TheStreet.com asks and answers 5 Questions about the Mortgage Crisis.

Although you know my opinion regarding the local real estate market*, the question remains whether nationally speaking, we are at or near a bottom. Some people say yes. Some people say no.

* Inventory is slowly dropping, sales are slowly increasing, prices may continue to drop for another couple quarters.

It turns out I am not the only person who is taking a hard look at the various fees that mortgage companies are trying to squeeze out of people. “Slowly but surely, a handful of public-minded bankruptcy court judges are drawing back the curtain on the mortgage servicing business, exposing, among other questionable practices, the sundry and onerous fees that big banks and financial companies levy on troubled borrowers.” Over and above the miscalculated interest, the sloppy record keeping, and the fees upon fees that can keep people from ever being able to put their loans in good standing, some lenders are adding fees back on after judges have tossed them out and discharged a bankruptcy!

The Christian Science Monitor reports that some potential home sellers are deciding not to play the game at all and pulling their property off the market. Eventually these homes will come back, as the owners find themselves needing to sell rather than wanting to. Others will someday decide that the market has improved enough to chance a new listing. Some will sadly end up in foreclosure and become REO properties. Short version, this trend helps shore up supply now but bodes ill for some future date.

And now for a completely different kind of real estate, French lighthouses. Interested in a tough historical preservation project?

Speaking of foreign real estate, you probably don’t know how lucky we have it here in the states in some ways. Let Robert Brady spell it out for you: “Believe me when I tell you that, when it comes to business (that is, the purchase of real estate), the agent you’re working with is not working for you. Buyers’ agents don’t exist outside of North America. In many of the markets I recommend, real estate agents aren’t regulated or even licensed.”

A message to all those Realtors out there: I know about “Realtor Standard Time” and I know that things happen, but you still have to make an effort to be on time. Got that? Would it have killed you to call and let somebody know you were going to be late?

In a move that surprises nobody who has thought about things for a few minutes, economists have found that housing prices have declined most in places where the commute is longest. I suppose if you can work remotely, you can get some screaming housing deals in the far-flung ‘burbs right now. In the meantime, remember that the Las Vegas Valley is relatively small; I can be on the opposite side of town in a half hour…. traffic permitting of course.

And last but not least, two fun if kitschy tours of Vegas: the mob history tour (hey, they’re all legitimate businessmen!); and the haunted Vegas tour.

That’s all for tonight!

Let’s start off with Mortgage Concepts Every Buyer Should Know. This important little article is must-read stuff for those trying to become first-time homeowners.

Maybe you knew that once you have a mortgage with a bank, the bank can sell that mortgage? Fannie Mae is a company (and former government subsidiary, it’s complicated) that buys those mortgages, freeing up your bank to lend money to somebody else. Fannie is in the process of tightening the rules on exactly what mortgages they will buy.

If you are losing your home, your mortgage holder might pay you to not trash the place on your way out! So please think twice about stealing the plumbing fixtures or leaving holes in the wall. You could use some cash, couldn’t you?

Speaking of leaving a mess, I was recently showing a bank-owned home where it appears that the previous owner locked the cat inside and let them pee absolutely everywhere. There was just too much pee to be explained by anything else. I can only hope this poor animal had food and water, and was safely removed from the home. For pity sake, please provide for your pets! Even if you don’t see pets as family members (in which case why did you get them?), your kids do. Do you want your kids wondering if you will leave them behind when money gets too tight? The flipside of this problem is that your local animal shelter or rescue group probably has some great new pets hoping to find a new home.

A new book called Greed, Fraud and Ignorance tells us even more about how we got into this mess.

These same problems might play out worldwide, as “Overvaluated housing [is] not limited to U.S.”

And lets close with a group of articles on the things Congress is doing to help the situation: it looks like homebuilders are getting a big tax break (yay for keeping construction workers employed, but the last thing we need is artificially inflated supply of new housing); there is little help for homeowners, well, maybe not even that; and both parties want to get something done so they can look voters in the eye this fall and say they did something. Not that there is a simple fix to this situation that doesn’t involve a time machine, but I’d settle for things that were actually helpful and don’t make the situation worse.

You might have heard about some figures released earlier this week:  February saw an 8.2% drop in sales prices with a 2.9% rise in sales.

Even so, many people still refuse to believe the market value of their home has dropped, and if they want to sell it they will have to take less money.   The banks have gotten this message:  most of them have dropped their prices, and that is part of why bank-owned property is moving fast in Las Vegas.

Oh!  And here’s a little follow-up on bogus foreclosure “rescue” schemes:  the Feds have indicted 20 people who defrauded over 100 people out of their homes in California.

