Clark County affected by New Fannie Mae Guideline

Just when the Las Vegas homes market was starting to come out of the doldrums, Fannie Mae has put another roadblock in front of many would be Las Vegas homeowners. We had been experiencing a lot more activity over the past month and at the auctions almost every property had actually been put under contract.





Last week Fannie Mae announced a new guideline relating to insuring loans in declining or soft markets. In Clark County, the new guideline requires a 5% reduction in the form of an additional down payment by the buyer on the maximum loan allowed on a residence. This new guideline officially started last week on January 15, 2008 and applies to all loans already in process.

Many banks are enforcing this guideline on all loans, not just conforming Fannie Mae loans of less than $417,000, but also on jumbo loans over $417,000 as well. This guideline does not apply on government loans like FHA and VA.

There is a box on the standard appraisal form called the URAR (Uniform Residential Appraisal Report) that asks the appraiser if the market is "stable," "declining" or "increasing." If the appraiser checks the box on the appraisal report that says the market is "declining," the buyer’s down payment on the selected loan program has to be increased by 5%, even if the appraisal comes in at or over the negotiated purchase price.

For example, the purchase price is $200,000 and you need 100% financing. The appraisal actually comes in at $220,000. Even though the appraisal came in higher, if the declining market box is checked, you still have to put 5% down on the $200,000 purchase price. If your loan program originally called for a 5% down payment, now you will need 10% instead.

Although many lenders are looking at reconciling these types of challenges, today the appraisal of the home means nothing compared to whether or not the community has been stigmatized as “declining.”

Fannie Mae and some national lenders have declared many areas around the country as declining markets. It doesn’t matter what the value of the appraisal is. It’s whether or not the county has been declared as declining that determines how much you can actually borrow. The maximum loan allowed is automatically reduced by 5%-10% in these areas, depending on the loan product.

This means that many more buyers will be revisiting the idea of getting FHA and VA loans in the near future. (Many mortgage brokers don't even have FHA or VA approvals yet as these were not popular programs during the past five years.) FHA currently requires 3% down, but the seller is also allowed to pay that down payment on behalf of a buyer using their Nehemiah program. And VA still allows eligible veterans to obtain a loan on 100% finanacing. For more information on Las Vegas mortgages please contact us at 702-985-7654 and we will be happy to help you find the lender that has the best program and rate for your particular circumstances.

Las Vegas Real Estate Thoughts for 2008

The year 2007 was a rude awakening for owners of Las Vegas homes who found their properties steadily decreasing in value. Prices between November 2006 and November 2007 declined an estimated 10% and many of those who bought real estate during 2005 and 2006 found themselves owing more than their properties were worth. Las Vegas foreclosures led the nation and auctions had hundreds of properties to bid on.

But already in the last few weeks of December and the first new hours of 2008, we can feel the scared-to-death-by-the-media buyers of 2007 coming out of hibernation, shaking off their fears and getting ready to cautiously dive into the real estate pool again. Experts have estimated that the worst is over, and that by the end of March 2008 prices will stabilize and actually start to slowly appreciate in value again as inventory decreases. One think tank already is predicting a housing shortage by late 2009, assuming workers flock to the state to fill jobs created by billions of dollars of new construction on the Las Vegas Strip.

“We're merely at the bottom of one cycle and heading back up on another one,” said Jeremy Aguero, one of Applied Analysis' principals. He points to the stream of Strip mega-resorts planned to go up over the next few years, from Las Vegas Sands Corp.'s $1.8 billion Palazzo, opening this month, to Boyd Gaming Corp.'s $4.8 billion Echelon in 2010.

In all, the surge is estimated to add more than 40,000 hotel rooms by 2012 and create around 100,000 direct and indirect jobs, according to Deutsche Bank. “Typically, people read the papers,” said economist Jim Shabi of Nevada's employment department. “They know when Vegas is building casinos and they come to town to find jobs.”

G. William Barnett II, author of “Are You Dumb Enough to Be Rich?” says “These are the times smart real estate investors live for. There’s more money to be made in chaos than at any other time, and no other investment strategy has created more millionaires than real estate.” As for the housing markets Barnett likes best right now, he says number one is Las Vegas, which currently has $10 billion worth of commercial construction going on and will soon have a demand for thousands of new employees.

So, like it said in one of my favorite all time movies, Field of Dreams: "If you build it, they will come." And they will have to find housing! Now is definitely the best time to buy Las Vegas real estate, BEFORE the next boom comes and you are left standing on the wrong side of the wave.

Tax Relief for Homeowners Who Receive Debt Forgiveness!

Many people didn't know it, but until today if you sold your Las Vegas home on a short sale or lost it through foreclosure, you owed taxes to the IRS on the portion of the debt that was forgiven by the mortgage company. Yes, not only did you lose your home, you also had to pay Uncle Sam to do so!!

There has been pending legislation in Congress to amend the Internal Revenue Code of 1986. Previously if there was a shortsale on your home and your Las Vegas mortgage company "forgave" part of the mortgage (in other words, they agreed to take less than they were owed) the amount "forgiven" was added to your gross income and you owe taxes on it. For example, you owned a home and your mortgage balance was $275,000. The home sold for $250,000 - the bank agreed to take $25,000 less than what it was owed. You made $60,000 per year. The $25,000 the bank "forgave" was added on to your $60,000 income and now you owed taxes on $85,000. Not only did you owe more money, it could also raise your overall income bracket!

The new amendment excludes discharges of debt from residential mortgage obligations from gross income. It only applies to a principal residence, not to an investment property. The legislation was introduced in April 2007, and on December 14, 2007 it passed both houses and then was sent on to President George W. Bush.

The President signed the legislation into law on Thursday. The bill — Mortgage Forgiveness Debt Relief Act — has been supported by NAR since the 1990s. "The president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home," said NAR President Dick Gaylord in a statement. “Today’s bill will ensure that any debt forgiven on a mortgage secured for a principal residence will not be taxed. This is very significant legislation." This amendment will only apply to a principal residence or home someone has lived in for part of the last 5 years (partial exclusion of the income is possible.) Again, it does not apply to Las Vegas investment property.

Also this week the House passed another bill (which has already passed the Senate) that could have a big impact on the real estate industry. The Mortgage Insurance Tax Deductibility Bill makes mortgage insurance premiums tax deductible for all mortgages originated for the next three years. Mortgage insurer Genworth Financial estimates that this tax break is worth $350 to the average taxpayer who has purchased a home with less than 20 percent down.