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Category: Political musings

Fast and loose mortgage collapses and the stories on the radio

Fast and loose mortgage collapses and the stories on the radio

Nationally, the sub-prime and fast-and-loose mortgage broker collapses continue to grow and spread. The tone darkened as a Bill Wheaton, an economist from MIT predicted that nationwide, several million folks will probably end up losing their homes.Overall, though, I have mixed feelings about this situation. Even in the boom, I wondered where the heck the government, investors, and brick-n-mortar banks were on watching these guys. It was absolutely ridiculous what people were pulling on these mortgage contracts – such as no income verification to speak of (put whatever you want down for your annual salary, etc). Too many people were getting into mortgages that even 10 years ago would have been laughed off the table. When I took a cursory look at some of the mortgage deals people were pushing through a few years back – I could tell these guys were used car salesmen at best. Now we hear lots of stories about people who got into a house or refinanced and were ‘tricked’ and ‘duped’ into these products. Yes, there is a lot of blame to be laid on these sleaze-ball lenders and front-men who are now slithering away to have the company take the fall for them – they definitely ruined lives when they themselves knew the products were bad for most people. Those front-line scum, and the managers that pushed it, should see jail time or at least lengthy loss of licensing for financial products. It’s also time for some

But wait a minute people – didn’t *we* do our homework? There is still a bit of blame to be placed on us as consumers for not picking up “Mortgages for Dummies” and doing the most basic, bare minimal amount of work you needed to do. Ten minutes looking at historical interest rates the last 20 years, understanding the bare minimum of how a sub-prime works, and doing some math with what your budget can take would have shown you what would happen. There’s definitely a shame-on-you that I’m sure many are now getting in very painful monthly doses right now each time their ARM goes up; or for that roof repair you didn’t plan for, or your car unexpected breaks down, etc. I don’t envy or place tons of blame on all consumers for what is happening. However, it’s time we grew up and learn that living paycheck to paycheck in NOT the way to run your life; and that proper budgeting involves much more than just thinking about what monthly payment you can afford next month – as this guy knows. I find it staggering that so many folks entered into the biggest investment of their lives and didn’t do any more homework than read a brochure they gave or just took their word for it. Just doing math to figure out your next monthly payment isn’t doing your financial homework or being a well-informed consumer – it’s a recipe for disaster. We can all read crazy amounts of stuff about the latest fad diet’s detailed food analysis, or which renewable resource our products are coming from and ban those we don’t like – but can’t spent 1 hour on the biggest outlays of cash in our lives? Did we all fail high-school economics? The question now is what do we do to ease these folks out of something they couldn’t afford in the first place; and have an orderly exit to keep the market from collapsing (which seems to be happening at a reasonable pace right now).

That’s right – and orderly exit for these folks. Not a bail-out. Not a subsidy for 20 years. People and families are going to lose houses – houses they should never have been in in the first place. Should they lose everything and end in bancruptcy – absolutely not. We have a duty to make sure it doesn’t become a whole-sale disaster. But it is time to be honest. If you cannot afford the home you bought, it’s time to get out and move into something you can afford. We as a nation should help ease that process with generous helping hands and creative helpful financing, but it’s time to live more sustainably – and I’m not just talking about paper or plastic.

As Americans, we are disgraceful financially. In China, the savings rate is about 40% – thats 40% of their take-home pay goes into savings/investment verses less than 1% rate in the US, while other industrial nations are at least in the 15% range (as were we until 10-20 years ago). In the US, almost 50% of all people don’t even have $1000 on hand for an emergency. While the average credit card debt spread over all American cardholders is more than $8000 (misleading – but true and climbing), the median balance on an American’s credit cards is still at $1900. It’s time we stopped feeling ‘entitled’ to living beyond our means with a bail-out always at our back. While I think it’s a bit overly-conservative, Dave Ramsey recommends that you buy no more home than you can pay off with: a 15 year fixed mortgage who’s monthly payment constitutes no more than 40% of your monthly take-home pay (after-taxes/15% saving), with a large enough down that you don’t need a second mortgage. Then, when you have that number, you go looking for houses in that range only. Yes, it’s smaller than you expected, but you can afford it. And afford to live a little, and afford emergencies and repairs that will always come up.

It brings up the question of always bailing someone out vs forcing personal responsibility down their throats. I’ve seen both methods fail, and have thought about this a lot recently. But more on that tomorrow….

