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Aug. 01, 2008
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HOUSING AND ECONOMIC RECOVERY ACT OF 2008: Law may be of little help to LV

Lenders would have to approve FHA refinancing

By JOHN G. EDWARDS
REVIEW-JOURNAL
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The new housing recovery law gives a glint of hope to homeowners facing foreclosure, but local business leaders doubt it will help many Southern Nevadans.

The Housing and Economic Recovery Act of 2008 that was signed into law by President Bush on Wednesday authorizes the Federal Housing Administration to refinance loans for up to 90 percent of a home's appraised value, which would help homeowners who owe more than their home is worth.

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    • Michele Johnson, CEO of the Consumer Credit Counseling Service, said Thursday she doubts the federal law will help much here.

    "Even if it were beneficial for consumers in Nevada, I believe it would be helpful on a very limited basis," she said.

    Lenders with second-home loans would be wiped out and probably won't agree to the FHA loan arrangements if they don't also hold the first mortgage on a home, she said.

    "How many second-mortgage lenders are going to be willing to eat the balance (on their loan)?" she said. "Probably 70 percent of the homeowners we're seeing have a second mortgage with a different financial institution (than the first mortgage lender). Most of the (second-home loans) were for down payment on the house."

    In order to take advantage of the new program, a homeowner or his mortgage broker will need to convince the lender to write off the amount that the original loan exceeds the home's market value, plus 10 percent.

    The question is whether the lender is willing to accept a loss in order to recover 90 percent of the home's value, said Brock Davis, outgoing president of the Southern Nevada Chapter of the Mortgage Bankers Association.

    And if the lender is willing, can the institution absorb the loss, Davis asked.

    Lenders would need to write off tens of thousands of dollars on each of the FHA refinanced loans, and the lenders may not be able to take a financial hit of that size, analysts say.

    Wells Fargo Bank, one of the biggest home lenders in Nevada, is analyzing geographic areas and may approve the FHA refinancing and loan reductions in distressed areas, possibly including parts of Clark County, said Kirk Clausen, regional president of Wells Fargo Bank.

    "It could include some forgiveness on some mortgage loans that might be underwater," Clausen said. "It's probably too early to commit on any across the board loan forgiveness (of amounts exceeding 90 percent of appraised value)."

    The FHA refinance option probably will work for only a small percentage of financially struggling home owners, he said.

    Yet, "I think it's going to do a lot to really stabilize the home mortgage market," Clausen said.

    Assemblyman Marcus Conklin, D-Las Vegas, is chairman of a legislative panel on home mortgages. Conklin said the bill was good for the country, but said it probably won't help many in Southern Nevada because many mortgage balances exceed home values here by such a large amount and lenders may be unwilling to take such a large hit.

    Las Vegas home loans "were really overcooked" and typically exceed the current value of homes by 20 percent or more, he said.

    A Las Vegas homeowner may have a $500,000 loan on a house with a current appraised value of $230,000, Conklin said. That would be too big of a loss for most lenders to accept, he said.

    If the public believes the law will help the housing market, Davis said, the law may become self-fulfilling by convincing people that the worst is over and it's time to buy a home.

    "Anything right now is a benefit," said Patty Kelley, president of the Greater Las Vegas Board of Realtors. She noted the law includes a $7,500 tax credit for some first-time buyers. However, she said, it's too soon to know if that provision will help many.

    Bankruptcy trustee Tim Corey said homeowners would have benefited more if Congress had given bankruptcy judges authority to force lenders to reduce the mortgage balances to the value of the home. Several decades ago, bankruptcy judges had that power but it was eliminated first by the 9th U.S. Circuit Court of Appeals and later by the 2005 bankruptcy reform law.

    Corey doubted Congress would restore the bankruptcy "cram-down" provision.

    The new law "will help a fair amount of people," said Martin Lobel, a Washington, D.C., attorney and former legislative aide to the late Sen. William Proxmire. "It's not a total solution to the problem."

    Before the home mortgage crisis ends, Lobel said home prices will need to decline to more appropriate levels that are justified by the local economy.

    Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.



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    Alicia wrote on September 10, 2008 11:00 PM: The housing problem began with government initiatives. Obviously Blacks and Latinos have been disenfranchised in the U.S. Needless to say this was once also Mexican land and how many Mexicans have property rights? Not many! This reinforces the fact that minorities have been stripped of wealth and an example of tangable wealth is the right to a home or property. But going back to the way this problem was governmentally initiated was by giving banks federal loan guarantees to banks so that they did not loose the principle if a mortgage could not be paid. The problem then came with the mindset of the banks: "as long as the loan is guaranteed what do we care?" And that was how substandard housing escalated and banks and lending agencies got people in trouble. Therefore I do find that the government should take the responsability for these side affects. And 79% of whites are middle class so please do not get defensive when saying that "trillions of dollars go to blacks for mortgages" because that is the population that works their ass off to keep you in the middle class. Whiteys only get defensive when we talk about their pocket books, but that is a tactic used by republicans to keep you from forming solidarity with people of color because it is not in their interest. If you think education is expensive, try ignorance.


