you can (theoretically) use an FHA mortgage to buy a newly foreclosed home from Wells Fargo or Nevada State Bank, but not Vinnie’s Pawn and Loan or Joe’s Mortgage Company. So will suspending this rule do what HUD says it will, “speed the resale of foreclosed properties“? Maybe.

There is another class of investor who sometimes gets hamstrung by the 90 day rule: investors who buy cheap, highly distressed properties. They quickly do the necessary repairs, paint and renovate, and sell the property for a profit. These investors are a necessary part of the foreclosure food chain, because they make homes out of properties that most buyers would never consider. Joe and Jane Average are not experts in repairing such properties, but these investors are. The temporary change to the HUD rule — and if successful, expect it to be extended — should make it easier for trashed out foreclosures to become owner occupied homes.

Here’s a round-up of some interesting mortgage and financing stories that have crossed my desk:

This one by a local loan officer gives you a rather technical view of the impact on Las Vegas real estate from a particular kind of mortgage, the Option ARM. He’s an expert in this, so even if you find it tough reading, it’s worth your time.

This insightful commentary talks about predatory lending and mortgage modifications. In short, there are a number of reasons banks have not exactly been enthusiastic about getting Joe and Jane Average a lower payment!

FHA loans are now one of the most popular ways to get financed. But did you know that nationwide there are only 172 people who can give the final approval? What I take away from this is ask for a 45 day closing on FHA transactions, and think twice before buying a foreclosure with one! By the way, FHA is asking Congress for tougher standards, bigger downpayments, and bigger mortgage insurance fees. No word on whether they are asking for more staff.

One more thing, the Treasury Department did issue new guidelines on short sales this week. To learn more, check out my article on The Moderate Voice. There is a link to the actual rules near the end.

Be sure to join me on Friday for the latest Vegas real estate market data!

Hooters Las Vegas is currently in default, and is trying to restructure $147 million in debt.

More on the Cosmopolitan: Deutsche Bank has had to write down a half billion euros — about $748 million — and there is no clear opening date in sight.

I’ve said before that the housing crisis will not be over until the banking crisis is over as well. The two are just too intertwined. Well, banking reforms may be further away than we would like, and the TARP is looking more like a cover-up than a life-preserver every day. In fact, I am more certain than ever that as bad an idea as it is, it would have been a better use of taxpayer money to put up to $100,000 towards every American mortgage than to continue to prop up huge banks that aren’t accountable to anybody. At least paying off people’s mortgages would have changed the fact that we now have record high delinquency rates.

Housing starts — that’s beginning construction of new housing — is at a new low. Permits to build housing are down too. Surprisingly, that’s a good thing if you think we have an oversupply of housing. It of course isn’t very good news at all if you work in construction.

I do have to say that I am very concerned by the disconnect between the economy you and I see on the streets and the economy that Wall Street is apparently enjoying. I can’t see the Wall Street economy continuing forever, nor pulling the rest of the nation up. Let’s face it, most jobs are not created by huge publicly traded corporations, but rather by the small businesses that are having a hard time getting financing right now. And until we have enough jobs, the housing industry will have something less than smooth sailing.

And on a happy note, there is a movement to create a new national park in the Northwest part of town. An area called the Upper Las Vegas Wash is home to many fossils.

More courts are getting picky about mortgage documents when considering judicial foreclosures and bankruptcies. And it isn’t just state courts either; now at least one federal court is in on the action. More federal judges will have a chance to rule on these issues as a part of bankruptcy proceedings. It will be interesting to see if MERS turns out to be an issue in Nevada’s foreclosure mediation program (few foreclosures in Nevada actually involve the courts). If this trend keeps up, title insurance will be more important than ever when buying and selling real estate!

Remember that MERS is involved in as many as 60,000 mortgages nationally. I personally think that if more than a handful of these mortgages is invalidated, that Congress will be under great pressure from the banking industry to quickly push through legislation that clears MERS’s status and allows “business as usual” to continue.

Until that happens, savvy lawyers will ask for proof that the mortgage holder actually holds the mortgage in judicial foreclosure and bankruptcies.

The San Francisco Chronicle is noticing what I told you some time ago: some banks are insisting on an additional credit check or an additional mortgage pre-qualification if you want to buy their foreclosed homes. In an environment where multiple offers are the norm, a buyer might end up needing 3 or 4 pre-qualifications, often paying a fee and always getting putting another inquiry on the credit report. But buyers are tired of strong arm tactics from banks:

The Hayeses found the requirements sufficiently infuriating that they decided not to submit offers on some properties they had been considering, and are now in contract to buy a nonforeclosed home from a traditional seller. Real estate agents say both practices – requiring fresh credit checks and steering potential buyers toward specific mortgage lenders – are increasingly common with many foreclosure sales.

In selling foreclosures, “we require either a credit pre-approval from another lender, other proof of funds, or a pre-qualification from Wells Fargo,” said spokesman Jason Menke. “We do not require that a borrower cross-qualify when they are considering a purchase of a short sale or REO property.”

Over the last couple of weeks, a huge mortgage and foreclosure story has been slowly developing. You’ve probably already heard about judges throwing out foreclosure cases because the banks didn’t have their documents in order. One judge in Kansas made a ruling that could — if upheld on the Federal level — invalidate the mortgages on 60 million homes. Judges in other states have already made similar rulings.

