March 2006 Archives

(Editorial note: I wrote an updated version of this to post Christmas morning 2006)

Doing my workout this morning I asked myself what's next for the real estate market.

The state of the market here locally is that prices are and have been in decline. There is no longer any mystery about whether they will decline, only how much and for how long. One of these days, the Association of Realtors and those pollyannas who preach that you always make money on real estate will admit it.

What comes next? Obviously increased defaults, as short term loans come up for adjustment and people are unable to make the payments, as I've said any number of times, and unable to refinance because they owe more than the property is worth. Short sales also increase, as people try to just get out. More Notices of Default means more trustee sales, as well. If the property sells at auction, somebody probably got a bargain. If it doesn't, the lienholder owns it (subject to senior liens) and that may be even better.

All of these are happening already. Daily foreclosure lists have more than doubled locally from a year ago. Trustee Sales are up, and so are REO's (Real Estate Owned by those who were originally lienholders). Check, check, and check. All about as surprising as gravity. What I'm trying for here is at least one prediction that has not already come true.

Rates have been rising of late, but there is a limit as to how far they are likely to go, if only because Bernanke and company are very shortly going to have irrefutable evidence of all of the above stuff nationwide. A nationwide economy has a lot of something analogous to inertia. Takes a while to move things in the direction you want them to go. More time, and more effort, than most folks, particularly bankers running our money supply, are likely to realize and sit still for without further pushing, which they have done a bit too much of, in my opinion, by about one full percent on the overnight funds rate. Once things get going in the direction that the Fed has been pushing them for the last two years, they are similarly going to have a lot of momentum built up. Bond investors are going to dry up at attractive rates, and Sarbanes Oxley or no, you're going to see private companies going public again because it's the only way they can raise capital at attractive prices, and the flow of public companies going private is likely to mostly stop. (Hard to think of Sarbanes-Oxley as a brake upon economic activity, but in the short term, that's what it's likely to prove. CEOs and CFOs are not used to the idea of personal responsibility for corporate activity, and while the cost of private capital is even vaguely competitive with public, private will be their choice. It's going to take a while for countervailing forces to come into play).

When bond rates rise, so do mortgage rates. When mortgage rates rise, and people can only afford the same payments, prices fall, further exacerbating the price fall that's already happening. Lenders are already between a rock and a hard place to a certain extent, but it's going to get worse. Keep in mind also that aggregated mortgage bonds are an attractive investment because of their historical level of security, and even though that's going to be compromised to a certain extent, rates are going to rise if for no other reason than that is what the money costs. I expect rates on A paper thirty year fixed rate home loans to stabilize somewhere around seven percent, at least for a while. Shorter term fixed rates will be cheaper once the yield curve normalizes. Given the prices things have sold at in highly appreciated markets, this is likely to permanently popularize medium term hybrid ARMs, as saving one percent in interest on $500,000 is well worth the cost of refinancing every few years, and people are refinancing every two years on average anyway. Two and three years fixed is really too short for most folks, but five is probably more than fine.

Here's another newsflash. I'm not going out very far on a limb here, but a three bedroom single family residence in a reasonable neighborhood here locally is likely never to drop back into the sub $300,000 range again. I'd bet money it's not going below $250,000. Yes, the market got badly overheated - but not that badly overheated. Furthermore, if past Southern California history is any guide, we'll lose about 30 percent of peak value, and then start going back up again. No fun if you're a semi-skilled worker trying to raise a family, but the most likely scenario nonetheless.

Now what's going to happen to the people who have bought highly appreciated properties who can actually make the payments? Well, if prices fall, they can't sell for what they bought for until they recover. They don't want to do that. But they don't want to be in a negative cash flow situation, where the rent they get from the property doesn't cover their expenses, if they can avoid it. They definitely don't want to be in that situation to a larger extent than they can avoid. A $500,000 purchase with a 6 percent first and 10 percent second yields principle and interest payments of $3276, plus property taxes of $520 and insurance costs of $120 per month, means that the owner is out $3916 per month without any repairs or management expense. A monthly rental of $1900 isn't going to cover that. A monthly rental of $2500 isn't going to cover that. This is going to put more upwards pressure on rental rates. $2500 is the entire gross monthly income of someone making $14.75 per hour, by the way. But the people feeding the mortgage alligator don't really care, all they know is that they have to pay the bank so much per month, and set aside so much for the state and the insurance company. This is also going to put upwards pressure on wages, and therefore prices. Inflation kicks into higher gear, which puts more upwards pressure on interest rates. Vicious cycle.

And this phenomenon is going to be part of what eventually helps prices make a comeback. If somebody is feeding the landlord $3000 per month, they're going to be more amenable to paying it to the bank instead. Especially since they get tax breaks, and most especially because when you buy the property you intend to live in, you take your monthly cost of housing out of the column that says "what the market will bear," which is subject to changes - and usually increases - and put it into the column that says "this is under my control." If you buy with a sustainable loan, your monthly payment is going to be under your control forever.

(It is to be noted that even if that $500,000 property loses $150,000 in value the day after you buy it, historical 7 percent per year increases will have you back in the black in about five years, and ahead of a market return on the rent you would have saved in about ten. Thirty years down the line, your net benefit from the purchase as opposed to invest the extra money over the cost of renting and investing the excess in the stock market, will be somewhere between $800,000 to $1,000,000. An almost irrefutable argument in favor of buying a home, if you plan to live there a while. Yeah, it's no fun being upside down while it happens. But the eventual payoff isn't exactly chump change, even by the projected standards of thirty years from now.)

Caveat Emptor.

This question brought someone to my site:

If my house is going into foreclosure but the house is also in probate, can the lender actually go forward with the foreclosure sale while the house is in probate?

The short answer is yes.

The Trust Deed (or Mortgage Note) that was signed by the now deceased undefined gives a security interest in the property to that lender in exchange for money. The lender lived up to their end of the bargain. That security interest is valid until the loan is paid off. It is not removed by the death of the person that signed over the security interest.

Probate takes an absolute minimum of nine months. During this time, the court will likely allow those members of your family to continue to live there, but they will not likely approve disposition of the asset except in an emergency, and that emergency is going to cost your heirs money for the courts, and money for the disposition. On the other hand, the lender still needs to get paid according to the terms of the contract, and they are entitled to foreclose if the terms are not being met. I'm not a lawyer, but I've never heard of an estate being permitted to declare bankruptcy, which some living folks use to temporarily stave off foreclosure, almost always to their eventual major detriment. Since your executor is claiming that your estate cannot pay its bills and rarely are you earning any more money, declaring bankruptcy would seem like an open and shut case of "the creditors get all of the assets and your heirs get nothing." Probably not what anybody who's part of the situation wants.

There are simple steps possible to avoid probate for major assets. A trust is probably the most flexible of these, in that the trust owns the asset and the successor trustee takes over the management and within the limits of the trust, does what needs to be done without the courts getting involved. Flexible, much cheaper than getting a probate court involved, and your heirs get control right away. But it requires planning ahead (which many people are loath to do, being in denial about the idea of death) and an upfront investment.

Given the fact that there is a loan and a Trust Deed against the property, somebody is going to have to make those payments until the loan is paid off, whether by outright payoff, refinancing, or sale. Given that in the absence of a trust, your heirs probably are not going to have access to any liquid wealth you left either as it is also locked up in probate, the odds are that your heirs are either going to have to come up with the cash out of pocket, or the property is going to be foreclosed upon.

Now there are some good options. If your heirs are wealthy and have the cash, perhaps some one or combination of them will make the payments in the interim if it's been agreed they will be compensated later. Not likely, I'll admit, and they're likely to drive a bargain for larger eventual replacement. In some instances, the probate judge may agree to taking out a Home Equity Line Of Credit (HELOC) to make the payments, but somebody's going to have to be able to qualify to make the payments, and a dead person is not on the list of options, which means somebody still living is going to have to do it. The rates on these are typically horrendous, and cost a lot more than a little bit of planning.

Another excellent option is life insurance. Life insurance passes (usually) tax free on death outside of probate to a named beneficiary. Therefore, it's available pretty much right away to pay bills and stuff. It's also leveraged money, so a few dollars now buys more dollars when you need them. The difficulty is that you've got to have it beforehand. There's that planning thing rearing it's ugly head again, and the upfront investment of the premium dollars for the life insurance policy. Finally, any money created by this becomes the property of those beneficiaries, and there is no way to compel them to spend the money on bills of the estate. If the beneficiary is the estate, well, the money is locked up in probate again, and you've got to get the probate judge to agree with doing the necessary.

Another option is the named beneficiary Transfer on Death feature of most investment accounts. These also transfer outside of probate to named beneficiaries. Problem is, they require the investment of those dollars beforehand, and they also require that you keep the beneficiaries current, and all of this requires, once again, planning. The money also becomes the property of the beneficiaries, just like life insurance, and if there's no named beneficiary, it gets locked up in probate.

There is no free, no-planning-necessary, magic bullet. I strongly suspect it's all part of the various Lawyers Full Employment Acts, but you've got to take the system as it exists. At the very least, you've got to do some planning ahead, and an upfront investment is probably going to return itself several times over. Remember, everyone is going to die sometime - I know of precisely zero exceptions thus far in the history of the world. Denial of this simple fact simply digs you in deeper, and puts your heirs in line to have to lose or waste a major portion of what you would have left covering for your deficiency, as is evidenced by the person who asked this question.

Caveat Emptor.

Carnival of the Vanities Recommended: Critical Mastiff


Do they know the Taliban isn't running things any more? Christian Convert Vanishes After Release. With mobs shouting "Death to Christians", and his family being the ones who turned him in, does anyone have an idea whether he went into asylum, sanctuary, or an unmarked grave somewhere?

LATER: Via Strata-Sphere, The Anchoress has a lot of worthwhile things to say.

LATER STILL: Justus For All links to a story that shows Rahman arriving in Italy. So much is good. I just hope the Islamists don't chase him down there.

Jawa Report notes that the Afghani parliament is still obsessing. I wish I could say that I was surprised, but I'm not.

neo-neocon has a post comparing the Inquisition to the Afghanistan situation. It's not every day the Inquisition comes out more civilized than anything else.


A hopeful sign. Kadima Party Projected As Winner in Israel Being a RINO, in my opinion a Kadima-type party would likely be good for the US.


Fed Boosts Interest Rate to 4.75 Percent, thus underscoring the fact that the Fed is composed of bankers, not economists, whatever their credentials. Their primary goal is to keep inflation in check, not to grow the economy at a healthy pace. I'm seeing some very troublesome indicators, both in statistics and in terms of anecdotal evidence. A lot of big money is looking for rocks to hide under, and the Fed isn't helping matters.


Boxing Alcibiades has a good article about top level predators.


Opinion Journal has an excellent editorial about the "waiting for Bush's term to expire" idea that's going around the middle east (among other places).


There's a big stir about the Donkey's new strategic direction today. Dr. Sanity has the only take on the matter that makes any sense.


Armies of Liberation reports that the UN is moving to replace the African Union peacekeeping force. Given UN Peacekeeper's proclivities, I'm not certain whether this is a good thing or not, but given how militarily weak the Janjaweed are, at least the UN troops will have the option of doing something helpful.


Moderate Voice has a guest article that demonstrates what is wrong with the immigration bill under consideration.

This one came from a search engine:

amortization of real estate loans early payoff based on a lump sum payment

This is one of the smart things you can do. Not necessarily the smartest, mind you, but smart. The question is if there's a better way to get a return on that money, wither by paying down a higher interest debt or by investing the money in a new asset. If you owe thousands of dollars on a credit card at twenty-four percent when your mortgage is at six, why would you want to pay down a tax deductible six percent instead of a non-deductible twenty four?

Similarly, if you've can earn ten percent somewhere else with the money, why do you want to pay your six percent loan down? Net of taxes, a six percent loan costs you about 4.5 percent, depending upon your tax bracket. Even if the return is not tax deferred, the net return on ten percent is somewhere over seven percent for most folks. Say you are in the twenty-eight percent tax bracket and the ten percent is completely taxed every year. $10,000 over the course of 15 years will turn into $28,374 if invested. If it's fully tax deferred, it turns into $41,772. For comparison with other numbers later on in the essay, at twenty-seven years the numbers are $65,352 and $131,099, respectively. Not half bad.

Suppose you've got the cash flow to instead buy another property? That puts the power of leverage to work for you, and if you can rent out one of your properties or something, possibly multiply your money by a factor of ten within a few years. When you put ten percent down, and your new property appreciates ten percent while giving you a few dollars per month of cash flow, that's smart investing. At seven percent annual appreciation (historical average), you've doubled your purchase price in a little over ten years. A three hundred thousand dollar property will likely be a six hundred thousand dollar property in about ten years (It's just numbers), while you've paid the loan down from $270,000 to about $226,000. Even if your expenses of selling are seven percent, your gross is $558,000, less the $226,000 you've paid the loan down to, and you've come away from the property with $332,000, not counting those few dollars per month you netted after paying your expenses. Sure there are places and properties that don't pencil out, and being a landlord is a headache, but as you can see the potential rewards are substantial if it does "pencil out".

Now, let's say you do this every nine years on a three to one split, and 1031 Exchange the first two at least. After nine years you have $281,267 pre-tax, net in your 1031 account. You then turn around and buy three $600,000 properties. You end up with three loans of about $506,000 each. Assuming net zero cash flow on the properties, after nine more years, you have three loans at $434,100, netting you $1,775,286 into your 1031 accounts, which you then roll into three more properties each at $1.2 million purchase price. Your loans are $1,000,000 each, but you rent them for enough money to break even on expenses. After nine years, you sell all of these properties, and end up with just a little under $10,750,000 net of sales costs in your pocket before tax, which at long term capital gains rates (15%) nets you $9.13 million or thereabouts. Now, you did start with three times as much money, and nobody in their right mind sells off nine highly appreciated properties in one year, and you did have the headaches of being a landlord on an increasingly widespread basis for those twenty-seven years, but this illustrates the money to be made for the same investment. Patience and leverage working for you over time are far more powerful than any quick flip.

But assuming there are no better alternatives, it is a smart idea to pay down your mortgage. Here's why: Let's say your balance is $270,000 at six percent, and you pay your loan balance down by $10,000. Your regular payment was $1618.78, and it still is, but interest is $1350 of that. Only $268.78 would normally be applied to principal. Yeah, you've just sent them about six months of payments - but it just paid your loan down by three years of principal payments. Assuming you never sell and never refinance and never pay an extra penny again, you will be done in month 324 - saving yourself thirty-six payments for a total savings of $58,276. Not to mention that if you do refinance, you'll pay lower fees. Not in the league of some of the alternatives above, but still a nice return on investment. Definitely beats spending the money.

Caveat Emptor


Carnival of Liberty

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Roll Call time. What have you done lately to advance the cause of freedom?

Individual advancement of Liberty

Fearless Philosophy shares some mental smart armor, which changes, adapts, and grows more effective with time.

The Picket Line want the anti-war protesters to stop wasting their energy on pointless gestures.

Below the Beltway has a book review of a biography of one of our most underestimated founding fathers. He made a lot more of a contribution than he's generally given credit for.

Jon Swift discusses the Texas Alcoholic beverage Commission's pre-emptive war on drunk driving.

Legal Redux covers the outcome and logic (or lack thereof) in Georgia vs. Randolph.

Group advancement of Liberty:

Your host discusses some weaknesses of our defense in U.S. Hiring Hong Kong Co. to Scan Nukes

Tom Rants notes another road paved with good intentions, or so those concerned tell us.

Spank the Donkey talks about one of the better guards to freedom. I speak of military grade weapons in private hands.

Hayek MD reminds us that the road to serfdom is paved with command economies.

Eidelblog discusses how folks are trying to get everyone else to pay in lieu of themselves. This is also known as scamming the government, which reduces to scamming the other citizens.


EDITOR's CHOICE Homeland Stupidity talks about the drugging into compliance of our children.

Stingray has an article that gives cosmetics an "Eeewww!" factor

Your host submits a cautionary article, Losing Property Value with Highly Leveraged Properties, about not getting burned by the markets of today.

On the QT notes a homeowners problems so severe that it would take me at least three articles to cover the necessary information. Ouch, and a load of sympathy.

Mensa Barbie notes Pakistan spending money on both roads and bombs.


The Squib uses his Jedi mind powers to tell us that he is not the fascist we're looking for.

Miscellaneous Items

Centrerion announces that the site will be home to a carnival of media corrections.

UPDATE: Radical Libertarian deconstructs some liberal ideas


Carnival of Personal Finance Recommended: Debt Hater, Ask Uncle Bill

Carnival of Investing Recommended: Sound Money Tips (Timeshares are an awful investment)

RINO Sightings Recommended: Decision '08, Inside Larry's Head


Utterly Cool! Researchers Develop Ultra-Thin Plastic


Sometimes things go right: FEC Won't Regulate Internet Politics (Or at least gives blogs the same exemption as newpapers, etcetera).

Money quote: "There will be no second class citizens among members of the media"


Mudville Gazette covers Scalia debunking the claim that enemy combatants have the right to a trial. He had a son over there, by the Maureen Dowd test that gives him absolute moral authority.

Captain's Quarters originally thought, with some reason, that the quote was grounds for Scalia recusing himself, but updated with a more balanced "maybe not".

My take on grounds for recusal is that it needs to be higher than that. Taking sides on an issue, publicly or privately, is not cause for recusal. Should Ginsberg recuse herself from abortion cases? She has certainly spoken on abortion, both before and since joining the Supreme Court. Should Rehnquist have recused himself from Casey vs. Planned Parenthood, seeing as he wrote the dissent in Roe vs. Wade, a clearly similar case? The justices are permitted the same first amendment rights as everyone else. They do not give that up when they take the oath of office.


I've said several times that China's attempt to censor the internet is wasted effort. Once they've got the access, it's not much effort to learn how to find whatever you want with just a little patience.

However, via Dean's World, here's an article at babalu about a Cuban who is on a hunger strike for internet access. He is almost certainly going to die, because the only way the Castro regime can stay in power is to keep the Cubans ignorant of what goes on in the rest of the world. Let them so much as get regular email to their relatives in Miami, and Fidel is done for.

If he is willing to pay that kind of price, the very least I can do is to publicize it.

We truly live in an age of under-appreciated heroes.


I've got Carnival of Liberty tomorrow, and therefore, there will be no new financial post, but check back in the morning for the Carnival. I'll try to have something new ready for Wednesday.

Michelle Malkin notes the "peaceful" protest that left the head of the Chicago Minutemen hospital-bound for protesting loans to illegal aliens. I could have told them that banks offering loans to illegal immigrants are nothing unusual, but that doesn't change the fact they were peacefully exercising their rights to protest on public land when they were assaulted.

Michelle Malkin also has coverage of the Los Angeles illegal immigrant's rally.

