GUEST COLUMN:

Don’t rule out another bursting real estate bubble

Every day, there are headlines announcing the housing crisis is over, that home prices are recovering and that Las Vegas is out of the woods (or nearly out). On the surface, these largely positive headlines are accurate, but it may be too early to celebrate.

A few sleeping giants in the mortgage and finance industry have started to stir. Ten-year notes are coming due, the Troubled Asset Relief Program is ending and the Nevada Foreclosure Mediation program is running out of funding. Our fragile economy might be able to shake off one of these events, but all of them at once? That’s not likely.

• 10-year notes: Year over year, housing prices in Las Vegas have risen, but they’ve been mostly flat or even slightly down this year. More important, upper-middle-class home prices are down nearly 40 percent from their peak values in 2006. This may not seem significant, but it’s important to remember that a favorite product of purchasers and refinancers in 2006 and 2007 was the 10-year, interest-only adjusted-rate mortgage. With this loan type now adjusting into principal and interest payments, borrowers are seeing their payments double or even triple overnight. With homes still underwater and Nevada income levels still down more than 15 percent from the 2007 peak, homeowners aren’t able to qualify for traditional refinance programs and can feel stuck with new payments they can’t afford.

• The end of TARP: Under normal circumstances, homeowners would have several nontraditional programs available to them, such as loan modification, short sale and underwater refinance. These programs are still available, but time is running out. The government versions of these programs — the Home Affordable Modification Program (HAMP), Home Affordable Refinance Program (HARP), and Home Affordable Foreclosure Alternatives Program (HAFA)— all end Dec. 31, and they are unlikely to be renewed. Homeowners whose mortgages haven’t converted (and who aren’t yet enrolled in these programs) may find it impossible to get help later this year or next year when their 10-year loans convert.

• Nevada Foreclosure Mediation Program (FMP) ending: At the end of the year, the Nevada FMP runs out of funding. It’s possible the 2017 Legislature acknowledges the success this program has enjoyed and renews it. I hope it does. Still, the FMP is a program of last resort. Additionally, the FMP’s rules refer to HAMP as an acceptable outcome. With HAMP scheduled to end this year too, the FMP is likely to wind up in limbo.

None of this spells certain doom for Nevadans. I’m cautiously optimistic that our federal and state lawmakers will see the confluence of events looming and take the necessary steps to ensure the economy can handle it. Until they do, or if they don’t, it’s important to remember that just before the last bubble popped, the headlines were pretty positive, too.

Judah Zakalik is an attorney at Peters and Associates.

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