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Aug. 31, 2007
Copyright © Las Vegas Review-Journal

Mortgage defaults high in Nevada

State leads U.S. in investor-owned loan failures, study says

By JOHN G. EDWARDS
REVIEW-JOURNAL

Nevada had one of the hottest housing markets for investors two years ago. Now it is the top state for investor-owned mortgage defaults, the Mortgage Bankers Association reported Thursday.

The Silver State leads the nation in the percentage of residential real estate mortgage defaults for investors, both in the prime and subprime mortgages categories, the association reported.

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INNER CITY, INNER BEAUTY

The association said 32 percent of prime mortgage defaults in Nevada were for non-owner occupied properties as of June 30. Arizona, with 26 percent, came in second.

Prime mortgages are loans to borrowers with good credit. When the borrower has substandard credit ratings, the trade group classifies the loans as subprime.

The percentage of defaults on investor properties for subprime loans registered at 24 percent in Nevada, followed by Arizona with 18 percent.

"Defaults are on rise in most parts of the country, but it should be recognized that it is not always the case of a homeowner losing his or her home," association chief economist Doug Duncan said in a statement. "But it is often the case of an investor gambling on a continued increase in home values and losing that gamble.

"California, Nevada, Arizona and Florida were among the states with the fastest home appreciation over the last five years. This rapid price appreciation attracted both speculators and home builders," leading to an oversupply of housing, Duncan said.

"When this oversupply became apparent and prices began to fall, many of these investors simply walked away from their mortgages," Duncan said.

Sean Corrigan, president of Aspen Mortgage, said he is not surprised about the study's findings, because many lenders in Las Vegas made loans to investors without documenting the borrowers' income and without requiring down payments.

The association figured that 29 percent of the prime home loans for buying residences in Nevada in 2005 went to investors -- the highest percentage in the nation. In the subprime market, 14 percent of subprime loans for buying homes were taken out by investors, second only to 15 percent in Florida.

The high-rise condo market accounts for a large portion of the fallout, Conway said. "The single-family market is more stable," said Delores Conway, director of the Casden Forecast at the University of Southern California's Lusk Center for Real Estate.

The annual appreciation of high-rise condos hit 40 percent in 2004, drawing investors like a magnet, according to Restrepo Consulting Group, Conway said. Appreciation declined to 25 percent in 2005 and to 5 percent in 2006.

By 2006, the appreciation increase was lower than the interest expense on the mortgage loans, she said, but it also became increasingly difficult to find buyers.

High-rise condo builders started delaying projects, but excess supply was already on the market, she said.

Brock Davis, president of the Southern Nevada Chapter of the Mortgage Bankers Association, said there was a "huge" influx of investors into the Las Vegas housing market, which amplified the local impact when trouble hit.

"Speculators will pull the plug quickly," Conway said..

However, she said some of the investors, she said, weren't speculating or planning to flip their purchase for a quick gain. Some investors bought properties for rental income and possibly for later use as a retirement home.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Kerry Hoffman wrote on February 06, 2008 01:51 PM: Does anyone know who financed Slade Development for Vantage Loft project? Trying to get hold of the bank. VegasJustice wrote on August 31, 2007 07:43 PM: All these home specualtors, liar loan acquirers and their minions, let then rot in hell, they are pond scum.My heart sors like an eagle, I dance for joy at their troubles, I hope they lose everything and go back to living within their means like the rest of us. I would take a bull whip and tie every real estate agent, mortgage broker and members of the development community to every road sign leading into and out of Las Vegas, and then I would have some bull dikes whip them till their flesh peels off and leave them for the buzzards and coyotes to nibble on! TheRealDeal wrote on August 31, 2007 07:03 PM: Ok Kiddies, now sit down and listen real good. Most of the speculation in housing was aided and abetted by a combination of Realtors(who actively took part themselves in this fraud),independent unregulated mortgage brokers aka "originators"( who shipped these liar loans on to the secondary market) and not traditional lenders such as Banks and S & L's who are much more closely monitored since the last crisis in the 80's and finally let's not forget the appraiser community whose " property valuations" were tailored to fit the pump and dump sales frenzy. The Real Estate Brokers will escape any punishment because its the fox guarding the hen house with GLVAR and the NAR. Mortgage Brokers wont face any real outcome ( maybe they will lose an unregulated job, they can always go back to their door to door sales or used car gigs) And the appraisers, hell they have noone looking over their shoulder and as a group could care less that their "numbers" propelled the buyer insanity. In summary, it is you and I dear taxpayer who will pay the piper. Edward wrote on August 31, 2007 06:21 PM: Hey Folks Its just like here - the Kalifornia buyers showed up with a bunch of bucks, bought a bunch of houses, wreaked havoc with property values, and now they're whining for Unca Sam to bail them out. Too bad for the lenders and too bad for the buyers. Let them suffer the way they asked for it with their greed. No matter what you call it, its a bailout. grandkidswillfootthebill wrote on August 31, 2007 03:35 PM: gubamit bailout gubamit bailout gubamit bailout all the guys driving new suv's & watching plasma screen tv's are crying for a... gubamit bailout! gubamit bailout! gubamit bailout! brad wrote on August 31, 2007 03:12 PM: over build, over price, and live high on the hog..What else is new Vegas ??? Patrick wrote on August 31, 2007 11:29 AM: I kind of thought that was happening to my old home Cashsosa. Thanks for your insight. cashsosa wrote on August 31, 2007 11:13 AM: I'm certainly not marketing to do fraudulent deals... I can protect agains these types of buyers... Obviously I have the knowledge & experiance to represent my clients... Can't blame a guy for exploiting capitalism right? Tony wrote on August 31, 2007 11:03 AM: Nice marketing strategy Cashsosa... cashsosa wrote on August 31, 2007 10:54 AM: Hey Patrick.... To answer your question, it is either one of two things... 1) With the 100K liquid equity the realtor now has 10% to put down on multiple properties to acquire which they feel will appreciate at a high level. That $100K allows for like 4 more purchases which if they think will go up 10 - 20% in the next 2 years will mean that the individual can make about 100K - 200K in a two year span. Once sold, the original $100K can come back as capital and be used to affordably sell the original purchase. It's leveraging 101. 2) It's a simple fraud situation. This is much more prevalant. If the buyer is asking for the $100K out of escrow it's a red flag. If the money is going to some "construction company for misc repairs/improvements" it's a red flag. Consider the fact that this realtor or investor purchases 5 homes simultaneously the lenders don't what's going on. If they can obtain say a 5% down loan or ($22,500) or use someone else w/ zero down. The credit report wont reflect the new mortgage for 30 days thus allowing 5 different lenders to get screwed at the same time. Once he's recieved $100K kickbacks 5 times he just net somewhere betweeen $387,500 - $500K pure profit in one months time. They never make a morgage payment and 6 months later the home is back on the market as a foreclosure! (Loan fraud 101). Be very careful of these type of deals... You don't want the FBI @ ur door. you can reach me directly if you would like more help at 7025016345 Read All Comments