Las Vegas Real Estate Blog

Mortgage completions are crumbling to a low and the bank’s base rate is predicted to hit an all time low. Is this the time to be hunting for a remortgage?

Well, it all is dependent vastly upon your own personal financial conditions. If you are tied into a product with redemption penalties then looking for a new product may cost you further than it would save you. But if your current product is nearing the end of the penalty term, or has completed any tie in periods, then it could be worth trying to compare all mortage rates to test out if there is a more efficient product out there on the market.

There is also, unluckily, another collection of people for whom looking a remortgage rate might not be an unproblematic or a low-priced opportunity. If you are unfortunate enough to have bought your property within the last couple of years, then with the tumbling house prices at this time seen in the market, it’s likely that at best your property is worth only what it was worth when you bought it. At worst, for those that bought at the height of the property prices, it is to be expected that you have lost quite a big portion of what you paid for the dwelling.

The problem here is that you may find that your existing deal borrowing is too high for the banks to be pleased to lend to you. For instance, if they were happy to lend you 90% of the value when you bought the dwelling and it has now dropped in value by 10%, though the sum on loan would be the same, the amount as a proportion of the house value has shot up to 100%. Many banks are now doubtful about such high lendings, in countless cases punishing those who are borrowing more than 75%. So although your borrowing may have seemed OK to the banks when you took out your present deal, now they could not touch you with the proverbial barge pole.

And it’s not merely those that have suffered house price drops that are in this arduous situation. Until of late some lenders would actually lend up to 125% of the home’s market value. If you were in this position when you took out the mortgage, unless your house value has risen by almost 40% or more, you would still be looking to borrow more than 90%. This would result in a lot of lenders unlikely to be willing to help you.

If you are caught with an pricey mortgage and want to move to a cheaper one, then the mortgage market can be a mine field. Make sure that you make contact with a mortgage advisor and let them compare mortgage rates for you, to see if they can locate some good mortgages for you.

Keith Lunt writes for the comparemortgagerates.co.uk website, where you can discover handy information about best mortgage interest rates and get in touch with a local broker who may be able to assist you in hunting a new remortgage product.

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During the last 2 years the price of your home has been losing value fast. The market is absolutely flooded with amazing homes at rock bottom prices. Selling your house for a price that you are comfortable with is really hard with the current situation. Perhaps it’s time to consider if you should become a landlord rather than putting your house on the market.

The biggest question you must answer is if you can charge enough in rent to cover your mortgage and additional costs. Look at your local newspaper or craigslist and find out what comparable houses go for in your area. Use an amortization schedule calculator tableau d’amortissement in in the language of love) to figure out how much you are paying off your mortgage and if your monthly rent will cover that amount plus the amount of expected repairs, insurance and other unforeseen factors. One thing you must calculate in is the wait between tenants, if they are only staying for a short period.
Make use of an amortization calculator (link above) and figure out if you should rather sell your home rather than renting it. If you find it likely for the market to take a turn for the worse rather than go back up, you should probably consider selling rather than becoming a tenant. Also if the added liability of an additional home ownership isn’t for you, you should rather consider to sell.

Are you ok with the idea that someone else will be living in your precious home, sleeping in your bedroom and eating in your kitchen? Can you handle the fact that your house will probably not be returned in the same condition as when you let your tenant in? If your home is a big house with a plethora of bedrooms, you will attract families with children, children most often cause damage to furniture, walls and other precious parts of your home. Will your tenant pay on time, or at all? Are you ready to wake up in the middle of the night to deal with problems with your house? If any of these questions make your spine shiver, than being a landlord is probably not for you.

Take into account that you will not always be available. The only way you can get away with having nice and long vacations away from your city is if you plan ahead. Make a deal with the family, a friend or a property management service to tackle the problems while you are away. Contact electricians, plumbers and other services your house might need before doing anything else and get a privilidged deal with them. Leave their phone numbers on a sticker on the phone or on the fridge. Having the knowledge that your house is in good hands takes a load off your shoulders and makes sure that your vacation will be better than ever.