A combination of aggressive mortgages, maxed out home equity lines, and dropping home prices mean that home equity rates in the United States have fallen below 50% for the first time since World War II.  This is of course related to housing being in the “deepest decline since the Great Depression.” There has actually been a major shift in the priorities of debtors, and homeowners are more willing to walk away from their homes than ever before.

This of course means that lenders are becoming more risk-averse — they don’t want to loan money that Joe Borrower might not pay back, and they really don’t want to worry about liquidating Joe’s house down the road.  In fact,  not only are people with good credit having trouble getting refinancing, you can’t get financing at all in some areas for certain kinds of real estate.  For example, if you want to buy one of those 800 high-rise condos currently available in Las Vegas, make sure you have a large cash down-payment.  I can’t blame the banks for not wanting to get involved in what is essentially a niche market, but it does make life “interesting” in our local real estate market.

Even if the current housing problems are not over, I find it very encouraging that pending sales were unchanged — not lower! — in January on a nationwide basis. On a local basis, things are doing even better here in the Las Vegas Valley (many thanks to Tim Kuptz for making sure this data is regularly available to the people who want facts instead of vague impressions).  Bargain hunters are swooping in trying to catch REO (foreclosed and bank owned), short sale, and vacant property at prices that they haven’t seen in years, knowing there is a finite amount of buildable land in the Valley.

Also encouraging on the national level is that the FHA has come out with the new conforming mortgage limits, adjusted for regional conditions.  You can find your local limits here;  in the Las Vegas Valley, it’s $400,000 for a single family home, last revised this past Wednesday, March 5, 2008.  Trust me, I can help you find a nice place to live for $400,000;  what part of town do you like? The FHA getting involved is great news, because everyone expects them to ride in for the rescue, much like they did in 1935.

In the meantime, this might be a great time for some renovations,  but remember these bits of advice:

To ensure that your renovation will pay off, make improvements that others will appreciate as much as you do….  [Some] projects… are a matter of personal taste, and they may not add value in the eyes of a future buyer…. Also, don’t compromise long-term value for short-term convenience.

How true.

CNN has an article about how the Hope Now coalition claims to have helped a million homeowners. At least that is what Treasury Secretary Henry Paulson says. CNN isn’t so sure:

But of those borrowers, only 278,000 actually saw the terms of their mortgages modified. Their lenders either froze or reduced their interest rates, and may have reduced their balances as well to make loans more affordable.

Let’s think about this for a few minutes. According to the guys over at the Census Bureau, there are roughly 303.5 million Americans right now. That number of course rises every minute. Also according to them, roughly 69% of homes are owner-occupied — we own it, or someone we live with does.

Mr. Paulson is asking us to believe that one out of every 304 people has been helped by Hope Now. If you were to fill Robert Kennedy Memorial Stadium with random people, you should be able to find roughly 186 helped by Hope Now; if you filled it with only random homeowners, you should find about 271 people. Doesn’t that seem a bit high to you? Could it be that Mr. Paulson is counting all the way back to the inception of Hope Now’s helpline in 2004?

And where are these people? I am sitting in a metropolitan area where 9.87% of our 22,000 current listings are the Repo market — that’s over 2100 properties! Where are they? How are they helping people in Cleveland, where things are even worse?

The President told us in December that Hope Now was prepared to help 1,200,000 homeowners. If Mr. Paulson’s numbers are right, does that mean we are rapidly coming to the end of what they can do a mere 4 months later?

And what exactly is Hope Now doing to help these people if they are not actually getting loan terms modified? Mr. Paulson admitted that “Loan modifications alone increased 19% from December to January….” Fewer than 1 out of 5 people being “helped” actually got anything that would make their loans more affordable in the long term. Do you count as being “helped” if you call and tell them a sad story? How about if they “help” you by telling you it’s time to consider a short sale, or mailing the keys to the bank?

And one last thing. “Everybody” agrees that none of these mortgage assistance plans should help investors, that they made their beds and should lie in them. So what about the renters those investors leased to? They will most likely lose their homes too, often with only 3 days notice. Do you think you could coordinate finding a new home, packing everything you own, and moving in 72 hours? Probably not, and neither can they. Every day someone in my office deals with the collateral damage of this problem. Where is Hope –Now or any other time — for them?

Good news for Vegas real estate development: the Cosmopolitan Resort and Casino will avoid foreclosure. When finished, the hotel and convention facilities will be run by Hyatt. The complex will include roughly 3000 hotel rooms in addition to a number of luxury, high-rise condominiums.

A couple items on that quintessential Vegas export, weddings! First we have the Vegas Wedding FAQ. Not up for a Vegas wedding? Join some other couples in a much more sedate (but equally quick) Henderson wedding.

