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!

Yesterday, the International Times Herald ran a Bloomberg article called Defaults in Las Vegas turn investment banks into decorators. I can only imagine the number of signatures that have to be gathered to actually change a paint color! Here’s an excerpt:

Since January, when Ian Bruce Eichner, a New York developer, defaulted on a $760 million loan, Deutsche Bank has been giving Perini a monthly check for $70 million to continue construction. It is now in full swing with 2,800 workers on site and a dozen cranes towering overhead.

Deutsche Bank, which declined to comment about the Cosmopolitan, is one of a dozen investment banks that rode a five-year boom in commercial real estate by financing developers and landlords while profiting by packaging loans into securities. But credit markets seized up in 2007, sticking banks and brokerage firms with commercial mortgages and bonds. The amount for large U.S. banks alone reached $169 billion, according to Fitch Ratings.

The Cosmopolitan is clearly worth more to Deutsche Bank as a finished product than a construction site. It’s still scheduled to open in late 2009.

But the Cosmopolitan has other problems too: Cosmopolitan Magazine is suing them over their name! Hearst Publications insists “the Cosmopolitan development has tried to confuse the public into thinking the project is associated with the publishing company.” Now I don’t know about you, but I don’t see how I can confuse the two. Here’s what the Cosmopolitan will look like. Now, here’s what Cosmopolitan Magazine looks like.

Next thing you know, they’ll be forcing bars everywhere to pay a royalty every time they serve a Cosmo.

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!

I have lived in (or near) a number of large cities over the years, and have now had the occasion to see multiple metropolitan areas dealing with the problem of vacant housing. Sometimes, integral to the problem is unclear ownership. Other times, it is a large concentration of bank-owned properties — so-called REO — that for whatever reason can’t be moved. Ironically, sometimes local efforts to make sure homes are up to code and livable makes it more difficult to rectify the problem: banks and other remote owners are not in a position to arrange lots of repairs and inspections. Hopefully other regions will come up with novel solutions to the issues of vacant housing, because they are coming to a metropolitan area near you.

“Separate But Equal” used to be a perfectly valid legal principle. Now of course, you would be sued into oblivion for advertising a “Blacks Only” community — and rightly so! — but there was a time when such developments thrived. Now such neighborhoods are fighting for historical recognition.

If you are not familiar with the BondDad, you really should be. Here he talks about some of the issues involved in banks and mortgage companies unwinding their bad loan positions. Here he discusses housing prices and historical averages — please note that he is looking at the big, national picture and not the Vegas picture (which is looking up in my opinion). And here he talks about employment data. This is normally a topic I would discuss elsewhere, but people who don’t have jobs have a hard time paying the rent or mortgage.

And interesting news from the construction front. Could bamboo be the building material of the future? It’s strong, renewable, and grows like crazy. In some parts of the world, it’s already the building material of choice.

Farmers Branch, TX, an upper-middle class northern suburb of Dallas, has enacted an ordinance that according to CNN, would ban illegal immigrants from renting or owning housing.

Regardless of immigration issues, I think the Farmers Branch ordinance is very possibly in violation of federal law.

First, there is the possibility that the typical Apartment Manager may apply the rules for checking current and correct citizenship and immigration status unevenly. It is not as simple as checking a drivers license, and may be particularly difficult in Texas, where they have had a large influx of Katrina refugees, whose birth certificates and other documents may no longer exist. Is she required to check the heads of household for legal status, or everyone who will be living on property? Even if she does try to check, will she really collect such information on every resident, or only ones with Hispanic surnames? That’s a discrimination lawsuit just waiting to happen. And who will be checking the legal status of purchasers of property? Realtors, title officers, mortgage officers? To whom will it be reported?

Finally, and most importantly, Federal Fair Housing Law says it is not legal to refuse to sell or rent to someone “based on race, color, national origin, religion, sex, familial status or handicap….” Refusing to rent to someone because they are not citizens of the United States is based on “national origin.” So our average Apartment Manager is caught in the middle: she can either follow the local law and face federal fines, or follow federal law and face local fines.

My guess is she should be eyeing jobs in neighboring suburbs.

Earlier this week, the Clark County commissioners voted to limit the number of garage sales a family can have to four every six months. The vote on the issue was unanimous, with one commissioner going on record as saying “Lots of residents have turned these garage sales into personal businesses.”

You’ve seen the disclaimers at the bottom of those mutual fund ads on the TV, right? The ones that say no single investment is for everyone and you should consult your financial adviser before sending money? Well, buying a house isn’t for everyone either.

If you are one of those people for whom this is not the right time to buy a house or condominium, this post is for you! The Consumerist has been kind enough to post Landlord-Tenant Law For Every State; here’s the law in Nevada. Here’s the law about housing discrimination in Nevada. If someday you are ready to buy a home — or you would like me to put you in touch with an agent who specializes in rental property — be sure to click the “Contact Me!” link at the side of this page.

This information originally posted on ShortWoman in this post.