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“Mortgage and Discount Notes”
By James Nsien2
Mortgage

A mortgage is the transfer of an interest in property (or the equivalent in law – a charge) to a lender as a security for a debt – usually a loan of money. While a mortgage in itself is not a debt, it is the lender’s security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.

The term comes from the Old French “dead pledge,” apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure.

In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than on other property (such as boats) and in some jurisdictions only land may be mortgaged. A mortgage is the standard method by which individuals and businesses can purchase real estate without the need to pay the full value immediately from their own resources. See mortgage loan for residential mortgage lending, and commercial mortgage for lending against commercial property.
The cost to the borrower is measured by the annual percentage rate (APR), which is an effective annual rate of interest and fees paid by the borrower.

In many countries, though not all (Bali, Indonesia is one exception), it is normal for home purchases to be funded by a mortgage. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets have developed, notably in Ireland, Spain, the United Kingdom, Australia and the United States.

Mortgages in the United States

Types of mortgage instruments
Two types of mortgage instruments are commonly used in the United States: the mortgage (sometimes called a mortgage deed) and the deed of trust.

The mortgage
In all but a few states, a mortgage creates a lien on the title to the mortgaged property. Foreclosure of that lien almost always requires a judicial proceeding declaring the debt to be due and in default and ordering a sale of the property to pay the debt.

Security deed
The deed to secure debt is a mortgage instrument used in the state of Georgia. Unlike a mortgage, however, a security deed is an actual conveyance of real property in security of a debt. Upon the execution of such a deed, title passes to the grantee or beneficiary (usually lender), however the grantor (debtor) maintains equitable title to use and enjoy the conveyed land subject to compliance with debt obligations.

Security deeds must be recorded in the county where the land is located. Although there is no specific time within which such deeds must be filed, the failure to timely record the deed to secure debt may affect priority and therefore the ability to enforce the debt against the subject property.

The deed of trust
The deed of trust is a deed by the borrower to a trustee for the purposes of securing a debt. In most states, it also merely creates a lien on the title and not a title transfer, regardless of its terms. It differs from a mortgage in that, in many states, it can be foreclosed by a non-judicial sale held by the trustee. It is also possible to foreclose them through a judicial proceeding.

Most “mortgages” in California are actually deeds of trust. The effective difference is that the foreclosure process can be much faster for a deed of trust than for a mortgage, on the order of 3 months rather than a year. Because the foreclosure does not require actions by the court the transaction costs can be quite a bit less.

Deeds of trust to secure repayments of debts should not be confused with trust instruments that are sometimes called deeds of trust but that are used to create trusts for other purposes, such as estate planning. Though there are superficial similarities in the form, many states hold deeds of trust to secure repayment of debts do not create true trust arrangements.

Mortgage lien priority
Except in those few states in the United States that adhere to the title theory of mortgages, either a mortgage or a deed of trust will create a mortgage lien upon the title to the real property being mortgaged. The lien is said to “attach” to the title when the mortgage is signed by the mortgagor and delivered to the mortgagee and the mortgagor receives the funds whose repayment the mortgage secures. Subject to the requirements of the recording laws of the state in which the land is located, this attachment establishes the priority of the mortgage lien with respect to most other liens on the property’s title. Liens that have attached to the title before the mortgage lien are said to be senior to, or prior to, the mortgage lien. Those attaching afterward are said to be junior or subordinate. The purpose of this priority is to establish the order in which lien holders are entitled to foreclose their liens in an attempt to recover their debts. If there are multiple mortgage liens on the title to a property and the loan secured by a first mortgage is paid off, the second mortgage lien will move up in priority and become the new first mortgage lien on the title. Documenting this new priority arrangement will require the release of the mortgage securing the paid off loan.