What’s the real story anyway? Thoughts of a potential buyer

What’s the real story anyway? Thoughts of a potential buyer

So, I started a little research into buying my first place. After doing a little number crunching, it looks like at least next year before it would be feasible. But I’m having difficulty trying to find an honest appraisal and state of Portland’s housing/condo market. It’s pretty clear that the meteoric rise of housing prices we saw the last 5-10 years has stopped. But things beyond that get very fuzzy. Previously very desirable neighborhoods seem to be seeing stagnation, new areas seem to be gentrifying fast, other areas are very hard to read, etc. Condos vs houses have conflicting anecdotal evidence. And that’s the problem – I can’t find any solid information other than what is gleaned from news stories and looking at the latest for-sale lists. Problem is, individual selling prices are all over the map – disproportionately high/low levels depending on the sellers motivation. It’s hard to get a read if a location is losing favor since people are all trying to sell at pre-slowdown prices. And that’s what I need to know as I make a minimal 5-10 year investment – will it be going up or down in the next 5-10 years? What’s the trending by location? What’s the trending by type: home vs condo?

It’s curious that local realtors’ websites are still quoting figures from the boom 2-3 years ago while updating their for sale lists every day. It kind of makes you think they know something you don’t. How come they could get those numbers in the heat of the boom, but they can’t seem to get them now? Why all the hush-hush? It makes me as a future buyer feel uncertain – and uncertainty is not a good thing when buying – makes me want to keep my money on the sidelines until patterns become clearer. The fed just announced no rate change, and inflation is ‘not a concern’. Sure, investors are pulling their money out of these high-risk, fast-and-loose mortgage places – so money is going to be tougher to get if you have tarnished credit. But if you’ve got good credit, there isn’t much to worry about. Prices are definitely not meteorically rising anymore and interest rates are likely to stay flat – so the pressure to buy isn’t there either. If I can save/invest my down payment and earn 8%, that’s roughly the same as investing in a housing market that’s growing by ~5% (for tax breaks, etc).

My concern is that I don’t want to pay a bunch of money and find out my property/area is in the middle of a decline that will probably last 3-5 years – and I just got in at the top of that drop. The few real estate agents I’ve talked with all seem overly up-beat about everything and don’t say squeak about any place’s declining values, etc. All three realtors I’ve chatted with were like: go ahead and buy now! It’s all good! And their not totally wrong, but they get more quiet when I ask where isn’t a good place to invest in.

If I were to guess, there is a lot of re-adjusting going on as the money leaves the market. And money is leaving the market as a whole; but there is no crash going on. Overall, things are probably cooling in some spots of Portland more than they thought. But where are those places? The hot and not spots of town are definitely moving around – just based on watching how much foot-traffic and cars wander through. If I had to guess, NW Portland is cooling – 23rd and 21st aren’t nearly as busy and hopping as they used to when I moved in a few years back. Alberta on the east side is going nuts with activates, new businesses, bars, fairs, etc. Hawthorn is flat to down. Condos? With lots of new buildings half-done, I suspect that unless they stagger their openings, there could be a glut. This condo developer seems to think so. But he did it too – oh – everything’s perfectly fine. I’m completely changing my business model – but there’s nothing going on at all. Yeah. I don’t think that’s the whole story.

I have been left with a bad taste in my mouth from the realtors. It almost feels like there’s this big inside secret – an elephant in the room – they won’t talk about. Because if someone does, then folks will start being told that their properties up in NW or the Pearl or Hawthorn, or wherever will -gasp- not be as good a buy as the area is slowing (or even declining) in value a bit more than other areas. And if somebody stands up to say the emperor’s clothes are off, and that certain areas are not such a good ‘buy’ – that might mean the prices for the whole area drop. And if the prices for one place drop, maybe the curtains will come down other places that are slower too. And then what will happen to our business as sellers? It’ll get tougher. What is going to happen to all those realtors that were coming out of the woodwork from real-estate school during the boom as there are less folks to sell to or a more competitive market? You’ll be shooting yourself in the foot needlessly. It’s simply not in their interest to be honest – it’s in there interest (and indirectly the seller) to get the sale. They’re long gone by the time you come around to sell again. So there is incentive from everyone in the industry to just shush, and let people wander around on their own.

This probably isn’t as dire as I’m painting it. The few figures I have found say the market is growing at the 5-7% year on year rate – pretty darn good really. But the lack of information that certainly MUST be out there and being done by these condo/housing developers isn’t getting out. It sure got out during the boom of how good things were, now, not so much – which tells you something in itself.

Can you guess what it was?

Can you guess what it was?

Here’s a little clip of information taken directly from a recent article I was reading. I replaced the parts that would give away what it is, see if you can guess what it is:

Even as project proposals were being submitted, a 53-year-old structural engineer secretly already had the job sewn up. He had met with the government official in charge of funding and the official had rigged the process so that only this engineer could possibly win the bid. When the construction was started, more than 300 prominent [inhabitants] signed a petition protesting the [construction]. They claimed that [it] would “disfigure and dishonor” the city.

There was a great deal of protest surrounding the construction as well. A [prominent] mathematics professor predicted that when the structure passed the 748-foot mark, it would inevitable collapse; another expert predicted that the [construction]’s lightening rods would kill all the fish in the [nearby river].

The [local] edition of the New York Herald claimed the [construction] was changing the weather; and a daily newspaper ran a headline story claiming The [construction] was sinking. “If it has really begun to sink,” [local paper] pontificated, “any further building should stop and sections already built should be demolished as quickly as possible.”

