October 2006 Archives

Carnival of The Capitalists Recommended: PaceSetter Mortgage Blog on the issues with "pre-approval." Ladies and gentlemen, I never trust pre-approvals unless I did them, and they are limited even so.



Carnival of Personal Finance



RINO Sightings Recommended: legal redux (the New Jersey Supreme court's recent decision on same sex marriage)



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Jane Novak, whose work I admire, has a categorical roundup of the sins of the Saleh regime in Global Politician. Check her out on a daily basis over at Armies of Liberation.



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Modern Humans, Neanderthals May Have Interbred, Fossils point to a melding, not replacement, of species



As anyone who's ever been terrorized by the jocks at school could have told them. Seriously, though, it's a fascinating article on what may have happened to our closest genetic relative. Although come to think of it, if our ancestors interbred with them, that would make us the same species by definition, correct?



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A man who may be one of the moderate moslems we need: A radical idea: How Muslims can be European, too. But I stress may. By his actions we should judge him. He may be the Islamic equivalent of a Menshevik.



This appears to be his web page http://www.tariqramadan.com/welcome.php3



his Wikipedia entry



Daniel Pipes had something to say a while ago.



We need to seek evidence on all sides of any question. Given the weight of what I found when I ran him through a search engine, I'd say his works perhaps incline one way (albeit with significant troubling exceptions), his associations another. However, let me ask this: suppose Dr. Martin Luther King had not reached out to defuse the more radically violent of his peers in the Black Civil Rights movement? Now consider that Dr. King did do so, and therefore his associations showed the type of person that Mr. Ramadan is being condemned for by various agencies today. I'm not ready to make a judgment, myself.



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Riehl World View has video of John Kerry's latest character revealing moment.



And here I didn't think anything John Kerry could say would bring my opinion of him any lower. I was wrong, as that digging noise you hear coming from his direction is proof that bottom is not low enough for him.



Maybe the Democrats will pull it off. Maybe they won't. We'll find out November 7th, which is the only poll that matters.



But I can tell you that in at least a couple of races, the thing that has pushed me into the Republican column (at least so far) was information contained in Democratic attack literature ("X voted against bills that would make medicine more affordable!" but those bills were attempts to repeal the laws of economics. Sounds good if you don't think, but if you do, it's a recipe for disaster. My thought in response was, "You say that like it's a bad thing!" and decided to vote for the Repugnantcan over the Dumbocrat.)



I am buying a house. I signed the contract but the seller said contingent to sell until she buys new house?

Is that normal?


People do it. It's smarter to avoid the stress and complications of dealing with both at once, but there's nothing wrong with a contingency sale, so long as you agreed to it in the contract. Note that once you have a fully negotiated contract, you can't just add a contingency to it. It has to be agreed to before there's a valid purchase contract, and if it isn't agreed to before then, the question becomes, "What concessions is the other side going to demand for this?" There will always be concessions, but by waiting to negotiate them after the contract is complete, you lay yourself open to a suit for specific performance. You agreed to that contract. Just because you forgot something important (or if you intentionally omitted it), does not mean you can just tack it on as an extra consideration, any more than the other side can unilaterally change the purchase price by $10,000.

Contingency does add a lot of complexity and not an inconsiderable amount of cost and uncertainty to the process, however. The buyer shouldn't lock their loan until they know when you can fund it, and if they don't know yet, this means the loan sits and sits, perhaps increasing in rate and cost. If you lock it, it definitely increases in rate and cost. This is the one exception to locking a loan rate right away. There's also the issue of whether your seller will qualify for the loan on the new residence, or the purchasers of your buyer's soon to be former residence can qualify for their loan. Not to mention the anxiety of whether you will qualify for your loan in time for the transaction to close so they can get their home, and I can go on.

There are better alternatives for this situation, and if your agent didn't give you a couple of ideas during the negotiating process, well, let's just say there are better ways to handle it, especially right now when you cannot afford to irritate or lose any buyers.

A contingency sale is most often for the convenience of the seller. Whereas this is just fine in a seller's market where as soon as you put the sign in the yard you get three offers, a buyer's market is something else again. By being unwilling to accommodate a particular buyer, you may not get another offer. I understand very well not wanting to move twice, but the person who is willing to work a little harder or go through some extra inconvenience usually gets it returned in the form of cash when the transaction is over. How much is dependent upon the competition of the moment. It can make your property a lot more attractive, and mean a significant difference on the sale price, if you're willing to cooperate with the prospective buyer on not making them wait while you find a new property to buy. In a market like today's, where buyers have all the power, it can make the difference between selling for a good price and not selling at all. Any time you find yourself unwilling to do something a buyer wants, you run the risk that you won't get another, or won't get another as good.

Some buyers want contingent sales as well. Just as being willing to work with a buyer without a contingency can make you money, a willingness to grant a buyer their contingency can also make money. You can ask for a larger deposit, a higher sales price, or for the right to continue to market the property - so you've got this offer, or a better one if that comes along, as they are not likely to be able to perform when you drop that Notice to Perform on them because you now have a better offer. If they could have performed, they would have already performed. If they really need that contingency, they've got to deal with the same market you're dealing with!

When there is a strong buyer's market, if you are willing to do what it takes, you are competing more strongly for the available buyers. Similarly, if you as a buyer have fewer needs that you ask the seller to cooperate with, chances are excellent that you will get a better price. Remember that there is a reason why he who has the gold makes the rules - because he's going to be shelling a good amount of it out in order to get his way on other things.

Caveat Emptor

UPDATED here


I am seeking to sell my properties to my tenants. I want to create a mortgage and then sell the mortgages. Properties are undervalued in this area as they have been historically fixer-uppers. Ours are in very good condition due to major renovations. This would interfere with a regular mortgage, but temporarily holding one might eliminate this problem. Is there a way to do this or is this not possible?


The first question one would ask is why you would want to do this. The answer, easily enough, is that this way you aren't chained to lender requirements as far as the appraisal goes. When you've got a property above the neighborhood in quality, it's very hard to get an appraisal for as much as you might be able to get at top dollar. Why? Because there's nothing else in the area as good. This phenomenon has a name: Misplaced improvements. Over on my other site, I've spotlighted several of these. They are not good investments, but they are an excellent way to get a significantly better home for not much more in the way of purchase price. If you've got a beautiful 5 bedroom home with 3000 square feet and all the amenities, and nothing else in the neighborhood is over 1500 square feet, and kind of run down at that, they are still your comparables (comps). If I understand the rules correctly, the appraisal can only be a maximum of 25% over the comps. So if everything else in the neighborhood is selling for a maximum of $400,000, this one can't appraise for more than $500,000, even if it might be worth $800,000 in a neighborhood of like properties. Best property in a neighborhood: Bad investment (relative to other properties), but a good way to find a great home for your family to live in at a bargain price.

So this person wants to get around that, and has an idea as to how. Forget lender standards, he'll just make the loan himself. Well, he is permitted to do this. Willing buyer and a willing seller agree upon the price, and since a regulated lender isn't involved to force the evaluation into a LCM, or "lesser of cost or market" format, the appraisal becomes irrelevant. Buyer and seller agree upon a price, and part of the transaction is that the seller carries the note.

Now the first issue is the "due on sale" clause of most mortgages. So if you sell the property in this manner, any mortgages you have become due when you sell the property. No problem if you own it free and clear, or if you've got the cash to pay it off somewhere. A large problem if you don't. It is possible that some lenders may allow the loan to be assumed, and to put the loan you are actually holding behind their mortgage as a second trust deed. You then have justification for charging a higher rate of interest on the portion you actually hold. Cool, from the seller's point of view. Not so hot from the buyer's point of view. Remember, they've got to actually make those payments. Some lenders may also agree to modify their trust deeds so that you're still holding them, but they become "pass-through" type investments. Expect the lender to require a modification that raises the interest rate in this instance.

Now, let's ask the next question: Why would the tenant want to pay more than the area is worth? Well, I wouldn't, but it does happen. There are "Rent to Own" appliance stores everywhere, and PT Barnum underestimated by several orders of magnitude. Many people think that for some unguessable reason that they are not qualified to buy a property, or that they are less qualified than they are, and many loan officers and real estate sharks prey upon this sort of buyer. It is for this reason among many others that I counsel everybody to shop their loan around and find a good buyer's agent, who should inform you as to the issues involved and represent your interests, so that if you end up doing it, you walk in forewarned and forearmed, and have someone with a fiduciary responsibility to you and only to you that you can and should sue if they don't. Because buying under these conditions is not likely to be in the buyer's best interests in the kind of situation envisioned by this seller. The buyer ends up owning more than the property is worth according to a lender, making it difficult to refinance, even if general values have increased. I would certainly want some major concessions in price or interest rate in order to consummate the loan. Note that it isn't wrong of the seller to do this as long as you do not misrepresent the situation; everyone wants the best possible bargain and both sides are entitled to pursue that best possible bargain, and sometimes, one side does a much better job than the other.

Now, let's assume that all of the above has been done. Willing buyer, willing seller, price agreed, exchange made and now we are going forward to the seller wanting to sell the note. Can they expect to be able to sell?

The answer is that yes, the holders of the notes can sell, but in my estimation they would be better off not doing so, other factors being equal. You see, all of the other lenders out there selling their notes have a track record. Even lenders just starting out can document their underwriting standards. Furthermore, CMOs and MBSs are normally sold in lots of $50 million or more - in other words, pretty good risk diversification, as that is at least 100 different loans from 100 different borrowers in 100 different areas at a whack, and the chance of that lender taking a net loss is far less than if there are only ten or twelve. Furthermore, as most lenders can document their risk management practices, and the ones who have been at it for a while have a track record of thus and such a foreclosure rate, and thus and such a loss write-off rate, they get a price for their notes that is commensurate with the value. In most cases, pretty darned good, netting three or four percent over value after paying the security brokerages who act as go-betweens. Do this six or ten times per year, you make some pretty decent money even after paying for everything it takes to do those loans.

In the case under consideration, however, those security brokerages are going to charge about the same amount as they charge on much larger issues. After all, they have to do basically the same work, so they want the same pay. Furthermore, you're going to have some real trouble convincing prospective buyers that your risk management underwriting is acceptable, as you are missing at least one of the most basic protections for lenders that there is: the assurance that if everything goes south, they will be able to market the properties for something approximating their investment. Chances are, they are going to require that you perform an appraisal in order to sell the loan to them, and since the appraisal will come back with the same value that you were trying to ignore in the first place, and the price they will offer for the loan will reflect that, and they will offer far less for those notes than you have at risk. All of them are in the same area, and all of them have the same issues. A lot less diversification of risk than what they normally see, and with other issues as opposed to loans underwritten by regulated lenders, as well.

Now if you can sell enough in one area, the comparables will start to reflect these values, for which neighboring properties will certainly thank you, but the real point is that after a few of these sales, both in the MLS and publicly recorded in a short period of time, your appraiser can start to get value, at which point regular lenders start being willing to bite off on them, if you've got a good appraiser who can justify choosing the comparables that they did. If you're selling out a sixteen unit conversion, well, most of them should be "model matches," but if they are all single family residences of varying floor plan and not particularly close to one another, there are likely to be persistently difficult issues with appraisals.

The upshot is that in most cases, when you go to sell the note, you are going to take the same "loss" (of value), if not more, than you otherwise would have "suffered" by simply putting the property up for sale at prices that the neighborhood comparables would support, and letting the lender's chips fall where they may. Don't get me wrong; if you're in a position to hold the notes yourself it could be a great way to make some money, although you've got to watch out for foreclosure issues. But if you're planning to sell the notes, you're going to have to go through the same rigmarole that the regulated lenders do, and come out much the worse for the fact that you did not go through the same process that they would. Now just to note, this has a lot in common with a couple of scams I've read about, and Wall Street is certainly a lot sharper than I am on that score. Just because you're being honest does not mean that the flinty-eyed people who invest other people's money for a living are going to believe you're honest, especially when what you're doing looks like a known scam to them. Oh, you'll be able to sell the notes, of that I have no doubt. But I sincerely doubt that you'll be able to sell them at face value or anything like it.

Caveat Emptor

UPDATED here



Border Patrol Agents sentenced to Prison: For Doing their Job



If this is the way we're going to approach it, why do we have Border Patrol Agents? Why have law enforcement at all? Violating the "civil rights" of someone who has just wounded a law enforcement officer? Get real!



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Iran Doubles Nuke Enrichment Capacity



They already have more than enough enrichment for energy needs (despite what the article says). Why a second set if they're not looking to build a bomb?



Israel isn't fooling itself: Olmert Compares Iran With Nazi Germany. Why are we?



Personally, I don't want to be recycling all the old tasteless jokes about the Holocaust. They're only funny to nine year olds.





Israel's concerns have heightened since the election of Iran's hard-line president, Mahmoud Ahmadinejad, who frequently calls for the destruction of Israel and has questioned whether the Nazi genocide of 6 million Jews took place.





and





"It is the first time that a leader of a very big and important nation openly and publicly declares that an aim of his nation is to wipe off the map," Olmert said. "And this nation continues to be a legitimate member of the United Nations and leaders of many of the countries in the world receive the leader. They hardly do anything."





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Gateway Pundit with some historical context for the election.




Home Prices Plunge by Most in 35 Years





The Commerce Department reported that the median price for a new home sold in September was $217,100, a drop of 9.7 percent from September 2005.





Keep in mind that we don't have a unified national market - we have an amalgamation of local markets. This is nonetheless not a good sign. Locally, the price of what actually sells is down almost 20% from peak, depending upon the ZIP code.



Don't look to the Fed to bail the housing market out, either: No Tricks, No Treats in New Fed Message



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An End to some folks denial: Bush Signs U.S.-Mexico Border Fence Bill



I didn't think the President wanted to sign it, either. Nonetheless, it was not an issue on which he was prepared to buck the emerging consensus, especially as it has become plain that the longer things go, the more hardline the eventual resolution is going to be. The prospect of a pocket veto would not have mollified anyone - it would just have ticked off both sides, and if there is one thing our current President Bush has established is a solid part of his character, it is the fact that he doesn't duck making a decision.



Of course, the Mexican government isn't happy:



Mexican officials have criticized the fence. Outgoing Mexican President Vicente Fox, who has spent much of his six years in office lobbying for a new guest worker program and a chance at citizenship for the millions of Mexicans working illegally in the U.S., calls the fence "shameful" and compares it to the Berlin Wall.





For the historically challenged, the Berlin Wall was intended to keep East Germans in. This is a measure to keep those without permission to be here out. The Mexican government would have been overthrown sometime along about World War II if not for remittances from family members on the north side of the border.



Now it happens, I don't think the fence, by itself, will be a real solution to the problem. The only measure that will work is harsh employer sanctions and aggressive enforcement. But a fence to physically keep out those who shouldn't be here is a necessary part of a larger solution. Run "anchor baby" through a search engine or two if you want to know why.



Nor do I think we should pay any attention to the Mexican government's desires, at least with regards to how we handle our border. If you want a real eye opener, check out what Mexico teaches its school children about the United States, especially the southwestern portion. If the Mexican government wants to close down the border from their side, that's fine by me. No more turistas spending yankee greenbacks helping to keep the Mexican outhouse government afloat. If they want there to be no border, they can apply for statehood. I'd urge my Congresscritters to vote "yes" if they did.