Discount notes:
A short-term debt obligation issued at a discount to par. Discount notes are similar to zero-coupon bonds and Treasury bills and are typically issued by government-sponsored agencies or highly rated corporate borrowers. Discount notes do not make interest payments; instead the bond is matured at a par value above the purchase price, and the price appreciation is used to calculate the investment’s yield. Discount notes will have maturity dates of up to one year in length.

Discount Bond
A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the secondary market.

The “discount” in a discount bond doesn’t necessarily mean that investors get a better yield than the market is offering, just a price below par. Depending on the length of time until maturity, zero-coupon bonds can be issued at very large discounts to par, sometimes 50% or more.

Because a bond will always pay its full face value at maturity (assuming no credit events occur), discount bonds issued below par – such as zero-coupon bonds – will steadily rise in price as the maturity date approaches. These bonds will only make one payment to the holder (par value at maturity) as opposed to periodic interest payments.

A distressed bond (one that has a high likelihood of default) can also trade for huge discounts to par, effectively raising its yield to very attractive levels. The consensus, however, is that these bonds will not receive full or timely interest payments at all; because of this, investors who buy into these issues become very speculative, possibly even making a play for the company’s assets or equity.

Duration
A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. The bigger the duration number, the greater the interest-rate risk or reward for bond prices.

The duration number is a complicated calculation involving present value, yield, coupon, final maturity and call features. Fortunately for investors, this indicator is a standard data point provided in the presentation of comprehensive bond and bond mutual fund information.

It is a common misconception among non-professional investors that bonds and bond funds are risk free. They are not. Investors need to be aware of two main risks that can affect a bond’s investment value: credit risk (default) and interest rate risk (rate fluctuations). The duration indicator addresses the latter issue. Short-term, intermediate-term and long-term bond funds will have different durations.

Maturity Date
The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop. It is also the termination or due date on which an installment loan must be paid in full.

Modified Duration
A formula that expresses the measurable change in the value of a security in response to a change in interest rates. Calculated as:

Where:

Macaulay Duration = the weighted average term to maturity of the cash flow from a bond.
n = number of coupon periods per year
YTM = the bond’s yield to maturity

Modified duration follows the concept that interest rates and bond prices move in opposite directions. This formula is used to determine the effect that a 100-basis-point (1%) change in interest rates will have on the price of a bond.

James Nsien2
NCN Internet Marketing Services
NCN Real Estate Investments,LLC

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Home ownership is an extensive task although the greatest responsibility is taking care of that the monthly contribution always gets there on time. Failing to meet those obligations could end up in you getting evicted. That is why we would like with all means possible to avoid mistakes that would lead to such drastic measures. What ever you do don’t make the following mistakes when selecting which mortgage you commit to give a big part of your income.

5. Doing No Research

It’s a well known fact that brokers take look closely at your credit history before lending you the funds required to buy an estate. Although being a well known fact, a large proportion of home buyers meet their brokers without having any idea of what is written about them in the credit report. Not a good idea! If your credit report is not so good you should work on it before meeting brokers. Failing to do so will force the lender to offer you a less affordable mortgage if you will get that privilege at all! To make matters even worse is that meeting all those mortgage consultants you will be stacking up unwanted inquiries on your credit report that will all show bad credit.

4. Yes Master

to often, mortgages and loans are looked at as complicated math only to be understood by financial wizards. For that reason many people just say yes to whatever their consultant might offer rather than shopping around and comparing mortgages. Don’t sign the first thing they offer!. First do a little research online and become more aware of what you are actually committing to before you sign the contract. Shop around and discover the best mortgage for you, not the best mortgage for your lender.

3. Don’t Trust Your Broker

The nice feeling you get when you are approved for a mortgage can be a nice experience. Don’t let it stop you from looking into other options and asking questions. Many people are sold mortgages that don’t serve their best interest just because they don’t ask questions and quit looking at alternatives. Don’t fall for that!