Wizbang has a take on the illegal alien thing that worth mentioning.

Glenn Reynolds has more thoughts.

Once upon a time, the United States needed all the cheap labor it could get, skilled or unskilled. For unskilled labor, that time is now at least forty years in the past. If we start enforcing our immigration laws, the only thing that will happen to our economy is that employers will start having to pay a little more, which means (in most cases) some things will cost a little more, and more americans will be willing to do those jobs, so the unemployment rate will go down even more.

Furthermore, a nation unable or unwilling to control its borders ceases to be a nation. If those who are claiming this as their homeland are not justifying it under the same terms as the German "drang nach osten" (run it through some search engines), then I must ask why those subject to immigration controls weren't they born here, and thus, citizens? Did their ancestors leave after 1848? Did we throw them out? (The answer to those questions, is, in general, no). The truth is that the illegal immigrant deluge (and Britain and Canada are the second largest group of illegals!) is about economic opportunity. They can make more money here. Take away the employer's incentives to cheat our laws, and they vanish.

I still want to see immigration. We still need a good bit of it. For one thing, without immigrants, we would be almost as badly off as europe because our native born population is declining, too. But I want to see it deliberate, controlled and legal, as opposed to the tragedy of the commons and recipe for domestic terrorism that we have now. If we will not or can not control our border, we are doomed to lose it, and if the thought of operating under the Mexican government isn't enough to scare you, I don't know what would.

It is worth noting that among my wife's family (who wetbacked the Rio Grande in 1916, before doing so was illegal, who marched with Cesar Chavez in the 1960s, and who vote overwhelmingly Democratic), if you pin them down, they want illegal immigration stopped as much as any other group. It hurts the family members who are possessed of lesser skills, by forcing them to compete with low wage illegals. It hurts their chances to bring relatives still living in Mexico across legally. This is one of those things where the attitudes of the masses seems to diverge significantly from that of the self-appointed "hispanic leaders", who want a larger bloc of people that they will control.

Who benefits from cheap illegal labor? Pretty much everyone who isn't competing with it. Those who benefit the most are rich capitalists, who get much cheaper labor while not suffering the increased costs.

I just don't see that the societal value of the gains to the rich capitalists exceeds the societal value of the costs to the relatively unskilled legal residents. Indeed, it makes it ever harder for those who are here legally to get started on their upwardly mobile journey.

This is something I probably should have covered quite some time ago, as it's part and parcel of the system that's abused. Here are sample rates from one A paper lender, picked at random, that were in effect a few days ago. These are Fannie and Freddie conforming 30 year fixed rate mortgages with full documentation of the loan. The first number is the cost for a 15 day lock, the second for a 30 day lock, and the third for a 45 day lock. A positive number means it costs that number of discount points to get the rate. A negative number means that the lender will pay that many discount points for a loan done on those terms. Now, I want to make the point that these are wholesale rates, but I didn't feel like translating them to retail. I don't work for free any more than anyone else, nor does any other loan provider.

5.625% 1.50 1.75 2.00

5.750% 1.00 1.25 1.50

5.875% .375 .625 .875

6.000% 0.00 0.25 0.50

6.125%-0.50-0.25 0.00








As you should notice throughout, there is a 0.25 spread in costs between locking in any particular rate for 15 days as opposed to 30, or 30 days as opposed to 45. This is because it costs them money to have the money standing around doing nothing waiting for your loan to fund. The difference in costs between a 15 day lock and a 45 day lock at the same rate is half a point. For most people, the column you want to pay attention to is the thirty day column. Two weeks from a standing start is not enough to do a refinance, and even a purchase is iffy. But you want a rate locked in when you start the process, or you really have no idea whether it will be available when you get to the end of the process. Indeed, many providers work on a "promise the moon and wait and hope" basis, hoping the rates will drop. That's why you want a written guarantee of a rate at a given price on a given loan type.

Now this is a fairly broad spread rate sheet, as the company is willing to take clients through a large range. On the other hand, at a 5/8ths point hit for 1/8th percent rate below 5.875, they are telling you that they really would prefer to keep their customer's rates locked in for 30 years above that. On the other hand, since most people dispose of their old loans about every two years, most folks shouldn't want to pay those costs, which will take much more than two years to recoup from the lower rate. It's much the same phenomenon as insurance companies guarding against adverse selection (only those folks who have major health problems buying health insurance, for example).

Which loan is the best for you? Don't know without more specifics. It depends on approximate loan amount, your life plans, your proclivities, and your financial situation.

But the devil is in the details, and one of the most common devils is details is a provider forgetting the adjustments. Adjustments generally mean that the loan will be more costly than the basic rate/cost tradeoff outlined above, so "forgetting" to post the adjustments on a Good Faith Estimate or Mortgage Loan Disclosure Statement is one of the easiest and most effective ways to lie in order to make your loan look more attractive by comparison. Since most providers don't guarantee their estimates, they can do this with basic impunity, but make no mistake - they know what the price is really going to be. If they won't guarantee their estimates, ask them why not. Here are the possibly applicable adjustments for this category:

Loan amount under $60,000: half a point

Loan amount $60k up to $100k: quarter of a point

cash out loan, 70-80% LTV: half a point

cash out loan, 80-90% LTV: three quarters of a point

Investment property 50-75% LTV: one and a half points

Investment property 75-80% LTV: two points

Investment property 80-90% LTV: two and a half points

No Impounds fee: quarter point

2 units 90-95% LTV: half a point

Manufactured home: three quarters of a point (they also have an absolute maximum CLTV of 80%)

Loan distribution

80/15/5 quarter of a point

75/20/5 quarter of a point

Interest only one and one eighths points

if CLTV over 90%: additional quarter point

97 percent of purchase price financed: three quarters of a point

100 percent of purchase price financed: one and a half points

2/1 Buydown two and a half points

Stated income FICO 680-699: half a point

Stated income FICO 700+: quarter of a point

(actually, these are small hits for stated income, indicating to me that I can likely do better elsewhere for a full documentation client!)

So let's see. If you are doing a cash out to 75 percent loan stated income and have a credit score of 690, you add one point to the costs listed above.

If you have an investment property duplex at 90 percent LTV, you would add three points (investment property loans are relatively expensive, as you can see, and it isn't restricted to this lender. They are riskier loans)

Doing 100% financing on a $50,000 home: Two points.

One hopes you get the idea. To leave these out is a tempting omission for the less ethical providers. Just because they are left out does not mean you won't pay them. You will. Usually they will spring them on you with the final closing documents and hope you don't notice. Surprise!

(Between this profession and being a controller for twelve years, people should not wonder why I think that's one of the ugliest words in the language).

Indeed, during my six weeks at the Company Which Shall Remain Nameless, I had no fewer than three screaming arguments with my supervisor over telling prospective clients the truth about adjustments. They didn't want me to. I have this thing about telling clients the truth as best I know it.

Why do they do this? At signup, you have little emotional buy-in. At final loan docs, you are signing so much stuff that even a marginally skilled person who's trying to distract you will be successful a lot of the time. The industry statistics say that over fifty percent literally never notice, at least until much later, after the transaction is irrevocable. And somewhere around eighty five percent of those who do just want the process to be over so badly that they will sign anyway, not to mention the fact that in the case of a purchse, they probably don't have any choice at that point. They need the loan to get the house, without which they lose the deposit, and there is no more time remaining in the contract with which to go out and get another loan. In order to combat this, do the smart thing, and apply for that back-up loan at the beginning. With two loans ready to go, your bargaining position is much enhanced, and the odds are much better that one of them will honor the original quote or something similar. If you can't find a backup loan provider, an alternate tactic is to find someone who will guarantee their loan quotes in writing, but very few will. A quote that is not guaranteed is so much hot air. They might intend to deliver, but the reason they won't guarantee it is usually that they don't intend to deliver it.

Caveat Emptor.


In many transactions these days, the buyer has absolutely no money, or an amount that is not sufficient to pay the costs that they would traditionally be expected to pay in order to close the transaction. Nonetheless, in today's buyer driven market, often the seller still wants to do business with them.

The usual way it's handled is in Seller Paid Closing Costs. The Seller gives the buyer an allowance to cover their share of the costs.

Lenders have been somewhat tolerant of the practice of late, at least so long as the appraisal comes in at or above the official sale price. However, more of them are once again starting to revert to the treatment this trick traditionally got, which is to say, if the sale price included a rebate to the buyer, then the sale price as far as the lender was concerned was the official price less the rebate. In other words, seller's net. Remember, lenders value real estate the same as accountants, on the LCM principal - Lesser of Cost (which is to say purchase price) or market (which is to say the appraised value). If the seller is giving the buyer money back, then the official price listed on the transaction isn't really the price, is it? Do advertisers tease you with the gross price of stereo or computer gear before the rebate, or the net price after the rebate? Same principle here. The lenders traditionally took this stance, although it has been more relaxed in the highly competitive lender's market of late. The lenders are (typically) not going to lend more money than the lesser of those the two variables, cost and market, and they will base the loan parameters on whichever is less. You can always buy a house for more money than the value, as long as you have the cash to make up the difference. But 100 percent financing seems almost de rigeur of late.

The Sellers get their house sold. That and the ego thing of the official sale price seem to be the benefits to them. I would certainly rather sell for the seller's net in the first place, if I'm a seller, without an allowance, because I have to pay commission on that higher amount. A $10,000 allowance (as has become common here) costs the seller $700 to $800 or so in increased costs - agents commissions, title insurance, escrow fees, transfer taxes - even if the sale price is $10,000 higher because of it. This is neglecting the potential effects of taxes due to exceeding the $250,000 (or $500,000) maximum gain exemption from the IRS code Section 121. I recommend against it for sellers unless there is a substantial deposit, as it is often indicative of a not very qualified buyer. Even then, it's a real good idea to talk to your tax person.

The Buyers get a deal, or so it appears at first blush. A piece of property without having to save for closing costs. In many cases, they don't have to put a penny down, either. Pretty cool, eh? Get a house and actually skip a month (due to the allowance covering prepaid interest), so effectively putting cash in your pocket. Keep in mind, however, that the average seller is going to inflate the sales price to match, where (if they were smart) they would rather have accepted the net sales price without rebate. Furthermore, at least here in California, property taxes are based upon official original sales price, so you'll be paying for it as long as you own the property. Finally, because your purchase price, and therefore your loan, is going to be higher, your payment is going to be higher, you'll pay higher loan costs every time you refinance, and your eventual net on the property will be lower. If it is the only way to get into the property, and the deal otherwise makes sense, that's fine - but don't kid yourself that you got free money. Chances are that you're going to pay far more than the amount of any allowance because you got it.

If it's bad for the seller, bad for the buyer, and risky for the lender, why does it keep happening so much?

Well, it's a sale for sellers. The property has now been disposed off. It's also an ego defense for sellers. Instead of $470,000, they can tell everyone they got $480,000. So long as they don't mention the allowance, it sounds like a far better price to their friends, family, and soon to be ex-neighbors. In short, bragging rights. Buyers, it gets them into the property, often without coming up with a penny and allowing them to save one month's rent or payment, effectively putting cash in their pocket.

Real Estate and Mortgage folks, get bigger commissions. $10,000 in sales price gets translated to $100 per 1 percent of commission. This is anywhere from an extra $100 to an extra $300 or $400 for each of the offices, buyer's, seller's, and loan. Furthermore, I know of loan agents who extract larger commissions because "it's such a hard loan." It does make the loan harder, but not by another point of origination's worth. Wouldn't you like to have extra money for essentially the same work? I assure you that your average real estate agent and loan officer are no different than most folks.

There is nothing wrong with this practice, so long as everybody knows what's going on. But it's certainly not something you want to do if you have a choice.

Caveat Emptor.


Short Payoffs

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A while ago I wrote an article called, "What Happens When You Can't Make Your Real Estate Loan Payment." This is kind of a continuation of that, as I got a search that asked, "What is necessary to persuade a bank to accept a short payoff on a mortgage"

Poverty. In a word, poverty. You have to persuade the bank that this is the best possible deal they are going to get. You can't make the payments, and if they foreclose they will get less money.

A "short sale" or short payoff is defined as a sale where the proceeds from the sale will not cover the secured obligations of the owner. The cash they will receive from the sale is "short" of the necessary amount. The house is no longer worth what they paid for it.

There are more and more of these happening around here. There are always people that lost their good job and can't get a replacement nearly as good. But now there are also people that were put into too much house, and approved for too much loan, and now they can't make the payments. Unscrupulous agents that wanted a bigger commission, loan officers going along, and nobody acting like they were responsible for the consequences to their clients. My concern for lenders who do stated income and negative amortization loans (and a lot of loans that are both!) is kind of minimal. Okay, it's very minimal. Like nonexistent smallest violin in the world playing "My Heart Cries For Thee" level sympathy. I forsee many lenders going through bad times ahead, to use a forecasting method that's about as mysterious as falling rocks.

On the other hand, for the people who were led into these transactions by agents with a fiduciary responsibility towards them, I have great heaping loads of sympathy and I'll do anything I can to help. Yes, they're theoretically responsible adults, but when the universe and everyone is telling them all the things that buyers were told these last couple of years, it's understandable. Sure there's a greed component in many cases but when they're told by both loan officers and the real estate agents that they "wouldn't have qualified for the loan if you couldn't afford it," they are being betrayed by the same people who are supposed to be professionals looking out for their interests. I really do suggest finding a good lawyer to these folks, as those agents who did this to them (and their brokerages) better have had insurance which said lawyer can sue to recover money they never should have been out.

I'm going to sketch it out in broad terms, but there are a lot of tricks to the trade. This is not something to try "For Sale By Owner."

First off, you need to draw a coherent picture of the loan payment being unaffordable. If you were on a negative amortization approaching recast, or hybrid ARM (usually interest only for the fixed period) that is now ready to adjust, you're facing a much higher payments. Even if you were able to afford the minimum payment before, now you can't and you've decided to sell for what you can get before it bankrupts you to no good purpose. You're going to have to prove you can't afford it, of course, the bank isn't just going to accept your word, but several late payments or a rolling sixty day late that looks headed for ninety have been known to be persuasive. Nonetheless, there are a lot of tacks that you don't want to take. Remember, lenders want to be repaid and they've got a couple of pretty powerful sticks to shake at you. They are not going to agree to sacrifice money merely because to make the payments would be uncomfortable for you. You're going to have to persuade them it's impossible.

Second, you're going to have to persuade the lender that this is the best possible price that you are going to get, and that anything more they might get from foreclosure is going to be more than offset by what they'll lose through the expenses involved. Not to mention that they might end up owning the property, which they don't want to do because then they have to spend more money selling it.

Third, you've got to be on the ball about the transaction itself. All the ducks have to be in the row from the start, which is when you approach the lender with a provisional transaction. If they're not, the lender is just not going to go through the process of approving a short sale until they are. Since this takes time, it has the effect of dragging out the transaction. Every missed deadline means the lender will look at the whole thing again, possibly changing their mind about approving the short sale. You need a qualified buyer.

Fourth, just be prepared for the fact that the lender is not only not going to approve the transaction if you get any money, but that they're also going to send you a form 1099 after it is all done. This form 1099 will report income for you from forgiveness of debt. This is taxable income! Many agents eager to make a sale will not tell the sellers this, and when you get right down to it, there is no legal requirement to do so, but I've always thought this was one of the ways to tell a good agent from a not-so-good one. It does seem like something you should be told about before you've got the 1099 form in your mailbox, right? At that point, you are stuck with all of the consequences, where if you had known before, you might not have been so complacent. It is to be noted I've been made aware of ways to circumvent the "no money to the owner" requirement, but they are FRAUD, as in go to jail for a while and be a convicted felon for the rest of your life FRAUD. It can be tempting, but committing fraud is one of the most effective ways I know to make a bad situation worse.

For the buyer, short sales are attractive for any number of reasons. Typically the seller is in a situation where they have to sell, and everyone knows it. The option of waiting for a better offer really isn't on the table if what you're offering is anything like reasonable. They can't bluff you, they should know that bluffing you is a waste of effort, and somebody should have explained to them that they really just want out now (and why this is so) before it gets worse. What's not to like?

Your competition. Because there's fast money to be made, these folks are the target of "flippers" everywhere. The large city, highly inflated markets more so than most. A couple weeks ago we put one on the market and got three ugly low-ball offers within 48 hours, and this is part of why you need an agent to sell one. Remember, the seller isn't getting any money, but they are going to get a 1099 form that says they have to pay taxes. Don't you think most folks would rather it was for less money, and therefore, less taxes, instead of more? The more money the lender loses, the higher your liability. Had any one of the three made a better offer in the first place, they would have gotten the property at a price to make a profit, but they had to prove how rapacious they were, or something. As it was, we jawboned the first three vultures and two other, later entries, into a quasi-decent price, with minimal later tax obligation to our seller.

In summation, "short sales" are a way to cut your losses for sellers, and a way to get a wonderful price for buyers, but you have to know how to convince the lenders to accept them, and how not to overplay your bargaining position, lest you get left out in the cold.

Caveat Emptor.


I'm a lot more concerned about U.S. Hiring Hong Kong Co. to Scan Nukes than I was about the Dubai Port deal. A company with connections to a rival power who wants to displace the US hired to undertake security scans.

The administration acknowledges the no-bid contract with Hutchison Whampoa Ltd. represents the first time a foreign company will be involved in running a sophisticated U.S. radiation detector at an overseas port without American customs agents present. (emphasis mine)

As opposed to DPW, which is a company owned by a country which has been a staunch US ally, and had no security responsibilities.

And a U.S. military intelligence report, once marked "secret," cited Hutchison in 1999 as a potential risk for smuggling arms and other prohibited materials into the United States from the Bahamas.

The CIA currently has no security concerns about Hutchison's port operations, and the administration believes the pending deal with the foreign company would be safe, officials said.

Did anyone else hear circus music running in their heads while they read that?


Wilkes, the NNSA spokesman, said the Bahamian government dictated that the U.S. give the contract to Hutchison.

"It's their country, their port. The driver of the mobile carrier is the contractor selected by their government. We had no say or no choice," he said. "We are fortunate to have allies who are signing these agreements with us."

Okay, here's the basic situation as I understand it.

We can have employees of these port operators running the equipment, or we can not have scans at that port. So the US government has no choice as to who does the scans. Furthermore, the equipment is automatic, and the driver does nothing except move it appropriately. So we might pick up a certain percentage of any nuclear surprises before they get here, assuming there's no official cooperation with the shippers of said surprise. This is therefore an improvement, but the fact that it's an improvement says nothing good about our Department of Homeland Security, with which I become more disgusted almost daily. We need to have said containers evaluated by persons selected for their loyalty to the United States. If it costs money, then those are legitimate costs that can be legitimately passed on to the companies looking to import stuff into the U.S. And if this drives prices up a wee bit, consider the damage that would be done by one nuclear or biological bomb on the waterfront of, say, the Port of New York, never mind a coordinated strike on several ports, which is a thought that I'm certain has occurred to our enemies.