What was this abominable construction that would destroy the environment and be a disfigurement to the city? It was none other than the Eiffel tower.I always try to keep things like this in mind when confronted with the scads of ‘disaster is imminent’ reports on everything from new public/religious social programs, to dams, to global warming, to whatever. Whatever you’re in the middle of, by nature you are going to be very myopic. Now, this is not to say that disastrous human endeavors do occur and are often foreseen but warnings ignored, but it reminds me that you need to look at the real data and know that expert ‘opinions’ are just that – and are just as equally wrong as right on both sides.

Instead, the only way to denounce critics or lend credibility for a plan is in a *lot* of careful research and number crunching before one begins. A great example is a task force in Portland that have done some great research on homelessness patterns and found that often times the current feed/shelter system simply prolongs and perpetuates the homeless’ problems (this is not to say that homeless help should go away – but that their influence and role needs to change in a new way). Some of their findings

There has also been all this talk of carbon-neutral obsession, bio-fuels, etc. This is all good, but simply reducing environmental impact down to your ‘carbon-load’ doesn’t take into account scads of other toxic stuff you release. Use an air conditioner in your car/home? What about your freon load? What about your arsenic load? What about your estrogen loads ? (yes, estrogens from shampoos and birth control pills goes right though water treatment and has long been known to be mutating fish/river life. That one sure doesn’t get as much press as blowing up damns now does it) Now we hear that bio-fuels aren’t that much better than other fossil fuels as far as the environment goes.

I guess my point is that productive change in the right direction requires people not being reactionary, over-simplifying the problem, or lately appealing to sentimentality or emotionalism, or even spiritualism about ‘mother earth’ (I could go on about that one being even worse than the religious appeals made in the middle-ages that everyone loves to decry) – but really put some pencils and pens to paper and do the math and science. Real science that isn’t myopic ‘experts’- or we’ll end up looking as silly as the Parisians did to future generations.

Price hikes for internet radio and how petitions should work

Price hikes for internet radio and how petitions should work

I’m not much of a zealot about most grass-roots stuff, but the Copyright Royalty Board has raised rates for internet radio stations by hundreds of percent to play songs online. I, for one, listen to lots of internet radio at work – and this stinks because it will put some good stations out of business.

These guys (http://capwiz.com/saveinternetradio/home/) have a great system that allows you to enter your name/address and it will find your reps – then allow you to automatically fax or email them.  You can also print and snail mail them. Takes about 30 seconds total unless you want to customize the message. This is the way petitions should work.

Conservative and Liberal

Conservative and Liberal

I have increasingly notice how useless and downright harmful the terms conservative and liberal are.  In the political arena, religious matters, or wherever.

I, for one, plan to ban their use from my vocabulary.  What does it mean to be conservative?  To be a liberal?  The best I’ve ever heard of is that it is a title under which we lump our favorite agendas and favorite demons.  If I were to ask 20 people the definition of those terms and what one would classify under each title, each person would likely put their own favorite issue(s) under whichever one they wish to alienate or affirm.  These labels often turn into firebrands upon which we like to point fingers and make tongue-wagging generalities.  When someone starts saying ‘conservative’ or ‘liberal’ anything, I find that it’s usually an attempt to be divisive, polarizing, and as vague as possible.  Even more harmful is to use these terms to classify people.

When I hear a person using these terms, I have yet to see it convince the person they are talking too if they are of a differing opinion.  I think it’s because we all can see the broad generalities they are appealing to and not actually saying anything about the real truth of the matter.  If someone is wrong about a viewpoint then the argument should be directed to correct the particular viewpoint or argue that one topic.  Making a blanket statements they are liberal or conservative seeks to lump a person with tags they cannot really fall under.

Is a whole person’s viewpoint really conservative or liberal?  At best we could use the term with the one stance or topic.  We are all far too complex of people to be satisfied with such foolishly simple terms and harmful judgments based on one position.  Far more often I find that the real reason people are so polarized or set on a particular topic is because they have personally been hurt or carry a lot of emotional, spiritual, or mental baggage with the topic that was never healed.  Often this pain or anger is carried subconsciously.

One of the best deacons I’ve ever met lives by the creed that it is only through loving relationship that any conversion happens.  I have come to believe more and more this is true.  Love implies relationship.  Unless we are willing to be in a genuine relationship with the other person, to really listen to their concerns and work with the questions *together*, we are not loving anyone.  Without love, there is no change.  God brought salvation to this world through the very real and human person of Jesus.  He didn’t do it from ‘on high’ but from real, human relationship and that is an example we should take to heart.

One does not deny there is wrong or evil in our understandings, but one needs to affirm that there is good in the person first.  It is the the power of real, loving relationship that  correction and change can happen.  One is far more likely to listen to someone that they know cares for them and listens to them than yelling at them with labels.