Las Vegas mortgage foreclosure lessons

Actually something good may come out of the foreclosure trouble we're currently experiencing here in Southern Nevada. Recent statistics chillingly point out that Nevada has the most foreclosure filings in the nation and Clark County is holding the number two spot for counties. The news are bad, they are, but there are some areas that give us grounds to remain optimistic.

Investors from all corners were pouring into town during the boom years. It can be compared to the old gold rush days when everything goes. They wanted to make money. As much money as possible. Many had thin credit files, but the gleam in their eyes was unmistakable. Specialty shops opened doors here that were in the business of creating tax returns for them. Another tactic they used is the occupancy fraud. They'd put on the mortgage application that the house they're buying is a primary residence when in fact it'd be a rental or a second home.

Foreclosures are now driving these investors out of town and the real estate market will return back to normal. We all welcome that.

Then we have the people who have a champagne taste on a beer-bottle budget? They are living right here among us. Subprime lending gave them the opportunity of a lifetime. And thousands of them jumped in without bothering to do their homework. They bought much more house than they really could afford. Subprime lending nationwide generated $126 billion in loans in 2000 and that zoomed to $590 billion in 2006, from 11% of the total mortgage market to 24%.

Now that the housing market has stalled, the equity they were counting on evaporated into thin air. The interest rates are resetting higher and they can't make the payments any more, nor can they sell for the loan balance. They're stuck between a rock and the hard place. It's an unfortunate situation. There is a lesson, however, in this. Exercise prudence, above all when it involves a major financial decision.