Linked to Don Surber

Think of the history he lived through! Kolkata tortoise, Clive's pet, dies at 250 years. Here's a biography of his first owner, Robert Clive, who was one of the reasons the British conquered India instead of the French.

The Plassey Campaign. The Mutiny. The Great Game. Gandhi. The Partition and Independence. Nuclear India. Market reform. And that's just in India. When this tortoise was born, there was no United States. Poland had not yet been partitioned. Mozart may or may not have been born. Napoleon wasn't born yet, and the French Revolution was decades in the future. The Ottoman Empire had not yet begun to decay. Venice was still an independent nation. Cook had not yet discovered Hawaii. The Barbary Pirates were the terror of the Mediterreanean and beyond.


Michael Barone has a convincing argument that we should re-examine the benefits and costs of "don't ask, don't tell" policy towards homosexual folks in the military.

I admit that I don't like "don't ask, don't tell," although I have defended it in the past. The purpose of the military is to keep us safe, and any other considerations have zero weight against that function, IMHO. There is no "right" to serve in the military. If, however, the repeal of "don't ask, don't tell" would not damage the military in effectiveness, retention, morale, or otherwise, then personal prejudices of anyone anywhere in the progress against homosexuals swing precisely zeo weight with me, and it should be repealed. In fact, I'd probably favor it just to tick off Fred Phelps (As Volokh Conspiracy notes in the referenced article, sometimes you've gotta let a jerk be a jerk. But that doesn't mean you have to like him).


I want to believe in moderate Moslems (and the one article documents some), and even moderate mullahs, but then I keep running across stuff like Danish Imam Caught Making Death Threat on Hidden Camera and Peaceful Religion Watch. Stuff like this are a good reason to read Little Green Footballs, and MEMRI, which is his source for a lot of it. I tend to believe what they say when they think the West isn't listening.

HT to Captain's Quarters for a link to a biographical essay of Mohammad-Ali Ramin, a hardline advisor to Iran's president.

Captain's Quarters also has the good news that Stephen Harper, the new Canadian PM, has been attempting to sway Afghani president Karzai on behalf of the Abdul Rahman, the gentleman that's being tried for apostasy because he converted to Christianity - sixteen years ago. (In case you haven't been following the story, they offered him absolution if he recanted, but he wouldn't. Then the mullahs, perhaps realizing the political danger, tried to pass him off as not guilty by reason of insanity, which is itself going over like a lead balloon among the international community). Relating to this, Scrappleface has a (satirical) suggestion for what to do now that the FAA lawyer has blown the Massaoui prosecution.


D'oh! Church Sign Smackdown! HT Hugh Hewitt

While we're on the subject of humor, Ann Althouse covers South Park's revenge on Scientology.


Michelle Malkin notes another good deed that didn't go unpunished. Coalition forces rescue these three moonbats (a fourth was executed by the terrorists holding them), and their website says "Celebrate the peacemakers release", as if the terrorists were going to let them go any day, instead of executing them one by one for maximum effect.


Do you think that the fact that (via Michelle Malkin) this study was conducted in Berkeley, and the kids' personality was evaluated by preschool teachers in 1969-1971, might have anything to do with the evaluation? Do you think that the attitudes of the researchers might have had some selection bias?

This doesn't pass the smell test on the undergraduate level. For crying out loud, my basic Psych professor or any of my statistics profs would have had apoplexy had I turned in work like that. As a serious scientific study, it looks a lot more like activism and self-validation.


Via Instapundit, StrategyPagenotes (in part):

The Internet and cell phones have changed all that. Now, whenever the military offends a lot of civilians, the words gets around (nationwide) quickly (within hours.) These embarrassing situations (especially when the military seizes land it needs, or causes a mess with pollution, or other bad behavior by the troops) tend to get into Chinese or foreign media, and that does not make the big shots in Beijing happy at all.

This is part of the reason why I'm not too concerned with the Chinese censoring the search engines and other stuff on the internet. Such techniques work about as well as building half a dam. It's not so convenient, and it's not so easy as it is for us, but people will find ways and the information will get around. To stop it from doing so would require plugging email, instant messaging, cell phones, etcetera - every method of fast communication, without which China cannot compete any more than we could.

My offer to perform searches if anyone in a censored country asks is still valid, by the way. Not that I think it's necessary, just my way of twitting the tyrants.

The whole referenced story is only about 300 words, if you're considering reading the whole thing, it's fast.

One of the things that has a lot of issues is any transaction between related people. Actually, this is not limited to purely family transactions, but applies also to transfers among partnerships and their partners, corporations and their officers

The market theory holding that the value of a property is what is agreed to between a willing buyer and a willing seller is subject to the proviso that neither buyer nor seller has a reason to inflate or deflate what the property is worth to them. If the parties are related, there is an obvious reason to think that this may not necessarily be the case. Parents do things for their children all the time, siblings for each other, and as you're probably aware if you work in corporate America, major stockholders, investors, and executives often manipulate corporate versus personal transactions for less than wholesome reasons. Partnerships do the darnedest things, as well.

The issue, as far as the lender goes, is that they are trying to safeguard their money. Lending is a risk based business, and the lender wants to know that they are not taking more of a risk than they intend to when they take on this loan.

Let's say Jane Jones is CEO of SuperColossal Corporation. She wants to manipulate her compensation, so she has SuperColossal sell her property for half it's real value.

Now this is actually okay by most lenders, if not securities regulators, IRS agents, et al. The loan is based upon the purchase price, the appraisal comes in double the purchase amount, and the lender assumes less risk than they price the loan for. Remember, the property is valued based upon LCM: Lower of Cost (purchase price) or Market value. When market value comes in high, the lender is covered. What isn't so cool is if Jane Jones sells SuperColossal the property back at twice its value. If the corporation gets a loan for 75 percent of value, that's at least a third of the lender's money they're not going to get back in case of default, which becomes likely when Jane is fired and the new CEO asks why they are paying the loan when they owe half again what the property is worth.

Needless to say, the lenders want to guard against that. Many lenders will not do related party transactions, period. For the ones that do, they will want to be very careful on the appraisal, which has now become their only guard against getting into an indefensible position. Many times, lenders may require related party transactions to go through certain appraisers, they may require in house appraisers, they may require multiple appraisals, and they may require that there be no contact between principals and appraisers. Whatever their required precautions, they need to be followed, as failing to do so will cause the loan to be rejected.

I'm going over this to make a point. Many lenders have other requirements as well. Some may require full documentation only, others require that the loans have full recourse (they can come after you legally if they lose money). Each and every lender creates their own policy, and if your transaction is between related parties, it is probably more important to inquire about related party transfer policy and requirements than it is to get a good rate at a competitive price. Not much use having a great quote if you can't meet the lender's requirements. Even worse if it causes you to waste time with a lender whose requirements you cannot meet, and now your deadline for the transaction is here and you don't have a loan, and so cannot complete the transaction.

Caveat Emptor.


Carnival of Investing

Carnival of Liberty Recommended: State of Flux

Carnival Of The Vanities

Carnival of the Clueless Recommended: Nose on Your Face

By my reading of the schedule, I've got the Carnival of Liberty next week. Email to me or use the Conservative Cat Submission form. BlogCarnival may also work if the proprietor updates it.


I just got a response to when the new VantageScore credit scoring will be implemented. The goal is for June. Here is the response I got:

Thank you for your recent inquiry about our VantageScore announcement of last week. I apologize for the tardiness of my response but the consumer, business and press interest in this topic was such that we were unable to answer all of the inquires in a timely manner.

With regard to your questions, we're planning to offer VantageScore to consumers in the June timeframe. At that time we'll begin to distribute consumer-facing materials which will answer all consumer questions. Until then, we're focusing on our business clients and their adoption of this new and revolutionary score.

Revolutionary? Well if consistent evaluations among the big 3 can be considered revolutionary, I suppose. Next week: Driving in the correct direction down a one way street and occasionally adhering to speed limits!


Just want to say a quick thank you to Casey Software and Educating the Wheelers, who have both put in plugs for this site recently. Thank You both.


I keep talking about the scam artists, liars, and thieves I encounter in the business I'm in. Don't get me wrong, there are a lot of people trying their best to do the right thing as well. Most of the crooks simply don't know any better, but some of them are intentional crooks, looking for the shortest route between two large scores.

Mortgage Fraud Blog writes about this last group. I'm adding him to the right hand roll as a useful place to check out when you start to get complacent.


Moslems practicing polygamy in the United States. Law Enforcement does nothing to them, while persecuting the Mormons (and any other polygamists)

HT to Wizbang


Iraq the Model had some good thoughts on the three year anniversary of the invasion.


Yesterday, there was a successful jailbreak that killed 17 cops in Iraq. Today, they tried the same tactic and got their heads handed to them.

Also, Israel May Be Next al-Qaida Battleground.

Somebody must be feeding Zarqawi stupid pills. Good job, whoever you are. They can't beat the americans, so they're going after the one country with more experience against their tactics, and that doesn't handicap it's military in dealing with their enemies, either. Okay, it's a recruiting coup - those who've heard Israel slandered since they were born will sign up right and left. But Israel doesn't fool around about this stuff, and there's no way al-Qaeda will break their will.

"Lenders Are All The Same"

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Just like Mohandas Gandhi and Genghis Khan and Attila the Hun were all human beings, lenders make money by lending money to people who want it.

That's about the limit of the truth in that statement.

Lenders do, by and large, get their money to lend from the bond market. But not all lenders get their money from the same part of the bond market. Some get the money from low-risk tolerance folks looking for security, and willing to accept comparatively low rates. Some get the money from high risk tolerance folks looking for more return for their risk. Within each band, there are various grades and toughnesses of underwriting. A lender with tough underwriting will have a very low default rate, and practically zero losses. A lender with more relaxed underwriting will have more defaults, and higher losses, meaning they must charge higher rates of interest in order to offer the investors the same return on their money.

I have literally just finished pricing a $600,000 loan for a client with top notch credit and oodles of income (he's putting $800k down). Even A paper and with the yield curve essentially flat, I got variations of three eighths of a percent on where their par rate was. Every single one of them had significant differences in how steep the points/yield spread curve was (if you need these terms explained this is a good place). For one lender it was "offsheet pricing" below their lowest listed rate. This lender is more interested in low cost loans, and they take it for granted that folks will not be in their loans very long. This lender is appropriate for those who are likely to refinance within a few years. For another lender, it was "offsheet pricing" above their listed sheet prices. This lender specializes in low rates that cost multiple points, so they can market lower payments. For those few people who really won't sell or refinance for fifteen years, these are superior loans.

Which do you think is really better for the average client? Well, let's evaluate a 6.5 percent 30 year fixed rate loan that costs literally zero (I get paid out of yield spread, while rebating enough to the customer to cover all their costs), with a 5.875% 30 year fixed rate loan that costs $3400 plus two points. I always seem to be computing $270,000 loans here, but since this was "jumbo" pricing and a $270,000 loan is "conforming", which carries lower rates, I'll run through both.

The 6.5 percent loan is zero cost to the client. Nothing out of pocket, nothing added to the loan balance. Gross Loan Amount: $270,000. The 5.875% loan cost 1.875 points in addition to $3400 in closing costs. Gross loan amount $278,625. You have added $8625 to your mortgage balance to save yourself $98.40 per month. You theoretically are ahead after 88 months (7 years, 4 months), but not really even then.

Every so often I get a question that asks why they can't have A for the price of B. The answer is the same as the reason why you can't have a Rolls Royce for the price of a Yugo. Another funny thing about Rolls Royces is how expensive they are to maintain. A middle class person with a Rolls better plan on living in it. The funnier thing is, your friends, family and neighbors can't even see you in it, so there is no point in a "Rolls Royce" home loan except for utility, and if it's not paying for itself, then there is no utility (or negative utility, i.e. something you don't want), and therefore, money wasted.

Now, let's crank the loans through five years - longer than 95 percent plus of all borrowers keep their loans, according to federal statistics - and see which is really better for most borrowers. The 5.875% loan makes monthly payments of $1648.17. Over five years - 60 payments - they pay $98,890 and pay their balance down to $258,869. Total principal paid: $19,756. Actual progress on the loan (amount owed less than $270,000): $11,131. Interest paid: $79134, which assuming a 30 percent combined tax rate, saves you $23,740 on your taxes.

Now let's look at that 6.50 percent loan that didn't add a penny to your balance. Monthly payments of $1706.58, total over five years $102,395. Looking pretty awful, so far, right? But your total amount owed is now only $252,750. Total principal paid: $17,250. But this same number is also the actual progress! Interest paid $85,145, and assuming 30 percent combined tax rate, same as above, it gives you a tax savings of $25,543.

Now let's consider where you are after five years.

With the 5.875% loan, you saved $3505 on payments. But you also owe $6118 more, and the 6.5 percent loan saved you $1803 more on your taxes. Furthermore, if you've learned your lesson and rates are as low when you refinance or sell (6.5 percent on your next loan), it's going to cost you $397.67 per year from now on for that extra $6118 you owe! Net cost: $4416 plus nearly $400 more per year for as long as you have a home loan. Assuming that's "only" 25 years, your total cost is $14,358. I never spent so much money to save a little for a little while!

Now, let's consider that $600,000 loan in the same context. After all, the pricing really applies there (conforming rates are lower). Appraisal costs a little more, and so does title and escrow, for jumbo loans on million dollar houses. Let's say $3700 in costs. Your new 5.875% loan would be for $615,236 (disregarding rounding). Payment $3639.35, which over 5 years goes to $218,361 in payments. Crank it through 60 payments, and you've paid the loan down to $571,612. Principal paid $43,388, actual progress $28,388. Total Interest paid, $174,973, which assuming a combined 40% tax rate (higher income to qualify!) gives you a tax savings of $69,989.

At 6.50 percent, the payment on a $600,000 loan is $3792.40. Times 60 payments is $227,544. Crank the loan through those 60 payments, and you've paid the loan down to $561,666. Principal paid and actual progress made: $38,344. Total interest paid $189,209, which at the same combined 40% rate is a tax savings of $75,684.

With the 5.875% loan, you saved $9183 in payments. Yay! However, you owe $9946 more, paid $5695 more in taxes, and on your next loan, assuming it's at 6.5 percent, you pay $646.49 per year in additional interest. Total cost is $6458 plus $646 per year for as long as you have a home loan, which assuming that's 25 years equates to a total of $22,620!

Which of these two loans and lenders is better for you? Well, if you're going to stay 15 years or more and never refinance, the lender who wants to give you the 5.875% loan. That rate wasn't even available from the 6.5 percent lender. On the other hand, if you're like the vast majority of the population that refinances or sells within five years (for whatever reason) you really want the 6.5 percent loan whether you knew it before now or not, which also was not available from the 5.875 percent lender.

The billboards advertising rates aren't going to tell you cost, of course. They're trying to lure clients who don't know any better, and often they're playing games with the loan type as well. But when the rate spread between the rate their selling and APR is over 3 tenths of a percent, you know they're building a blortload of costs into it. Keep in mind that the examples I used were almost two full points, and they were each only about a 0.25% spread between rate and APR. You are never going to recover those costs in the time before you refinance. The lender who offers you 6.5 percent for zero cost is probably offering you a better loan.

Now, there were lenders targeting the markets between these two lenders, some that overlapped the whole market, and even another lender specializing in rates even lower and with higher pricing. Keep in mind that this article was limited to A paper 30 year fixed rate loans, which are limited in what they can possibly accept by Fannie Mae and Freddie Mac rules. Once you get out of the A paper market and especially down into sub-prime lenders, the diversity between offerings really multiplies, as the differences they are permitted in target market cover all parts of the spectrum. Some wholesalers walk into my office with the words, "Got any ugly sub-prime today?" Other sub-prime wholesalers ask me about "people that could be A paper but are willing to accept a prepayment penalty to get a lower rate" (I don't use those much). Some want short term borrowers, and their niche is the 2/28. Some want the thirty year fixed with a prepayment penalty. The ones who ask me about negative amortization loans, I throw out of my office but they're selling them somewhere. A lot of somewheres, judging from the evidence that they were 40 percent of purchase money loans here locally last year.

So lenders are not all the same. Indeed, every single one of them is different, and you need to shop enough different ones to find the program that's right for you, and ask lots of questions every time. Just asking about rate is not going to make you happy, as I hope I have just demonstrated. If you walk into their office, they're not going to tell you that you're not the client they're really looking for unless they just don't have any loans at all that you qualify for (and if you're in this category, do not blindly accept any recommendations they make. Most places, they're sending you to the place that pays the most for the referral, not the lowest cost provider).

Caveat Emptor.



Carnival of The Capitalists Recommended: Slow Leadership, Ask Uncle Bill

RINO Sightings Recommended: Techography, Strata-Sphere, Dean's World

Carnival of Personal Finance Recommended: Roth and Company (It's good to see I'm not the only one pounding my head against the "I need the deduction!" stone wall)


Stuff like this are part of why I think the Iranian government is doomed. Freed Iranian Journalist Remains Defiant. This guy is really speaking truth to power - and that power can and will do horrible things to him. Here in the US, few of them are anything but poseurs - they do it to bond with their peers, safe in the knowledge that nothing will happen, in fact they will be praised for their "daring". Akbar Ganji has no such knowledge, none of the protections of our professional dissidents, none of their advantages, and he speaks out anyway.


Mr. Completely has a solution to those folks who are complaining about the treatment of enemy combatant detainees.


Armies of Liberation notes that the man who alerted Yemeni authorities to the incipient jailbreak of 23 Al-Qaeda prisoners is still in jail himself. And no, he wasn't in jail until he made the report.

Do I need to connect the dots for anyone?


Belmont Club, on the other hand, offers an evidence based refutation of the idea that civil war exists or in imminent in Iraq. Actually, Wretchard is very restrained in calling "Bull****!', but I suppose it's a case of where you draw the line.


HT to Hugh Hewitt for a pointer to this Middlebrow article on the long view of George Bush.

Shakespeare had it right:

This day is called the feast of Crispian:

He that outlives this day, and comes safe home,

Will stand a tip-toe when the day is named,

And rouse him at the name of Crispian.

He that shall live this day, and see old age,

Will yearly on the vigil feast his neighbours,

And say 'To-morrow is Saint Crispian:'

Then will he strip his sleeve and show his scars.

And say 'These wounds I had on Crispin's day.'

Old men forget: yet all shall be forgot,

But he'll remember with advantages

What feats he did that day: then shall our names.

Familiar in his mouth as household words

Harry the king, Bedford and Exeter,

Warwick and Talbot, Salisbury and Gloucester,

Be in their flowing cups freshly remember'd.

