Loan delinquencies soar for Nevadans

About one in eight Nevadans is now behind on their residential mortgage, new data from the Mortgage Bankers Association show.

It's probably an indication that more foreclosures are on the way for Nevada, which ranks first nationally in mortgage delinquencies and first in foreclosures started in the first quarter, according to the Washington, D.C.-based bankers group. The delinquency rate excludes loans in the process of foreclosure.

The delinquency rate for residential mortgages in Nevada increased to 11.75 percent in the first quarter, compared with 11.12 percent in the previous quarter, the group said Thursday.

The percentage of loans in Nevada that have started the foreclosure process rose 70 basis points during the quarter to 3.35 percent, while the percentage of loans in the foreclosure process rose 125 basis points to 7.83 percent.

"What we saw from the MBA wasn't surprising," said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac. "We saw a spike in delinquency in the third quarter, but we didn't actually see a corresponding increase in foreclosure activity. Then the moratorium was lifted and it's pretty much like the dam burst."

RealtyTrac showed Nevada foreclosure activity was down 18 percent in April from the previous month, but increased 111 percent from a year ago.

Realtor Robyn Yates of Windermere Real Estate said she's seeing the "buy and bail" trend happening in Las Vegas as homeowners watch their home values decline.

While a portion of foreclosures are coming from people who are unable to make mortgage payments because of job loss or market conditions, others are facing the gut-wrenching decision of making payments on a home that's no longer worth the original debt, she said.

People who are "upside down" on their mortgage -- owing more than the home's value -- are buying cheaper homes and letting their original home go to foreclosure, she said.

"It's much more difficult to do now because you have to prove that your other property is leased and then all the numbers have to work," Yates said. "Sometimes the lenders are asking if the property isn't leased, can you still afford to make both payments?"

While buy-and-bail is an appealing alternative, there are consequences, Yates said. It will have a negative impact on the person's credit rating, affecting their ability to get a credit card or car loan in the future, she said.

Real estate consultant Steve Bottfeld of Marketing Solutions said April housing data for Las Vegas showed improvement in foreclosure numbers.

For the third consecutive month, the total number of foreclosures declined. Las Vegas-based SalesTraq reported 1,289 foreclosures in April, the lowest in the last 16 months. The number of foreclosure sales exceeded the number created by 139 percent in March and by 195 percent in April, another positive for the market.

"Two months of data does not make a trend," Bottfeld admitted. "But the last two months of data appear to represent significant change and new hope for a shorter negative cycle in Las Vegas."

It could also be the calm before another recessive storm, he said. The self-imposed bank moratorium on foreclosures was lifted in March, so it's likely that Las Vegas will see a significant "bump" in the number of actual foreclosures at the end of this quarter or the beginning of next quarter.

At the same time, President Obama implemented a $350 billion federal program in March to rescue homes headed for foreclosure, which could ease the bump, Bottfeld said.

But Rick Byrd of RB Realty in Las Vegas said not to count on it. The first 100 days have provided no traction or relief to homeowners in distress, he said.

"There is no housing relief," he said. "The reality is that banks and mortgage servicers have multiple layers to obtain compensation when they foreclose on your home, but very few monetary avenues if they modify your loan. So expect foreclosures to escalate through the summer and next fall. Watch prices continue to fall."

Sharga of RealtyTrac said Obama's plan will help certain parts of the country and homeowners with certain types of loans, but it's probably not going to help people in Las Vegas, where home values have dropped by nearly 40 percent.

Lenders aren't required to do anything about principal mortgage balance, but Sharga expects them to come up with other solutions.

"If they got as creative on this as they did on the subprime exotic loans that got us into this mess, they'd find a solution," he said.

When the U.S. economy begins to recover, the four housing "bubble" states -- Nevada, California, Arizona and Florida -- will come out of it after the rest of the nation, said Keith Schwer, director of the Center for Business and Economic Research at University of Nevada, Las Vegas.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.