2. Don’t take it to far

A big portion of potential home buyers get a pre approval from their mortgage advisor before finding the their dream estate. They look at the figure they were approved for and shop for a home in that price range. But you must take into consideration that this number is not necessarily the amount you can afford. It is the amount they are willing to lend you! So please remember to carefully look at what you can afford and rather take a lower mortgage and less risk than a mortgage that can get you in to the poor house and out your your house. You can find out how much you can afford by spending a few minutes with an amortization mortgage calculator.

1. Don’t Take the First Offer

Many people go for the fist offer their mortgage advisor is willing to show them. Don’t be that person. Remember to difficult questions and calculate how much you can afford with the amortization schedule calculator.

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Loss mitigation is the process of trying to stop a home foreclosure before it occurs. The loss mitigation process is often better handled by a third party or a loss mitigation counselor due to their experience and the ability to deal with the lending company without a personal attachment to the situation. Loss Mitigation is the art of helping delinquent homeowners, in or close to foreclosure, to save their home. By representing them and negotiating on their behalf with the lender; using government and non-government programs and regulations, and other proprietary techniques to resolve the delinquency and keep them in the existing mortgage and home.

While the number of borrowers in loss mitigation has increased, it has been matched by an increasing level of delinquent loans. Loss mitigation is made more attractive by the fact that foreclosure costs are often substantial. Historically, the foreclosure process has usually taken from a few months up to a year and a half, depending on state law and whether the borrower files for bankruptcy.

Loss mitigation is essential to asset protection because it provides the borrower with information necessary to make good decisions. Learning the programs or “tools” available as an alternative to foreclosure is the key to preserving home ownership. Loss mitigation is about keeping the home owner in their home. If that does not seem like a realistic outcome, every attempt should be made to help the home owner get the most for their home as they possibly can before a foreclosure sale takes place.

The sad part is that most people are not aware that legal and effective loss mitigation programs are available that can stop foreclosure quickly and legally. Loss mitigation is there to help save their homes, but homeowners first try to help themselves save their homes before others can help them. The future of their homes still depends mostly to the homeowners.

Loss mitigation is good, very good. It is not just for any person or professional to try and attempt without the correct training. In some states it may be illegal for an agent to provide loss mitigation services under a real estate license.

Loss Mitigation is one of several processes designed to minimize the damage caused by defaulting mortgage loans. Often backed by an attorney or firm, it involves negotiations between the lender and the borrower that binds them to new, more manageable terms. Loss mitigation is a process and an art. It’s a delicate balance between the facts, reality, distorted reality and the art of negotiation. The Lenders loss mitigation department would rather work with you than file foreclosure.

Loan modification, often referred to as loss mitigation, may include a partial payment of amounts in arrears and then an extension of the loan terms to compensate for the remainder of the amount of the loan in default. With the repayment plan, it is imperative that the plan be realistic when it comes to the homeowners’ ability to repay the amount the is delinquent.

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The Fed is taking unprecedented steps to ensure florida fha company rates remain as low as possible. Only one day ago the Feds announced that they are pledging another $750 Billion dollars to continue to buy agency Mortgage Backed Securities (MBS). These MBS are exactly what the entire conforming loan market is run on. Since the mortgage meltdown last year there has been virtually no investor support to purchase these MBS from lenders that are making loans. The Fed support for these MBS is what is holding our conforming lending world together.

The comments below were made yesterday:

“To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of these types of mortgage debt this year by up to $100 billion to a total of up to $200 billion.”

This means the Federal Reserve is now going to provide $1.45trillion in supply support for the mortgage market. When all is said and done the government will own roughly $3 trillion in agency mortgage backed securities (taking into account what the Fannie & Freddie already own). That is about 75% of all agency MBS in the market today!

This is all technical jargon but what it means to the average Florida resident is that mortgage rates fell IMMEDIATELY upon the announcement. Rates have flirted with the low 4’s and there were reports within the mortgage broker circle that a lender went down below 4% today. This was not able to confirmed by Five Stars Mortgage’s staff at the time of this writing.