This story shall the good man teach his son;

And Crispin Crispian shall ne'er go by,

From this day to the ending of the world,

But we in it shall be remember'd;

We few, we happy few, we band of brothers;

For he to-day that sheds his blood with me

Shall be my brother; be he ne'er so vile,

This day shall gentle his condition:

And gentlemen in England now a-bed

Shall think themselves accursed they were not here,

And hold their manhoods cheap whiles any speaks

That fought with us upon Saint Crispin's day.


Volokh Conspiracy has the missing South Park episode.

I'll admit that my opinion of Scientology and L. Ron Hubbard have always been colored by the legend among sf fans that he got mad one day and said, "I"ll show all of you. I'll found a religion!"

On the other hand, with a biography that reads like this, I don't need a lot of external coloration.


I've had a busy few days. Trying to push-start the sister site (there is no way not to have to push start a new business. I'm informed that large amounts of start up capital make grease the skids, but increase the mass at least enough to compensate). Mellon, the sweet one of my two dachshunds, is having trouble with her back legs (The vet says he's hopeful that steroids will help), and of course, Hilda's birthday (We got her officially sixth birthday'd). I don't want to split up my two posts on the Good Faith Estimate anyway, and I think I'll have something for you by Wednesday morning. It's more an embarrassment of riches than anything else. I've got about forty articles started, I just need to decide which one to finish..

In this article somebody wrote in the comments about going upside-down on their mortgage:

What happens if the property value falls and becomes far less than the loan ammount? (POP) Lets say you get a loan for $280,000 on a home that was $330,00 and then three years later is is only worth $150,000, but you still owe $250,000 on it?

Now "upside-down" in the context of a mortgage is just slang for owing more than the property is theoretically worth. This is a tough situation to be in, and there's not much that can be done while you're in it except get through it. Before, yes. After, yes. During, no.

I've predicted that this is going to be a widespread phenomenon over the next few years, and it's going to cause a world of hurt, but it doesn't need to include YOU, unless this has already happened, and I thought Sandy Eggo, where I live, to be on the bleeding edge of bubble problems, and appraisers are still able to justify near peak values even here.

Surviving being upside down is actually pretty easy if you have the correct loan. I bought near the peak of the last cycle, and was upside down myself for little while. If you take nothing else away from this article, understand that the only time your current home value is important is when you sell or when you refinance. If you don't need to either sell or refinance, it does not matter what the value of your home is. It could be twenty-nine cents. It's still a good place to live. You've still got the loan you always did. You should be able to keep on keeping on until the situation corrects. Prices will come back sooner or later.

The key is to have a sustainable loan. I did. I had a five year fixed period, during which time the market recovered and I paid down my loan. By the time I went to refi, five years later, things were better.

This is the real sin of the local real estate and mortgage industry. Yeah, the bubble's going to pop, and everybody knows it. Actually, it's already had significant price deflation. But if they had been putting folks into longer term sustainable loans, they'd be fine. Instead we've had about forty percent of purchase money loans being negative amortization and another forty percent being two year fixed interest only loans. The period of low payments for the former, and the fixed, interest only periods for the latter, are going to expire while prices are still down. That would be tolerable if the people could make the new payment, but if they could have made the new payment, they would have been in longer term fixed rate fully amortizing loans in the first place. What's going to happen next is kind of like when Wiley Coyote looks down.

I've been telling people there are no magic solutions to the problem for over three years now. If you borrow the money, you're going to have to pay it back. Make the payments now or make them later, and the later it gets the worse it will be. There is no such thing as free lunch, and those who pretend that there is are not your friends. The Universe knows how much more money I could have made by keeping my mouth shut and screwing the customer. $100,000 is a conservative estimate. Instead of struggling to convince people to do the smart thing these last eighteen months, I could have been glad-handing everyone in sight and making a mint off of ignorant people. But then there would be court dates looming in my future (those in my profession who were not so careful are going to be in for a hard time, and I hope you'll forgive my schadenfreude when it happens. Those con artists masquerading as professionals stole a lot of money from me and from the people who became their clients by convincing them they could afford more house than they could, or by not admitting to the tremendous downside of what they were offering the client. "No, he just wants you to do business with him and he can't do what I'm doing." I could have gotten the loans, as I informed more than one of the clients I lost, and on better terms, but I wanted them to know the downsides. So I lost the business to the con artist who pretended there wasn't one. There were downsides, but people want to believe the con artist).

What to do if it has become obvious you're headed for the canyon? Figure out what your payment is going to do for the next several years. Determine if you're going to be able to make that payment before it happens to you. If not, refinance now if you can, sell if you can't. Pay the prepayment penalty if you have to, because given a choice between a prepayment penalty and foreclosure, the former is much better.

If you want to refinance, find a long term fixed rate loan. Minimum of five years fixed, fully amortized. Since thirty year fixed rate loans are actually about the same rate as 5/1 ARMS right now, I've been recommending the thirty year fixed for almost everyone. This is a loan that never changes, and you never have to refinance because the payment is going to jump.

The critical factor for refinancing is the appraisal. The Critical factor for the appraisal is how much value can be justified by the appraiser. In order to justify the value, there have to be comparable sales in your neighborhood. The appraisers don't always have to choose the most recent; they have the option of choosing better matches for your home. May the universe help you if there are model matches selling for less in your condominium complex, because there the lender is going to insist on the most recent sales. All the more reason to act now, while you can, rather than wait and hope.

If you're already over the chasm and prices have fallen, consult some local agents about selling. Short payoffs are no fun, but in the vast majority of cases, they're better than foreclosure if you're not going to be able to make your payments. At least when they're done, they're done. Foreclosure is a hole that keeps on draining you long after you've lost the house, and after it's cost you thousands of dollars more than a short sale (and if sale prices continue down, that 1099 love note from the lender after the foreclosure is going to be worse). As for waiting, well, if it's an honest consensus that things are coming right back, but here in San Diego the Association of Realtors had not yet admitted there's price deflation despite it going on for almost a full year. They've been playing games with reported figures to make it seem like things are rosy. There are obvious motivations for this, not all of which are explained by self-interested greed, but it's not something you can paper over and ignore indefinitely.

Who's to blame for the impending trainwreck? I'm not really into blame, but here are several targets. Unscrupulous lenders and agents bear a lot of blame, but not the exclusive burden. Panic and greed on behalf of the buyers is certainly a significant part. And if several folks are telling you that the best loan they have is five and a half or six percent or even six and a half, shouldn't a normal, rational adult be suspiscious of an offer that's theoretically at one percent? I can maybe believe somebody who offers something a quarter of a percent better than the competition. Half a percent might be just barely possible. Sombody who offers money, of all things, that's less expensive by an interest rate factor of five isn't telling you the whole truth. (Unfortunately, in this case, these loans are so easy to sell on the basis of minimum payment and nominal rate, it got to the point where these loans were what the vast majority of agents and loan officers were talking about)

As a final note, 125% loans do exist, but they are ugly. Very ugly. Not as ugly as Negative Amortization, but ugly, and the payments and interest rates aren't any more stable than the real terms on those Negative Amortization loans. They don't do stated income, either, or nonrecourse. You stiff those folks, they will get the money out of you.

Prices are going to come back up. It's as predictable as the fact that they were going to fall. Can't tell you when, anymore than I could tell you when exactly they would start falling. Doesn't mean it won't happen. The trick is to have a sustainable situation in the meantime, and this means a loan with payments you can make every month, month after month, indefinitely until the loan is paid off or you have the ability to refinance or sell. If you've got this, someday you'll be telling yourself how happy you are that you bought that property. If you don't have it, get it. If you can't get it, get out.

Caveat Emptor.


Evolution has a good article debunking the religious right's opposition to an HPV vaccine, HPV being one of of the leading causes of cervical cancer.

What part of "straw man" do you not understand?


Security Watchtower notes that our new National Security Strategy name both Iran and China as major concerns.


Rhymes With Right brings up evidence wherein the Court of Review indicated that the President has the constitutional authority to order the wiretaps he did.

There are at least three reasons why the Donkeys are running from Senator Feingold's motion of censure. First is politics. Second is the facts of the law. Third is the fact that not doing it would be one of the stupidest things any nation has ever done.


Wizbang has a thoughtful article on the nature of impeachment, and what grounds Congress has for impeaching Bush, and what the consequences would likely be. Basically, disastrous for the Donkeys.


Victor Davis Hanson does some compare and contrast, and looks at the results.


Michelle Malkin and Captain's Quarters both have excellent reporting on the released Iraqi documents documenting a connection to Al-Qaeda. The former is from a Legacy Media response to it perspective, the latter from a coordinating the actual information perspective.

Dr. Sanity has some more evidence of the ill health of the Legacy Media.


Off to Celebrate the Leprechaun's birthday! Hilda turns six today! We're having a family party tomorrow.

Yes, her favorite color is green.

Argghhh! has a wonderful article, including a link to a power point presentation, that indicates the military "gets it" as to what it will require to win the war on terror. Pay particular attention to slide 15. It indicates who the enemy is not.

As usual, it's our political class - mostly on the left side of the isle, as the President has demonstrated he does understand - where the difficulties in understanding lie.

Jawa Report notes that the report doesn't talk about winning the war of information, and suggests hacker privateers. Actually, the concept he espouses is more in line with the concept of bounty hunters, as privateers usually had their targets determined for them, at least as a class, by their Letters of Marque and Reprisal. My comment is that this is an excellent idea, but more in the line of a defensive tactic. Nobody ever won a war by sitting on the defensive.

The offensive tactics? Telling our side of the story. This is being done right now, for free, by literally millions of people (of which I hope to count for one). The difficulty is that they're not being heard at a level above background noise. Go to Mudville Gazette, or any number of milbloggers, to read first hand accounts and expert evaluations of what is going on. Go to Argghhh!, Blackfive, and many others.

Also important, perhaps more so, are people like Bill Whittle at Eject! Eject! Eject!. We live in a cynical age, and to show reverence for the achievements of the United States and the western world is to invite all of those who "are living in the real world and know better" (or think they do anyway) to come down and publically ridicule you as "naive", "brainwashed", or worse. We have heard all our lives, constantly, about the limitations and failures of western society. What they fail to understand is this is the equivalent of nitpicking the performance of the team that has won not just the gold medal, but every medal in the sport of improving the human condition in the last four hundred years. Those nations who have prospered in real economic terms have all done so to the extent that they have adopted an open, western model of society. If you look at when that success happened, and to what degree, it has nearly perfect correlation to the adaptation of the western model. Yeah, we in western society have our mandatory deductions, but focusing only upon the defects is like griping that we only shot 985 out of a possible 1000, when nobody else cracked 600. It's like complaining that your SAT was only 2350 (I understand it goes to 2400 now), when nobody else in the class beat 1800. Most precisely, it's like defaming a long distance runner who hasn't finished yet because he's "only" nine miles ahead of the second place runner. We are still improving, and the critics perform a vital function, but to fail to place the criticism in the context of how much we do right is to do everyone a disservice of the most grave sort. The news of what we've done wrong, and what has gone wrong, is only news because of how much we have done right.

We have replaced despotic, repressive governments with freely elected ones.

We have replaced political systems where the transfer of power was done at the point of a gun, with ones where the transfer of power happens because of ballots.

We have won two wars against incredible logistical barriers with microscopic casualties, and fought low level guerilla warfare against the loser's holdouts with incredible success by any historical comparison.

We have, if anything, more global goodwill and respect for having the fortitude to act, than at any time since the end of the Marshall Plan.

We have succeeded so well by every measure without those of our citizens not directly involved making any significant sacrifice. Compare and contrast this to World War II.

Our foreign success is so overwhelming that we have the luxury of debating whether tapping phone calls made by known enemy combatants that happen to call sympathizers here in the United States was illegal or even inappropriate. (Clue: it is neither)

Our foreign success is so overwhelming that it has permitted negligences and oversights of a most heinous nature domestically, because those lines of defense (and they are lines of defense) have simply not been tested since creation.

So, yeah, Homeland Security is a joke, but it's a joke because they think they're performing a sinecure (They're not, as we're going to find out some awful day that I hope isn't worse than 9/11). Our response to Katrina wasn't anything like what it could have been, but contrast that with the nations hit by the tsunami in 2004, and consider that what Katrina did was much worse in terms of destructive power. So keep it coming, critics, but put it in context - and you'll find yourself the most effective, most enthusiastic cheerleaders on the planet.

Carnival of Liberty Recommended: Robot Guy. As an addition, Barry Goldwater established before he left the senate that it takes only an Executive Order to withdraw from a treaty. If it looked like there might be something to gain, that would be a real possibility with a realpolitik president. Charlotte Capitalist

Carnival of the Vanities


Now THERE'S a couple that knows how to fight!


Is there anyone who thinks this isn't posturing for the far left? Feingold Accuses Democrats of 'Cowering'. Money quote: "Majority Leader Bill Frist, R-Tenn., tried to hold a vote Monday on Feingold's resolution but was blocked by Democrats"

(later) Captain's Quarters documents the Donkeys as they run from this bill.

In short, it's to their political advantage to have it before Congress. But as for actually voting for it, that sound you hear is crickets chirping. On the moon. They know it's a loser, and their votes on the issue would come back to haunt them, some in a few months, and others, particularly in 2008.


pfadvice is claiming a new scoring system for credit has been agreed to.

I found this as confirmatory evidence, and more on Experian's website. All Transunion has is an announcement popup with no significant information. Equifax had a similar announcement with a bit more information, but nothing substantial. I emailed the given contacts to find out what the implementation schedule and scoring mechanisms will be.


HT to Tinkerty Tonk for a pointer to false child abuse complaints at Sean Gleeson. The linked post is part one of a five part saga, and I left the following comment on part 5:

You have a valid professional complaint against this lowlife, who if he cannot be bothered to follow the law, should not be in the profession. Here in California, that's a violation of the professions code. It probably is in OK as well.

Here is a list of OK Realtors Associations:

Here's a link to the Oklahoma Real Estate Commission

Complain to both the Board of Realtors and the state. The former is a professional association that probably won't do anything, but they'll make his life interesting (in the chinese sense) for a while. Even if they throw him or his brokerage out, it doesn't put them out of business. The latter is where you have a real chance to stop this nincompoop before he does this to anyone else, with possibly tragic results.

end comment

Several years ago one of my neighbors (who thinks - erroneously - that I don't know who it was) falsely accused me of animal abuse. Fortunately, I had just been to the vet that day for a routine visit. I referred the inquiring officer to the vet, and I got a quick letter saying that the complaint had been found to be groundless. That lucky coincidence saved me no end of heartache, and that was for a dog. Now, I love my little dachshunds, but they're not my girls. My father-in-law was a Child Protective Services worker for several years, and I've heard some front line stories about abuses of the system, which easily takes the gold medal for overzealous reactions and defenses away from Torquemada's Inquisition. I don't blame the CPS people; it's the way the legislatures write the laws to comply with political interests. Organizations who make campaign contributions win. Lawyers win. Doctors win. Social workers win. People with political agendas win. Parents, families, and especially children all lose.

False accusers belong in the same hell they try to put other people into. My sense of accusers who aren't willing to sign their names to a public complaint is that the complaint should automatically be consigned to the wastebasket without wasting a the time of any living human. If someone really believes they're stopping child abuse, they should be proud to step forward and take credit for the report. I would be. The only reason for not doing so is because you are ashamed of what you did. And if there ever is a case where there are credible reasons why someone might suffer (say, because the person turned in is a mafia don), it should need a judge's order to seal it.


I thoroughly agree with Michael Barone, among others. Like him, the one subject that turns me into a flaming left winger is CEO pay. (Actually, a lot of other current and former financial planners are this way.) It doesn't bother me so much for the privately held corporation - although they're a lot less generous than the public ones. It's the publically traded companies lack of self-interested strong negotiators that all go along with the culture so that their own lavish compensation package doesn't suffer the same examination.


Via Michelle Malkin a 5 minute video that in the end, demonstrates what a good thing it was for the Jedi and Sith that they never encountered D'Artagnan or Cyrano. Stop thrust, anyone?


Armies of Liberation doesn't write exclusively on Yemen. Today, she has an excellent article on the Phillipines and what may be the root of their problems: identity group politics.


Asymmetrical Information examines the health care system and its constraints, mostly political.

I've always said it is pretty easy to design a fair, rational, economical health care system - but that it's politically unworkable. It is also easy to design a politically correct healthcare system, but such will reliably fail far worse over the long term than anyone's worst nightmare of an unrestrained free market.

As an illustration of the first point, consider a healthcare system where the young - up to about age 25, where most folks who are going to graduate college have done so - get automatic free care, and the coverage declines over time to where those over whatever age is the limit for productive work get only routine or preventative care.

As an illustration of the second point, every universal coverage scheme ever tried. They have all proven themselves economically untenable, actuarially.


Big Lizards has the report on corruption within the Iraqi army that was planning to allow terrorists to infiltrate for purposes of attacking the green zone.

It was foiled by the Iraqi army. They took down their own people, even their own bosses in some cases.

That sound you hear is me cheering. They get it, at least enough of them to make the difference. It's about the rule of law, and what's best for Iraq as a whole. Many americans could use this reminder. This is the final piece of evidence for me to know that our efforts in Iraq have borne the necessary fruit. There will still be casualties, setbacks, and all sorts of problems.

If I had anything to do with the effort in Iraq, I'd say I was proud of them. You folks who have been or are over there, pat yourselves on the back. You have a right to be proud of a job well done!

Volokh Conspiracy has an excellent article on the state of the law vis-a-vis publicizing past felony convictions.

I ask, how can it be permitted for the media to do something that private citizens cannot? Does the media have more freedom of speech than a private citizen? I would submit that the first amendment was clearly intended to protect both equally.

Do we want privileged classes in the US. Admittedly, we have them de facto, but is this a practice we wish to discourage, or encourage, de jure?

As an additional note, at what point does it become media? Am I, with roughly 1300 visits and 2000 page views per day over the last week (making my articles more read than many small papers, newsletters, etcetera), a media publisher? Are the Volokhs, at roughly ten times that level? Michelle Malkin, at roughly ten times that level? Does it require incorporation? Financial Statements? What, precisely, is the factor or factors distinguishing media publication from non-media?

I mistrust, as a matter of principle, all lines dividing our nation into two or more parts as to legal rights, privileges, or obligations. The correct view to take, and definitely to start with, is that all citizens are equal before the law. If A is allowed to do something, what compelling societal reason do we have for forbidding B? If C is not allowed to do something else, what overriding concern allows it to be permissible for D? We may disagree on specific cases, but I believe that the reasoning is universal.

I submit that in this case, no valid distinction can be drawn between the rights of media and the rights on individuals.

As a final reductio ad absurdem, suppose it is permissible for something to be published by one media outlet or another. Can we visualize any scenario under which it should be illegal for one citizen to tell another what they saw in a news report? If this distinction is drawn, that is precisely the state of affairs we will find ourselves in.

