Esko Kiuru - Las Vegas NV Mortgage Consultant

The co-founders of $1.5 billion fund have long resumes highlighted with mortgage, FHA, Wall Street and financial regulation experience in executive positions. Richard Stewart Jr., CEO of Heritage Capital Resources and Peter Monroe, CEO of National Real Estate Ventures, have carefully assessed the turbulent state of the national housing market and decided to pool their talents to buy and sell distressed real estate. In doing so the plan is to "help return foreclosed homes to productive use, prevent many foreclosures and also allow us to work with banks, servicers and federal agencies to reduce evictions."

Their forward-looking joint venture has also formed a close strategic alliance with Partners in Action, or PIA, a non-profit organization that has for years helped first-time home buyers via the HUD-sanctioned Affordable Housing Program. Currently it is heavily involved in assisting troubled homeowners with loan modifications and lease-purchase options that would let them stay in their homes.

The REO, or real estate owned, fund is set to work together with Fannie Mae, Freddie Mac, FHA, FDIC and the Treasury to seek workable solutions to this financial calamity. Not only that, but it also aims to maximize returns for the investors on board.

This partnership is a good example of how a private enterprise can work together with the government in finding answers to common problems. When something like this is structured correctly it can turn out nice returns, monetary and otherwise, for both sides. From the looks of this fund it'll do just that.

Is the traumatized Las Vegas real estate market going to be one of the joint venture's priorities? At the moment no one knows, as a more specific plan of action is probably just now being put together. If it calls for heavy involvement in Southern Nevada - in communities like Henderson, Summerlin, Green Valley, Seven Hills and Eldorado - it would certainly help stabilize the still fluid situation here. Home prices have in many neighborhoods dropped below replacement cost, as several industry experts are saying, so that in itself offers excellent investment opportunity. Which ought to be incentive enough to give Sin City a careful look.

Mortgage-backed securities were some of the most-sought-after paper on Wall Street not so long ago, when the residential real estate market was still cruising along smoothly. The yields were solid and risk was seemingly minimal. Everybody and his nephew wanted at least some of them in their portfolios.

Then the mortgage securities business rolled right over the cliff, shoved there by the rapidly-deteriorating housing market. And the deep hurt was on, felt all across the industry. Now even well-qualified borrowers find it challenging to obtain a home loan, for refinance or purchase, as requirements have tightened considerably. The government had to step in and has been buying mortgage-backed securities to maintain some liquidity on the secondary market. The private money that used to participate there in a meaningful way just about disappeared altogether after absorbing huge losses on their prior investments.

The tide may be turning, though.

China Investment Corp., or CIC, is rather serious about investing in noxious, some prefer to call them toxic, mortgage-backed securities. It would happen under the Public-Private Investment Plan, or more affectionately PPIP, where the U.S. government creates public-private funds using taxpayer and investor money to purchase chunks of this nearly worthless paper from banks. CIC is for now planning to put in play about $2 billion, which really is only a couple of drops in the bucket.

The interest in mortgage securities is cautiously returning, obviously, is the important news here. Whether it comes from a Chinese entity or Las Vegas pension fund or someone else is immaterial. Somebody has to show the way and that in turn will attract others to at least come and sniff around.

The real estate market is showing some signs of turning around, although in some areas more so than in others. That's what CIC is evidently betting on. It must've done its homework and feels that plunking down $2 billion at this stage is well worth the risk. If it's right, it'll be well rewarded. Undoubtedly the rest of the investment fraternity is watching, and deliberating, this with great interest.

The real estate market has been pumped up nicely with the up to $8,000 first-time buyer tax credit, Las Vegas definitely being one of the beneficiaries. Many renters go for it here and acquire good homes that have become very affordable during the prolonged housing and mortgage slump. The program runs through November, 2009, so those thinking about it should get their ducks in a row pretty soon.

To claim the credit is relatively simple, basically requiring the filling-out of form 5405, sending it in and the qualified money should be coming within a couple of months. That and as it goes with any program anyway, there are always going to be abusers. Some borrowers think that they can get away with falsifying applications and collect some undue cash in the process.

IRS, however, is keeping a keen eye on this, using smart computer screening software to catch fraudulent filings. It has a few dozen criminal investigations under way around the country right now, involving individual mortgage borrowers and tax preparers.

Some of the key abused or misunderstood categories that will negate an application are:

- Purchasing a property when one spouse is ineligible.

- Buying a home from a "related person", like parents, children, grandparents, grandkids and spouse or from a corporation or partnership where the borrower holds over 50% ownership.

- Becoming a homeowner via an inheritance or gift.

- Earning too much money - over $95,000 for singles and $170,000 for married couples filing jointly.

- Funding the purchase with a tax exempt bond program.

It's better to know in advance whether the borrower qualifies or not. It's generally not much fun to be subject to lengthy IRS audits and potential penalties.

The housing market in Southern Nevada had several strong months late in the spring and going into the summer, largely because of low mortgage rates and increasingly affordable prices. Those two conditions have that something extra to attract buyers, in this day and age mostly first-timers and investors, to make a play for it.

GLVAR, or the Greater Las Vegas Association of Realtors, reports that for July the stats are still rather strong, although some slowdown from previous months is evident. The single-family home inventory slipped lower by 0.9%, from 20,613 in June to 20,423. It is slowly coming down. Many housing experts in Sin City would like to see it do so a bit faster. It is down, though, by 12.8% from last year.

In the statistical area that also includes Summerlin, Henderson, Green Valley, Seven Hills and Eldorado the numbers show that 3,738 single-family houses closed in July, a small 1.2% down tick from June. The nice run of continuous increases came to a halt, at least for now. Yet, it's a solid 44.2% gain from the same time last year. Nothing wrong with that.

The one sector that still causes concern among Las Vegas homeowners is the value of real estate. The median single-family price came in at $138,800, a decrease of 0.9%. If converted to an annual figure it would be 10.8%. It is high, but, on the other hand, much more palatable than the 36.9% beating the values took during the past twelve months. The price erosion is slowing considerably on the single-family product, whereas it actually gained modestly, up 1.5%, from June in the condominium and townhouse sector.

All in all, the news are cautiously optimistic.

Energy Efficient Mortgage, or EEM, by FHA has been around for quite some time but hasn't really caught on that well. Not yet anyway. The government is just now revving up a national campaign to highlight the importance of energy conservation in housing. It's putting a lot of resources into it. As a result the EEM is definitely going to get more media exposure and could even see some additional incentives added to its current program.

Here is how the FHA EEM basically works now. The borrower would purchase or refinance a principal residence, undergoing a regular FHA home loan approval process, and then can add the cost of energy efficient improvements on top of the mortgage. He does not have to qualify for the extra money nor is it included in the down payment calculations. One- to four-unit existing and new properties are good to go.

The cost of improvements that may be eligible under EEM is the lesser of the two below:

- The actual total of cost-effective energy improvements, as well as the cost of the report and inspections, or

- The lesser of 5% of:

- The value of the home, or

- 115% of the median area value of a single-family home, or

- 150% of the conforming Freddie Mac limit. Kind of confusing right here.

HERS, or Home Energy Rating System, report is the required paperwork to get one of these FHA EEM loans. In short, it verifies the cost of the improvements and figures out an estimate on the energy savings.

Typically, these improvements are installed after the mortgage loan closes while the lender has put the money into an escrow account. As soon as all the related equipment is up and running and verified, the funds are released. And now the savings can start accruing month after month to the forward-looking homeowner. The future in energy-efficient housing is now.