It goes back to the way mortgage companies have sliced, diced, and sold off mortgages into mortgage backed securities. This often involved a private company, a clearinghouse called MERS. Well, because it would be difficult for a consortium of 10 companies to file foreclosure, MERS did it for them. And this judge says MERS doesn’t actually have the legal standing to do that. In short, they can’t prove they own the mortgage because they don’t.

How do you find out if MERS is involved in your mortgage? That’s hard without getting lawyers involved. The best (only) advice on that I’ve heard is to call your mortgage servicer. The phone number should be on your statement. Ask the nice person at customer service. The problem is they may not know, and even if they do they may not be allowed to tell you. I know it seems like you should have a right to know, but that nice person in customer service doesn’t want to lose his or her job by telling you.

It is pretty easy, however, to tell if Fannie Mae or Freddie Mac holds your mortgage, and Forbes tells you how.

The mortgage crisis won’t be over until the unemployment problem, job creation problem, and wages-not-keeping-up-with-inflation problems are solved. And until the mortgage crisis is completely worked through, there is no chance of completely fixing our banking crisis. The banking in turn is impeding job creation (and therefore impacting unemployment) by making it difficult for businesses (and individuals trying to start businesses) to get loans. Actually implementing mortgage modification plans is a good and necessary step to slow this circular dance, but it only works when people have at least some money to pay a reasonably priced mortgage — and when banks are willing to work with people.

On the other hand, it does look like housing prices in some markets are putting in a bottom. Someone with adequate capital and patience has the opportunity to put together a nice portfolio of properties, particularly if they can pay cash. For that matter, someone with adequate capital and patience could go into the venture capital business.

When I am screening listings for my clients, there are a number of things I look at. When buyers are on a tight schedule, I don’t include short sales, because there is no telling if or when they will close. Unless my client is a licensed contractor, I don’t send listings that have warnings about mold infestations or other health/safety hazards. There are a number of other “red flags” I look at, because my client’s time is valuable. I am not going to waste his or her time on a home that won’t be suitable, or that they can’t buy, or that they can’t get in to see, or that will be a big headache later.

Because time is so valuable, I make sure that buyers start the process by getting a pre-qualificaiton from a reliable lender or mortgage broker. Not only do we need this before we can put in a credible purchase offer these days, the “pre-qual” tells us both up front exactly how much they can afford. If the client wants to stick to a lower price range, that’s fine; but if they want to go above the price on that pre-qualification, I know we need to clear it with the mortgage people first. I don’t knowingly show people homes they can’t afford.

And this brings me to one of the biggest “red flags” I look for in a listing, a requirement that my clients have a second pre-qualification through the seller’s chosen lender. “Must pre-qualify with [insert bank name], no exceptions”  in the agent-to-agent remarks means my clients aren’t seeing that listing, ever.  Here’s why:

My clients are already qualified, thank you. The official line is that they are merely trying to protect themselves from disreputable or fly-by-night mortgage companies. Sorry, I have already screened for that. Don’t insult me or the mortgage professionals I work with every day.

A second pre-qualification costs money. It is my personal opinion that what these companies really want is the $200-500 they will get for an application fee.  If they get a mortgage out of the deal? Bonus.

A second pre-qualification involves a second credit check. This additional inquiry has the potential to cause slight damage to my client’s credit report. If there were anything “borderline”, this small change could jeopardize the first pre-qualification and my client’s ability to buy.

A second pre-qualification takes time. Every week there are dozens of homes in this market that don’t spend a whole week on the market before having an accepted purchase offer, often with multiple offers. See Friday Figures for an exact count each week. The days (or weeks in some cases) it takes to get a completely unnecessary pre-qualification may mean the difference between buying, or having to wait for the next home that suits the client.

It drives a wedge between my clients and myself. Part of the game is that the new lender has the opportunity to talk my client into using their mortgage services. If they can do that, they rack up a nice set of origination fees, and a bunch of interest for as long as they hold the note. Since odds are very good that I won’t know their representative personally, this complicates the entire escrow period because I won’t have the same level of communication and rapport that I do with my small circle of mortgage people. I can’t stress enough how critical this can be in the last week before a sale closes. That’s when things are most likely to go wrong, and when I most need to be able to speak frankly with the mortgage people.

And finally, The other bank or mortgage company isn’t that great either. Specific pre-qualification requirements only happen on distressed properties, almost always bank owned homes. At least 9 times out of 10, the “required” company is the one that got burned on the mortgage last time. Usually, it’s the bank that owns the now-foreclosed property! If they were such a great judge of people’s ability to repay a loan, they wouldn’t be in this mess in the first place.

There is a movement to prohibit this asinine practice. You can sign a petition to amend a law called RESPA to make it illegal by clicking here. Better yet, you can send a message to your elected representatives in the House and Senate.

In the meantime, I won’t be showing listings that require a second lender’s pre-qualification.

The foreclosure problem is has been so bad here that Las Vegas, North Las Vegas, Henderson, and Clark County are teaming up to best get and use Federal stimulus money.

People who signed up to buy condos in the City Center project are not very happy right now. They bought near the top of the market, and prices in general have plunged 52% since then according to Case and Shiller. Worse yet, many of the people who bought high and early were MGM executives and high rollers. Ouch.

This is more interesting than bad, but the nice folks at Rain City Guide wonder about the wisdom of spending lots of money on rooms your family doesn’t even use.

Office vacancy is up to 15.9%, and apartment vacancy rates are at at 22 year high.

And mortgage fraud is is up… or at least awareness of it is.

If you want the good news too, come back tomorrow for Friday Figures. I will be focusing on year-over-year figures. Except for the drop in prices, things aren’t that bad.