Better deals for the bank, that is.

Ken Harney has a recent article Study Shows Loan Brokers' Better Side

But now a new, independent academic study has concluded the opposite: According to a team of researchers headed by Georgetown University's Gregory Elliehausen, home mortgage applicants with less-than-perfect credit pay lower financing costs when they obtain their mortgages through brokers rather than from loan officers directly employed by lenders. The same pattern holds true for African American, Hispanic and low-income borrowers.

The study was limited to subprime borrowers, but the results are not surprising:

Overall, broker loans cost 1.13 points less for first mortgages, 1.98 less for second mortgages

For borrowers in predominantly black areas, the difference was 1 point and 1.9 points, respectively.

For borrowers in predominantly hispanic areas, the difference was 2 points and 2.4 points. The explanation as to why this gap is larger is probably as simple as the fact that many of these folks limit themselves to dealing with spanish speakers.

Skolnik added, though, that the data overall could reflect that "brokers in general operate in a much lower-cost structure" compared with banks and retail mortgage companies that carry heavy overhead and employee costs. Moreover, he said, "brokers are far more agile and nimble than retail" lenders, when pushed to compete on pricing and terms.

That and any given lender may have anywhere from a dozen loan programs to fifty, all intended to hit specific niches and priced for given underwriting assumptions. A 3/1 is different from a 7/1 is different from a 30 year fixed, stated income is different from full doc is different from NINA. That's nine programs right there, and this is A paper stuff. Subprime is even more varied. It doesn't matter if you barely meet guidelines or soar through them. If you find a program with tougher underwriting guidelines that you still qualify for, than that lender will give you a better rate on the loan, because they will have fewer of them go sour, and therefore get a better rate on the secondary market. You can go around to all the lenders yourself - or you can go to a broker.

Furthermore, even if you're one of those so slick that you fit into the top loan category of the toughest lender, brokers can typically get you a better price. Why? Two reasons. First, the lenders don't have to pay broker's overhead, making it more cost effective for the lender to do the same business through the broker. Second, and more importantly, when you walk into a lender's office, they regard you as a "captive" client. Brokers know better. Brokers are not captive to anyone, and they know that you're not captive to them. A good broker's loan officer will price with at least a dozen lenders. I've shopped fifty or more for tough loans. Furthermore, there's an efficiency factor at work. After a while, a good loan officer learns which lenders are likely to have good rates for a given type of client. Which do you, as a client, think is likely to be the best use of your time and resources? Going to all those lenders yourself, or going to a few brokers?

This article of mine is also highly relevant to this discussion.

Caveat Emptor


Most of what you read on financial planning in the media is garbage, but here is one of those occasionally useful pieces: IRA Rollovers Could Have Tax Implications.

Here's the idea: You keep company stock in your qualified plan aside from any rollover you may do. Leave it with the company. Convert it to non-qualified money, which means you take the hit for ordinary income at whatever you paid for the stock, or its value at time of acquisition(consult a tax professional. There used to be some circumstances where you could substitute other assets of equal value, and avoid the ordinary income hit altogether). Hold them for one year or more after conversion.

Now, if you sell them, you're talking about long term capital gains, rather than ordinary income tax, a much lower rate, and subject to your control as to when you realize it.

Because it's no longer part of your IRA, you are not paying ordinary income tax rates on the whole amount as you take it out of the account. Nor is it subject to Required Minimum Distribution (RMD) rules that the IRS has. You pay only capital gains tax when and where you redeem them, as you redeem them. Capital gains is a much lower tax than ordinary income, provided you hold for at least one year.

This is not for every qualified account. Since the brand new Roth 401s are after tax accounts, the whole thing is rather self defeating if the assets should be held in one of those, or in a Roth IRA for that matter. Why would you want to do this to conserve taxes if there are no taxes due if you just do nothing?

Now, by and large, I recommend moving your money to an IRA of equivalent nature when you leave a company. Traditional 401k to Traditional IRA, Roth 401k to Roth IRA. But as you can see from this, there are exceptions to that general rule.

Caveat Emptor

(Postscript: My wife is the IRA clerk for a fairly large local institution. You would be amazed how often people get bad advice from generic tax farms, and how often theoretically competent professionals do the rollover forms wrong. This highlights the fact that just because they work for Famous Well Known Corporation, doesn't mean they know what they're talking about. Matter of fact, I've regularly seen people working for Famous Well Known Corporations give awful advice that cost clients money, and would lose the business permanently to anyone else. But people cut Famous Well Known Corporations way too much slack. It is a better strategy to consider the individuals who will be performing your services.)


RINO Sightings

Carnival of Personal Finance

Carnival of Capitalists

Carnival of Investing. Recommended: Dividend Guy

Carnival of Debt Reduction


Dr. Sanity has a worthwhile read on the status of Iran's nuclear weapons and the implications if they are actually used. The civilized nations could easily destroy all of the Islamic ones, radicalized or not, and the first time such weapons are used on the west, the only rationally defensible solution will be massive retaliation. Yet there are still those in this country so convinced that we are the evil ones for attempting to confront evil.

There is an old proverb about "Run from a man with a knife, for his reach is limited. Charge a man with a gun, for he does not have to reach you to kill you."

Nuclear weapons are a gun with a very long reach indeed, and we're all out in the open.


I've been wondering how long it would be until this was challenged: DUI defense lawyers challenge breath test. Actually, they're challenging the machine. In no other case that I can think of is the critical witness for the prosecution immune to challenge as far as credibility. Turns out, the code isn't copywrited, either - it's a trade secret like the formula for Coca Cola. That's all well and good, but the testimony of Coca Cola isn't putting people behind bars, and until the code and the range of possible inputs is analyzed, we're taking the machine's testimony on faith. If DNA analysis, ballistics, and any number of other forensic techniques are subject to analysis and scientific review, so should this be.

I don't want to encourage drunk drivers (I don't drink myself), but this violates a basic constitutional protection, the ability to examine the evidence against a defendant.

Transparency is good. Accountability is better. The former enforces the latter. Secrecy does neither.


Leave it to the FAA bureaucrats to screw things up: Judge Unexpectedly Halts Moussaoui Trial.


Q and O reports that the Dutch have figured out that even tolerance has its limits.


neo-neocon has a lengthy profile of Dr. Wafa Sultan, who confronted the Arabic Muslim world's prejudices on Al-Jazeera, and has now received death threats and as Atlas Shrugs reports, is in hiding and in need of protection.


Dr. Sanity notes the religious fervor on the part of the leftists of the world, and why they are so hostile to religion. It is because they have their own god of exclusive worship, who tolerates to straying from the one true religion. They are also hostile to reason, for their faith excludes it.

I had some small thoughts here, but Dr. Sanity does a better job.


Captain's Quarters has some worthwhile thoughts on changing the primaries. I like the idea of primaries as close together as possible. The current schedule has the nominees determined before California - the largest state - even gets to vote. Out of the seven presidential primaries since I've been able to vote, not once have the eventual nominees for both parties not had the nomination locked up before polls opened in California.

I want to see those who want the job to be forced to campaign nationwide. It forces them to organize nationwide, and allows less gaming of the system, using all of the resources early in the hopes that you'll be a contender and attract more donors.

The last time we had a convention fight between two or more candidates in the same party was 1952 (and Eisenhower won the general election). Looking at the candidates fielded since then as opposed to before, I cannot make a serious case that the more recent actual nominees are superior. In actuality, except for Gerald Ford and Bush pere, they have all been the candidate of the party separatists, rather than the candidate most able to appeal to most of the electorate. The ability to appeal to primary voters of one party has become distinct from the ability to win general elections - and the sooner we realize this and take steps to reverse it, the better off we will be.


I just noticed, but Strata-Sphere has been on a tear lately with vital updates about FISA, Plamegate, and the Dubai Ports Deal not being dead.

This guy needs the reward of as much recognition as possible for his hard work. I really suggest reading his entire front page (the first link in this category)


I'm kind of tired, so I'm not going to promise to adhere to my four new specialty articles per week schedule for a while. I usually let a carnival day go without a new article, so that's no different today. I have one waiting to go tomorrow morning, but after that I may need some recharge time, and so be less prolific for a while.

I have forty-plus article ideas posted and at least partially fleshed, but there's a lot going on outside of this URL right now.

I'm always open and enthusiastic about new ideas and questions, so don't hesitate to ask, but I think I may need some recharge time, so don't be surprised if the morning article is a repeat more often than you're used to for a couple weeks, and these Links and Minifeatures are shorter and come less often.

RINO Sightings

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Monday the 13th Edition

Doesn't it seem like that fits horror much better than Friday the 13th? Friday's usually a pretty cool day. But if you've seen some past coworkers of mine on Monday morning...

Night of the Living Moonbats! (US Politics)

Strata-Sphere leads with a horror story for the leadership of the Democratic Party. And it will hit right after Halloween!

Unabrewer tells a very scary story about The Other White Meat! It's Aliiive!

Leave it to Professor Bainbridge to bring our attention to the real horror story: Incompetence. This is pretty much par for the course in war, by the way.

New World Man tells us how much horror the line item veto would cause. Someone calling "B*******!" on Congress? Say it isn't so!

Don Surber tells of the horror of asymmetry between the sexes, and how the situation for one sex is basically equivalent to being an Alabama field hand prior to the civil war. Take them to the salt mines!

Aiieee! Monsters! (War on Terror)

Armies of Liberation tells the scary story of the impact of the mass Yemeni prison escape on Saudi Arabia. Look out! They're Loose!

Your host tells an atomic radiation horror story! Mutants in our future!

Tom Rants tells the horror story of not looking before you leap! *Splat* on the rocks!

Decision '08, on the other hand, tells us the fate of the hero of one film. Oh, the humanity!

Pigilito Says tells the story of the Silence of Spanish Satire.

Trailing blood through the snow! (Canada)

Centrerion tells the horror story of the allegedly conservative Canadian government violating Canada's own laws to fund Hamas. Quis custodiet ipsos custodes!

Laugh While You Scream! (Humor)

Nose On Your Face tells the story of an old horror that's still with us! No it's not Cthulu. It's much worse.

Avant News Also tells of a truly universal horror story. The Universe was designed by Committee! Multiple Committees! Aiieeee!

Beware of What's Under The Bed! (Miscellaneous)

Your host tells about the horrors caused by remaining apart from the mainstream of society. They marginalized themselves!

Enrevanche gives us a map with all the political horror stories for corporations. "And then the communists took over!"

Inside Larry's Head tells us a real world biological horror story. Michael Crichton, call your office!

Sophistpundit talks about traffic management horror. Here they come and we're stuck in traffic!

aTypical Joe tells of the horror story of a talk show host confronted with his wealth.

Respectful Insolence slides in under the deadline with the tale of an all too real world horror story.

Next week's RINO Sightings will be at Below The Beltway

RINO Sightings is listed with the Ubercarnival

Housing Bubble

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Gay Orbit: "Besides once in California, which completely recovered in a short period of time, by the way, can someone please show me an example of a "Housing Bubble" that burst that did not completely recover within a few (i.e., 3-10) years?

"Housing Bubbles" were invented by stock brokers, and real estate remains, and will almost assuredly remain, your absolute best investment."

(me again)

Actually, California pricing has reliably gone through cycles within my lifetime. We have hit the peak of the fifth one I remember (1991 was the last peak, which makes this the longest period between peaks ever. Previous peaks were mid 80s, about 1978, about 1970, and one when I was very young), and started a downslide. Right now it is primarily the higher end properties which have been hit, but it's starting to push the middle down as well. It is important to note that with the exception of the slide of 1929 to 1932 (when real estate prices fell, as well, and didn't come back to 1929 levels in most of the country until after the war), the stock market has not had a slump which it didn't come back from within ten years, either. Furthermore, when you consider returns uncorrected for leverage, the stock market reliably outperforms real estate over the long term.

In fact, nobody that I'm aware of has said that anyone who intends to buy and hold for years cannot make money - a lot of it - in the current market, even if prices do fall for a while. The problem is in the formerly large number of people looking to buy a property with the intent of "flipping" it for a quick profit. As the ability to buy your average property with the goal of selling it in six months for a substantial profit even after paying transaction costs is just about dead, so too are those deals that would have been made by those buyers. This has the effect of reducing marginal demand, and voila!, the prices are starting to slip. I (and every other bubble proponent out there that I have read) am confident that the prices will come back eventually. The question now, as in the stock market bubble that ended in 2000, will be how long it will take to come back and how far down it's going to go. Right now, lots of people are still down more than 50% from the stock market peak in March 2000. If they need to retire, or need the money for some other reason now, they are stuck. The same goes with housing, which due to the increased leverage of the investment can be much better when it's good to much worse when it's bad. There are at least three "short sales" (where proceeds will not cover obligations) in process in my office right now. If you can't hang on, it does not help you that prices will come back eventually. There's an awful lot of "Negative Amortization" loans out there that will be coming up on recast in the next 18 months, as well as "interest only" loans where the people just cannot afford the amortized payment. Be prepared for problems when they do, as this is going to significantly enlarge the supply (Inventory in many markets is over 200 percent of last years levels already, and mean time on market is even higher as number of transactions slips). The fact that prices have slipped will place many people temporarily upside down, and so unable to make their payments and unable to refinance when their loan adjusts or starts amortizing. Expect foreclosures to further increase the supply of available units.

If you are heavily leveraged on a short term loan (total loans against property total over 70% of current value, and most especially over 80%), I seriously suggest refinancing it into a longer term fixed rate loan now, while appraisers can still find justifiable comparables that use peak real estate values. It is entirely likely that any property which has changed hands in the last couple of years, at least here in urban or urban fringe California (and many other markets, as well), is going to end up upside down for an unknowable period of time.

I am a Loan Officer and Real Estate Agent, and still have current financial licenses which I have not yet abandoned. Real Estate Bubbles are not "invented" by stock brokers; the just ended bull market run in housing was the longest in recent memory partially due to peripheral psychological factors on behalf of investors "chasing returns" in what many will tell them is a "safe market", as well as things having to do with the financial aftermath of 9/11 as well as overcompetitiveness on the part of many pieces of the financial market, most particularly the subprime and Alt-A market. As a particular prediction, when the fall off from the current market is over and done with, I wouldn't expect there to be any lenders willing to go 100 percent on the value of a property for quite some time. There are many people out there too young to remember previous housing cycles, and partially for this reason and partially because the housing markets are more heavily leveraged than at any point since the Depression, I expect to be in for a couple of UGLY years.

I would be delighted to be wrong. Nobody will be happier than me if you can crow at me in a few years time "Told ya!" But I see what I see, and I won't lie about it to anyone (especially not clients) simply because it makes it easier to earn a commission. If you happen to be in the real estate business, be very careful what you tell your clients, or, at least in California, you'll likely wish you had.

Both real estate and the stock market go through periodic downturns. The question is not if, but "when" and "how much" and "how long." You always need a place to live, and you can make money if you invest prudently in any market, and the permitted leverage upon real estate together with favorable tax treatment gives it an advantage that's hard to beat. I had clients make double digit positive returns in each of 2000, 2001, and 2002 in the stock market, too. They were the ones who didn't get greedy (2003 was a rising tide that lifted all boats. It isn't genius when everybody makes 25%). Even in this market, you can make money on real estate, just like you could in the stock market when it was sliding.

In both cases, "time in" counts for more than "timing", but that's not the mentality you encounter in the average client. See my post Getting Rich Quick In Real Estate and Cold Hard Numbers for more information, but although real estate can be the best possible investment if you handle it correctly, it is not liquid. In fact, it is just about the least liquid investment you can make. You cannot go to your real estate person, as you can to a financial person, and say "liquidate it for cash" and expect to have a check for market value within a few days. You have to find a willing buyer. This is one reason for the existence of the "bigger fool theory," and sometimes that bigger fool doesn't come along when you need him to.

This is a very good sign: Unlikely Alliance Takes on School Conflict. Homosexual advocates and Fundamentalist Christians coming together to build a framework for discussion?

Now where did those four horsemen go? They were here a minute ago...


I really suspect this is going to really hurt us in the long term. DP World will transfer fully the U.S. operations ... to a United States entity. If being moderate politically and strong allies in the war on terror doesn't help get them business, and gets them castigated like this, they've got to be asking themselves why they are our allies.

Willisms seems to have the definitive take on the matter.

Wizbang has a list of other things we need to do in order to maintain any policy consistency.

Captain's Quarters has a list of those who lost face because of this.

Scrappleface covers the poetic justice angle very well. Give the contracts to Wal-Mart!


Interesting proposal: Senator Brownback wants to use DC as tax lab


Blackfive has some interesting statistics about the press. It jibes with my experiences.


Enceladus may have life They found liquid water geysers.


Don Surber makes a point that needs making about the federal budget. Worrying about porkbusting is much ado about practically nothing, at least on the scale of where the money is spent. If you want serious cuts in the federal budget, we've got to start cutting entire departments. This is why I want the entire federal budget process altered, and one bill per year that authorizes the maximum the government can spend.


Q and O makes the same point I made about father's responsibility a while ago.


Belmont Club has an article on the strategies and tactics that win wars - directed at the minds of the enemy.


I'm not qualified to assess the weapon's performance, but I like the idea behind this. Now the Marines can drop six grenades on their current Target of Choice in three seconds, at much longer ranges than thrown ones. The have been fast firing grenade launchers for decades, but this is the first I've heard of them at the man portable level - which means there can be a couple per squad.


Volokh Conspiracy covers the fact that the ABA is requiring quotas for minorities in violation of many laws, is effectively requiring law schoold to violate the law in order to meet those quotas, and may lose their ability to accredit law schools as a result.

Passive Asset Allocation

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A while ago I talked about Passive Asset Allocation as a way to beat market return as a strategy. So I'm going to write a bit about what it is, why it works, and how to do it.

Passive Asset Allocation is very simple at its heart. What you are doing is keeping the balance between asset classes that you have decided is best for your situation.

The way you do it is simple. The objective is to maintain a certain investment mix. You allocate your investment pool among the asset classes, and at strict intervals, rebalance to that allocation from whatever has happened over time. Typical period is once per year. You can do it either with individual stocks and bonds, or with mutual funds, variable subaccounts, or even a mix. For most folks, bonds especially are going to require mutual funds or variable subaccounts, as individual bonds tend to be high dollar values.