(Just so there is no misunderstanding, the Mexican people are every bit as hardworking and deserving as any other nationality, more so than many, and I'll willingly stand at the border and greet those arriving here legally with a handshake and "Welcome to America! How can we help you get started?" But their government is a century old fetid outhouse of decay, corruption and incompetence, and anything that increases the prospect of it expanding it's mordida influence north of the border is worth getting violent about.)



Scrappleface understands what is really going on.



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In the "helping the truth catch up with lies" department: Gilchrist: Don't fall for media's spin about the Minutemen



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China takes heat after tragic flight of Tibetan teenager



Admittedly, no passport. Still:



About half the group was captured by Chinese police. The Chinese Foreign Ministry announced the death of a second victim, a 23-year-old male, days later in a hospital, stating he died from "oxygen shortage." China's official news agency, Xinhua, reported on Oct. 12 that Chinese police opened fire in self-defense after the Tibetans attacked them.



Human rights groups say the Tibetans were unarmed, and that the male victim died from gunshot wounds.





You want human rights violations at the border? Those are human rights violations: shooting your own citizens from ambush for the horrible crime of wanting to leave, even though those on the other side are willing to receive them.



They've got this one on film: Exclusive footage of Chinese soldiers shooting at Tibetan pilgrims Please, watch it before some politically correct numbskill censors it.



While I'm at it: Begging for justice in China's capital





Last year, the number of mass protests rose to more than 87,000, up from 10,000 in 1994. Party leaders recently agreed to reform the system after a surge in unrest linked to land grabs and other abuses, according to the official Xinhua news agency.



However, researchers say that far from quelling tensions, new restrictions on petitioner gatherings may actually be radicalizing complainants. In squatter camps in Beijing, rural petitioners are finding common cause with each other, stirring a nascent protest movement.





The Chinese government can't win and they can't break even, but they're not going to quit the game.



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Fascinating: Amazon River Flowed Backwards in Ancient Times



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Victor Davis Hanson reviews Robert Spencer's "The Truth About Mohammed"



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Captain's Quarters on the Michael J Fox campaign ad.

In all of my conversations on mortgages with prospects, there is one subject that comes up over and over and over again, and that is the subject of payment. "But that loan over there only has a payment of $1450! The payment you are quoting is $2700! The other guy has a better loan!" Then I tiredly have to tell them about negative amortization loans and what is really going on, and why my 6% thirty year fixed rate loan is a better loan.



Usually, they don't believe me. Over 80% of people are in denial when I'm done explaining how a negative amortization loan works. They so desperately want the Negative Amortization loan to be a real payment, and they trust the guy trying to sell it to them. After all, he told them all about his little girl's soccer game, or whatever irrelevancy he used (like all the good sales books tell him to) to make him seem like a trustworthy human being. So I'll tell them about what is usually my favorite loan, the 5/1 ARM, but with an interest only rider. "Now I shopped eighty lenders for real loans and real payments that you would actually qualify for. Of all those lenders, this 6% was the best thirty year fixed rate loan for no more than one total point. But I have got this other loan over here that another lender is willing to give you. It's at 5.375%, and the payment is interest only to start with, so you'll only be writing a check for about $2015. How does that sound?" They'll say it sounds better but not as good as that other loan that the other guy is offering. Then I'll tell them the downsides, "That's okay, because this loan's rate will adjust starting in five years, and at the same time, it'll start to amortize, meaning your payments will go up. If the index stays where it is now, it will jump to 7.25% that first month after five years, and your payment will be over $3250 in that sixty-first month. Furthermore, you'd have had to pay over three points discount to get that rate. So adding $10,000 extra to your balance, and suddenly having payments $1200 per month higher, is the price you pay for cutting your payment about $650 per month. What do you think the price is for cutting your payment by $1250?"



Well, as I've covered elsewhere, the price for a negative amortization loan in these circumstances, by whatever friendly sounding name they have for it, is a real rate two percent higher than you could have gotten, a balance that increases by about $70,000 over a five year period, and a prepayment penalty for the first three years, while your real rate isn't fixed even for one month, let alone 5 years.



Selling by payment is the number one trick of unscrupulous people. You go out car shopping, and someone says you can get a $20,000 car for $608 per month, while the lot down the street says you can get a $25,000 car for $303 dollars per month, that second car sounds fantastic, right? Never mind that the loan is based upon a ten year repayment, and the interest rate is two percent higher than the three year loan the first car was based upon. Never mind that the used car dealer is actually going to give you a payment of $339 after they soak you for $3000 in bogus fees simply because you are so happy you got this wonderful car for half the price, and you're so happy with that payment that you don't watch what they're doing as closely as you normally would, because, after all, you're getting this car for about half price! Except that you aren't.



Real estate, and real estate loans, are no different. You've got to be able to make that payment - the real payment, not that minimum payment. But if someone's quoting you a payment that much lower for the same thing, there is a reason. But it is amazing the number of people who would never fall for the low payment line of patter out on the used car lot when they're talking about a car will fall for it the nice plush office in real estate that some of that money they soaked their suckers for bought. Those few I can get to own up admit to thinking of the mortgage loan as something akin to rent, which is kind of like thinking of your car payment like you would think of bus fare. Hey, here comes a bus that's seventy-five cents cheaper than the express bus right here - but this other bus is jam-packed, you can't get off until the driver's shift is over, and it's going in the wrong direction!



Payment is not price. Most people know this, but they forget to apply it. The amounts at stake in real estate are usually many times the amount at stake in any other product aimed at consumers, and the chance of banks giving away that kind of money are correspondingly lower. The great rule that applies everywhere else applies equally strongly for real estate: Sales folk who try to sell by payment are trying to get you to pay too much, and not just for the item you are purchasing, but for the loan as well. I have helped folks who first bought their houses in the seventies for forty thousand dollars, and who now have four hundred thousand dollar mortgages on the same property. They have refinanced ten or twelve times (except for the two that added a grand total of $45,000 cash out, and the loans mostly had smaller payments, and each one added $20,000 to their balance in fees, and now they need to sell the house and they are walking away with $20,000 instead of $450,000 they would have had if they had simply been more careful.



One thing to remember is that you can never go backwards in time with what you know today. What is important is not just the type of loan, but the interest rate and the cost it takes to get it. Mortgage loans are not free - all of the people whose help is required do not work for free and you - the borrower - are going to pay for every penny they make in one way or another.



Now, your greatest friend once you have own a home is inflation, particularly if you've got a fixed rate loan. You only borrowed $X. Just because they are now worth less does not increase the number of dollars you borrowed. If you have a fixed rate loan, or at least long enough to get through the period of inflation, you don't care that the interest rates on new loans are 14%. You've got this nice 6% loan locked in for as long as you care to keep it. Matter of fact, in situations like this, lenders will often offer you a much cheaper payoff if you will, in fact, pay it off. But four years of ten percent inflation and that $400,000 loan is worth about $273,000 by the standards of the day you took it out, and all the folks who were laughing at you because your monthly cost of housing went from $1650 rent to $3000 mortgage are now paying $2350 and getting none of the deductions you are, while your costs are fixed and theirs are still riding the escalator up, and if they want to step off now, that property with a $400,000 loan is now $5100 per month!



Nonetheless, choosing a loan based upon payment is financial suicide. If you cannot afford a real loan with a steady payment on the house you want, instead of a loan that messes you up for life, consider buying a less expensive house. Yes, everyone like house bling, and the more expensive of a house you buy, the more leverage works in your favor. But, as millions of folks are finding out the hard way right now, if you can't make the real payment on a real loan, you are at the mercy of the market, and the market has no mercy.



Caveat Emptor.

UPDATED here

The answer is a modified no. The same answer applies to property that is only structurally damaged, but not condemned.



That condemnation is a matter of public record. I've seen any number of them while perusing title records. It shows up kind of prominently on the title commitment, which every regulated lender is going to require.



Now it is a rule of regulated lenders that they will only lend upon the state of the property right now. If a house is condemned, you can't sell it to anyone as a house. Furthermore, with a condemned house on the property, it really isn't vacant land, either. It's less valuable than bare land, as you have an expense that vacant land does not. You have to pay for demolishing the structure and hauling away the garbage.



In the case of structurally damaged but repairable property, regulated lenders won't deal with it as a house either, although some may deal with it as if it were vacant land, less the cost of demolition and haul away. It depends upon lender policy.



The only place to get loans upon structurally unsound or condemned property is a hard money lender. They don't have the Securities and Exchange Commission to answer to, and only much smaller responsibility to the Federal Reserve Board. Many of them are individuals holding the loans in their own name. They can do most anything they want. If one of them can be convinced that the property can be marketed for a given sum, they will typically loan based upon that sum. It's all a matter of what they want to do.



Hard money lenders will loan a maximum of only up to about seventy-five percent of whatever the marketable value of the property is, and the rates are unfriendly, to say the least. However, they can choose to lend where a regulated lender can not. They can be your only option other than no loan at all. Most brokers will have at least a couple hard money lenders available to them, but your average direct lender cannot. As a final note however, before doing business with a hard money lender, you want to think long and hard and consult some experts as to whether you should - whether it's a good idea or not.



Caveat Emptor.

UPDATED here


I recently closed a mortgage loan. The loan officer told me there would be no prepayment penalty. When the documents came there was none and the loan funded and closed.

Two weeks later I got an e-mail stating some documents had been missed and we need to sign and return them. They contained a new TIL, prepayment rider and addendum.

The original TIL states there is no prepayment penalty. I have not signed these and the lender is telling me I have to because of the compliance agreement.

Is this true?



Talk about scummy behavior!

I wouldn't sign the new documents. As a matter of fact, talk to your state's department of real estate about this behavior immediately. I hope that whoever is responsible for this loses their license to do loans in your state. You also will likely want to consult an attorney, as a precaution. A lender attempting to modify the contract after funding requires your consent. This strikes me as a a good candidate for fraud, depending upon the particulars of the contracts. Explain to them that you would not have signed the documents had this been presented as a condition of your loan funding, and so to attempt to alter the contract ex post facto (after the fact) is, in some cases, grounds for a prosecution based upon fraud.

That contract is a two-sided document, freely agreed to as it originally was by both parties. The fact that the loan funded is evidence of this. I have never heard of needing to sign a pre-payment agreement as a compliance procedure after the fact - except to comply with getting that lender paid more.

If lenders could require this sort of thing, they could unilaterally change the agreement any way they want to after funding. So what if you signed a thirty year fixed rate loan at 5.5 percent and paid three points to get it? You new rate is eight percent, "for compliance"! According to everything I know about contract law - which is limited, because I'm not an attorney and you should talk to one - they have no legal grounds to demand this of you.

At the very least, it would be the case that signing these documents is what starts the clock on the the three day right of rescission. That the lender funded the loan before then is evidence of a severe error on their part, and they would have to restore you to the situation as it existed prior to you signing the original documents. If you get a sharp enough attorney and help from your state's regulators, it's possible that you might get yourself some concessions or even a settlement from the lender.

Every state's laws are different, so you need to talk to your state's department of real estate, and I do suggest consulting an attorney before you draw any lines in the sand, but this is my best understanding of the situation.

Caveat Emptor

UPDATED here

Carnival of Investing



Carnival of the Capitalists



Carnival of Personal Finance



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Some welcome news here: Radical Islam finds US 'sterile ground'



On the other hand: Egyptians who enslaved girl, 10, get U.S. prison



Only three years for two years enslavement?



via Tinkerty-Tonk, Two faces of Arab intellectuals



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While I was finding a good permalink to another article, I noticed this one: A century on, Brazil still claims flight's first.



What it doesn't say is that there were people trying to steal the Wright Brothers ideas and inventions, and so, of necessity due to the murky nature of intenational intellectual property at that time, they became very secretive for several years after the initial flight. Once their claim was settled, they made a tour of europe, astounding audiences with their control of the airplane. Flying figure 8s may not seem like a big deal today, but back then, the Wrights were the only ones who could do it. Where before, europe, led by those self-proclaimed arbiters the French, had disparaged the Wright brothers claim. But when the Wright brothers showed their stuff (about 1908) those doubters who had carped the loudest conceded the truth of the Wright Brother's claims.



By the way, the Wright brothers' initial flight was witnessed by six other people uninvolved with their project. Santos-Dumont, while a pioneer in his own right, was not first. There are legitimate limits as to what the Wright Brothers accomplished. They were only the first controlled self-powered heavier than air craft, but seeing as that's the generally accepted definition of airplane, they get the name recognition. Gliders were decades ahead of the Wright brothers, the Montgolfier brothers balloons, over a century. But those were all hobbyist curiosities, something for dilettantes to fawn over. The Wright Brothers built upon all of the work that came before them, and improved it enough to make something useful out of it that revolutionized flight, and made flight useful.



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I don't often agree with Bill Bennett, but he gets it right here: Bennett: Most around world still believe in America



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Old jokes come to life: Man accused of having relations with dog. He will never be known as Mike the barman, or Mike the dock builder.



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Diebold Source Code Leaked Again. Or maybe not. Buried 12 paragraphs down:



Diebold said the source code was for BallotStation 4.3.15C, which is no longer being used in the U.S., and for GEMS 1.18.19, which is being used in a "limited number of jurisdictions."





So the correct headline, as far as I can tell, would be "Former Diebold source code leaked again"



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My Hero: Fighting spirit saves pensioner from attack



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Disturbing if true: The Kennedy KGB letter Updated with info about the NIE leak



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Q and O has a nice article in which both he and Justice Scalia examine why the judiciary needs to be both independent and limited, and the less limited they are, the less independent they should be.



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Sounding Taps (via Mudville)



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Thank you to the nice lady who asked me a question I could use for a last minute article for tomorrow. I had a family emergency and didn't have anything until she asked her question.

RINO Sightings

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Welcome to the October 23rd, 2006 episode of RINO Sightings, wherein we deal with those most dangerous of creatures, the RINO. RINOs are severely dangerous to orthodoxy in all of its forms. A group of RINOs is known as a "crash" for good reason. Beware the horn of the individual RINO! However, an entire community of RINOs can shake your very understanding of reality!



There are inclusions here that may be a little older, and I apologize to those submitters whose submissions might have been inadvertently missed in the past few carnivals. So there are a couple of multiple submissions from the same site, being linked because they were missed in previous editions. Nor are the posts within a category in any particular order except that's how they ended up.



The Crash of Foreign Affairs and the War on Terrorism




Enrevanche discusses Islam 101: Sunni or Shi'ite?, which notes that many people in critical positions don't understand the difference.



Jane at Armies of Liberation talks about Leading al-Qaeda: Yemen will not confront the Mujahiadden, about the Yemeni regime and Al-Qaeda. I highly recommend her site, and not merely for its excellent reporting upon the situation in Yemen, but also for the window of understanding it opens on many other regimes in many other countries with similar issues.



Commissar at Politburo Diktat does some Habeus corpus blogging



Cory Herche of Legal Redux discusses North Korea's actions versus its words in Kiss and make up?, discussing several North Korean actions it would rather the rest of the world conveniently forgot.