With mortgage brokerages being cut out of the wholesale lending market by bigger banks it is difficult to get excited about the possibility of a refinance boom. By all account the Government is keeping their word and trying to keep Interest rates in Florida low enough to spur demand for real estate refinance and possibly even investment. The irrational fear of banks to lend money to anyone is clearly now standing in the way of economic recovery.

If only there was an aggressive lender willing to dive back into lending and stand shoulder to shoulder with our Federal Governments wishes to grease the wheels of the Florida and Nationwide real estate industry, we could finally put an end to this recession.

With the new refinance program for those with lowered home values set to take effect in early April all the pieces are set and the game is ready to be played. Will the Florida Banks have the courage to step up to the plate and answer the call? Only time will tell. One thing is for certain and that is that we at Five Stars Mortgage will continue to stand at the forefront of this economy recovery offering rock solid customer service and the most aggressive florida fha company programs in the industry today.

We look forward to helping as many Florida homeowners take advantage of these new developments as humanly possible. Thank you for your continued support and we look forward to the opportunity to serve your florida hard money needs!

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The prospect of purchasing a home for the first time home buyer in California could be an extraordinarily exciting experience, however for several it could also be a particularly frightening one too. Having the ability to put down a deposit major enough to secure a mortgage remains the largest up hill struggle for most California first time buyers. The truth is that the bigger your available deposit, the wider your selection of mortgage products will be.

It’s not suprisingly difficult for the first time buyer in California to need a large sum to put down for the initial investment. Ten percent has always been a rule of thumb which could easily equal amounts of $30,000 or more for an average home. Understandably, finding that kind of money is going to be difficult for most would be borrowers and not long ago banks have recognized this problem and have looked to look for alternative measures – it is now possible depending on your credit record, to secure a one hundred percent loan to the value of the property. Go here to get more information if you are a California first time buyer

It is a good idea however to provide some kind of deposit as there’s a danger of being in negative equity should home values fall sharply. Without a deposit, the bank will also view you as a higher lending risk which could result in your mortgage interest rate being less competitive. As captivating as it could be, taking out a loan somewhere else to pay for a deposit should be evaded.

Mortgage Fees

There’s more costs to home buying than the actual purchase itself. Seemingly a detail ignored is the closing costs and origination fees. If the first time buyer in California is not properly informed, the money they planned to use for their down payment can be eaten from these costs. It is common to overlook these costs when scraping around for a deposit to put down.

Some banks will even charge you a fee known as a higher lending charge – this charge is mostly applied where a borrower is looking to borrow over 75% loan to worth. The higher lending charge is applied to guard the bank in the event of mortgage shortfall however, the pricetag is covered by the borrower.

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An REO property is a home which has been acquired by a lending institution through a foreclosure process. Basically they are homes which mortgage companies have take possession of after an unsuccessful foreclosure auction. Foreclosure auctions on homes are nearly always unsuccessful because the minimum bid on these properties has to cover the outstanding balances owed to any lien holder to the property. This would include the loan balance, any accrued interest, fees for attorneys and costs incurred during foreclosure. All these things nearly always amount to more than the property is worth. Once the minimum bid at a foreclosure auction is not met possession of the property goes to the mortgage holder in the form of an REO.

Once the bank owns the property the mortgage is no longer in place. Then the bank will handle any eviction process, occasionally make basic repairs, negotiate any tax liens and make take care of home owner association dues. Recently banks have moved away from paying the fees for closing and are making these fees the responsibility of the home buyer.

You really do need to understand that mortgage institutions are not interested in just dumping the property on the market. They are still interested in making the process as profitable as possible or limiting their losses. They don’t just give the property away for pennies on the dollar. When you find a REO property and make an offer, the bank will generally come back with a counter offer. You can generally count on some negotiations to get to a price that both sides agree with. Banks have an obligation to their shareholders, auditors and investors that they are working to get the best possible price for their assets. You should be prepared for a game of offer and counter offer.