    James Fulton wrote on August 06, 2008 09:38 AM: According to the housing and economy recovery act of 2008 I, being fiscally responsible individual, who took the time to save a downpayment and bought a house I could afford to pay for, get screwed again. No tax break, no special refinance oppotunity, no forgiveness I just get to pay more taxes so the (*&%^$# ignorant )(*&@$% can get more of the government provided funds. Where is the justice, did you vote for this bill to be signed into law, were you even asked about it. Just like the issue of illegal immigrants we the workers of America are paying the bills. time to move to a third world country and become the ugly American.


    Seller wrote on August 01, 2008 02:41 PM: I would like to encourage us who are trying to sell in this lousy market to go down to GLVAR, take those SOB's out on the strip, tie them to the Welcome to Las Vegas Sign and bull whip them until their flesh falls off! That might get their attenstion to come to Jesus and start doing right by the consumer!


    In your WHITE Face wrote on August 01, 2008 02:33 PM: And to be further Baffled, the Congressional BLACK caucus (which I never knew existed) said more of the designated MONEY related to the rescue "bill" needs to go to black people. Just google it, and you should find the article that I read a few weeks ago. Who ultimately pays for this "bill"? In your WHITE FACE whiteys!

    White Folk: why pay into a system that does not support you?


    TRILLIONS- how many zeros is that? wrote on August 01, 2008 02:30 PM: Yeah, I "bill" is just that, a "bill" that someone else must pay lol! As for what LVHS diploma RE broker says, I am not surprised. Like we really need a someone to tell people that a loan has payments that must be made, or bank gets the home. This is elementary!

    Oh, if you want to get baffled, don't forget to goodle the Community Reinvestment Act (CRA) that began with the civil (black) rights movement in the late 60s, so over 40 years ago!! TRILLIONS of dollars (yes, the "T" word) goes to BLACKS for mortgages! So yes, people do get FREE HOMES in USA. Any wonder why Hispanics jumped the border and onto the bangwagon?

    Who ultimately pays for this BILL? Anyone? In your WHITE FACE whiteys!

    Attn White Folk: why pay into a system that does not support you?


    Capt Nemo wrote on August 01, 2008 02:30 PM: AAAOOOGAAAAH! AAAAOOOOOGAAH ! AAAOOOOGGAAAH! Dive! Dive! Dive! CRASH DIVE! HEADING FOR THE DEEP DARK BOTTOM OF THE HOUSING SEA! AAAAOOOOGAAAAH!


    dt wrote on August 01, 2008 02:22 PM: I wish it were 2015 so we can get back to irresponsible lending; by then we should have all forgotten about history. It only took about 15 years after the S&L crisis to forget about that.


    LV High School Diploma Real Estate Broker wrote on August 01, 2008 01:30 PM: The new law (FHA Housing Stabilization and Homeownership Retention Act of 2008) includes $100 million for mortgage counseling to be administered by non-profit groups like the National Council of La Raza...

    LOL.....this was meant to be a 2008 vote buying bill!!!


    lv h8r wrote on August 01, 2008 12:28 PM: "Assemblyman Marcus Conklin, D-Las Vegas, is chairman of a legislative panel on home mortgages"...."Las Vegas home loans "were really overcooked" and typically exceed the current value of homes by 20 percent or more".....So should we assume the city government knew these values were inflated yet sat back and did nothing ?


    roger wrote on August 01, 2008 11:22 AM: First of all yes creative financing is the culprit behind alot of these problems. But who was watching over all this careless lending? The government obviously was not.. the ceo's making millions in incentives/compensation certainly were not..the unethical lenders and real estate 'professionals' certainly didn't care. Credit standards were a joke, underwriting guidelines were a joke, and property values went thru the roof. And now the average joe is paying the price. We shouldn't blame ALL homeowners, many made purchases they could afford....but now have no reason to pay because the values have deteroriated so much. Yes, this recovery law isn't going to do much for us here...values have dropped way too much and I would guess anybody who bought a house over the last 3-4 years has negative equity. Then throw in those who went and got a 2nd mortgage or equity loan..ouch, we're cooked. Alot of people owning homes here are now going to face a difficult future.. don't be surprised if every house purchased over the last 3-4 years someday becomes a foreclosure. And all you people who say I am being negative..are we going to rely on the casinos again to save us? Let's talk about the Echelon project shall we ?


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