Buckley F. Williams at the Nose on Your Face laughs at terrorist enabler Lynne Stewart in Lynne Stewart Sentenced, Superlative Futures Soar. It's more constructive than the alternative.



The Crash of Domestic Politics




Larry Bernard of Inside Larry's Head discusses our most recent ex-president in Bill Clinton: a comment so stupid its given me cancer. Hey, better cancer than Clintonitis. Doctors are successfully treating many cancers these days. There is no known cure for Clintonitis, the ability to justify anything you want in your own mind. Cody Herche of legal redux illustrates this with Aftershock: Clinton on political assassinations



Rachel Sawyer at Tinkerty Tonk talks about The Barack Obama swoon



Your host checks in with Republican or Democrat in 2006: Lazy Larcenous Slugs or Partisan, Obstructionist Civilization Hating Suicide Artists Who Are Also Lazy Larcenous Slugs?.



Jack Yoest submitted a link to a televised debate involving his wife, Charmaine, at Reasoned Audacity. 6 minutes 30 seconds.



Stephen Littau of Fearless Philosophy For Free Minds submitted Personal Attack Ad...Against Myself! on the attack ad mentality, also known as the attempt to beat something with nothing.



Tom Hanna of Tom Rants submitted Local History, Speeding and Lawbreakers, which is really about immigration and illegal immigration.



Digger's Realm presents another viewpoint with A Word From The Cousin Of Victim Amy Kortlang Who Was Killed By A Drunk Driving Illegal Alien. Victor Davis Hanson wrote an article a couple weeks age about the pro-immigrant hardliners delaying a sensible resolution to the illegal alien process, and in the process forcing more and more people further and further into the other camp, meaning that the eventual solution is likely to be less to those hardliners' liking. This is a case in point.





The Crash of Miscellany




Cody Herche of legal redux on The impact of Darwin on domestic and foreign policy.



Stephen Littau of Fearless Philosophy For Free Minds on Just Defending Marriage? Don't Believe it!



As a host's prerogative, I'm reserving the last link to a fairly lengthy article on my site's area of special emphasis: Real Estate and Mortgage information. First Time Buyer Programs: The Mortgage Credit Certificate (MCC)



Next Week's RINO Sightings host will be Inside Larry's Head

Politburo Diktat had a post a few days ago on Habeas Corpus Blogging. It was submitted for RINO Sightings, so I read it again. The comments are also worthwhile.



Most folks seem to be unaware of the history and purpose of Habeas Corpus. It is historically applicable to those residents of a state accused of crimes, most particularly against that state. It has never, historically, been applied to enemy combatants in any form. If there is someone at Guantanamo to whom the definition of enemy combatant does not apply, I'd like to know about it, and I'll support the point of view that they should be entitled to a trial. But this has been a tool for those of a certain political stripe to score political points, by attempting to apply a broad-brush strategy (habeas corpus) to a situation it was never intended to apply.



If those "defenders" were really trying to free prisoners of injustice at Guantanamo, they could have done so with a fraction of the effort they have spent so far, by publicizing the details of particular cases, making it politically untenable for the Bush administration to continue holding that particular detainee in that fashion, getting that prisoner freed. But that is not the case - or at least I haven't found one single case of a prisoner where that is the case. If there were one, it would not apply to the next prisoner over, unless that prisoner were also in that situation.



Now it sucks to be in all essentials, a prisoner of war indefinitely. But let's consider the other side. Suppose North Vietnam had released John McCain after only four years. Is there any doubt in your mind that he would have once again become an enemy combatant against them? They were therefore justified in continuing to hold him.



The same situation applies here. By all means, if there is anyone being held as a political prisoner, or a prisoner of conscience, let's get that news out and get them a trial and get them released. I will publish any news of one such that I run across. But enemy combatants have got to stay locked up, lest they return to the fray and kill more of our soldiers, or worse, civilians. Those performing the evaluations of the detainees have been, if anything, too forgiving of those detainees. There have been multiple former prisoners at Guantanamo killed or recaptured in battle in Afghanistan and Iraq, and one would have been one too many.



It's not a matter of trusting the administration, as any number of its opponents have charged. If there were any of these detainees who are not deserving of incarceration, the avenues exist to get them freed. It is a matter of protecting our troops and our country from an unnecessary threat that has already been neutralized. These people are not noble revolutionaries out to free us from the chains of the Bush administration. They are enemy combatants. They want to kill us. All of us.



Suppose some of them are released, and subsequently participate in the detonation of a radiological bomb in New York Harbor, or along the banks of the Potomac. Would we not say that the Bush administration was responsible, that they failed to protect us from a known threat? Make no mistake about it, the administration would be responsible. They volunteered to hold that particular bag of responsibility, and we elected them to do so. But simple ethical guidelines says that we cannot then rip large holes in the bag, rendering it incapable of retaining its contents, and then fault the Bush administration for failing to keep them in.



The stuff they're doing with CGI these days: Ford says he's fit to play Indiana Jones



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Iranian leader threatens Israel's allies





Ahmadinejad called the U.N. Security Council and all its decisions "illegitimate" and said the world body was being used as a tool of Iran's enemies - the United States and Britain.



and



Ahmadinejad, speaking to a crowd of hundreds of thousands in Tehran, threatened any country that supports Israel, and said the U.S. and its allies had "imposed a group of terrorists" on the region by their support of the Jewish state.



"It is in your own interest to distance yourself from these criminals... This is an ultimatum. Don't complain tomorrow," he cautioned. "Nations will take revenge."





Is there anyone reading this who doesn't think Iran's leaders would unleash a nuclear apocalypse if it could?



But he goes on:



"The time is over for such logic. Under such circumstances, the Security Council is illegitimate and its decisions are illegitimate," Ahmadinejad said, drawing chants of "Death to America" from the crowd.





Nuke watch: The game's getting tougher



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Cue "Twilight Zone" music: Why is the White House so Eerily Confident about the Coming Elections?



Read the comments, also. But maybe you'd better wear a helmet so your head doesn't explode.



And she actually gives one of the two reasons why the White House is not worried:



Karl Rove recently told the Washington Times, "For most Americans, particularly the marginal voters who are going to determine the outcome of the election, it started a couple of weeks ago... Between now and the election we will spend $100 million in target House and Senate races in the next 21 days". That is $30 million a week in 15 or 16 key races. Knowing this group, the answers must lie in a clever blitzkrieg combo of all of the above.





In short, the Democrats are basically broke, while the Republicans are sitting on a huge pile of cash. People remember what you told them last, and it doesn't matter where you are in the polls now. What matters is how many votes you get on election day. Does the marathoner who's ahead with two miles to go get the gold medal, or does the one who actually crosses the finish line first? There's only one poll that really matters, and it take place November 7th.



Number two: Bush isn't running again. Ever. Even if the Republicans lose as badly as the most partisan Democrats are hoping, he will still be President. Furthermore, as I've said before, if the Democrats win, I'm confident they'll sink themselves responding to the need to govern. The Democrats aren't going to have the votes for a successful impeachment. Worst possible case: Bush gets a Democratic Congress to deal with his last two years. If they're obstructionist enough, Newt Gingrich could give you chapter and verse of what's likely to happen. Remember Newt? He hasn't been Speaker for quite a while now. Tip O'Neil and Tom Foley could fill in the little details. Yeah, it would make the President's job a little harder - and would likely set the stage for a return of the Republicans in 2008. Big time. The Democrats last sensor contact with reality was 1996, and it's only the fact that they have nothing to do with governing has kept them competitive nationally. I'd love to see the Democrats develop more contacts with reality - it would give us all a realistic alternative to the Republicans, because as bad as the Republicans are, let the Democrats get in charge of the economy and the war, and their policies will wreck both. Which will be the reason the Republicans would be back in 2008.



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Michelle Malkin on how outraged the Democrats are that the Republican chair of the House Intelligence Committee suspended the access to classified material of a Democratic committee aid accused of leaking classified information.

Carnival of the Capitalists



By the way, I've got RINO Sightings next Monday. Both sidebars have my email address, or you can submit via Blog Carnival.



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Clark Kent, call your office: Rare Meteorite Found in Kansas Field



Not just Clark Kent, but Sue Storm too: Scientists create cloak of invisibility



If a Russian offers you Vodka, be careful: Russia probes reports Spanish king shot drunk bear





A Russian region has ordered an inquiry into a report that hunt organizers, keen to make the King of Spain's chances of killing a bear easier, provided a tame one drunk on vodka, a regional spokesman said Thursday.





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How certain are taxes? Virtual economies attract real-world tax attention



While we're at it, Reuters opens virtual news bureau in Second Life



Next thing you know, they'll have murders, rapes, muggings, etcetera. I thought the point of playing was to get away from reality?



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Iran warns against U.N. nuke sanctions





But he warned that "in the case that a new resolution is passed by the Security Council, we will not be in the current point to resume possible talks."



"Resorting to arm-twisting through the Security Council would be considered a security threat to Iran and will change (Iran's) behavior," he said in an interview with the semi-





In other words, once the Security Council has actually done something, they won't talk while they continue building the nukes they are not going to stop building anyway.



Of course, the odds of the Security Council approving more than mild slap on the wrist sanctions is small. Tiny. Microscopic.



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looks like the Democrats in Florida have turned 180 degrees since 2000. Either that or they're just actually and blatantly trying to do what they accuse Republicans of: Steal an election by keeping voters in the dark. Fla. official appeals Foley sign ruling



Foley resigned his seat and the race, but too late for the ballot to be changed. I would like to know exactly how it is a disservice to voters to inform them that a vote for Foley will be counted for his replacement?



The infamous "butterfly ballot", it is to be noted, was an inadvertent creation of a Democratic Registrar of Voters. This is intentionally depriving the voters of information at the polls as to who they are actually voting for.



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Ed Koch at Real Clear Politics: "It makes no sense to retreat"



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When they start to develop a tolerance of being made fun of, I think Kazakhstan is definitely on the road to a democratic society: Grumpy Kazakhs invite Borat to "his" land, at last



I haven't seen any of Borat's routines. But if Kazakhstan wasn't advancing rapidly, it probably wouldn't be funny.



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Where's the week go?



One anecdote from today's casting about: Two doors down from one property I looked at, a sign on the fence of another house for sale, "Smile, you're on Candid Camera! Property guarded by use of Armed Force!" Well, I believe in the second amendment also, but when you're trying to sell your house, this is hopelessly inappropriate. If I had been intending to look at it, I would have driven right past. In this market, there is no client other than institutional investors I that I might take to see that property - and these people are not the buyers you would prefer. I thought, "What kind of bozo agent would not have that sign down?" The Answer?






This is a nationwide program for first time home buyers that helps them qualify for the loan by saving them even more money on their tax bill. With that said, however, the state of California accounts for more than 50 percent of all MCC Certificates.



Each individual area has its own administrator. Within the County of San Diego, for instance, there are three individual programs, although one company administers two of them. You must submit your paperwork to the correct authority, under the correct program. Each program has its own allocation of money, and if you submit to the wrong program, the application will not be approved, wasting your money.



Now, before I go through all the rigamarole of the program, what does it do for you? Simply put, it boosts the value of the mortgage interest deduction.



Here's how it works. During the escrow period, the time between the purchase contract being agreed to and the consummation of the transaction, you apply for a Mortgage Credit Certificate (MCC) through the originating lender. This means the people who take the loan application. This program is emphatically open to loan brokers. If the broker participates, it does not matter whether the funding lender participates, because it is not required that the funding lender participate, only that the originating lender participate. There is a nonrefundable upfront fee involved. This fee is paid to the authority administering the program. Some brokers may front this money on your behalf, but they will expect to be paid back several times over upon funding. Remember: There is no such thing as a free lunch. Your lender submits the application and the fee, and receives an approval from the authority on your behalf. This approval is good for up to 120 days, and in most cases, it may be transferred to another property conditions if this escrow falls apart.



What does it actually do for you? It converts part of your mortgage interest tax deduction into a direct tax credit. 20% of your mortgage interest, to be precise. This applies to both first and second mortgages on which interest is being paid and payments are being made. It does not apply, however, to first time buyer assistance loans on which there are no payments, or only nominal payments.



Let's do some math! Let's say you're buying a property for $400,000, using 100% financing. Of that, $320,000 is a first mortgage at 6%, and $80,000 is a second mortgage at 10%. Let us examine the situation you should be familiar with, the normal mortgage interest deduction, first. This is the situation without MCC:







loan

amount

rate

interest

first

$320,000

6%

$19,200

second

$80,000

10%

$8000

total

$400,000

blended 6.8%

$27,200





You also have property taxes of $5000 per year (California rule of thumb. Yours may vary), which are deductible. Total: $32,200. The amount over this is deducted from your income before computing tax. The net benefit to you is based upon what exceeds the standard deduction you'd get anyway. For married couples, this will be $10,300 in 2006. $21,900, at a 28% tax bracket, sees a net benefit of $6132. This shaves a $511 per month off of your federal tax bill.



Now let's look at the situation with MCC:







loan

amount

rate

interest

20%credit

80%deduction

first

$320,000

6%

$19,200

$3840

$15,360

second

$80,000

10%

$8000

$1600

$6400

total

$400,000

6.8 blended

$27,200

$5440

$21,760





So you get a $21760 deduction and a direct tax credit of $5440. Your deductions total $26,760 with property taxes, using the same numbers from the first scenario. Les $10,300, your real deduction is $16,460, times 28% tax bracket is $4608.80. That's the reduction you see on your taxes due to the deduction. You'll also see a tax reduction due to the credit of another $5440, for a total of $10,048.80 tax benefit, or $837.40 per month. That's over sixty percent more you save off of your federal taxes. What's more, is because the credit is a known number, not subject to alteration as to your deduction status or other tax situation, it can be used to help you qualify for the loan. That $5440 credit works out to $453.33 per month that can be used to help you qualify for the loan. I just took the training for this program, and I know I'll have some interesting arguments with nonparticipating lender underwriters, but I'm going to have the documentation on my side. They say, "Show me on paper," and I show them on paper. United States Government paper. IRS Tax code citations. Anybody want to bet how that turns out? One more thing before I change the subject: This only applies to federal income taxes, not state. For state income taxes, if any, the situation with and without MCC is identical.



Participation in this program is not universal. There are fees to be paid, and some cities can't or won't. Many entire states do not participate. In other cities, there is no qualifying housing. For instance, within the county of San Diego, the City of La Mesa is not currently participating, although they have stated an intent to return to the program. The Cities of Del Mar and Solana Beach also do not participate, due to the complete lack of qualifying housing within those two cities.