A deal with a bank is not your typical real estatetransaction. You can expect it to take a longer amount of time than normal and delays are a real possibility. Each time a document is generated in an offer several individuals need to review and approve it to be effective. It is common to get a preliminary approval of an offer which still needs to get final approval from a higher up. Things like this are some of the many things that make negotiating on REO property unique.

Most often mortgage institutions will want to sell the property as is so you will want to make sure that you conduct good inspections of the property to understand its condition. Banks will often refuse to make repairs on the property so you will want to take this into account when you make an offer. In some instances banks may renegotiate if after the inspection you find that the repairs will be substantial. The mortgage institution may feel that lowering the price is a better option than putting the property back on the market again.

In those instances where the bank will not move on the price and you get a rejection, you should consider watching the property for another month and if it is still available you can resubmit your initial offer again with adjusted dates. After an additional month with the home not selling they may be more inclined to take your offer.

A couple things you should have your agent find out prior to making your offer are:

Do they have any inspection reports you can look at?
Is it being sold as-is with a as-is form?
How long can it take for the bank to respond?
In what way will offers be presented?

You should realize that when dealing with a bank nothing will happen in the evenings or on weekends. The offers to bank owned homes are typically faxed or electronically delivered with no actual face to face interaction. To speed the process along provide a lenders pre-qualification letter with your offer. If you let them know you’re serious by having your financing in place they will take your offer seriously.

An REO is a good way to buy a property in distress without having to deal with a seller. There is only you, your agent, the agent for the bank and the bank’s representative who are negotiating.

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Its a great time to buy!!!

Now it is a great time to buy, despite the naysayers. Look around home prices are dropping through the floor. This market conditions won’t be this good for quite awhile after this recession comes to an end.

Orlando’s housing marketing for the fourth month experienced a month-over-month increase in the number of home sales as buyers responded to improved affordability, according to statistics released by the Orlando Regional Realtor® Association.”Lower interest rates and more affordable prices are attracting buyers who have been sitting on the fence about the decision to buy,” said ORRA President Les Simmonds, broker of L.G. Simmonds Real Estate Corp.

Bank owned properties offer the first time home buyer with a credit score of at least 605 a chance of a life time. This homes are offered at significant discounts, sometimes 20-30 percent off current market value. It is not that hard to find great deals all over the city. Many of these homes are in some of the most exclusive neighborhoods around town. The median home price looks to be slipping below $225 soon.

USDA 100% financing is available in some areas, with Fredie and Fannie May loans in others. Cash is always king, it can make price drop quitely because peopel can close quickly. Cash entices people to accept deals that normally wouldn’t fly.

Ideally you would purchase your house with a 20 percent mortgage down payment closing costs equal to about 3% to 5% of the purchase price and enough left in your checking account to cover two or three months of monthly housing expenses. That starts you out with lots of equity in your house upfront and makes the lender happy as a result of your large mortgage down payment — something that usually translates into a better deal. The trouble with this mortgage down payment plan is coming up with that much cash is too much to ask from many first-time buyers. After all we’re talking $40000 mortgage down payment on a $150000 loan or $70000 on a $250000 mortgage.

The good news is that lenders over the last couple of years have become increasingly willing to finance as much as 95% or even 97% of a home purchase. The reason: They can now unload the risk of such loans onto somebody else. To limit their exposure many lenders regularly sell their loans to the Federal National Mortgage Association (Fannie Mae) which then bundles them into securities which are eventually sold to investors. It used to be that Fannie Mae only would buy loans for 80% financing. But it recently standardized the lending criteria for 97% financing and will now buy these loans making lenders much more willing to provide them to you with less mortgage down payment. It’s now common for first-time buyers to put down only 5% mortgage down payment or $7500 on a $150000 loan.

While this sounds enticing remember that small mortgage down payments have their price. First of all you start with very little equity in your home. Also if you don’t have 20% to put towards you mortgage down payment you’ll probably have to ante up for mortgage insurance which protects the bank against default and can top $1000 a year if you put 5% down on a $200000 loan. Mortgage insurance rates are fairly standard but rates for adjustable rate loans and alternative credit can be much higher than a good credit fixed rate loan.

