Lending standards still tight, but relief could be on the way

Q: Why is it so hard to get a mortgage loan these days? What's it going to take to improve this situation?

----Chuck J.,

Las Vegas

A: Your question raises a good point. While I think you're right in pointing out that lending standards are tighter today than they were in past years, I see some potentially positive changes on the horizon.

Unfortunately, the results of some federal legislation known as the Home Valuation Appraisal Code of Conduct have caused much confusion for appraisers and loan investors.

This law was passed in response to high rates of financial fraud, particularly in New Jersey and New York. Though well-intended, this law has artificially devalued properties, whether newly built homes or fully remodeled ones.

While there has been some relief recently, I'm glad Congress is holding hearings on corrective legislation that includes some beneficial safeguards. Changes are needed, since we're seeing a growing and pent up demand for housing driven by retirees and young people just entering the housing market.

Nevada's congressional delegation, cognizant of the problem, has been working in unison on the HVACC issue.

The increasing percentage of buyers paying cash for homes, especially in areas like Las Vegas and Miami, has also helped mitigate this problem by providing greater confidence for appraisers and loan investors.

These cash transactions are confirming that buyers are willing to pay higher prices for homes in finished condition, compared to homes of roughly the same size that are priced lower but need restoration.

Another positive development is that mortgages underwritten since January 2008 are performing much better than those of previous years. This has helped restore confidence among lenders, who are gradually offering more mortgage programs.

After attending recent presentations on these topics, I learned that some lenders plan to offer programs for applicants with lower credit scores who can pay higher down payments and interest rates while still meeting responsible underwriting standards.

Here in Southern Nevada, I see another positive trend stemming from more underwriters and loan processors being hired and moving here. This has resulted in local mortgage loan applications being processed faster.

Previously, loan officers had to submit most local applications to regional centers such as ones in Phoenix or Orange County for final approval. Meanwhile, more appraisers certified in Veterans Administration appraising will be needed due to the projected increase in military retirees moving here.

The 2010 U.S. Census may help by providing fresh information for new real estate and financial software analysis programs that can produce market data more quickly for the lending industry, which will then gain a better understanding of the sociological and demographic trends of areas like Southern Nevada. Also, the Clark County's recorder's office has been updating its software and systems, resulting in more readily available data that research companies need for their reports.

Regardless of this improving technology, establishing relationships with a loan officer and responding to all requests in a timely manner makes the loan application process a much easier one. If you're seeking a mortgage loan to buy or refinance a home, I suggest contacting several loan officers for "good faith estimates."

For more information on such issues, consult a qualified local Realtors or visit lasvegasrealtor.com.

Paul Bell is the president of the Greater Las Vegas Association of Realtors and has worked in the real estate industry for 30 years. GLVAR has nearly 11,500 members. To ask him a question, email him at ask@glvar.org.