There are basically three qualifications, in addition to submitting your request to the correct regional program and buying a property in a participating area. First, you cannot make more than the appropriate income limits. In San Diego County, this is currently $82,800 per year for a household of one or two persons, $96,600 for a household of 3 or more persons. Qualifying income adjusts annually. Second, this is valid for owner occupied dwellings only. You must occupy the home, or intend to occupy it as soon as the purchase is finalized, and then you must actually occupy it. Therefore, only single family occupancy properties are eligible; no duplexes, apartment buildings, or other properties with more than one living unit. Condominiums are fine, as are manufactured homes on owned land, as these are both single family dwellings. If you move out, you will lose the benefits of this MCC. As a side note, any tenants displaced by this program are entitled to compensation from the program, so if the current owner is renting to someone other than the prospective buyers, expect the application to be refused. It must be vacant, owner occupied, or rented by the prospective purchasers. Third, and finally, the property must be within the maximum limits for size of the purchase. In San Diego County, these limits are currently $503,700 for a resale property, $490,000 for a newly built property being sold by a developer. In some "targeted" census tracts, specifically designated due to their low income, the qualifying limits for the purchase are higher: Currently $615,700 for resale, $598,900 for brand new properties. About these census tracts, more very soon.



Now, what is a first time buyer for purposes of this program? A buyer qualifies if they have not owned their primary residence for three years or more. This is proven via federal income tax returns. You may own another property off far away somewhere else, too far away from your job to commute, at least according to the interpretations I heard.



There is a way for people who are not first time home buyers under this definition to take advantage of this program. Remember those "targeted" census tracts I talked about two paragraphs ago? If you buy in one of those "targeted" census tracts, it does not matter if you're a first time home buyer or not. As long as you meet the other criteria, most particularly including owner occupancy, you are eligible. These targeted tracts change with every decennial census. We're in the middle of such a period now, so no changes are anticipated soon, but they do change from time to time.



Now, there are some financing limitations on this program. It is aimed at people who really can afford the loans they are getting, and so these loans must be done full documentation. Stated income loans or NINA/No Ratio loans are not eligible. In other words, you must prove you make enough money to justify the loan. Furthermore, the emphasis is on being able to afford the loan. Negative amortization loans are not allowed with this program, nor are ARMs or hybrid ARMs with an initial fixed period of less than three years. Interest only loans are allowed, but they must be both fixed rate and interest only for at least five years. Finally, because the money comes from the same place as the CalHFA and Cal-Vet loan, it cannot be done in conjunction with those loans. I think it's a better program for the vast majority of buyers anyway. For instance, the MCC can be layered with a local purchase assistance program, which those cannot.



There are two major flies in the ointment. The first is refinancing. The MCC dies when you refinance, unless you get it reissued. This involves another fee, and getting an RMCC (for Reissued Mortgage Credit Certificate), and doing so within a deadline. There are no income restrictions once you have the MCC on getting an RMCC, but if your property has ballooned in value 200% and you do a "cash-out" refinance, the RMCC will apply only to that portion of your loan that relates to your original loan amount.



The second fly is the possibility of paying recapture taxes. This program was originally established under President Reagan, and people were selling the properties for high profit in short time frames. This caused it to be de-funded, as it was painted as causing windfalls for folks. But it proved popular enough that they brought it back, albeit with the recapture provisions. If you actually sell, as opposed to merely moving out and renting, within nine years of purchase, there's a formula for whether you'll have to pay taxes on the gain or not. But the maximum possible tax is half the gain, and the money they get helps them keep the program going. It has to do with how much your income was versus the guideline you qualified under, plus a yearly five percent adjustment for inflation and people earning more later in life. This is based upon the maximum qualifying income guideline, not what you actually made when you qualifies. Furthermore, it is waived in cases of death or divorce. In general, avoid selling in years you get a major windfall. It is to be noted that the competing programs have this recapture feature as well.



When you weigh the advantages of the MCC against those of the competing programs, as well as against doing without such a thing, the value of this program to the middle income home buyer becomes clear. Indeed, this national program is probably the broadest brush, easiest to obtain home buyer assistance program there is. Funding is not unlimited, so there can be points where it may waste your money to apply, as there is no money available in your area right now. Furthermore, a lot of lenders seem to sign up to lure first time home buyers in, and then direct them to loans that are not eligible for MCC; this is a major part of what motivated me to undertake the training myself. Furthermore, it's not free. But if you fulfill the requirements, the payoff is enormously better, at a cheaper price, than anything else of which I am aware.



Caveat Emptor

UPDATED here

People sometimes ask how they can improve their credit if they have old collections on their credit record.



Well, the answer is NOT to simply pay them. Paying off a five year old collection can cause your credit score to drop by 100 points.



You say that makes no sense? Well, here's the logic of it: Collections are weighted by how old they are; when your last activity was. They are weighted heaviest for the first two years, then somewhat lighter from two years to five, then lighter still after five years. If you pay it off, it's still a derogatory notation, because after all, you were way past due on it. But now the date it gets marked with is TODAY, and now you've got an absolutely fresh collection on your credit record. In other words, it comes back to bite you just as hard as it ever, for another two years.



So what you do is get a promissory letter of deletion. This says that *if* you pay $X, they promise to issue a letter of deletion. You need this promise in writing. Call or write the company involved, and come to an arrangement that if you pay however many dollars they want, they will give you a deletion letter. Tell them to send it to you at your current mailing address. Don't pay until you do have the promissory letter in your possession, lest your credit suffer the hit I discussed above.



Once you have the promissory letter in your possession, then pay the bill. Include a copy with the bill to remind them. They will wait until your payment clears. They should then issue an actual letter of deletion. This is on company letterhead, has a contact name and phone number and an authorized signature. It should be short and sweet, reference the account, and say "Please delete this account."



You then send copies of that letter to the credit reporting agencies (Experian, Equifax, and TransUnion) and get your account deleted. Once the account - and the negative reference - is deleted, it's like it never existed.



Now, if the company reneges on the deletion letter, you have the legal ability to sue them. That promissory letter is a legal contract, with offer, acceptance, and consideration, for a legal purpose, etcetera. Talk to a lawyer about the details, I'm just a loan officer who's helped people with this a few times.



This entire process does take a month or two. It's not something to try when you already have a mortgage loan in process; it's something to do before you apply. Trying to do this while you've got a loan in process is expensive, because you're going to blow your lock period and need to extend it, sure as gravity. Thirty days of extension for your loan lock is approximately half a percent of your loan amount, so on a $400,000 loan, that's $2000. Most collections are a lot smaller, and you may have to resign yourself to the hit on your credit in some instances, in which case you should probably wait and have it paid via the escrow process, where the loan will be funded and recorded before paying off that old collection hits your credit score by being brought up to the present day. Otherwise, you could find your loan denied due to credit score dropping, and discover that you're not getting another one on anything like comparable terms. Maybe you are not getting another loan at all, because your score has dropped too much. Be careful, plan ahead, and take care of old collection accounts ahead of time.



Caveat Emptor

UPDATED here


Is there any problems with having all your money in only real estate?


That was a question I saw.

The answer is YES there are problems!

1) No diversification. The real estate market tanks, like it has right now, and you are hosed. The more so because of the leverage attaching to most real estate investments. If you own five properties with a total value of $3.5 Million, and it loses 20% of value, you may have lost more than the entirety of your equity.

2) Most people who do it get too strongly leveraged. Leverage is great, it makes your money work harder. But you've got to do some heavy thinking about how much you're going to do. If your cash flow is positive or tolerable, you can last out downturns. If you get into a situation where you can only make the payments for a certain amount of time, that can create desperation, and force you to accept an offer that leaves you owing money to the lender, and money to the IRS.

3) Real Estate is not liquid. This is the real kicker that drives the first two. You can't just call your stockbroker and get cash in seven days. You have to find the right buyer to get a decent price. If you need money in a hurry, this can force you to sell property for less than it's worth. If there are no good offers but you need to sell, you can find yourself forced to accept a bad one.

4) Landlord issues. The more properties you have rented out, the more likely that either blind chance or one of your tenants is going to do something to one of your properties which requires a lot of money in a hurry. If you're maximally leveraged and have no money anywhere else, where are you going to get that money? Particularly if the nature of the damage renders the property uninhabitable, in which case you're not likely to get any new loan on the property until it is fixed, and your lender might just decide to keep any insurance money in order to cut its losses.

If they're not rented out, of course, you're flushing cash every month.

Don't get me wrong. Real Estate is a great way to make money. In fact, given the phenomenon of leverage, you can make more in real estate with less risk than in practically any other investment field. But you've got to have some money somewhere else, and the larger your investment in real estate, the more money you need in other investments.

Caveat Emptor

UPDATED here

RINO Sightings Recommended: Politburo Diktat



Carnival of Real Estate



Carnival of Personal Finance



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Missouri Court Strikes down Voter ID act





The new law would have required voters to show a photo identification card issued by Missouri or the federal government before they could cast a ballot. Voters lacking the ID would be allowed to cast a provisional ballot this fall, but after that, only the elderly, disabled and those with religious objections could vote without one, and only by provisional ballot.





But you still need an ID to buy beer. I think this is just a little more important than that. If cost were the issue, how about donating the money for the lawyers to a fund to help people obtain ID? But cost is not the issue. Padding the voter rolls is the issue. Stealing legitimate votes is the issue. Running dishonest elections is the issue. A healthy democracy requires exactly one vote per voter. If I can pretend to be someone else (I could, at the polls), if people can register in multiple locations (as they can), if people can register and stay registered without being cross correlated to make certain they're voting in only one place (they can), if people who should not be permitted to vote can cast valid ballots (they can), then we have a problem.



Lest anyone be unsure, this is not a grandfather law out of the worst days of civil rights abuses. It has nothing in common with those laws, from intent to exceptions.



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Gateway Pundit reports on Iran's real ruler packing an AK-47 to a speech.



Pajamas Media of the fate of an Iranian dissenter, a Grand Ayatollah no less, for the terrible crime of supporting more separation of church and state.



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Captain's Quarters and New Yokr Daily News on Hillary's campaign:



Privately, Hillary's camp was not overly upset by the McCain swipe because it suspected he was doing the bidding of the White House and that he ended up, as one adviser put it, "looking similar to the way he did on those captive tapes from Hanoi, where he recited the names of his crew mates."





You could tell by the way he was dragged into the room in a cage and recited it all at gunpoint.



What? You didn't see the cage or the gun?



McCain's Response?



"I never expected the Clintons or their allies to know much about Vietnam. But [it] is disappointing to see one of her spokespeople purposefully lie about John's war record and time in a Hanoi prison camp. There was no such tape recording; though he did once give up the starting lineup of the Green Bay Packers while under extreme duress. Senator Clinton's spokesperson does a disservice to all who were there and served so bravely and honorably."





Game. Set. Match.



At last report, John McCain has escaped the perfidious prison of White House expectations and desires no less than several dozen times, Hillary. Could it be that he actually believes what he said (that North Korea getting nukes is traceable directly to her husband's do-nothing gladhanding for appearances' sake)? Could it be that there are some actual facts indicating that to be the largest part of the explanation?



Terrorist lawyer who smuggled messages sentenced. She should have gotten life for her flagrant abuse of the civil rights system of this country. Every lawyer who violates the law like her is one more endangerment to the civil rights of all of us.





"If you send her to prison, she's going to die. It's as simple as that," defense lawyer Elizabeth Fink had told the judge before the sentence was pronounced.





That's her lawyer. She has to say that. I don't know about hoping she's correct, but I have no sympathy for traitors, particularly traitors who abuse the civil rights that have evolved to protect us all from government abuse.



Here's her crime:



Stewart and other defendants carried messages between the sheik and senior members of an Egyptian-based terrorist organization, helping spread Abdel-Rahman's call to kill those who did not subscribe to his extremist interpretation of Islamic law.





In other words, she helped a terrorist we had already caught continue to lead his followers. Just a little violation of ethical guidelines. Probably wouldn't have aided in the murder of more than a few thousand people.





Stewart, in her letter to the judge, said she did not intentionally enter into any plot or conspiracy to aid a terrorist organization. She believes the Sept. 11 terrorist attacks made her behavior intolerable in the eyes of the government and gave it an excuse to make an example out of her.



Unless she's suffering from multiple personality disorder, this is a lie, and the latter half is paranoid delusional as well. "Poor little me! Just because I'm guilty is no excuse to prosecute!"



She could have gotten thirty years. She should have gotten life without parole. She didn't even get 30 months. If I'm ever guilty of anything, I hope they "persecute" me like that.



Don Surber has more.



Stop the ACLU also has some thoughts worth reading.



Captain's Quarters:



Stewart wants to play the patsy. However, patsies don't spend the lengthy time between her conviction and her sentencing appearing at numerous left-wing anti-war rallies, undermining the war effort and claiming to have been persecuted. Patsies don't tell crowds that they would do the same thing all over again under the same circumstances. The only saps involved in this case come from the multitudes who bought that story, and they're about to discover how gullible they've been.





Which last thought wins the "Wishful Thinking" of the Day Award, but the rest is spot on debunking of some boldfaced lies.


Hi--I just found your site today. The best I've ever seen/read, etc. Thank You!!

I do have a question I didn't see addressed regarding our current situation/dillemma:

Our present home, which we've lived in for 8 years, is worth around $180,000 (yes, it's a small town...), and we owe $105,000. My husband has been working for about 5 years now, & has a pretty good salary (around $100K) but we have a LOT of debt --mainly a result of having had 2 babies while in school. We have about $40 K in credit card debt, a $775/mo. student loan payment, & a $500/mo car loan which will be paid off in 18 months.

We've been planning on moving across town for a few years (MUCH better schools there), but had been holding out as long as we could with the idea that the longer we waited, the better house we'd be able to afford. And besides, the kids are still young, & their elementary school isn't intolerable, etc.

The problem is that the school situation DID become intolerable about 3 weeks ago, at which time I began to homeschool them, which is also intolerable! So we need to get this moving across town show on the road!

My question is this: I know we need to at least take out a home equity loan so that we can pay off the credit cards. Some of the rates are outrageous, and I'm sick of fighting with them. That would put our equity at $35,000. But since we want to move ASAP now, I assume we could just use the sale proceeds of the house to pay off the cards, & use the remainder as a down payment. Or, am I wrong? Our current debt to income ratio is so poor--will the lenders even consider our current plan to pay off that debt using sale proceeds, or will we have to refinance now & wait a period of time before pursuing a new house to show them that we're not just going to rack the debt up again? Oh, but we haven't incurred any new debt or put any new charges on the credit cards in about 3 years--does that make any difference?

Also, the houses in the neighborhoods we are looking at are around $300,000. I'd sure appreciate your advice on this. We really want to move immediately, but not if waiting until later, like this summer, would be be better...


Your situation is a classic example of the urge to hurry a situation, and how to come out better if you don't.

You don't mention how the market is in your area, or what your credit score is like, and yes, it does take a while for bills to show as paid off. It can take over sixty days. I see some options for you, all of which have drawbacks. This is a complex situation, and I don't have nearly all of the information it takes to recommend a partiicular solution.

You can refinance, sell, or do nothing with your current residence, and you'll want to rent it out if you don't sell. You can rent or buy a new property, although you do want to buy before long. There's some issues that need to be dealt with, and they take a little time to deal with them properly. You can rush the situation, but doing so will cost you some big bucks.

