Heeeere Firedoglake! Go get the Cluestick! Good Doggie!

A few minutes ago I read a seriously wrong post on Firedoglake called Reid Seeks Bubble Re-Inflation. The author accuses Senator Harry Reid of trying to reinflate the housing bubble by extending the home buyer tax credit, presumably saving the Las Vegas economy and ensuring his re-election this fall.

Let’s step back and look at the facts.

First, he doesn’t want to extend the credit for new contracts. The purchase contracts had to be signed by April 30. All that paperwork is safely in the files of 2 brokerage offices, an escrow company, and mortgage office. So wrong thing one, this will do nothing, repeat, zilch, nada, to “re-inflate the housing bubble.”

What he does want to do is extend the time those buyers have to close on those homes. As it stands, the transaction must close by the end of June. Under normal circumstances that’s no problem, but we don’t have normal circumstances.

The author says this extension is “ostensibly because of application processing” and warns that this could start a cavalcade of tax fraud! Wrong. First, all my mortgage experts are telling me to plan on a minimum of 45 days from contract signed by all parties to close. That’s because of certain changes in the mortgage process implemented at the first of the year. That makes June a tight squeeze for anybody whose contract is dated April 30, even before you consider the problems of distressed property.

For bank owned properties — which currently account for 19% of available Southern Nevada properties and 38% of recently sold properties — there is the wrinkle of waiting a week to 10 days for the signed contract to come back from the bank. It’s a pain in the butt, and simply the way it is.

And then we have the short sale. A short sale is when the buyer owes more than the home is worth; to sell it, the bank will be “short” money at the end of the deal so they get to approve it. Since roughly 65% of Vegas homes are underwater, there will be a lot of short sales for the foreseeable future. Right now we’ve got over 10,000 properties that have signed, accepted contracts and are waiting for that approval. In the last 30 days, just under 1100 short sales actually closed.

Think about that. At the current pace, it will take 9 months to get through just the short sales with approved contracts, to say nothing of the 4600 short sales that don’t have accepted contracts yet and any others that come on the market. New short sale rules requiring 2 week approval be damned, because they don’t apply to most borrowers.

Heaven help me, I’m defending Harry Reid…

Harry’s not trying to “re-inflate the bubble” and he’s not trying to create a place where mortgage fraud can run rampant (expect mortgage fraud arrests this week, by the way). He’s trying to give all those short sales time to get approved and close.