Confused about the various mortgage options and qualifications out there? Thanks to Inman News for pointing out Mortgage Grader. Warning: inline sound and video.

And a foreclosure prevention currently under debate would allow bankruptcy judges to modify or “cram down” new terms on some mortgages of owner-occupied homes with “subprime or non-traditional” mortgages. A bunch of stipulations apply, of course, and terms are still under negotiation in Congress. Needless to say, lenders hate this idea, and say it will increase lending costs to consumers. Notable economic minds like Larry Summers advocate some sort of bankruptcy reform needs to be a part of the foreclosure solution.

Looking forward to seeing some of you this Friday, February 29, 2008, at the Desert Shores Dojo!

Rather late last night, I came upon this item from TheStreet.com called You Might Not Want to Wait to Refinance That Mortgage.

Make no mistake, I have been telling everyone who would listen for several years now that it was high time to refinance ARMS and take advantage of low fixed rates. Personal finance expert Terry Savage puts some other support under that idea.  First, she points out that the bond trade is likely to push up long term interest rates regardless of what the Fed does with short term rates:

If bond buyers are worried about inflation, they’re going to demand higher rates to compensate. In reality, if they sniff inflation coming, they start to sell the bonds they own, pushing prices down and yields up.

[snip]

Here’s the simple rule to keep in mind: When interest rates rise, bond prices fall.

That’s something beyond the Fed’s power to control over the long run. The market is bigger than the Fed when it comes to long-term interest rates.

She goes on to point out that if we have a bad enough recession that home prices drop, the option to refinance may not be available in the future at all, at any price:

In fact, if you don’t have enough equity in your home, you simply can’t refinance — as millions of homeowners have already learned. They’re stuck in adjustable rate loans, worrying about the possibility of higher monthly payments.

Take advantage of this possibly temporary dip in mortgage rates to start the refi process now. And as you start the process, get a written rate guarantee from your lender.

If rates drop again, and your house retains its value, you can always refi another time. But if rates rise, you may not get this chance again.

So please, take advantage of this refinancing  opportunity whether you are refinancing, investing, or bargain hunting.  If you need a mortgage broker, click the “Contact Me!” button to the left and I will put you in touch with a couple of people I trust to help you out and get the job done.

On one hand, Tyler Cowen of Marginal Revolution things the mortgage mess isn’t really that bad. On the other hand, Dave Johnson of Seeing the Forest thinks it’s even worse.

It is, however, worth noting that Mr. Cowen hedges his bets with a link to a British article suggesting that we may be staring down the possibility of a full-blown worse than 1929 style economic meltdown. I’ll stick with my theory that reality is somewhere between the extreme predictions.

Sad but true, we are in the midst of record foreclosure rates. And also sad but true, there are charlatans who would gladly take advantage of this family tragedy for personal gain. And that brings me to TheStreet.com’s warning about mortgage rescue scams:

Foreclosure-rescue scams usually revolve around heavily promoted deals supposedly designed to save the homes of people who have fallen behind on their mortgage payments and are facing foreclosure. The scam artists proclaim to “save your home” or “pay your mortgage,” but in reality they only generate a quick profit for themselves while possibly stripping away the value of the home with no benefit to the owner.

“Scam artists can evict a family from their own home and then sell it on the open market before the homeowner has any idea of what is going on,” says Gail Cunningham, spokesperson for the National Foundation for Credit Counseling.

Make no mistake, there are legitimate services that will help you as well, and they too are growing. The most helpful tip they have for selecting a service is that scammers often ask for money up front, while legit services usually do not. The National Foundation for Credit Counseling adds this list of red flags:

The NFCC advises homeowners fearing foreclosure to proceed with extreme caution if an individual or company:

• Calls itself a “mortgage consultant” or “foreclosure service.”
• Contacts people whose homes are listed for foreclosure, including anyone who uses flyers or solicits for business door-to-door, by phone or email.
• Encourages you to lease your home so you can buy it back over time.
• Collects a fee before providing any services to you.
• Instructs you to cease all contact with your lender, credit or housing counselors, lawyer or other legitimate experts.
• Tells you to make your mortgage payments directly to him or his company (not the lender).
• Requires that you transfer your property deed or title to him or his company.
• Makes a promise that seems too good to be true, for example, instant cash with “no strings attached.”
• Tells you that as part of the deal you will need to move out of your house for some period of time for remodeling or other reasons.
• Offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale.

You can also check out this clip by Freddie Mac. My advice? Have an observer come with you to meet with such companies: a lawyer; your adult child; a trusted friend. They are less apt to be swayed by emotion-manipulating pitches and listen to the unvarnished facts. If they say your observer can’t stay — they may falsely claim it’s for privacy reasons — consider that the biggest red flag of all.