You don't mention what rents are in your current area. By the time you pay for the refinance, my guess is your balance would be $150,000, maybe a bit higher. I'm as certain as I can be without full workup information that you're in a sub-prime situation, which means you can choose a very high rate or a prepayment penalty that'll run you about another $5000 if you sell while it's in force. The high rate is the better choice, because it's only for a few months, but it also has implications for your debt to income ratio. The reason I ask about rents is that I'm wondering if they'll cover your mortgage on the place. The rate you'll get might be higher or lower, but let's assume seven percent. That's principal and interest of about $1000 per month, plus taxes and insurance. Now your husband makes plenty to afford some negative cash flow on the property if you folks have to and the rest of your debts are gone, but not a huge amount of it. You'll only get credit for seventy-five percent of the rent, as opposed to all of the expenses, but better to have it rented for a little bit of a theoretical loss than not to have it rented.

Now whether you refinace or sell, it's going to take a grand total of about three months to get your bills showing as paid - once month to get the refinance done, two months for your current finance companies to get off the dime and report the accounts as paid. It might be longer if you sell, depending upon how long it takes to get a good offer made and the sale consummated, then add two months. On the other hand, if your property is in good shape, vacant properties in good condition show very well.

Now, with your new property, your debt to income ratio is going to sink your loan if your current bills aren't paid off. Unfortunately, A paper has an issue with paying off bills after your initial credit is run. If it's a credit card or other revolving debt, guidelines have issues with paying them off in order to qualify. If you pay off a credit card, the wisdom goes, you could turn it right around and charge it up again. Even if you pay it off and close it, the reality is that you could get another. So they qualify you based upon your current situation. Even paying off installment debt to qualify is at the discretion of the underwriter, and I have seen them turn it down. So you want to have the debt paid off, and showing as paid off, before you make the offer for a new place. That can take up to two months after they actually are paid off.

So you're going to want to wait at least two months after you pay the debt off before you make your offer on the house you want to purchase. This means either staying where you are for now, which I can see is unacceptable, or interim renting something in the area you want to live, which is likely to be better, and you might get a line on an extra-good deal if you are living in the area. Yes, you want to buy, but you don't have to do it all in one step.

So I'd most likely go rent a place - which gets you into the new school district now - while I tried to sell or refinance the current place. If you're not living there, be advised that a refinance is a cash out investment property loan, which carries higher rates and more difficulty. I'd probably try to sell instead, but that does place you at the mercy of the market, and not only do I not know your market, but we're coming up on the worst time of year for sellers. Which means settling for a lower price than you might otherwise get, but you will be rid of the debt without the headaches of being a landlord at a stressful time in your life. You can learn that situation later.

Now, if you sell, you get a downpayment for the new place. If you refinance, you probably don't. Your credit score may dictate the sale option; I don't know. It should improve after everything is paid, but I can't guarantee that, and I definitely can't say by how much. Better to plan on the status quo than to bet on it improving.

Now, a couple of months after the debts are paid, you'll be a a position to make an offer on home you want to raise your family in. If you have a decent credit score (580 or above, with 640 making things easier and 680 better yet), 100 percent financing is no big deal deal. If you've got serious credit issues, you're going to need a down payment. For the school year, you may want to delay until late spring or summer to give the kids some stability for the rest of the year. Worst time to buy, but you're looking at moving again in February if you get on the stick right now.

Now it's a real pain to move a household once, and here I am telling you to plan on moving twice. Let's look at what happens if you risk the solution that cuts the Gordian Knot.

Your husband is an attorney. I don't know what attorneys make around your area, but around here they can make several times $100,000. So somebody advises you to do stated income, state that you make several times what you do, and just make a bid right now on the home you want to raise your family in, while putting your current home up for sale. And if your credit score is decent, I could get such a loan done pretty easy. But let's consider what happens next.

Now you not only have your current debt load, but you also have the payments for a brand new $300,000 loan on a $300,000 house. In California, with good credit, that would be 6.125% right now on the first, maybe a little under 10 percent on the second. $1460 on the first, $530 on the second, plus property taxes (California would be about $315 per month) and insurance of about $100, more or less. Total obligations added: about $2400 per month, on top of what you're paying now.

You don't say, but if you weren't struggling at least a little bit, you would have paid those debts off by now. So you are fairly close to the edge. My best guess as to your reserves: Non-existent. Now you have to come up with another $2400 per month. Where can it come from? Borrowing is the only thing that comes to mind. Charge up the credit cards, personal loans, payments start getting behind, your credit score drops - and it won't come back quickly if you start making those payments on time. Especially if mortgage payments on either place end up being late. Meanwhile everything is compounding, eating up your equity, even if the house sells fairly quickly. As I've said, we're coming up on the worst time of year for sellers. Its entirely possible you won't sell until Spring, no matter how good a job your listing agent does. In short, things get desperate quick. Not only is your cash flow unsustainable, you get motivated to sell for a lot loss money than you might have otherwise. With everything compounding, it's very possible that you end up selling to a shark for less than you need to get out from under your debts. This perpetuates the situation you're trying to get away from, and makes it worse because your credit is likely to take major hits.

So tempting as it is to take the situation at one go, you eliminate a lot of risk and stress by taking it in stages, and you render yourself a lot less of a target for the sharks of the real estate world. Yes, it adds something to your cash flow to go rent for a while, but not nearly so much as if you just bought straight away, and you give yourself a line of retreat if you have to take it.

There are a lot of things that could change this. As I've said, there's a lot of stuff I'd need to know before making a final recommendation for a client, but I've sketched out the stuff that needs to be considered.

Caveat Emptor

UPDATED here

At this point in time, it's looking like Democratic control of the House after the midterms is the likely outcome. Not assured, but likely. Now, it's not like this is a Good Thing; it's not. But let's put it into perspective: The midterms that happen in an incumbent's sixth year are historically a party's electoral low point. The party in the White House loses seats in the midterms. The opportunity for gains happens in the Presidential Elections. When the Republicans gained seats in 2002, it was the proverbial blue moon in politics. Politically, losing the House is about as minimally damaging as practical in American politics.



Now, here's the rub: This puts the Democrats in power sharing mode. Suddenly, they have to become responsible for policy. Furthermore, they will have more outlets to make fools of themselves. Put Pelosi and Murtha in the two top spots in the House, and the American public will get a lot more tired and a lot more disgusted with them, than they did with Hastert or Gingrich. It's like reading Democratic Underground - amusing so long as it's just hot air, but if the American people have to pay attention, they will want it to stop. Furthermore, the 2008 elections are likely to see a shift such as we haven't seen since World War II. If the Donkeys keep talking - and acting - like they have recently, they will have two years in the spotlight to alienate the public. I think that if the Republicans hold both chambers, we might see Hillary as President. If the Democrats win the house in 2006, I think people will be so disgusted with them that Hillary will lose badly in 2008 (as the Republicans take back Congress as well) even if she does score the nomination, clearing the way for a Dukakis, Dean or Kerry clone in 2012, and the death of the Democratic Party, at least as we know it. See the Whig disintegration, number of other realignments. Christians used to be a Democratic constituency. Blacks used to be Republican. The current Democratic coalition is right at the verge of its ability to hold together and be competitive nationally. The bias in the national press and media has become so blatant that clear non-partisans are noting the uneven treatment. This is not the action of a secure governing coalition; it's the actions of a coalition that's metaphorically punching out of its weight class. The Republicans are much closer to the center of society today, if only because they are afraid to offend the average centrist. But the Democratic coalition is going to have to start attracting new groups to stay competitive nationally, and frankly, I see Republicans taking various minority groups away from the Democrats before I see Democrats taking christians or business folk, let alone small l libertarians. Yes, the current Republican platforms don't have much to offer libertarians - but the Democratic ones promise to actively torpedo libertarian policy aims, such as school choice among many others.



I don't regard Democratic control of the House as a done deal yet, and I'm still hoping it doesn't happen. Not because I'm enamored of the Republicans. But I'm not insane enough to vote Cthulhu for President, and I'm not going to hope the Democrats win control of Congress, either. I've been known to echo the aphorism about knowing the advantages of the two party system, while wishing it weren't these two parties. The fact that the Republican party is in no way worthy of admiration does not alter the fact that the Democrats are intellectually bankrupt, blindly partisan, and doing their best to sabotage the best interests of the country. The lesser of two evils is still the lesser of two evils. I'm not so far gone in annoyance at what amounts to larcenous conduct that I'm willing to vote in obstructionists who would have the country commit suicide to aid in their larceny. And that is the choice in front of us.

Kerry says he deserves 2nd chance in '08. He talks of John McCain, who has never achieved the nomination, and Ronald Reagan, who lost the nomination to Gerald Ford in '76 but won when he was nominated. It's been a long time since either party has nominated a formerly unsuccessful nominee: Richard Nixon in 1968 was the last time. The wisdom - that a person's flaws as a candidate have attained too much exposure for them to win, is especially applicable to John Kerry, who has too many flaws to enumerate here, starting with his military disservice and going forward from there. There are Democrats I would vote for over certain Republican nominees, but John Kerry isn't one of them.



The Democratic contenders in 2004 and since have all raced each other to the left, leaving themselves unelectable. John Kerry has a particularly bad record as voting for whatever he thinks will advance the cause of John Kerry for President. Joe Lieberman, as left wing as he is, I might vote for because he's proved to me that he is willing to take heat for his speeches, votes and decisions when he feels it is in the best interest of the country. I utterly detest Hillary Clinton, but she might possibly be able to win my vote if the Republicans nominate a sufficiently right wing nutjob. John Kerry needs to be flushed once and for all.



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Study: Parents low ball college costs





A lot of American parents seem to think they don't have to worry about saving for their children's college educations because the kids will get through on scholarships and grants.





My eldest is six years old and in first grade. I've been putting $2000 a year in a 529 for her since I had a social for her. She won the scholarship award in Kindergarten, which changes nothing. By the time you could possibly know if your child has what it takes to get a full ride or something close to it, it will be too late to save if the answer is no, which it will be in the vast majority of cases. College is more time critical than anything else. If you don't have the money to retire, you can usually put off retirement. If your child doesn't have the money for college when it's time, they're probably not going at all. If you have a child, open a 529 today. The things that set it apart are the ability to recover the money, and the ability change your mind and apply the money to a younger sibling. My $2000 per year won't buy her a full ride at Harvard, but it will mean she has the ability to get through a state school without mortgaging her future, even if she gets not one dollar of grant money. The younger daughter? She's got three years of $2000 contributions also, and she just turned two last month. Get off the dime and do it today. You might be surprised what a difference $50 per month started early can make.



Oh, and you can use any state's program, no matter what state you live in or plan to go to college in. I'm not going to recommend one to anyone, but I will say that I'm not impressed by California's. My girls money is in another plan.



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Armies of Liberation notes in the first link and later a second that the Post Election Yemeni Regime Targets Opposition



The only thing the world hates more than a sore loser is a sore winner.



<

Iraq the Model on the Lancet study regarding Iraqi deaths.



Dean's World agrees.



In the same category, this looks like it's probably political: Coroner says U.S. forces unlawfully killed British TV journalist in Iraq



Let's see, two british medical journals publish easily debunked "studies" of deaths in Iraq, vastly inflating the casualty count. Then another british physician, a coroner who just happens to be assigned to the case, finds a killing "unlawful". I didn't realize british coroners were attorneys, prosecutors, or judges.



Perhaps the administration knew it for a frame job:



ITN cameraman Daniel Demoustier, the sole survivor of the incident, told the inquest that ITN's pair of four-wheel drive vehicles were overtaken by a truck carrying Iraqi forces and that gunfire erupted.





and





Demoustier said after the ruling that the inquest had not made clear whether the bullet that killed Lloyd was fired by a U.S. tank or helicopter. He said the forces in a tank would have been able to see that they were firing at a civilian vehicle, but a helicopter would not.





and





The court watched a video Tuesday, filmed by a U.S. serviceman attached to one of the tanks accused of firing at the reporters' cars. The tape opens with images of Lloyd's vehicle and the Iraqi truck burning amid gunfire. The tanks drive to the cars and inspect them. A minivan - possibly the ambulance - appears and more shots are fired.



At the end of the tape, a U.S. soldier shouts, "It's some media personnel! That's media down there!"





and





U.S. authorities didn't allow servicemen to testify at the inquest. Several submitted statements that the coroner ruled inadmissible.





And why were they ruled inadmissible? The story doesn't say. Is it possible that this coroner pretending they are a judge didn't say? Is it possible the motives were less than pure?





Lloyd's widow, Lynn, in a statement read by her lawyer, said U.S. forces "allowed their soldiers to behave like trigger-happy cowboys in an area in which there were civilians traveling."



She called the killing a war crime - "a despicable, deliberate, vengeful act."





I've never seen the elephant, as it was called in a former day. At my age and in my condition, it would be really bad news for the US if I ever do. But from all the military history I've read, some of the few things about combat I'm pretty certain about is that it's fast, it's confusing, it's stressful, there is often no time to make certain that you're only shooting the right people (you're dead if you do, something that no country can ask of its defenders) and sometimes the wrong people get shot. There's a classic aphorism that there is no such thing as friendly fire, and yet so-called "friendly fire" has always accounted for a large proportion of combat deaths. There were Iraqi soldiers in the area, as the article makes clear, and this was during the initial invasion when the US was fighting the Iraqis. Remember that part?



Anytime you are in or around combat forces, especially voluntarily like this reporter was, absent some glaring display of malice the most a reasonable person should conclude is that it was a tragic accident. Examine the incident in light of the rules of engagement, and if they were violated, by all means court-martial those responsible. But this is part and parcel of the way it is in combat. If the rules of engagement were followed, it is nothing more than a tragic accident, nothing actionable.



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Belmont Club on the New York Times getting even more two faced and partisan.



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Armies of Liberation has some pretty convincing evidence the Yemeni election was crooked: when the numbers of votes exceed registered voters, that's kind of a giveaway.



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Gates of Vienna notes some politically selective censorship by the Department of the Interior. Right of center: blocked. Left of center: not blocked.



In the same category: Professor to defy request and contact Minutemen





A San Diego State professor has been using his university computer's electronic mail account to organize rallies against illegal immigration and correspond with the controversial Minutemen.



The professor, Stuart Hurlbert, said yesterday that he doesn't plan to stop - despite an official university request to cease and desist.





and





He said the SDSU administration never stopped his colleagues from soliciting him via university e-mail for any number of nonwork-related causes, including the Gay Pride Festival and Girl Scout cookies.



"It's routine (to use e-mail); that's what makes this whole thing so silly," said Hurlbert, 67, who maintains a campus office and has e-mail privileges. He is working on a book about the Salton Sea.





and





Bonnie Zimmerman, associate vice president for faculty affairs, says the university's demand has nothing to do with Hurlbert's politics. State policy forbids use of public resources for nonwork-related activities, whether they're political or not, she said.





So they're going to stop the professors from using e-mail to organize communist rallies? La Raza pro-immigration rallies? Democratic voter drives? Somehow I doubt it. SDSU professors routinely do all of the above. This is partisan.



At least the ACLU is actually willing to do the right thing and defend him this time!



While we're on the subject, it looks like they want to criminalize scientific disputation: Global warming: the chilling effect on free speech (HT Samizdata)



Opinion Journal is worth reading on the subject.