Here's an example, based upon an established portfolio of $100,000. Average market growth is 10%, but it's not evenly spread:

Large Cap growth $10000 @11%=$11100

Small cap growth $10000 @14%=$11400

Large cap value $10000 @14%=$11400

small cap value $10000 @20%=$12000

developing world $10000 @-5%= $9500

developed world $10000 @-2%= $9800

sector investment $10000 @24%=$12400

short bond $10000 @ 7%=$10700

intermediate bond $10000 @ 8%=$10800

long term bond $10000 @ 9%=$10900

The portfolio is now $110,000. Rebalancing (note that this is a taxable transaction unless it's tax sheltered) to the original percentage allocation, we get these returns the next year:

Large Cap growth $11000 @18%=$12980

Small cap growth $11000 @ 4%=$11440

Large cap value $11000 @25%=$13750

small cap value $11000 @ 6%=$11660

developing world $11000 @20%=$13200

industrial foreign $11000 @14%=$12540

sector investment $11000 @-12%=$9680

short bond $11000 @ 6%=$11660

intermediate bond $11000 @ 8%=$11880

long term bond $11000 @11%=$12210

Total is $121000. Seems like right on 10% compounded, right? But look what would have happened if you didn't rebalance:

Large Cap growth $11100 @18%=$13098

Small cap growth $11400 @ 4%=$11856

Large cap value $11400 @25%=$14250

small cap value $12000 @ 6%=$12720

developing world $9500 @20%=$11400

industrial foreign $9800 @14%=$11172

sector investment $12400 @-12%=$10912

short bond $10700 @ 6%=$11342

intermediate bond $10800 @ 8%=$11664

long term bond $10900 @11%=$12099

Total is $120,513. You've added $487 by moving money from where assets were relatively expensive, to where they were relatively cheap.

Let's do it on more year:

Large Cap growth $12100 @-5%=$11495

Small cap growth $12100 @14%=$13794

Large cap value $12100 @-9%=$11011

small cap value $12100 @12%=$13552

developing world $12100 @18%=$14278

industrial foreign $12100 @20%=$14520

sector investment $12100 @24%=$15004

short bond $12100 @ 8%=$13068

intermediate bond $12100 @ 9%=$13189

long term bond $12100 @ 9%=$13189

Total is $133,100. If you rebalanced once per year. If you didn't, here's what you end up with:

Large Cap growth $13098 @-5%=$12443.10

Small cap growth $11856 @14%=$13515.84

Large cap value $14250 @-9%=$12967.50

small cap value $12720 @12%=$14246.40

developing world $11400 @18%=$13452.00

industrial foreign $11172 @20%=$13406.40

sector investment $10912 @24%=$13530.88

short bond $11342 @ 8%=$12249.36

intermediate bond $11664 @ 9%=$12713.76

long term bond $12099 @ 9%=$13187.91

For a total of 131713.15, a difference of 1386.85 you lost in just two years.

This works even better in real world circumstances. Here, I used a larger number of asset classes than most folks use, forced them to be exactly equal, and then forced the yearly returns to average exactly 10% in order to isolate the effects of rebalancing versus not rebalancing from all other concerns. The real market is not so neat. Some years you'll be on top of the world because you gained 40 percent, some years you'll be picking up pennies on street corners because you lost twenty (and it's been better as well as worse than that within the last ten years).

The whole thing that makes this work is that you are moving money from where assets are relatively expensive to where they are relatively cheap at the moment. This is another real world example of the principle behind dollar cost averaging.

It would fall apart if one asset class outperformed all others, or underperformed all others, consistently over time. But this hasn't happened yet. Even in the asset classes that do outperform others over time, the consistency is not there. These classes are volatile. They will do very well one year or two, then do very poorly. When I see or hear people talking about "letting their winners run" over a multi-year period, particularly if they're talking mutual funds or the equivalent rather than a particular security, I know I shouldn't trouble myself about their advice. If an individual security was bought as part of an asset class, that's fine - as long as it still meets the definition of that asset class and you deal with it appropriately.

The one thing that kills this strategy is not sticking to it. "Google has doubled and is still going up!" (or Qualcomm, or Microsoft, or...). The idea is lock the gains in, buy where stuff is realtively cheap. The same asset classes do not do equally well from year to year. It is rare to find one year's superior asset class among the next year's superior performers. This can be hard with individual securities, so most folks who adopt this strategy use mutual funds or variable insurance instrument subaccounts.

What can sabotage you is a fund company or variable subaccount who will not sit on their fund managers and make certain they adhere to stated asset class. When a Large cap value allocation has forty percent of its stocks in common with a small cap growth allocation, you've got a problem, no matter how wonderful that forty percent performs. It's likely buying apparent performance through demand, which only works short term. One mutual fund company got away with artificial inflation of this kind for about two and a half years back around the start of the decade before the market caught up with them. People are still holding their funds, though, confident that they'll recover because they were doing so well for a while...

Speaking of which, I left financial planning a couple of years ago, but my former clients who did this had amazingly resilient accounts when the market went bust in 2000-2002. Nobody went much below peak account values, and they were all ahead of previous high account balances by the beginning of 2003 (even discounting the effects of contributions). One's balance went from $44,000 to $86,000 over that period with about $10,000 in contributions. Why? Because they didn't let greed rule them.

And before I close, I do need to say that past results are not guarantees of future returns, and this is not a panacea. Consult a currently qualified professional. If an asset class is getting obviously overbalanced or under-represented, it may be time to deal with the situation even though it's only been six months, or one. If you're holding security X, and you keep getting tips on how hot it is, it's probably time to sell.

Caveat Emptor.

Who's Next

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I was going over my read list and Politechnical asked the question "Who's next?" which I read just as my Tom Lehrer CD had gotten to the relevant song.

I couldn't resist a chance to turn Mr. Lehrer on his head with an optimistic version.

Afghans got the freedom and that was good

For they love peace and brotherhood

Iraq got the freedom and that's okay

The world is safer with Saddam Away

Who's next?

Georgia got the freedom,

have no fears

No Old World trail of tears

Ukraine got Orange Freedom,

don't you grieve

they're on our side


Who's next?

Libya and Egypt claimed that they

Were gonna get some any day

Some Americans want two,

that's right

one for the left and one for the right

Who's next?

Philippines will get some too

just to ward off you know who

Islam is getting tense

wants more in self defense

"Mullahs are the leaders, says the Koran,

But they're a joke - you don't elect imams!"

Who's next?

Lebanon is next in line,

in the wake of Ba'ath decline

we won't try to stay calm

when the whole world has freedom

Who's next, who's next, WHO'S NEXT?

Bernanke is concerned about signs of some easing of underwriting standards. He's talking about commercial stuff, but he's a long way behind the curve in the residential market.


From a service I get:

...the number of foreclosures nationwide was up 24.5% in the fourth quarter of last year from the first quarter of 2005. A nearly 25% increase in foreclosures last year, combined with slowing sales, softer home prices and higher mortgage rates has many analysts concerned. Hardest hit by rising foreclosure rates during 2005 were Massachusetts, up nearly 200%; Connecticut, up 188%; Michigan up 170%; Virginia up 151% and Maryland, up 117%. Nationwide, the number of foreclosures during the first quarter was 188,122 but by the final quarter was 234,278. In Massachusetts, the foreclosures jumped from 616 to 1,843; Connecticut, 1,456 to 4,202; Michigan, 4,411 to 11,937; Virginia, 380 to 956 and Maryland, 667 to 1,448. Georgia documented the highest foreclosure rate among the 50 states -- one new foreclosure for every 422 households, and Nevada was 2nd with one in 483 households. California has one property in foreclosure for every 1,306 households.


Don't want to see the other side of the story? Only want to hear your own polemics, be they conservative or liberal? Balloon Juice notes a search engine that tells you if the results are conservative or liberal. I'll bet it succeeds, handsomely, too. "We have an exclusive lease on Truth" seems to be one of the most universal human mindsets.

Looks like it's time to enlarge the echo chambers on both sides of the political spectrum.


Strata-Sphere notes that the Senate has decided to work with the administration on the wiretapping issue, folding it's bluff of hearings.


Enrevanche directs us to a cool page full of .pdf downloads on risks caused by political factors


So much for Yemen's "unusual tolerance of free press" (This Weeks US News and World Report). Armies of Liberation notes that the government prosecuters are asking for the death penalty and confiscation of the Yemen Observer.

Nice folks: Iran Threatens U.S. With 'Harm and Pain'. Kind of like the criminal threatening the cop who brings him in for trial. Just the sort of folks we'd want to have nuclear weapons.

I do not want to get into an actual war with Iran. The US does not want to get into a war with Iran (far as I can tell, EU is only dangerous in the same way as Mellon, one of my two little dachshunds. She'd never have the guts to bite anyone - but she might accidentally drown them). But the Iranian government seems to be banking on the fact that the rest of the world is in denial about what they intend. Put their intransigent attitude together with the propaganda they are feeding their own people and the fact that they actually bragged about sandbagging the atomic negotiations and the fact that they are furnishing arms to the insurgents in Iraq, and what have you got? What situations similar to this have we seen within the last couple of millennia?

To deny that Iran is intending to acquire nuclear weapons is no longer tenable. To deny that the Iranian government has ambitions beyond their current borders is to ignore their actions of the last twenty-eight years, as well as their stated intentions. I happen to believe that they mean what they say, and that there is more than ample evidence of this. Which is better: dealing with them now when they don't have nuclear weapons, or dealing with them later when they do? I'm becoming more certain every day that that is the choice we have, and given that choice, I'll take the former, thank you very much.

I believe that the US can conquer, and can afford to occupy Iran, but more importantly, I do not believe the American public is willing to occupy Iran. Given this situation, the only way to deal with the situation is smash the government and the atomic capabilities, then leave. Net result: Americans are the bad guys, Iran spends the next twenty years playing a somewhat friendlier version of Aftermath, millions may die of starvation and similar basic causes despite the best efforts of world charities, and there's another country full of people with good reason to hate the American government. It would make them our permanent enemies. World oil prices also shoot up, but that's hardly worth mentioning on the scale of the other problems mentioned. My guess is that Russia would move in, as well. Putin would see opportunity to further his nationalist ambitions. The Russians have always had interests in the region, and there is no reason they can't want to expand those interests.

The second option is conquest and occupation followed by rehabilitation along the same lines as Iran's neighbors. It'd take more troops than Afghanistan or Iraq, as Iran is a much larger country with many more people. It would also take a firmer hand, and as a result of this, casualties would also be much higher. On the other hand, the Iraqis and possibly the Afghanis might be willing to help, even if no one else will. Assuming we have the intestinal fortitude to see it through (which I do not believe to be the case), end result is another country with a basically positive outlook on the US. Millions don't die, and there's a democratic government in place. Against that, this costs several tens of thousands of US casualties.

Third option is keep making concerned noises like we are, but sit on our thumbs and not do anything. If public Iranian statements are to be believed, end result is Israel nuked, and our friends and allies all around Iran (Turkey, Iraq, Afghanistan, and India, among others) menaced by Iranian nukes. Perhaps Armenia, as well, if for no other reason than that they're christian, have a historical dispute with Azerbaijan (a muslim nation) and in range. Not to mention that any revolution aimed at replacing the mullahs that doesn't capture the entire country at once gets nuked itself, because you can bet that the folks controlling the nukes will be the most fanatical available. The world wants to do anything about the situation then, nukes will be a necessary component, and not all of the nuclear traffic will be flying one way. That's kind of the idea of dealing with it before it gets there. Note that this is the default situation at this point in time. If we don't do what is necesary to prevent this, it's what we are going to get.

This is a bad situation. But moaning about it won't produce anything positive. I'd prefer occupation, but that's easy for a fat middle aged man sitting at a keyboard to say. If we want something other than a nuclear armed Iran governed by a proselytizing Islamic theocracy (i.e. a jihad government), we need to do something about it now, or at least before they get nukes, because once they have nukes (or the world believes they have nukes) the situation becomes a lot more dicey.

In other words, we do nothing, in about five years we're going to have to deal with a situation that's a lot worse than it is now, and it's going to grab us by the least convenient body part and demand we pay attention.

Joint Loans

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First off, let me say that your site has been very informative and helpful. I stumbled across your blog looking for information on ARM vs. 30 year fixed loans and ended up reading every article.

One issue I have never really seen addressed is joint loans. When a couple, married in this case, gets a loan, which FICO score do they use?

Right now, my wife is a nursing student, when she graduates in August we want to buy a new home that is significantly more expensive than our current home. Our combined salaries at that point should be somewhere around 120K. I have been told by a mortgage professional in our first phone conversation that being a student counts for "years in
line of work", but we would have to wait until she receives her first paycheck from her new job before we could count her income. We just accepted an offer on our current home last week, and will have enough cash to put down 10% in the price range we are looking at (200-300 K). If we want to buy before she is employed, but has an offer so we know
her salary, what are our options? It seems to me that we would be in a situation where we are doing a Stated Income type loan.

The answer to this is that whoever make more money is the primary borrower. This works with a couple as well as other arrangements. It's a very simple answer, but you'd be amazed how often I have to repeat it for trainee loan officers. Of course we all want to use whichever score is better, but it's the person who makes more money whom the lender will consider to be the primary borrower.

Now as far as A paper goes, it's kind of academic. If you want to use both incomes for the loan, you both have to qualify. This can be an issue when one spouse forgets to pay bills and the other is as a-retentive as I am about it. Over time, spouses credit reports tend to track one another more and more closely, as they switch from single credit accounts to joint accounts. If it's a joint account, doesn't matter who forgot to pay the bill - you both take the hit. On the other hand, even long-married spouses don't tend to have exactly the same score, and in many cases they have intentionally segregated the credit accounts for precisely this reason, that one spouse is better about paying bills. So one spouse has a 760, and the other spouse has a 560. Ouch.

It is to be noted that the superior solution is to have the responsible spouse pay all of the bills, which results in two high credit scores. Why is this important? If one of you has a 760, they may qualify A paper. If the other has a 560, you have a choice: go subprime, or have the high scoring spouse be the only person on the loan. In other words, when you're talking about A paper, you both have to meet the credit score minimums, or you don't qualify as a couple.

This has implications. Suppose you have a 760 score spouse who makes $3000 per month, and a 560 score spouse who makes $5000 per month, you have a choice: Qualify based upon $3000 per month, go stated income, or drop to subprime.

$3000 per month doesn't qualify for a lot of house most places. So if you're thinking 3 bedroom house, you can be stuck with small one bedroom condo - if you want the best rates.

The second alternative is going stated income. This only works if the necessary income for the loan is believable for someone in that occupation. Somebody who makes $3000 per month is not likely to be in a profession where $8000 per month is a believable income, and most people tend to overbuy a house rather than underbuy, regardless of the fact that underbuying is a lot more intelligent in most cases.

The third solution is to go subprime, where you'll qualify, but get a higher rate. A single borrower with a 760 credit score gets a better loan, with less of a down payment, than the couple in this case - the primary borrower has a 560 score, remember - but they just won't qualify for as large of a loan because they can't afford the payments.

You might also go NINA, which is a "here I am - gotta love me!" approach where income is not verified, nor employment history. The loan you get is based totally upon your credit score and equity picture (how much of a down payment you make, in the case of a purchase). The rate is higher than stated income and the restrictions on equity is greater, but you'll get a better loan at a better interest rate in most cases for a NINA A paper loan than even a full documentation loan for a 560 score.

Now, as to what you were told, student does not, in general, count as time in line of work. As a question to make why this is obvious: How are you going to compute her average income over the last two years? That is the way full documentation loans are justified. Some subprime lenders will accept it (not the better ones), or the person who told you this could just be planning to substitute a stated income loan based upon your income. The fact is, that unless you're talking ugly subprime, they're not going to accept your wife's income until there's some time actually working it. Many people graduate school and never work in the field. They don't pass licensing, or they decide soon after they start that it's not for them.

In this case, you are talking stated income unless you go subprime. It's just the way things are computed. Sorry.

As I keep telling folks, there are a lot of shysters out there in my profession. The easiest way to get people to sign up is to promise the moon, and until you get the final loan paperwork you have no way of knowing whether they intend to deliver what they said.

Caveat Emptor.



By the way, I've got RINO Sightings this coming week, Monday March 13. Republicans and Independents Not Overdosed (on the Kool Aid). Looking for thoughtful stuff written by middle of the road folks? RINO Sightings is it. The official carnival of the Raging RINOs community. Go here for a list of past and future carnivals.

To submit, either email me or use the Conservative Cat Submission Form (A great carnival resource!)

Carnival of Liberty Recommended: Eidelblog


Right in the middle of the nuclear argument with Iran, Captain's Quarters has the best article on the IEDs and other stuff that's been killing our soldiers being traced to Iran.

This is a casus belli.

There is no argument. President Bush would be justified in putting this evidence in front of an Iranian representative, and saying, "Prove this isn't you or produce those responsible or you will have a war with the United States of America". He also needs to put it in front of every world body going.

Head on war with Iran is not in any way desirable. We would most likely win, but the fallout would be very bad. The best way to get rid of the mullahs regime is from within, but we may not have that choice. Indeed, the mullahs may actually want war in some perverse way, thinking we would play as nice with them as we have with the Iraqi people. I don't think so. I think if they get pried out of power the Iranian people will never let them near it again, but the mullahs may think it's the best way to shore up their regime.

On an entirely different note in the struggle against terrorism, Michelle Malkin notes an Arab American psychologist tongue lashing an al-Jazeera host. Clip here at MEMRI.


One less survivor remains to testify to what he saw. Auschwitz Escapee Herskovic Dies at 91

Three months after being sent from Belgium to Auschwitz, Herskovic escaped by cutting through a chain-link fence with two other prisoners using a pair of wire cutters he had hidden. It was the first night of Hanukkah in 1942...

In his prewar home of Antwerp, Belgium, Herskovic delivered one of the earliest firsthand accounts of the atrocities of the Holocaust.

The resistance swiftly mobilized, placing bricks on railroad tracks to stop a train packed with hundreds of Jews bound for the camps. About 250 prisoners escaped.

"His survival saved hundreds," the Simon Wiesenthal Center in Los Angeles said in a tribute.

I believe most folks are basically good. I would like not to have to believe it happened, but it did. Never forget.


Wallace and Gromit Fans want statue. Gromit, at least deserves one, despite the fact that he's fictional. Memorials to dogs aren't unknown. Lord Byron did one that may be his best known work. Then there's this one. I happen to think we need more praise, and more memorials for that kind of loyalty where it happens.

Apropos of this here's a post on how Pets can save you money. Given my recent vet bills, not likely (each of my two thirteen year old dachshunds have had vet bills over $2000 in the last year), but that's part of what I agreed to when I brought them home.


Wizbang has a good post up about legal and moral liability versus just plain stupid.

Every time you do something stupid, you roll the dice. The dice turn up bad enough, you get hurt or worse. The level of difficulty varies - many people get away with not wearing a seatbelt for a long time. Walking naked through a bad area at night with $100,000 plainly visible is a lot more likely to get you hurt.

It's not illegal to be stupid. Where else we going to find congresscritters? But it's the only universal capital crime. It may not be the only way to get hurt. Many people are doing everything right but get drastically unlucky in one way or another. But it's an invitation for the hostile universe to jump in and shout "GOTCHA!"