If you are buying in an urban area or have low to moderate income look into programs offered by your city or state that provide below-market loans with little or no mortgage down payment required. If you’re really cash-strapped you can get 100% financing by “piggy-backing” a second loan equal to 20% of the purchase price on top of your 80% loan. But that 20% second mortgage will come at a much higher rate.

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I think it’s safe to say that no one really wanted the $700 billion bailout. Unfortunately something had to be done as the credit cash-flow spigot was down to a drip. Even those with good credit were beginning to have difficulty getting funding of today’s tighter standards approved loans. Not only in our own industry, but just about anywhere, a 700+ credit score was no longer good enough. For business, equity credit lines were being shut off and large business commercial paper unable to find takers. These short term business loans are how they keep the doors open, pay the bills and payroll, and buy materials and supplies, while they wait for their money to come back from the billed customer. Not enough cash flow for 30 to upwards of 120 days can be tough to manage in a household, let alone when you have so many households that depend on them for a paycheck. The alternative is to cutback, and the last thing we all needed is more national unemployment.

The finger pointing heads to Wall Street, creators of exotic loans. From there to mortgage brokers and loan officers for arranging loan funding. Real Estate agents because they sold these homes at the increasing market prices to buyers knocking at their door. Home builders who supposedly ‘overbuilt’ in their quest to keep up with demand. Greedy? Yes there were some in the mix, some even to the extreme of fraud and now arrested or investigated, as should be. The rest were simply doing their jobs and caught up in the mad rush. Even the majority of media was on board, cheerleading the boom and the economic growth and prosperity along the way.

There were others that were greedy as well. Some home buyers and owners for one. Exotic loans or not, you still need to know what you can afford….or not. To this day you often hear “it was the credit card companies’ fault” for some amassing debt, because the lenders increased limits or sent offers in the mail, and made it ‘too easy’. No, not that people need to be responsible and budget themselves, and that available credit lines are to be used wisely and to your advantage, not simply buying until they max out. The same happened with some home owners that began cashing out equity, using their homes as ATM’s for extravagances or ‘moving up’, on equity credit they couldn’t afford to repay. Yes the system was loose, but it’s a 2 way street. The majority respected their credit, and they most likely have even more opportunity to extend it well beyond their means.

That brings us to the uneducated speculators, especially in the ‘hot’ markets, like Las Vegas. They bought up homes like hotcakes, but couldn’t afford to carry the ‘investment’. They created an imaginary demand, and in turn artificially inflated prices. They helped create a battleground and bidding wars for legitimate home buyers and investors, that added to the feeding frenzy and more hype to the media. I myself had 6 months of ‘oops, just missed it’, and my parents later shocked with a ‘lottery’ on building lots, and 2 months of searching resales to finally catch a lucky break (literally) for them to be able to buy.

All the while our ‘leadership’, from both sides of the isle, kept a blind eye. The too little, too late housing bill of this summer, years after the opposite swing of the pendulum began. Now we’re caught up in election year divisiveness. He-said, she-said mud slinging ads to divide and conquer have been filling our airwaves and our mailboxes, at a time when we need to pull together to dig out of this hole. Instead we hear a barrage of constant negativity from the media, that not long ago was lauding the housing industry as the white knight leading the charge from the recession and added devastation of 9-11 a few months later.

While details are few of how this $700 billion will be used, the media does little to explain anything. Instead they throw out misleading information on costs to taxpayers, to households, and ‘Fat Chance’ as to if it will work. They use their ‘news framing’ to keep the public tuned in, instead of offering an objective view and truly informing the public of all sides of the issues at hand.