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Air America Radio files for Chapter 11



I guess the Boys and Girls Club that "loaned" them the money is S.O.L.



Has nothing to do with the Democratic Party, or directly with other leftist organizations. But what a metaphor for the government subsidy way of life. As if we needed any further reminders, what with all the democratic and economic successes of communism.



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A sign Hollywood may be ready to make peace with Christians - or at least with Christians' money: Hollywood takes a leap into faith. Christians are at least a very large minority of the population. Hollywood wants their money. Hollywood starts making films in accordance with their values. Guess what? Those non-christians who aren't too far gone in despite for Christians might go see them, also. My wife and I are considering going to "One Night With The King", logistical considerations permitting. Failing that, we might buy it on DVD when it comes out.



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Certainly a more worthy winner than last year: Bangladesh banker wins Nobel Peace Prize



This is the guy who pioneered micro-credit - which, by enabling poor people to borrow small amounts of money to start a business with, has done more to fight poverty in one of the poorest nations on earth than all the aid and all the subsidies and all the do-gooders of the world combined. I respect those people who have devoted themselves to the cause of aid. But this guy has shamed them all as to results, and his idea has expanded to many other countries.



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South Korean Foreign Minister Ban Ki-moon named next UN Secretary General



Think he might be motivated to do something about Kim Jong Il?



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Willisms with yet another worthwhile post on why social security needs reform. An internal return of anywhere less than about 3% is less than break even in real terms, in case you didn't know.



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Don Surber has the scoop on why the Reid land deal was really dirty: he worked and used his influence to have it rezoned.



Captain's Quarters has much, much more.



Looking more and more like "A Culture of Corruption" to me.



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Riehl World View on the largest group of victims of child abuse in the world.



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UPDATE: FYI, in the last twenty-four hours, I have received roughly 1000 "returned undeliverable" emails to this domain's email. I don't know if it was just a random spam spoof in an attempt to circumvent spam filters, or if it was the result of a "joe job". I tend to believe the former because this site just isn't that important as to warrant specific targeting, but I don't have the technical expertise to be certain. So if anyone got blitzed, I'm sorry, but it was not of my doing. I also apologize if anyone got deleted by accident.

Or, Some Are Born Scum, Others Achieve Scum-hood, and others have scumminess thrust upon them.



I spent several hours Thursday "house-fishing". Kind of like people hunting for a house to buy for themselves, but I'm looking on behalf of clients. This eliminates embarrassing moments in front of clients, taking them to a place that may look great on the MLS, but has one or more factors about it that renders it a waste of the time I have with a particular client. I want the time a client gives me to be productive, and show them that I'm on the ball and know what I'm taking them to and that I won't waste their time. I really don't like taking clients to properties I haven't previewed. I won't do it without what I consider an over-riding reason, and there aren't many of those. But while out there, I had two really strong, "Some people are scum!" moments.



The first was mid-afternoon. I'd looked at several properties already and had half a dozen left to do. A little dog, maybe a Shelty or maybe a Corgi limped up to me when I parked. Poor creature looked dirty, bedraggled and hurt, but seemed friendly enough, so I petted her and got her calmed down. She had a license, so I called animal control, and the automated system gave me the owner's number. "Cool!", I thought, "I get to do a good deed today!" Called the number, left a message, left my phone number. She seemed willing to stay, so I was going to take a quick two minute look at the house while I left her outside, give the owner one more call and take her to the shelter. I've even got a couple bites of sandwich left in the car. Well, up drives an older man and the first words out of his mouth are "Bad dog!" That should have set alarm bells ringing, but it didn't, I'm ashamed to say. He apologized to me for her having run off, and she went off with him willingly. All was happy with the world, or so I thought. It wasn't until they were gone that I thought there were maybe some signs of, if not necessarily abuse, at least neglect. She was so happy to get some positive attention.



Then about twenty minutes and two houses later, my cell phone rang. Yes, they had owned a female Corgi - she was stolen about two years ago. I was standing there thunderstruck at what a idiot I had been. I hadn't even written down the license plate of the car the guy was driving. Imagine: Your dog is stolen. Two years go by, and you get a message on your answering machine that maybe, against all odds, someone has found your dog. Then the dimwit (that would be me) lets the thief make off with the dog again without even writing down the license plate of the car. I apologized, told the lady what neighborhood I found her in, and offered to at least describe the car and the man, and meet her and whomever else she wanted to bring at the corner closest, and we could all walk the neighborhood and look. If there ever is a next time, I'll write down the plate at the very least, even if the dog is wriggling with excitement and the six year old is happily crying that they got their doggie back.



Later on, something about the last house on today's route seemed a little familiar. No, I hadn't been there before. I couldn't put my finger on it, hard as I tried, and then I saw a picture, left behind on the floor. It was a guy I'd been working with about four months ago; he had been screwed badly by an unscrupulous lender. So badly that there was nothing I could do to salvage the loan situation. I priced him out with over seventy lenders, and the only place that would do the loan, the rate wasn't enough lower to help, and with the drop off in prices, then an appraiser I asked for a ballpark said the value had gone down so much that it was below that one lender's guideline. I felt rotten about it, but the only realistic solution was a quick sale. Comps suggested $455,000 as a realistic price, but the guy couldn't make the payments so I estimated the quick sale price was most likely about $430,000. Well, he was talking to other folks also, which was good and smart and I couldn't argue with the logic, and that other guy swore he could get the guy the loan. Well, the guy wanted to save his long-time home if he could, so I did the ethical thing: Told the guy while I sincerely doubted that a loan would actually be consummated given the situation (low credit score, high loan to value, and inability to document sufficient income), but if this other guy was certain, I understood and I wasn't absolutely certain it was impossible, just very unlikely. I basically got the heck out of the way of the guy's attempt to save his house.



Well, it's on the market now with a pending Trustee's Sale. It took me about five minutes to confirm the whole story when I got back to the office. This clown wasted the entire summer - peak buying season - trying to do a loan that I should have been more certain could not be done, while prices started to collapse, and then was rewarded for his perfidy with the listing, and since prices are further down now, and the guy trashed the place during the move out, I really don't think it will sell for more than $390,000 at the very most, and that's if it sells. If it doesn't, he gets a full-on foreclosure which is not something he can recover from at retirement age. Even if it sells for top possible dollar, it will end up with the guy having a net liability of several tens of thousands of dollars to the lender, or a tax bill to match for debt forgiveness if the lender forgives it. And I scored an assist for doubting myself, for not speaking out more strongly, for thinking that maybe someone else might be able to help where I couldn't, despite the evidence I get every day about what f-ing sleazeball incompetents out for a bigger commission no matter what it does to the client that so many people in my profession are.



(One of the earlier houses had a card with the agent's name, and the title was "Attorney/Realtor." Impressive enough, but he had left a Loan Worksheet there, promoting a thirty year fixed at 6.5% for "only" one point, or a 3/1 at 6.375 for "only" one point. Ladies and gentlemen, I have a 30 year fixed at 5.875% for that cost today, and a 5/1 at 5.625% for that cost. Last week, I had the thirty year fixed at 5.75% for that cost. The Dread Pirate Attorney's quoted loans have two points of yield spread on top of the point of origination he's charging. With the same assumptions he's using and no pre-payment penalty, I could do a literally zero cost loan - pay all the loan costs out of what I make and still come away with my usual compensation, if not more. That's the kind of difference shopping around can make.)



So I'm feeling lower than the repository of whale excrement right now, but lesson learned. From now on, no enabling the scum-meisters. I may not have been in it long enough to know everything, but I've spent enough time and effort looking for ways to make it happen, and systematizing everything such that I shouldn't be afraid to communicate in much stronger terms that something just isn't possible, and I'm going to start writing up contracts - simple written promises on a piece of paper - to give to people so they can ask the scum-meisters who promise something I know isn't going to happen. Sign it, or admit you can't do it. That way there's no pretense about it. If you really think you can do it, there's no reason why you shouldn't sign. I couldn't have saved the guy's house, but I sure could have kept the situation from being quite so bad - if I hadn't thought that just maybe somebody else might be able to do what I knew I couldn't and wouldn't pretend that I could. Yes, I am angry. Yes, I am disgusted. But I'm going to turn that around right now and start doing something positive about the situation. From here on out, nobody else gets victimized if I can do something reasonable about it.





Caveat Emptor.


I've seen many new home developments with vaulted ceilings, mini-vineyards, huge houses on little tiny lots...Why can't some developer built some homes for us regular people?
A normal sized home with plenty of closet space and a decent (not designer) kitchen that is set more than 3 feet from the neighbors house.
I realize that they need to make money, but more people could afford homes in this state if the builders weren't catering to people who already own 2 and 3 houses.


The developer has have a certain amount of LAND for a development. That's all they have, and they are not getting any more. For this, they paid a set amount of money. Furthermore, once they have it, it's likely to be years going through the permit process before the can even build. That money they invested in the project, both upfront and as the project goes along? If they wanted to invest it in say the stock market, it's be earning income - for years - before the first spade of earth gets dug. If it's three years from purchase to completion, that's a 33.1 percent necessary return just to break even from the opportunity cost (at ten percent per year - very doable). If it's five, as is more likely, they need 61 percent. If it's seven, 94.9 percent. To this, add property taxes as they go, the costs of environmental studies and obtaining the permits and paying for inspections and certifying everything. If there's a loan going on, they have the cost of interest going on as well. Now there are ameliorating factors as well, but given the sheer amount of work that has to be done before they nail the first two boards together, a rational person could maybe be forgiven for thinking that society wants housing to be prohibitively expensive.

Furthermore, it's silly, but people buy a property based upon the structure and the amenities. Well, it's not silly to make that one of the factors, but people go overboard. They will buy a 5 bedroom 2800 square foot house on a 3000 square foot lot before they'll buy a 3 bedroom 1800 square foot house on a 20,000 square foot lot. The same structure is really worth a lot more when it's on a bigger lot, and even a lesser structure may really be worth more if it's on a bigger lot, as is likely to be the case here, but for most folks, we're talking emotional appeal, not rational thought process. In other words, like many people looking for a mate, they see the gorgeous sculpted toned and tanned member of the opposite sex, and ignore the abusive personality behind the beautiful exterior. I'm not certain I've ever met someone who wanted to live in such a development, but they sure sell like hotcakes! Add travertine and granite countertops and the fact that it's *new* to the 2800 square footer, and you've got people willing to pay $800k for the first property as opposed to maybe $550k for the second. In their mind, the first property might be a "flipper's investment" while the second is "the keeper" that they are going to make improvements on for the rest of their lives, but economically, we vote with our dollars. If you opened your wallet for the house where you don't have any land, guess what? You're voting for developers to keep building them. You know something else? That brand new cheek-by-jowl development isn't going to be new forever. Considering market returns, that older $550,000 3 bedroom on half an acre is a better investment, even if it needs updating. Curb appeal and house bling and "ooh, it's new!" are the best ways I know of to sucker buyers into paying too much money.

The developer knows this at least as well as your average real estate agent. The developer has all of this researched down the the last centimeter of the lot lines. They are not in business to build wonderful homes that people are going to be happy in forever; they are in business to make money, and the blinged-out houses on the smallest possible lots bring in the most money for that developer. The fact that you're the very first person to live in the house is a further attraction to the kind of person who buys new cars, which is to say, most of the population, and it's worth serious money to that developer's bottom line, although it will cost you money in the long term.

Nor is the developer alone in this endeavor. They wouldn't make the most money from homes like that if people didn't pay the most money for homes like that. You want the real culprits in this scenario, look around you in any large crowd. It's all to easy to blame the developer, but the desires of the average home buyer and the regulatory environment both played huge factors in getting the state of new housing to where it is now.

There are ways to potentially fix the problem. They start at real consumer education, easing environmental restriction s and the permit process, particularly for high density housing, which may not be desirable, but when your front yard is the size of a postage stamp and most people wouldn't use it anyway, doesn't it make more sense to put all the community lawns together in one park that someone can actually get some use out of? Say, a place for kids and dogs to play? People say they hate condos, but condos townhomes and row homes are all that's available if the price of land stays where it is. Environmental regulation and slow growth policies are fundamentally at odds with affordable housing in high demand areas. I'm not saying throw them out entirely in the name of putting up cardboard shacks, but I am saying that we can certainly choose a point friendlier to low cost housing than we have chosen. I can only conclude that society must value the environmental status quo more than it values lowering the cost of housing, in which case the status quo is the correct choice.

None of this has any measurable political support. Everybody is for lowering the cost of housing, at least for the poor, but put it on the ballot against loosening environmental protections and it loses. There are a certain number of addition reasons why this happens, of course. Multimillionaire developers are not politically popular, but Least Tern environment is. Rarely do people stop to consider that by constricting the supply of housing, you unavoidably increase the price. Nor can you do anything by governmental fiat to fix the problem that doesn't price even more people out of the market. Demand is a given - it not directly controllable. There are 300 million Americans and they all want housing they can afford. Even kicking out the estimated 11 million or so who are in the country illegally wouldn't do a whole lot to really solve this problem. The only way to treat the issue is by increasing the supply, which does seem to include being nicer to those multimillionaire developers, but in this case the issue is more affordable housing for everyone, and being nicer to the developers means that you get more housing units, which drops the price of housing from whatever it would have been without being nice to the developers. Because any time someone else enters the United States, whether legally, illegally, or simply by being born, you create a housing need. Every time there is a new American without another place for that American to live, we create somebody without a home. We price somebody out of the market. We now have an American who cannot afford to buy a home.

Now how to handle this issue until such time, as any, as society changes its mind and decides to make housing more affordable? Your best bet is to find a good buyer's agent to defeat the problem on a retail level, that is, for yourself, because wholesale solutions are not likely until people get rational about solving society's problems. You can't make people build the kind of housing you say you want. But you can make informed choices between what's out there now, and a good buyer's agent will look as far out as you tell them to.

Caveat Emptor

UPDATED here



Top Qaeda leader urges fighters to hit White House





A man believed to be a top al Qaeda militant who escaped from a U.S. jail near Kabul was shown in a new videotape broadcast on Tuesday exhorting followers in Afghanistan to fight on until they attack the White House.



"Allah will not be pleased until we reach the rooftop of the White House," Abu Yahya al-Libi was shown telling fighters in the tape aired by the Dubai-based Al-Arabiya television.





There is a war on. We don't try those who are merely enemy soldiers, as they have done nothing morally wrong. But neither can we afford to let them go, as this escapee illustrates.





**********




Shortest easiest manhunt in the history of the world: Putin vows to hunt down Russian reporter's killers



All he has to do is look in a mirror.



I don't think he actually pulled the trigger. But given his governing tendencies, I'll bet money he was responsible, in at least the "Will no one rid me of this meddlesome priest" sense.



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Q and O covers admirably the history of what happened with North Korea and nuclear weapons.



Drudge (among many others, but this got sent to me first) notes a video that Republican strategists are refusing to use, thus differentiating themselves from Democrats. It's over the top. It's not fair or balanced, and it distorts things way beyond shape (although there is a lot of truth to the basic story). You should not use it for information. But it is funny!