I've always had my suspicions that this was the case, and this particular satire makes a strong case for Universe designed by committee. Multiple committees. Separated by thousands of miles and not communicating with one another. The monotheistic deities we've all been talking about this past millennium
or so? They're the art critics. Let's all go pick at least one god from each classic pantheon to worship!

HT to Politburo Diktat


Argghhh! has some questions that were asked on an International Tourism Webs site (of Canada). The answers are worth laughing at.


Captain's Quarters notes the very welcome news that some House Elephants are trying to return to the issues that brought their party into its majority status, lowered federal spending.

Meanwhile, the Donkeys issue a Contract On America.

Seriously, the Donkeys don't have a message, and they know it. HT Hugh Hewitt


Michelle Malkin indicates what the current immigration plan in the senate wants to do with illegals who are currently here. Give them "gold cards". I wish I were making this up.

This is definitely not a "Who you gonna call?"

I've done a couple articles in the recent past on the two ratios, debt to income and loan to value. Nonetheless, there exist a plethora of reasons why someone can be turned down for a loan even though they make it on the ratios.

The first of these is time in line of work. A paper looks for two years in the exact same line of work. One change that trips a lot of people is going from being employed by a company to being self employed in the same line of work. Believe it or not, a promotion can also sink a loan if your job title changed, for instance from salesperson to sales manager. If it was with the same company, it can sometimes be okay, but if you changed companies to get the promotion, that's a really tough loan. Subprime loans will accept shorter time periods.

Making payments on time is probably the biggest deal buster for A paper. In general, you are allowed no more than one mortgage late, or no more than two other lates. The reason does not matter. It does not matter how justified you were in not paying. The fact remains that you are reported as being late. The only way to remove them is for the company to admit it was in error in reporting you late. Many people will not pay the charge as it gets marked later and later and later. This is self defeating. Pay it now, dispute it afterwards. Yes, it's harder to get your money back - but the money it saves you on your home loan is typically much larger.

Store credit cards are one of the biggest headaches here. If you buy merchandise with a generic credit card, you've got the card company, who are neutral, looking at the transaction. Both you and the merchant are their customers, and the merchant needs to take credit cards. They're not going to quit taking them. If you use your store credit card, the dispute department is going to take the view that you bought that merchandise at their store and therefore you owe the money. I run across five or six store card problems for every generic card problem I encounter.

Bankruptcy is another deal buster. People in Chapter 13, or just out of Chapter 7. Most banks won't touch them. It's not really rational, but you there you are.

Reserves can be a deal buster, particularly for stated income loans. A paper stated income requires six months PITI reserves somewhere that you can get to it. Subprime is less demanding, but if you don't have the lender's requirements, you won't get the loan. Would you loan money to someone with absolutely no cash in the bank? Payment shock, where your monthly cost of housing is increasing, can increase the reserve requirements.

Related Party Transfers are another questionable point. All of the background for loans assumes that the transaction is between unrelated parties, who have no reason to cooperate in order to do the lender dirt. If you're buying the house from your brother, that assumption goes out the window. Some lenders will do them, others wont. Some will but charge extra. Others will but have special requirements. Whtever they are, you have to meet them.

The appraisal coming in low is another. The lender evaluates the property on a "lower of cost or market" basis. The Appraisal is the "market" part of that, and the lender will only loan money based upon the lower of these two methods of evaluation. I have people tell me all the time that their new purchase is worth $20,000 more than the appraised value (or the purchase price). No it isn't. By definition - it's worth what a willing buyer and a willing seller agree upon. The bank's evaluations are necessarily conservative, and they don't want to take over the property. They're not in that business. They want you to pay back the loan.

Late payments. Whatever you do, while the loan is in progress, keep making all your payments on time. Whether just indirectly due to the credit score dropping, or directly because now you've got a(nother) thirty day mortgage late, this can raise your rate or even break the loan.

Sourcing and seasoning of funds to close. Just because you've got $100,000 in the bank doesn't mean the bank is happy. Nobody rational keeps that kind of money outside of investment accounts. At least nobody rational who needs a loan - Bill Gates might. Lots of folks hide loans that way. The bank is going to what to see that you've had it a while (seasoning) or prove where you got it from (sourcing). If you really just got $400,000 from the sale of a previous property, you're going to have the escrow papers and HUD 1.

Final credit check: I have a set spiel I go through, "Until this loan is funded and recorded, don't breathe different without getting my okay. Make the payments you've been making. Make them on time. Don't take out any new credit. Don't allow anyone (other than mortgage providers!) to run your credit. Just before the loan gets recorded, the lender will pull a final credit report. Woe be unto the person whose situation has deteriorated, and it means we'll have to start all over again, if there even is a loan that makes sense."

Failures of verification. Three biggies here: employment, rent or mortgage, and deposit. I do not know why people bother lying, but they do. Don't you be one of them. World of hurt if the lender wants to prove a point.

Lines of credit/credit history/no credit score: Most lenders want to see at least 3 lines of credit with a 24 month history of making payments on time. Freezing your credit cards is a wonderful idea, but you need to use them to demonstrate a payment history. Once per month, I use mine for something small and stupid that I would otherwise pay cash for - just to show payment history (it also helps your credit score). Pay if off as soon as the bill gets there. Waivers for two lines of credit are fairly easy, but if a given bureau doesn't know you have two open lines of credit, they may not score your credit profile. If you don't have at least two credit score among the big three - no loan.

Property is structurally unsound, is not certified for habitation, unsuitable or not zoned for intended use, etcetera. Wouldn't you really find out about this before you have a very large debt to pay? Okay, this can cost you money, but it's a "Thank (deity) I found out now!" moment.

So there you have them, most of the most common reasons why loans - and therefore real estate deals - fall through.

Caveat Emptor.



Carnival of Debt Reduction

RINO Sightings Recommended: Ex Donkey, Techography

Carnival of Capitalists

Carnival of Personal Finance Recommended: Million Dollar Goal

Carnival of Investing


Looks like my local rag has decided to sponsor a blog. Here's the link. First glance, it's nothing I'd visit again, but I'm sure that it'll be successful with Legacy Media driving traffic that way.


Another thing the local rag is trying to do is sell us on an airport in Imperial County, 100 miles east, served by a maglev train from downtown. Okay, I think maglevs are cool, but this is a boondoggle on at least two levels.

The train: There are requirements for railways - maximum grade, maximum curvature, etcetera, that roads do not have. Last I was aware, the one railroad path through those mountains is famous worldwide - the Carrizo Gorge segment of railroad is am impressive if expensive solution to a railroad's needs (by the way, it goes back and forth between the US and Mexico fourteen times). For this, those mountains are famous among railroaders worldwide. Maglevs would need to be very high speed to be popular, and I'm not certain Carrizo Gorge can be engineered thus. Therefore, much blasting, resurveying, environmental reports, border concerns. Cost: unknown but very high. Here's one estimate. I think they may be low.

The location: a long train ride for folks after they get to downtown. For people in Oceanside, John Wayne Airport is closer (33 miles) than Lindbergh (56 miles), and a large portion of the former is through the fast, free flowing freeway segment through Pendleton, as opposed to trying to inch south on I-5 (and back through the merge!). For folks in Fallbrook, Ontario is 68 miles, as opposed to Lindbergh's 59 and even going around Pendleton to John Wayne is 69 miles. Downtown is further than Lindbergh to both, by the way, and the parking situation is not so friendly. Then after they get downtown, potential passengers have an hour long maglev ride that's not going to be free. At a guess, nobody south of Miramar (where the new airport should be if they've got half a brain) would even use the Imperial County site. Folks in South County would save time (and probably money) by flying out of Tijuana. People like me make out okay if there's an east county station somewhere, but the only real winners to an Imperial Valley site are the contractors, and the unemployed in Imperial County.

What's going on? The double headed snake of political cowardice and the opportunity for graft. Nobody wants to tell the NIMBYs the truth that that's the only place to put the airport (Actually, joint use of the runways at Miramar makes even more sense, but that would irritate even more people in the high rent districts west of there.) Logistics. The Miramar location is where the space and the freeways for access are. Lindbergh is an accident waiting to happen, and has no room to add runways. We've been beating around this bush for thirty years now. It's time to stop playing games and get real.


Justice prevails! Supreme Court Unanimously upholds Solomon Amendment. This basically says that if you want federal money, you have to allow the federal government - specifically, military recruiters - the same access to campus that you give every other employer. Harvard Law had sued because they "couldn't afford to give up federal money." Guess what? This takes it out of the realm of freedom of speech. You'd think the most prestigious law school in the country could figure that out without appealing it all the way to the Supreme Court. Want to bar military recruiters? Give up your federal money. That would be a protest that might mean something, not the mealy-mouthed "We want our cake and eat it, too!" approach. A refusal to subsidize is not the same as censorship.


U.S. Dismisses Talk of Compromise on Iran Compromise? Iran already has everything it wants except more nukes than any other country. Not to mention they admitted they were bargaining in bad faith. Anything less than a hard line response to this situation is technically known by a common technical military term: "Surrender"


Riehl World View deconstructs an argument between a couple of other members of the 'sphere.


Via Argghhh!, AWST notes that the highly classified Blackstar program (two stage to orbit) may have been decommissioned, assuming it existed, on which AWST is uncertain. Nonetheless, certain peripheral facts support the suppositions, like the retirement of the SR71.


If you're not tired of this story yet, Michael Barone (with help from Wizbang) demolishes the "Bush was warned about the levees" contention of the left wingers in Ancient Media.


Via Instapundit, ChicagoBoyz has a good post on the childless free riders. I'm not certain I agree, but it's certainly worth reading. The childless do subsidize my daughters' education, among other things. On the other hand, my wife and I are spending a very large amount of money raising them, not just in explicit dollars out the door but also in opportunity costs and lifespan spent. Nonetheless, I'm certain we could cut their schooling costs by at least fifty percent with more competition between schools (which puts childless liberals on the horns of a dilemma!). It's hardly selfless devotion on my part, and yet we are investing in tomorrow's economy by raising children, where childless folks are not. I'm not certain how much of a "free ride" this is, however.

Section 1031 of the IRS Code has to to with tax treatment on the exchange of one parcel of real estate for another. It's similar to Section 1035 which covers most non real estate exchanges. Car for a car. Boat for a boat. Business for a business. But section 1031 allows indirect exchanges so long as you follow certain guidelines. After all, how often do folks want to trade two parcels directly? It happens, but not very often. Usually, if A is buying B's parcel, then even if B wants to replace it with another piece of real estate, it probably isn't owned by A.

Why would you want to do this? Taxes. No other reason but taxes. If the taxpayer makes the exchange according to the provisions, they defer the gain. But we're talking capital gains, not ordinary income, so keep in mind it's not worth going gonzo over. The maximum long term capital gains tax rate for most folks is 15 percent. Still, getting to keep 100 percent of your gains instead of 85 can be worthwhile, and when we're talking sometimes about multiple hundreds of thousands of dollars, that's quite a bit of motivation. It's nice to be able to invest and use those (potentially) tens of thousands of dollars, rather than basically forking them directly to the tax man.

Your primary residence is not eligible for 1031. Second homes are severely limited in eligibility (general rule: You can't occupy it more than 10 percent of total occupancy, although you get up to fourteen days per year. Check with your accountant for details. Matter of fact, check everything with your accountant. This is just a basic overview, and the devil is in the details). Section 1031 is for investment property, of whatever nature.

Section 1031 is not for "flipping". I am not aware of any explicit minimum general holding time, but the IRS looks hard when the held period is less than a year. 1031 Questions are good jumping off points for general audits. Be careful. If the properties are being sold between related parties, there is a two year minimum holding rule, and nobody can end up with cash. For this reason, 1031s with a related party transaction are tough. If it's a property you bought as investment that you later made into a personal residence (or vice versa) the minimum holding time is five years.

There are some significant complexities in duplexes where one unit is for personal use, or personal use dwellings where there's a home office. I've just gotten to the point where I don't understand the attractiveness or value of a home office deduction for many people, but they keep insisting upon trying for them.

Basically, there are three requirements for a standard "forward" 1031 Exchange. You can not have constructive receipt of the funds. You must designate replacement properties within 45 calendar days of the sale of the relinquished property, and you must consummate the sale within 180 days or before you file your tax return, whichever comes first.

Constructive receipt is a fancy way the IRS has of saying control of the funds. If escrow sends you the check, or if the check is in your name, you have constructive receipt of the funds and the 1031 will be disallowed. So what happens is that you need to pay an accomodator (most title companies have one) to act as trustee for the money, and the actual transaction is done in the name of the accomodator. If you see something about cooperating with a 1031 exchange at no cost to you as part of a sale or purchase, this is what it's about. Makes no difference to the other party in the transaction, but the Grant Deed has to be made out to (or by) the accomodator entity, not the people who are actually taking part in the transaction.

There are three rules I'm aware of to use in identifying replacement property. The 3 property, the 200 percent, and the 95 percent. Keep in mind that this is investment property, often commercial in nature, and that even within major metropolitan areas it can be difficult to replace the property with something similar within the time frame. This is one situation where the law is a lot more flexible than most of the people. As long as it's real estate within the United States not held for personal use, the law doesn't care what the use of the property you replace it with is, but lots of folks are trying to find something as specific to their purposes as possible. Also, in hot markets, there may be difficulties created with finding a property you can afford and that the seller will agree to sell to you in that time frame.

Keep in mind always that we're not necessarily talking a straight one property for one property exchange here. It can be multiple relinquished properties for one replacement (in which case the sale of the first relinquished property starts the clocks), it can be one relinquished for several replacement properties, or any mix of A properties now and B properties later, where A and B are nonzero, whole, and positive. Counting numbers, to use the technical mathematical name. For every additional property in the exchange, you can expect to spend more in fees to the accomodater, exclusive of all other costs to the transaction.

The first method of designating replacement properties is what's called the 3 property rule. You may designate up to three properties of any value, and as long as you actually acquire one or more that fits the parameters within 180 days, you're good to go. The second rule is any number of properties but no more than 200 percent of value. The final rule, 95 percent, is basically worthless and a good way to get in trouble, because unless you only designate one replacement property, you're not going to be able to acquire 95 percent of the total value of the designated properties. Identification of these properties must be precise and unambiguous. "Land at the corner of First and Main" won't work. You need something like a legal description or an Assessor's Parcel Number (APN).

Finally, you need to acquire the replacement property within 180 days of selling the property (or before filing your tax return for the year - this can require you to be forced to extend your taxes)

Where the person making the exchange wants to buy the replacement property before selling the relinquished property, that's called a "reverse" 1031 exchange. It's basically the same concept switched around. You have 45 days to designate which property will be sold (usually not difficult), and 180 days to actually sell it, which may be a problem in slow markets. Reverse exchanges are also more expensive, as they require accomodaters to take title to an actual piece of land, and they are not, in general, for the weak of wallet. Any financing must be non-recourse financing, because the accomodater is in title and they're not going to agree to be on the hook for the value of the loan if you can't sell the property. This can also cause a requirement for larger down payments.

There are also "partial" 1031 exchanges, where you end up with a replacement property but something else you didn't have before. In general, the replacement property must cost at least as much as the relinquished was sold for, the equity in the replacement property must be at least as large as the equity in the relinquished was, and the loan must be at least as large as the previous loan. If any of these three conditions is not satisfied, you've probably ended up with what the IRS code calls "The part of a like kind exchange transaction which is not like-kind exchange" but most accountants and other people in the real world call "boot," as in "you've got this, and that to boot." Boot is taxable, so if there's a lot of boot, it may defeat the purpose of a 1031 exchange.

There are a lot of pitfalls, and with typically large amounts under consideration, the IRS is notorious for being hard nosed about all the particulars of 1031 exchanges, whether they are forward or reverse. Don't try this without the aid of a tax professional, and for real estate purposes, an agent who has a good understanding can save your bacon. But if you do fulfill the requirements, it can be a good way of keeping money in your hands that you can continue to have invested in your new property, reducing your mortgage on that property, further saving you money, where otherwise nobody would be happy but the tax collectors.

Caveat Emptor.


Carnival of Insanities Recommended: American Thinker


Strata Sphere has an excellent article on cracking down on those who leak classified information to the press.

I don't care who is in power, leaking of information that can get people killed needs to stop.

Captain's Quarters notes the hypocrisy when the leftist members of the press are hoist by their own petard. It was one thing demanding an investigation into the outing of Valerie Plame which might catch Administration thugs, quite another when it would involve putting reporters in front of grand juries (as the Plame investigation ended up doing). You want to wield power, you are subject to investigation. The president, who was elected, faces far more scrutiny than the publisher of the New York Times, who was not.


Samizdata has the details of thoughtcrime in the UK.

On a related subject, Coyote Blog mourns the unjust execution of Arthur Anderson.


I am not a reporter and do not pretend to be, but I believe if more reporters followed Countercolumn's suggestions, we'd be much better off.

HT to Chapomatic


Camp Katrina has morphed into MilTracker. My understanding is that all new content will go there.


Blackfive has some self-interested rationality on the results of the negotiations with Iran.

He's absolutely right in that in order for negotiations to be successful, both goals must be simultaneously achievable. He misses the corollary that in order to achieve anything by negotiations at all, you cannot be seen as unwilling to do something about the intransigence of the other side. The EUropeans were known by all parties to be unwilling to actually do anything, and so they accomplished nothing beyond providing a smokescreen for Iranian nuclear ambitions for two years. In other words, worse than useless.

At a minimum, the regimes in Syria, Iran, and North Korea, are going to have to get dealt with if the next generation of humans is not to grow up mutated survivors of atomic warfare. Yes, we've got to be careful. Damned careful. We're going to have to get inventive. Neither one of those words means anything like the opposite of firm or determined, which are also components of any possible solution that's actually desirable. It most emphatically doesn't excuse us from having to do it.

Mind you, all of this is about as surprising as gravity.


Q and O has a great essay about fetishizing democracy. No, not as in expanding electoral democracies. As in expanding lowest-common-denominator responses. Money quote:

(Some libertarians, of course, raise the distrust of democracy in to a matter of high principle, by refusing to vote at all. "Voting," they say, "is merely giving consent to a system that takes away my rights! I'll never compromise my principles by participating is such a charade!" Well, maybe so, but it also ensures the election of people who are prone to take away your rights, rather than people that will defend them. This is the very name "self-defeating".

These same people often say that they'd fight to defend their rights. Huh. Let's see if I get this straight: You won't try and defend your rights by voting once every two years, but when jackbooted government thugs drop by with submachine guns, you're gonna pull out a rifle and make a courageous final stand. Go on, pull the other one.


Remember I said it appears as if there's more perception of an Iraqi Civil War in the US than there is the actuality over there? The New York Post debunks that other New York paper.