First you need to understand that sub-prime mortgages and foreclosures aren’t the only problem with this financial crisis of banks holding ‘toxic loans’. At the moment it is estimated that foreclosures account for roughly 3% of all outstanding home loans. The issue is, what that and the falsely inflated home pricing had caused. A reduction in value for the rest of us home owners, many of whom may have had a downpayment vanish, equity disappear, or are now upside down even in their conventional mortgage. The banks are holding assets that have devalued from solid upstanding home buyers. Should they need to move for employment, they are often trapped in their homes to either take a loss they can’t afford, or to walk away and add to the problem. Not a good situation in an economy that is shrinking and shedding jobs.

So how will this ‘bailout’ be handled. Again the exact details aren’t out, but it’s safe to say the government will be buying these mortgage assets, that will also include commercial loans. Buying at face value? Probably not, more like pennies on the dollar. It’s not unlike what you may have seen with cash investors entering the Las Vegas real estate market, purchasing bank owned properties at below value prices and able to hold until the market rebounds.

http://www.msnbc.msn.com/id/22425001/vp/26422565#26422565

IF the market does return to normalcy and has some stable growth along the way, there could possibly be a profit returning to the Treasury over time, not taxpayer debt. That’s what these investors are looking at, as well. Unfortunately you don’t find explanations of that making headlines of the bailout, and may have to go as far away as India for an objective story.

The treasury will have the option to help out homeowners though the process. Reconfiguring the loans for some and slowing the bleed of foreclosures into the market that hurts everyone’s values. They can also begin repackaging solid loans for resale to investors at a new face value that could offer returns. Will it work? That depends on how many investors look past the fear and negativity that abounds. As you can see from the Business Standard article above, the banks will still need more liquidity for all to come together. I’d expect to see some more from the Fed and the Treasury along the way, and from other foreign governments as this has esxcallated globally, but so much depends on returns of capital investment into the marketplace.

While some, including billionaires, have professed government bank takeovers and preferred stocks for ultimate control, that also raises issues. Would there be Congressional support for nationalization of banking, or more boondoggle with some crying socialism, leading to lengthier debate while Rome burns? Mass confusion from the government bureaucracy, with it’s hands in control of so many individual lending institutions, and how many people needed and how much time to organise it all? In either method, it still needs the support of the private investor to come on board.

So no, the entire problem is not just about the evil loans of Wall Street, it’s now about the average homeowner that has been gutted by the greed of wild speculation. The same thing was seen in the tech bubble burst of the 90’s, where penny stocks of ‘tech companies’, even without any business or building, were drummed up into the hundreds of dollars before they imploded. We all just saw it again with the speculation in oil futures with estimated, or fabricated, ‘demand’. A few ran up the market, leaving the masses to pay the price at the pump, grocery store, job losses, and beyond. Leverage and risk taking can be good and create growth, but only works when used in moderation. Wild price fluctuations are typically the first clue of something gone wrong.

A number of the ‘exotic loans’ did help create grwoth and jobs, and the majority achieve home ownership and they did pay their bills. Yet now all are stuck in this quagmire with the rest of us. Downpayment assistance also helped many, but because of a few that failed with the hand up, the programs were axed from the 2008 Rescue Bill. Fortunately that has been brought back to the table with HR 6694, now with added protections and guidelines to help reduce abuse of the system and help insure against those slightly higher percentages of loan defaults. The bill has passed the House Finance Committee and next to be brought to the floor. The recent Congressional Budget Office Report on HR 6694 concludes that with it’s estimates it would have a negligible cost to taxpayers. Obviously if allowed to return in it’s new form, it could help reduce national home inventory that is hindering the market’s and our economy’s stabilization. You can find out more and send a message to Congress at SupportHomeOwnership.org.

Yes there are a lot of questions yet to be raised and no one can predict the future. Obviously much of our success, or failure, will depend on whether a half-full or half-empty attitude prevails. That’s why I wanted to present some of the other side of the story that seems to be missing from the major news of the day.

If you are interested
in relocating to Las Vegas or would like information on Las Vegas real estate, please email me, Roberta LaRocca, at roberta@search4lasvegashomes.com,
or call me at 702-354-8988. I look forward to hearing from you!