What a coup! Captain's Quarters has a guest post from Senator John McCain and the Straight Talk Express on the issue of nuclear Korea.



Captain's Quarters himself has more of the real story, which is more than damaging enough to the Dems.



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The Ultimate Smackdown of multiculturalism from the Financial Times, with spin the take the edge off.





Prof Putnam said: "What we shouldn't do is to say that they [immigrants] should be more like us. We should construct a new us."





A new us that includes elements from them. I've got no problems with Islamics celebrating Ramadan or Mexicans celebrating the 16th of September. An American of Scottish, Nigerian, or Vietnamese extraction is an American, whether or not they toss the caber, wear tribal costume, or eat that disgusting fish sauce. Someone who wants to see Mexico retake the southwest or Islam conquer the United States is not.



If regarding ourselves as somehow different from our neighbors unwinds the fabric of society, perhaps we should stop accentuating those trivial differences that don't matter, and start focusing on what should be the big similarities?



**********




Captain's Quarters has the story on Harry Reid's corruption.

One of the most common things I'm seeing as I roam about the East County looking for bargains: Agents not doing their jobs.



Now single family detached homes that are priced appropriately are selling, and for appropriate prices, even at 37 sellers per buyer. Condominiums aren't moving unless they are brand new with lots of glitter, but appropriately priced detached homes are selling. I can find all of the evidence of this you would care to see, because I've already seen it. Willing buyers and willing sellers. It's just that what an appropriate price is has shifted.



Let's change mental gears here for a moment. Here's the real differences between sellers markets and buyers market: Competition. Specifically, which side of the sale is competing. In seller's markets, which is the mindset most sellers and most listing agents are still in, buyers are competing to buy the properties that are for sale. Because of this it is the buyers who have to compete to look attractive - highest offer, quickest offer, fewest contingencies. They have to offer more money or a bigger deposit or something else that the seller needs and nobody else wants to do. With the buyers market we have now, it's the sellers who have to compete, and most of them are not doing it very well.



I want to make very clear that sellers are always competing against other sellers, even in the strongest seller's market possible. But in a buyer's market, it's not enough to have your property "out there." In a seller's market, the prices will often catch up to unrealistic asking prices, given time. In a buyer's market, prices are not increasing, and in this strong of a buyer's market, they are going down. In other words, the longer it takes, the worse you look. You have to have some stand out aspect to your property. It can be physical attractiveness, or it can be low price. Price will get buyers in the door, but it takes a strong agent to sell a fixer to the average buyer, no matter how attractively priced, because the scumbag with the office down the street will show them something a more attractive that they really cannot afford, but with a negative amortization loan, done stated income, they can make it look like they can afford the payments, and a buyer who hasn't had this explained to them ahead of time will think they've just gotten the Taj Mahal for the price of a dirt floor shack, except of course, they haven't. And the other way to stand out is to be priced the same, but more attractive. Don't tell buyers you'll give them a carpet allowance, replace the carpet. Don't tell buyers that all they have to do is spend two months and $20,000 fixing it and they'll have a property worth $20,000 more. That won't wash in a buyer's market, if it ever does. The party who does the work, even of engaging a contractor, gets the payoff. Why should your buyers take the risk and do all that work and spend $20,000 cash that most buyers don't have (and cannot be part of the purchase money loan) when they can go down the street and find all of that work already done for maybe $10,000 more - or even the same price? I assure you it's happening all over San Diego County right now. Some seller just out-competed you for that buyer's business. The only good news for sellers is that most of your competition isn't trying very hard yet, so small bits of competition can look very attractive.



Even lenders are still in denial for their owned properties, and they are the ones with the hardest issues of all. They must get rid of the property. They don't have any choice. Even if it was in the same shape as surrounding properties - which it rarely is - they have a deadline to get rid of that property, and everyone knows it. They also have other constraints that other sellers do not. These make the property worth less, as they rule out certain buyers and make others less willing. In a buyer's market, every buyer counts. I had two clients putting in offers on different lender owned fixers in the last two weeks. One might comp out at the asking price of $450,000 if it wasn't lender owned - which automatically makes it worth about ten percent less than the comps. Add the fact that it's an ugly fixer that would be worth maybe $400,000 at most if it wasn't lender owned, and they will be extremely lucky to see $360,000 out of it. Not supposition, not guesswork, fact. The fact is that there's a beautiful owner occupied comparable on the same block asking $459,000. It's even a bit larger. There is no doubt in my mind whatsoever that the beautiful comparable would take $450,000. Actually, I just checked again and the beautiful comparable is in escrow now. One owner that competed well, one that is not competing well. I told the agent for the lender's fixer this, and she said, "I've been in this business forty years and I know what I can get for that property!" I offered to bet her $10 she couldn't close escrow on it within ninety days for over $390,000 net - essentially a zero risk bet from my point of view. From hers also, if she thought the property was really worth more. She wouldn't take me up on it. Furthermore, she's violating her fiduciary duty by not explaining this to her client. Doesn't matter how long she's been in the business. What matters is whether she reacts well to this market.



About five miles away, another lender owned fixer asking $480,000 because that's what the lender is on the hook for. And you know, it is a better neighborhood. Unfortunately for them, just because you were silly enough to lend them that much two years ago when the market was peaking doesn't mean someone else will pay you that much for it now when the market is in the tank. What matters is the comparable properties, and there's one just around the corner that anyone would rather have listing for $470,000. Above par house for a below par price. Hasn't gone into escrow yet, but it will go fairly soon, unless someone else lists a better property cheaper, and they might even get a little bit of a bidding feud on it, despite the strong buyer's market. This lender owned fixer is in rotten shape and has several issues that turn the average buyer off. I initially thought my client's offer was lower than it should have been, but the more I thought about, the more I think my client came closer to the mark than I did initially. Horrible floor plan, necessitating major work to make it attractive. Yard not suitable for children, despite the fact that there's a school on the same block that the agent is using as a "come-on". These people will be lucky to get anything over $350,000 for it, but the agent sent me a blanket, "Anything less than $400,000 will be rejected without counter," despite the fact that I explained how much work it will be to bring it up to the neighborhood standard. I left her some messages, and she didn't respond. The implication to me was clear: She is in denial, and doesn't want to hear plain facts explained. She's got dozens of REO listings - maybe because she was a great bargainer in seller's markets, maybe because she knows someone, maybe some other unknown factor. She's not dealing well with this market. I don't know if she doesn't know market conditions or just acts like she doesn't. If nobody puts an offer in good enough to get past the blanket rejection, it doesn't make much difference, does it?



This the times when good listing agents really earn their money, as the gentleman listing the $470,000 comparable is. It may not be the great publicity of getting the highest price ever in the neighborhood, but getting it sold quick and for something like asking price in this market is a real achievement. Especially with as many distress situations as are out there - people that have to sell, for one reason or another. (I'm doing very well for my buyer clients, but it's depth-charging fish in a barrel. You really find out how good someone is when the market favors the other side of the transaction.) There are dozens of FSBO and discounter listed properties in the neighborhood, sitting on the market for months. The last six months of Canceled, Withdrawn, and especially the Expired sections of MLS have all that and more, but that one property is going to sell quickly, and sell for a good price. That agent has already earned every penny he will get paid, and it isn't even in escrow yet.



The person who "buys" listings, telling the people that they can get them more money than anyone else, more money than the market will support, had a nice long run. When prices are moving up strongly and there aren't many houses to be had and everyone wants one, well a monkey could sell that house at that price given enough time, because given a few months the market will catch up to all but the most egregious of overpricing.



That is not the way things are now. Buyers have all the power, and they know it, because buyer's specialists like me have told them if nothing else. Inventory is over nine months worth of sales at the current pace, more properties are coming on the market and the worst time of year for sales is approaching. Given these facts, What do you think is going to happen? Where do you think the market is headed, at least in the short term?



(and incidentally, what kind of bargains do you think those few buyers willing to get off the sidelines can drive?)



The longer listing agents wait to talk some sense into their sellers, the worse it's going to be. The more days on market, the further the market falls, the more the sellers will have to move to meet it - and the more unhappy they will be with their listing agents. The agents I respect will refuse a listing rather than ask for a price they aren't going to get except by freak coincidence. They get the same no transaction either way, but if they refuse the listing, they haven't created unreasonable expectations, they haven't failed to live up to those expectations, and neither party has wasted months finding out what that agent should have known in the first place.



Now, I've seen agents telling people that because interest rates have stabilized or even moved down, that will revive the market. This is complete and utter nonsense. I initially wrote something stronger, but my internal censor really wants to keep this family friendly. Yes, payments drive the market - when it's a seller's market. Buyer's markets are driven by the bottom line, because there are lots of sellers and only a few buyers and if this seller won't cut them a deal, the one down the block who is a little more motivated will. When every listing gets three offers within a week and buyers are getting desperate, they'll bite off on another $1000, $5000, or $10000 because "It's only $10 (or $50 or $100) more on the payment. They shouldn't, but they will. When buyers have the power and they know it, they'll tell the sellers to pay that $10 per month, because they're not paying the extra in the first place. It is the sign of someone who does not understand supply and demand to think otherwise, and I certainly wouldn't want that sort of numbwit as my agent. Your agent is your expert. If they are not an expert, why are you hiring them?



Now, looking forward. What's going to break the logjam and get the market moving? Well, absent sudden 25% inflation or something else equally unlikely, the current market has the effect of adding to inventory while those who can afford not to sell drop off. We've had over a year of this now, and a lot of would be sellers have discovered that they don't have to sell. They can stay in the home, or they can rent it out or let some family members use it. The ones left are looking an awful lot like a listing interview I helped another agent with today. Negative Amortization loan, darned near a $4500 real monthly cash flow requirement, equity all gone, and they comparable rentals are all around $1800 per month. There is no way on earth these people are coming away with any money, and the longer it goes the worse it will get, but he said another agent told him they could get an amount that's at least $60,000 over market, just by comparable listing prices, never mind what they're actually going to get an offer for. No, he didn't sign up with us, quite predictably. He's been told what he wants to believe, and this other agent is going to put him another $10,000 or $20,000 in the hole, and nobody would be happier than me if that other agent had a liability for what they're going to do to this client.



So with more people that have stronger reasons to sell, very large inventory with more coming onto the market, and buyers quite aware that they have a level of power they haven't seen in over a decade, what's going to have to happen in order to change this? Basically, that inventory is going to have to clear. It can go one of three ways: the owner finds an acceptable alternative (increasingly unlikely), the owner decides to get serious about competing for a buyer's business, or the lender takes it over. I've mentioned that the lenders are evidently still in denial, but they have legal requirements to dispose of those properties within a certain amount of time. The closer they get to that time expiring, the more desperate they'll get. Once the regulators climb onto that lender's back, they don't climb off cheaply, nor easily. Quite frankly, if I were a major lender, I'd take the entire thing as a write off if someone offered me a dollar any time in the last week, and I think some lender's listing agents are going to have rude awakenings before this is all over. I'm strongly considering sending my agent's resume out to some lenders. But my real point is this: Sellers can compete on the individual level any time they want to, and the sooner they want to, the better off that individual is likely to be. Eventually, the seller's aggregate is going to have to compete much harder for the business of the buyers that are out there, and for the buyers they want to lure off the sidelines. It took a long time to sink in, but the fact has sunken in to prospective buyers that the market got overextended. You can ameliorate your expectations and come out as well as possible, you can hope for the bigger fool of a bygone day, or you can take it off the market, if you have a sustainable situation. There aren't a lot of sellers with sustainable situations out there right now.



Now, one word about rapacious buyers before I go. I know I've said you've got the power. But if you or your agent has done your homework, when you settle upon a property that you're going to make an offer on, that usually means it's more attractive to you for the money than anything else. There is a strong temptation, given the current market, to low-ball just a little too hard. Don't do it. Everything I've said about unrealistic sellers ending up with no transaction applies to you also, albeit less strongly. There is a point below which every seller out there will tell you to take a hike, no matter how desperate they are. If they owe $350,000 altogether on a $450,000 property, sure, they could it to you and be out from under at $350,000, but the vast majority of folks will see that you want every last penny of the equity they thought they had, and they're going to tell you to do something rude, vulgar, and otherwise unprintable in a family friendly format. They will lose the house outright, and take major long term hits to their credit, before they do that. In this case, you end up with what the unrealistic seller gets: Nothing. Exactly how much should you bid? Ah, that's part of the Art of Buyer's Agent-Fu. In other words, it varies, and it takes more information - sometimes a lot more information - before I can give a good answer in a specific situation. The answer is never guaranteed, which is why it's an art, not a science. But I can guarantee you'll find out about the downsides of poisoning the well in this fashion if you step over that ill-defined line.





Caveat Emptor.

UPDATED here

Why Do Lenders Sell Mortgages?

| | Comments (1)

When and Why does a Mortgage Company Sell your Current Loan to another Mortgage Company?


Lenders sell their loans because the lender can make an immediate premium of anywhere from 2.5 percent to four percent by selling your loan to Wall Street. Yes, this is less than the six to eight percent per year interest that most primary homeowner loans get, let alone second loans, commercial loans, etcetera. Nonetheless, they can turn the money several times per year, earning far in excess of what they could earn from the interest on your loan itself, and that's why they do it.

Selling your loan doesn't just get them four percent once. It lets that lender turn around and do another loan and make more money without getting more money in deposits. Many lenders can turn the money three to six times per year, getting them a twelve to eighteen percent bonus in addition to anything they make those few months that they hold the loan.

Now there are several philosophies on when to sell the loan. The one that seems to have the most adherents currently is the pure packaging house philosophy, where they sell it off immediately upon closing, or within a few days. Given this, they can turn the money a dozen times per year if they work at it, selling the loan for a smaller premium, but getting twelve markups per year, amounting to somewhere between twenty-four and thirty percent on the money.

The second philosophy is one that is practiced by a smaller, but still significant number of lenders, who fall more into the traditional lender's model of doing things, and that is to wait until one payment has been received. Since this eliminates a noteworthy fraction of the fraud that's out there, they get a better markup for their loans. The downside is because they have to hold it an average of two months before the first payment is received, that means they can only turn the money six times per year at most, as opposed to the twelve for the previous model of lender. So they get six markups of three percent or so, maybe close to 20 percent over a year. To this, they add maybe three percent, to cover the interest they actually received from borrowers directly. Net: maybe 22 percent. Furthermore, this leaves them stuck with those loans where the first payment is late, because nobody wants to buy those. Better from their mortgage bond buyer's point of view, not so hot for their bottom line because there is a high percentage chance of those loans becoming what is known as "non-performing." In other words, default. The bond buyers got stuck with the results of default in the first scenario, which the lender views as a much better thing than dealing with it themselves. In other words, this scenario forces the lender to actually live with the results of their riskier underwriting scenarios. They actually can sell those loans, but anybody who's paying to assume that kind of risk is going to demand a commensurately lower price for it, which is reflected in a lower bottom line. So the lenders who hold a loan until after the first payment usually have tougher underwriting than those with pure packaging house mentality.