Asymmetrical Information notes a Times Magazine Article by Jon Gertner that says most of the same things I said in my article on The Economics of Housing Development back on December 26th, even if it does mostly wait until page six to start with the meat of the article. He also hypothesizes:

Glaeser speculates that there may be a viral phenomenon whereby once housing prices reach a certain level, residents become aware of high home values and agitate for restrictions; another possibility is that judges have become much more sympathetic to blocking development for environmental reasons. Still another thought: that homeowners, utilizing skills learned during the civil rights movement and political protests of the 1960's and 1970's, became much more adept at organizing against developers. (There appears to be a reasonable correlation between liberal enclaves, zoning regulations and high housing prices.) In any event, Glaeser says, he doesn't know the answer yet, and it may take years to find out.

I just don't care about which side of the political divide is causing the problem, I just want it dealt with in a rational manner.


Armies of Liberation notes that US News has a good article on Yemen due out tomorrow. I look forward to it.


Via LGF, Publish or Perish, the lessons of the Cartoon Jihad.


Via Volokh, Housing Bubble reports that not only are builder cancellations up, but that the builders are keeping the deposits and in some cases coming after the depositors for the difference between what the house sold for and their contracted sale price. You want something guaranteed to chill the market long term? When your potential customers are worried about becoming your insurance company by insuring that you'll get that price.

Foot. Bullet. Hydrostatic shock.

I can imagine the company spokesman: "We're just doing our part to make a bad situation worse."


Full Disclosure and Mea Culpa: A few days ago I wrote about how the children of those who drew the Islamic Cartoons have been threatened. Via Michelle Malkin, I find a report that it's not true.

I can't read the Danish either, and Babel Fish doesn't do Danish to English, but I thought I'd post it in the interests of disclosure. here is a Danish onliner's translation.


Austin Bay has a cute little couple paragraphs on information isolation and overcoming it.

Carnival of Liberal Wrongs


You know the Minutemen, the citizens organization that tries to help Border Patrol by going out and looking at border crossers and telling the Border Patrol what they see?

A taxpayer funded organization is threatening their children.

They are not vigilantes. All that the organizations permits is to inform law enforcement of what they see. For this, they have been villainized in any number of places.

Even if they were vigilantes, the appropriate thing would be to go after them with legal proceedings, not their minor children. I suppose that the constitution affords more protection to children of murderers and rapists than children of law-abiding civic minded citizens? That's certainly what it appears like. Or are the laws the rest of us have to follow suspended for those breaking the law and their enablers?

Rhymes with Right has more.


Michael Totten bears witness to the murderers and torturers in Iraq. I suggest reading the comments as well.

Digger's Realm has finally discovered that illegal immigrants have been getting home loans based on taxpayer ID. Actually, pretty much every single one of the lenders I do business with will do EIN loans.

I wrote on it here on July 20th, 2005. Here's the Business Week article I referenced then. I got a Employer ID Number (EIN) for my dba over the phone with zero documentation. But I can't get a loan with an EIN because I'm a citizen.

In all fairness, one cannot blame the lenders in this instance. My reading of California anti-discrimination law, together with our "shelter the illegals" law practically forces them to deal with the illegal immigrant market. If you have to serve the market anyway, you might as well serve the market.

(It's also worth noting that practically anyone can buy land in the United States. They don't even have to be here in the country, much less here legally. If Osama bin Laden were to contact me for help buying property, I'm not certain it would be legal for me to turn him down).

Add to this the fact that many housing and loan markets are overextended and lenders are trying to maintain volume, and you have the recipe for an ideal environment for questionable loans of all sorts.

It's the responsibility of our elected politicians and their surrogates in law enforcement to deal with this, but they are held hostage by fear. Hispanics are a very strong voting block, especially here in Southern California, and they are afraid of being voted out of office. Never mind that those here legally want illegals curtailed as much as any other american citizen. We're dealing with a political dichotomy here. Hispanic leaders want the illegals here, where the hispanics themselves do not. If the politicians listened to their actual constituents instead of their supposed leaders, the problem could get dealt with.

I haven't done any deals for illegals (that I'm aware of - there are ways to hide it), but I find it very hard to find scorn in my heart for those who have. Given the regulatory environment, it's simple self protection to cooperate.

Well, the commercial side is finally ready for prime time. I had to keep after the programmers constantly to do it on schedule and to spec, but they did get it done. Okay, if I was grading their business practices, their score might only be in the low 80s, but when nobody can manage anything above fifty, grading on the curve of their competing firms means they deserve an A++. Right now we're concentrating on merchant sign ups, but if you have a need and we have the merchant already, we're happy to oblige.

The idea is to have a pool of ethical practitioners in the mortgage, real estate, and insurance industries, that gives them reason not to defraud their clients. The idea is to include financial planners as well as soon as I can find someone willing to sponsor me for the relevant tests.


Govt. Eyes Error That Cost U.S. Billions

Now this needs to be investigated as to whether it was really just an error or not. Billions lost because somebody "forgot" to put a clause Congress required in over a thousand different oil leaseholds? I know that if I was an oil company looking to get a good return on my investment that would certainly be a candidate for a few hundred thousand.

It says they've ruled out computer error, so at the very least someone needs to be fired for incompetence. I don't know any company that would put up with this. Why should we put up with it from public employees?

When did this "error" take place? 1996, 1997, and from 2000 onward. Who does that suggest is responsible?

Suppose this had begun under Bush administration appointees? Is there any doubt that they would be crucified. As it is, I'm justifiably angry that they've took five years to find out about it. But given the fact that they were handed an ongoing problem, that could easily be simple negligence, although I want that looked into as part of the investigation.


Yellowstone Bulge May Cause Thermal Unrest. Offhand, I'd say that's so low a concern as to not be worth mention. I saw a documentary a while ago and followed up by reading a bit. The reason for the geysers is that Yellowstone is a buried caldera that last erupted about 640,000 years ago, and was approximately 1000 times more powerful than Mt. St. Helens twenty five years ago. They're thinking that it would bury most of the plains under a foot of ash if it did so again, and it's overdue. Not a darned thing we can do about it, of course. Geologists are saying that Yellowstone erupts at about 600,000 year intervals - meaning it may be overdue.


Fascinating! Generic Confusion has an article directing us to the Islamic concept of Takaful, which is how they handle insurance contracts. Inefficient by comparison with Western models but it gets around religious prohibitions put into place by a man who just didn't understand economics. (I find the notion of an all-knowing god putting these limitations on human economic activity to be laughable. Such a god would be more than capable of economic designs that are not only moral, but work efficiently.)


Argghhh! debunks John Derbyshire on the readiness downgrade of the one previously level one Iraqi battalion. Reason? A new command rotation and scheduled training.


This needs more circulation: Professor Bainbridge has an eye-opening article about Mr. Clinton seeking patronage for a friend of his.


Wizbang has the authoritative debunking on the Legacy Media's assault on Bush in the form of claiming he was warned in advance of Katrina.

My take is that even if it were an unambiguous warning of disaster - which it wasn't - what precisely is the President to do?

1) Order levees built over the course of decades demolished and rebuilt in a day? If you can read this without laughing, you need a refresher course in reality.

2) Order evacuation? Send Troops? This is not his decision to make, as any number of people have pointed out, and if he had, it would have been correct to impeach him.

3) Stand there with his finger in the dyke (and his thumb elsewhere) while other major problems that he is charged with fester? Okay, I know some people want precisely that. Doesn't mean it's practical, worthwhile, or intelligent.

4) Precisely what he did.

Big Lizards has more.


I knew I wasn't alone! Vodkapundit has a very nice article on the tactical victory and strategic disaster that was Gulf War I. If I live another five thousand years, I might forgive Bush I for multiple-botching that easy opportunity to do something right.


Dr. Sanity and Adventures of Chester have excellent articles about the question of whether Islam is potentially compatible with Western Democracy, and the consequences of yes and no answers.

The only thing that I have to add is that the ideas of Western Democracy may have been claimed to be universal, but not demonstrated to be so, and I'm not certain that even those who laid the cornerstones believed it to be universal. What Western Democracy is, is more accommodating of alternate beliefs and ideas than anything which has been tried or proposed before. Western Democracy tries to incorporate new strengths to the extent possible. I do not believe that failing to incorporate Islam would be a failing. We didn't incorporate much of pre-WW2 Japan, and the only fascism is those poor deluded leftists who think they understand our choices better than we do. Of course, this has become most of them, but I digress.

The exclusion from the world of Islam as presently constituted would make for a dark blot on the soul of Western thought, but not an unbearable karmic burden of precedent. When the axe murderer charges the cop, implement held high and persists despite warnings, warning shots, and the threat of the gun lined up on his chest, the policeman who does what is necessary to preserve his own life and that of any bystanders is not irredeemably stained. Yeah, he may - wrongly - believe that "if only" he had done something different, the axe murderer would still be alive, and blame himself. But a sane response puts the responsibility and any karmic burden squarely upon the axe-murderer. The cop in this scenario is a hero by any reasonable standard. Why not the sane, tolerant society who removed a mad dog who was endangering others and could not be stopped by any lesser response from committing offenses many times worse?


Armies of Liberation connects the dots on the Great Al-Qaeda Prison Break. Doesn't look good for the incumbent regime.


Via Instapundit, a proposal to come up with a rational system of fair use that rewards engineers, not patent attorneys.


Carnival of Liberty Recommended: Combs Spouts Off, Solomon's House

Carnival of The Vanities

(My submission was an editor's choice! The happy dance will now commence!)


I belong in Time Enough For Love. What Heinlein novel should you be a character in?

HT Below the Beltway


All please take a moment to pay tribute to the passing of one of our heroes of yesterday: Robert Scott, author of "God is My Co-pilot", has gone from among us. Story here. This is the guy who painted his propeller a different color every day, to indicate a different squadron. Japanese propaganda broadcasts indicated that they had caught on to the trick somewhat, saying they knew there weren't more than three squadrons of P-40s in Burma. They were right. There was a grand total of one P-40 - piloted by Robert Scott.


Chutzpah: Saddam Asks: 'Where Is the Crime?'

Let's grant your point, Mr. Dictator. How many of those people actually shot at you? How many just happened to be from the wrong village? Considering the fact that your "investigations" killed 48 of those accused, wouldn't a reasonable person have grounds to conclude that perhaps the evidence was extracted by means not in compliance with the search for truth?


Consumerism Commentary notes occupations where women make more than men.


Dr. Sanity has a breath of fresh air on events in Iraq, the war on terror, and how our media are treating it. The media over here is more exercised than the Iraqis are - mostly because they see a chance to "get" George Bush and those evil Rethuglicans. Step back and take a deep breath. I'm not certain I agree that we've already won, but taking action now was significantly superior in outlook to waiting.


Michael Barone has some thoughts on whether the New York Times should be prosecuted for its role in publishing and publicizing classified data. He wonders how we should guard against selective prosecution

My answer is that we shouldn't. Allow any federal prosecutor the discretion to bring charges. Alternately, set up two special prosecutors if we have to, one appointed by Donkeys and the other by Elephants, and either of them could bring charges unsupported by the other. The purpose of bringing charges is to say that there's enough evidence here not to be laughed out of court. It is the purpose of the trial to determine actual guilt or innocence, but the jury can't make that call if they don't get the case. (Limiting it to two special prosecutors would limit the number of cases to the most egregious).

I don't think any member of the press has been prosecuted for this since 1972. I'm thinking that needs to change.

If someone is convicted of something minor, picayaune, or justifiable: That's what executive clemency is for.


Speaking of predictions: Big Lizards is justifiably proud of one of his on the grandstanding of the Donkeys in the Senate.


Captain's Quarters notes that Mexico is violating NAFTA.


By the way, I'm planning on doing an article on buying a home (or not) in the current market. I would appreciate half a dozen or so volunteers, either in comments or email, coming up with the following information about the situation as it exists in your area. You'll get linked if you want it.

1. Purchase price of a home you might buy

2. Down payment you have available.

3. How undervalued or overvalued you think your local market is

4. How much of an value appreciation, percentagewise, your area might see in a typical year

5. What kind of a rate, and at what cost you might qualify for a loan. If you don't say, I can fill in the blanks by assuming A paper.

6. What property taxes are like in your area (assesment rate and rate of increase). If you don't say, I can fill in the blanks by assuming it's California.

7. How much in extra costs you think you'd have beyond the loan and taxes. I can ballpark this if you don't say.

8. The inflation rate you think we'll have. I'll use historical if you don't say.

9. How much per month the rental alternative is right now

10. Whether you are married or single, and your marginal tax rate.

11. Time frame until you need to sell, assuming there's a reason, either in your life plan or just beyond your control (e.g. you're in the military and get transferred every so often, or you work for one of those industries/companies where you have to change assignments to keep them happy)

Stop the ACLU has an open letter (and open trackback) on opposition to Islamism. Among many other online sites, they print the following manifesto:

Together facing the new totalitarianism

After having overcome fascism, Nazism, and Stalinism, the world now faces a new totalitarian global threat: Islamism.

We, writers, journalists, intellectuals, call for resistance to religious totalitarianism and for the promotion of freedom, equal opportunity and secular values for all.

The recent events, which occurred after the publication of drawings of Muhammed in European newspapers, have revealed the necessity of the struggle for these universal values. This struggle will not be won by arms, but in the ideological field. It is not a clash of civilisations nor an antagonism of West and East that we are witnessing, but a global struggle that confronts democrats and theocrats.

Like all totalitarianisms, Islamism is nurtured by fears and frustrations. The hate preachers bet on these feelings in order to form battalions destined to impose a liberticidal and unegalitarian world. But we clearly and firmly state: nothing, not even despair, justifies the choice of obscurantism, totalitarianism and hatred. Islamism is a reactionary ideology which kills equality, freedom and secularism wherever it is present. Its success can only lead to a world of domination: man's domination of woman, the Islamists' domination of all the others. To counter this, we must assure universal rights to oppressed or discriminated people.

We reject « cultural relativism », which consists in accepting that men and women of Muslim culture should be deprived of the right to equality, freedom and secular values in the name of respect for cultures and traditions. We refuse to renounce our critical spirit out of fear of being accused of "Islamophobia", an unfortunate concept which confuses criticism of Islam as a religion with stigmatisation of its believers.

We plead for the universality of freedom of expression, so that a critical spirit may be exercised on all continents, against all abuses and all dogmas.

We appeal to democrats and free spirits of all countries that our century should be one of Enlightenment, not of obscurantism.

(signed) Ayaan Hirsi Ali, Chahla Chafiq, Caroline Fourest, Bernard-Henri Lévy, Irshad Manji, Mehdi Mozaffari, Maryam Namazie, Taslima Nasreen, Salman Rushdie, Antoine Sfeir, Philippe Val, Ibn Warraq.

In case you weren't aware, I've been against Islamism for a very long time. I was one of the few people who didn't move anywhere politically as the result of 9/11 - I knew something like that was coming, and however much I wish I had been wrong, merely having my prediction confirmed is not grounds for moving further against Islamism's insanity.

To the Islamists, I say:

To hell with your demand that we all become Islamic.

To hell with your demand that we give Islamics preferential treatment.

To hell with your demand that we treat women as lesser beings.

To hell with your demand that we treat women as being guilty of anything they are accused of and unable to effectively testify in their own defense.

To hell with your demand that we allow your religion to dictate how we will respond to the universe.

To hell with your demand that the will of Allah as interpreted by your clerics shall be the supreme ruling word of the world. We did not elect Allah, we definitely did not elect his clerics, and we do not acknowledge any authority of theirs save that which is given them voluntarily by their own believers.

In short, I do not submit.

I will not submit.

I will exercise the rights reserved to me as a free individual by the United States Constitution and other such documents. I will aid by any means at my disposal the ability of others to do so. I will not stand by and permit others to be oppressed by my lack of action.

If you can't handle it, that is your problem.

Fixing A Bad Mortgage Sale

| | Comments (0)

i was sold a bad home mortage who do you talk to

That was a search I got the other day. The answer depends upon where you are in the process.

If you've just applied, not yet signed the actual loan papers, go talk to another loan provider. It's not like you're committed to the company, and it's not like it never happens. Even the most ethical loan provider loses loans between application and funding. It happens. Go make certain that you are getting the best loan for you. In order to do this, you need to actually discuss your situation with several loan officers - and I mean really discuss it. Ask the hard questions. I've got a list of questions here. Apply for a back up loan, in case you are lied to.

If you've signed the final papers but are in the rescission period, contact the escrow company and rescind in writing. Walk it in, don't rely upon a fax or registered letter. Mind you, if it's the last day and after closing time, a faxed rescission before midnight will prevent it from taking place - if the escrow company actually gets it. Faxes go astray. This is one reason why you want to contact the escrow company, who is paid to be a neutral third party. I've heard stories of people who supposedly contacted the loan provider and it somehow "got lost" and the loan got funded. Bad situation to be in, and the legal presumption is not in your favor. Now you've got to prove that you sent the rescission in time, and that they should have known not to fund your loan. This is hard.

The most common time to realize you've "been had" before the loan funds is right when you get the final loan documents to sign. That's always the moment of truth, and there are few legal protections in advance of that moment. Many people think that the federal Good Faith Estimate or California Morgage Loan Disclosure Statement mean more than they do, when the fact is that there are very few regulations upon the accuracy of either document, and unethical loan providers are adept at not running afoul of them. And if you trusted that provider and didn't apply for a backup loan and now you are likely to lose the deposit you put down, well the provider is the scumbag, but the person in the mirror helped put you into this situation.

If your loan is already funded, you can contact your state's Department of Real Estate and your lawyer, but odds are extremely poor of those folks being able to do anything that changes the situation. There basically have to have been major rules broken to invalidate the contract, and those unethical providers who pull this garbage are adept at not breaking those few rules which really will land them in trouble. I've had a fair number brought to me to see if I could tell them how to fix it, and the form response is, "If your lawyer and the Department of Real Estate can't help you, all I can do is take the situation today as a starting point and see if selling or refinancing from this point forward put you in a better situation." In other words, the only way to reliably fix the problem is another (hopefully better) loan, or if that won't help, selling the property. The lender is not going to amend the contract because you've got a bad deal. The seller is not going to say, "Oh, I'm so sorry that you had a bad experience!" and restore you to where you were before you bought. This is why you need to make certain that what you're getting is a good deal before you are stuck with it. I'm trying to produce the knowledge that makes this possible here, but you still need to sit down and really talk the matter over with several professionals, and make the effort to find out if a proposed deal is real or nonsense. I am sorry to report that there is no easy way to do this, but you might want to start with these five articles of mine.

If you go in alert with your eyes open and do your homework, you can avert the vast majority of problems before they affect you. If you are one of those who won't do this, then you will be placing yourself in one of three categories: Those with an unreasonable amount of pure dumb luck, those poor schmoes who've been had but know better now, or those poor schmoes who've been had and don't realize it.

Caveat Emptor.


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This page is an archive of entries from March 2006 listed from newest to oldest.

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