Finally, there are still a few lenders who wait until they have three payments, giving them the best prices of all when they sell. Unfortunately, it takes about four months for them to be able to do this, so they get four percent for the loan, but can only turn the money three times per year. This actually gives them a chance to fix bill paying problems that might have afflicted the second group, but on the other hand, more people have a late payment somewhere in the first three. Nobody wants to pay a good price for loans that are not current, and a little less if it has been delinquent but is no longer, as that's a flag for possible future problems. These lenders get maybe 12 percent per year in funding markup, plus four percent or so for interest actually received from borrowers, netting maybe sixteen to seventeen percent. Needless to say, this model has largely fallen out of favor by most lenders because it doesn't put as much money into the firm's bottom line, but they still get over twice what the lender who actually holds the loan makes per year.

Now this phenomenon has been part of what has driven rates down from their rates of years previous, as lenders face increased competition from other lenders who "want in" on that twenty-four to thirty percent per year from turning the loans, and are pressured to deliver lower rates by the fact that most of their money actually comes from selling the loan, as opposed to servicing loans they do make. Many lenders actually retain servicing rights when they sell the loan, as this gives them continuing income. Indeed, may people out there whose loans have been sold multiple times are blissfully unaware of the fact, as they are still sending the check to the original servicing company.

Another thing that this has driven is the increased use of pre-payment penalties, as the entities buying the loans, which are mostly large Wall Street entities, are very attracted by the consequences of buying loans with prepayment penalties, and thus, pay more for them. If you know that you're going to get that 7% for at least three years, or get a one time stroke of three percent if you don't, you are willing to pay more for those bonds than if the people involved could just hand you your money at any time. Many times the sub-prime market will offer the same people a better rate with a prepayment penalty than the A paper market will without a pre-payment penalty. It's all well and good to save half a percent on a half million dollar mortgage, which is $2500 per year, but if you don't last the three years you are out $15,000, twice the maximum you possibly could save! Pre-payment penalties are to make the aggregated mortgages more attractive to Wall Street.

Caveat Emptor

UPDATED here

Carnival of the Capitalists Recommended: Spooky Action (moving decision making from the Reptilian hind brain to your logical thought processes)



Carnival of Real Estate



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North Korea Faces Global Condemnation After It Announces It Set Off Atomic Blast Underground



I said a week ago that Kim Jong Il was singing "I'm so Ronery" again. It appears that he got what he wanted.



Then there's this AP story: Bush says N. Korea nuclear test a threat, in which the President talks about what a theat, and how he will deal with it. Meanwhile, John Kerry continues to highlight what a hack he is:





Kerry also used the occasion to criticize Bush. "Weapons of mass destruction pointed at our allies and strategic partners represents a shocking failure of President Bush's security policy, and a threat to the interests of peace and stability in the world.





Except that it was Bill Clinton's accommodationist deal in 1995 that enabled North Korea to acquire nuclear weapons - much like a similar deal today would allow Iran more room to acquire them, and our current president, to his credit, is doing his best within the range of options available to him to prevent.



And it looks like Harry Reid is right behind John Kerry in the left's drive to the edge of the cliff.



To paraphrase Don Surber, let's blame the guy holding the bag now after Clinton let Kim Jong Il get nukes. Does this mean that if Hillary wins in 2008, her policy will have failed on day 1 of her term, January 20th, 2009? Of course they'll spin it differently then.



Tigerhawk has more, both historical to North Korea getting nukes, and of current relevance to keeping them out of the hands of Iran to whatever degree may be possible.



Carol Platt Liebau directed me to this well considered TCS article on what is done after the fact to handle the nuclear North Korea, years after someone gave it all the leeway necessary to build nukes.



Texas Rainmaker has a photo he thinks will come back to haunt someone.



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Eidelblog with yet another reason that, as disgusted as I am with Republicans, I'm not going to vote Democratic any time soon. I can name a dozen ways I really dislike the Republican machine, none of which is nearly so important as the ways the Democrats are promising to mishandle the country. Foreign Policy. Economics. Regulation. Every time I consider what "Speaker Pelosi" would mean to the really important issues, or "Majority Leader Reid", I want to run screaming for the exits.



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The burnout may be abating. I've got an article on Why Do Lenders Sell Mortgages set to go for tomorrow. Nonetheless, things still aren't altogether better, and I don't know if I'm going to return to the "four major articles per week every week" pace that I kept up for the previous ten months. It's not lack of material. It's lack of self-motivation and spare time.

I have a confession to make: When I was doing financial planning, I didn't put enough emphasis on Disability Income Insurance. I was hardly alone in this; Disability Insurance is one of the two most undersold financial products there is. The other is Long Term Care Insurance, which product I at least researched properly and sold enough of (and the exact right product, also).



An article I found the other day brought Disability Insurance, or as it is technically known, Disability Income Insurance back to me. It's a good article and I really do suggest you read the whole thing, especially if you have a family or intend to. I have nothing but sympathy for the victims of this, and yet I would like to arm those reading with some information for preventing it from happening to them.



Disability Insurance isn't sexy; in fact it's damned hard to sell to the average person. Where I can sell Mutual Funds and Variable Annuities and Life Insurance all day long, it's because the basic understanding of the benefits or the needs is present in most people in society. Everybody understands that when you're making an investment, it is because you hope to Make Money. Everybody understands that Life Insurance is there for your family in case you are not. But this basic understanding is lacking for Disability Insurance. What they understand is that you Want To Sell Them An Insurance Policy. An Attacking Salesperson! Red Alert! Shields to maximum, Mr. Sulu! Fire Photon Torpedoes! Fire Phasers! Turn us around and head back to safe territory, Maximum Warp! Fire! Fire!



Disability Insurance is one of the red-headed step-children of the financial planning process. SEC and NASD guidelines don't mention it; it is only when a practitioner really digs into the nuts and bolts of financial planning that you find out how important it is. I did at least get to the point where I would discuss Disability Insurance with every one of my clients who was still working.



It's very easy to tell if you are in need of Disability Insurance. Ask yourself this question: If you couldn't work for the rest of your life, starting now, would you have enough money to live the lifestyle you want for as long as it lasts? If the answer is "Hell Yes!", you don't need it. Otherwise, you probably do.



Some basic facts about Disability Insurance: It is three times more common for a worker to go through a period of disability and need wage replacement than it is for them to die before age 65. Family finances do not tend to recover well from lack of disability insurance, whereas they do from lack of life insurance. In other words, the consequences of no Disbility Insurance on a family without it are worse and longer lived than the consequences of no Life Insurance on a family without that. Surveys of what happens to families five or ten years after the death of an uninsured breadwinner are much rosier than the equivalent ones five or ten years after the disability of an uninsured breadwinner, and the latter scenario is far more common.



The federal government does contribute something to disability insurance. But within the financial planning community, Social Security Disability is famous for three things: Denial, Difficulty, and Delay. It is far and away the most difficult Disability Income program to qualify for benefits under. A private insurer would not be permitted qualifications so strict by any state. As a percentage of from those who have some real disability, the federal government denies more claims than any private insurer. The paperwork (which I have never filled out, so I'm reporting secondhand) is supposedly awful, and it takes months for a decision, and it doesn't kick in and start paying benefits until at least five months have passed. It is my understanding that it doesn't pay back benefits if the application and approval process takes longer than five months, either.



You cannot buy, nor should you want, disability insurance which replaces your entire income. I think that there is an actual legal limit of 70% on a single policy in California. On the other hand, disability income is (typically) tax free and you're not commuting to work every day, both of which go a long way to stretch what you get. 50 to 65 percent is probably about what most folks should have.



There are two main types of disability policy: So-called "own occupation" and "any occupation," differentiated by what triggers the benefits. Both require medical certification, but the "own occupation" policy makes it easier to qualify for benefits. What you are buying here is a policy that will pay benefits when you can no longer do basically the same thing you are doing to earn your money now. It is more expensive than the "any occupation" policy, but then again, you are getting more coverage. When you get an "any occupation" policy, you will not qualify for benefits unless you are unable to perform the duties of any occupation for which you are suited by education and training. In other words, if you can still work at 7-11 or McDonalds or as a receptionist somewhere, no benefits.



Other major factors in how expensive the policy will be are: What you're doing now (an office worker gets cheaper rates than someone who works with dynamite), How much income you are looking to replace (it's less costly to replace 30% of your income than 60%), how long before benefits kick in (a policy where they kick in after one month is going to pay more benefits more often than one where they don't kick in for six months, and is therefore more expensive), and how long benefits last (a policy that pays benefits for two years is cheaper than one that pays until you're 65. Take note of this - especially if you're 63).



Disability Insurance is sold in two ways: as part of a group program, or individually. If you read the article, you may have figured out that this is a critical difference. As a general rule, Disability Insurance sold as part of a group plan through an employer is subject to ERISA, individual policies are not. This is a critical difference. If the insurance company wrongly denies your claims under a policy subject to ERISA, all you can get is the actual money you would have qualified for. No penalties, no interest, no legal fees, no court costs. I tend to look at buying insurance from a point of view of what happens if I need it. I want to make clear that most insurance companies are ethical. Nonetheless, if the most Colossal Insurance Company can lose by denying my claim is the actual money they would be on the hook for anyway, they might be going to look for any excuse to deny my claim, as they have nothing to lose and the prospective benefits to gain. If, as in most individual policies, you are the owner of a non-ERISA covered Disability Insurance policy, now there is a significant potential downside to Colossal Insurance denying your claim. If you sue and win, they're on the hook for not only the benefits they denied, but potentially also interest, penalties, and the legal costs of the fight, a much larger number of dollars. They are much more inclined to consider your claim from an unbiased viewpoint in this case.



It is to be noted that group coverage is cheaper, for precisely this reason. But why anyone would want to pay money to buy an insurance policy that's more likely to deny benefits when you need them is beyond my ability to comprehend.



Group Disability Insurance can have part of the premiums paid by an employer, group insurance can even be portable or convertible to individual policies, albeit with a higher premium. On the other hand, you can become uninsurable in the meantime, if for instance you contract any one of a number of diseases or conditions, some of which are terrible and some of which only set the stage for worse things to potentially happen. If you are uninsurable and lose you current policy through losing your employer, guess what? You literally cannot buy another policy. Individual policies offer more protection; once issued, they generally cannot be cancelled (there are exceptions!), and there are no worries with portability or conversion. If, on the other hand, you can only afford a group policy, better that than nothing. Like everything else in life, it is a set of trade-offs.



Caveat Emptor

RINO Sightings



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Waah, waah, waah! Foley says he was abused by a clergyman



The appropriate thing to do is tell someone about it and get help, not turn around and victimize others. How long was this sicko a congress critter? How many others got abused because he didn't come forward? How many did the priest who abused him later abuse? I've got sympathy for him as far as being molested, but it gets him zero as far as excusing his behavior since.



He was representing himself as a responsible citizen in order to run for Congress, was he not? So as far as I'm concerned, if he actually broke the law, they can lock him up and throw away the key. That's what would happen to ordinary citizens, and he procured himself a place that needs to be held to a higher standard.



On the other hand, this is not worth any electoral significance, and it is a sign of shame to those on the left that they need to resort to this. One Congress critter is a pervert, and so they want us to turn out his party? If that were the case, both Donkeys and Elephants would both be immediately banned from politics nationally. There is no evidence that the Republican leadership knew about the truly sick Instant Messages (which may have been a prank, according to Drudge), as opposed to the far weaker emails they acknowledged right away. Furthermore, most of those in the Democratic Party making the attacks on Hastert and other Republicans are actually on record as defending a far worse pervert in their own ranks a few years back (one who committed statutory rape, as a matter of fact, as opposed to merely, at worst, sending perverted Instant Messages). The Republican response should be lauded by comparison, if anything.



I'm not linking any of the excrement flying back and forth between the sides simply because that would imply that I consider it worth reading. It's all worthless nonsense - Foley isn't currently charged with anything, and there is no evidence available currently that he ever acted on any of his perverted urges with anyone beneath the age of consent. The worst charges I can see being made are soliciting a minor and sexual harassment, and he's already out of congress and out of the election.



If you like the Democratic party platform better than the Republican, by all means vote Democratic. But don't do it because of this nonsense.



I sincerely hope this is the last time I'll feel compelled to write anything on this subject, which doesn't rise to the level of excrement. At most it's a very loud but not particularly noxious gaseous emission. Stop chasing your partisan tails up your rear entrance, and start looking out for the best interests of the country. My respect for various news sources and commentators is inversely proportional to the amount of time and effort they spend on the resignation of one sick pervert from Congress.



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German doughnut shops deserted! Police hunt breast enlargement cheats





Bild published a five-column picture of Tanja's naked breasts. "It's probably the most unusual wanted poster police ever had," the newspaper wrote.





Police work: It's a tough job but someone's got to do it.



The internet being what it is, I'm sure someone will have 'film at 11' (not me, though!)



I wonder if Tanja got into any automobile accidents?



(and yes, I admire most police quite a bit, but sometimes a snark is too good to resist)



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That time of year again: Ig Nobels honors odd scientific research



I just think that researchers who don't take themselves too seriously are worth paying attention to.

The IgNoble website http://www.improbable.com/





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Consensus on Iran Unlikely





European Union foreign policy chief Javier Solana told security experts in Paris that "the door to negotiations is and will be always open."





I know it's a legend, but maybe someone should send the naked Emperor Nero a fiddle.



Iran tells West not to miss chance to solve atomic row



It's not exactly what you might think, though:



"Fortunately, some European countries want talks and we hope they appreciate this opportunity given to them by the Iranian nation to change their behaviour of the past 27 years.



"I hope that they appreciate this opportunity, but there are some powers that we are not optimistic that they will return to the right path — those powers that have created bloodshed in Iraq and Palestine and other parts of the world."



Gee, I wonder who he means? And how generous of him to talk to the west.



The president also said Iran would resist pressure to halt its atomic work.



Well, duh! I suspect they may already have enough in the way of enrichment (via using fuel grade production to boost their weapons grade production) to have at least one nuclear weapon, with more on the way. The window to prevent the crazy mullahs from getting (more) nuclear weapons is closing, and it looks like nobody is willing to step up to the line to stop it, or even allow it to be stopped - yet another tragedy of the commons.



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Straw veil call sparks Muslim fury



What he said?



Straw, leader of the House of Commons and the former foreign secretary, said he was concerned that "wearing the full veil was bound to make better, positive relations between the two communities more difficult."



Asked on Friday if he would like veils to be discarded altogether, Straw said: "Yes. It needs to be made clear I am not talking about being prescriptive but with all the caveats, yes, I would rather."





So these people are getting outraged by someone who notices that they hold themselves separate from the main community? Next they will be outraged over someone noticing that they eat, drink and breathe. If someone notices that they excrete, instant fatwa!



Victor Davis Hanson notices the double standard at work.



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Black Holes Power the Brightest Cosmic Objects, Study Confirms



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Willisms on some of the many reasons I don't think Bob Woodward is completely truthful.



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Tigerhawk has an example of left-wing censorship, afraid to let someone speak.



Captain's Quarters has more on the same issue.



When I was very young, it was the right wing who were in favor of shutting down their opponents ability to speak. That mantle has now largely passed to the left. Actually, it's been there for quite a while.



To all censors and would be censors everywhere, I must once again ask: If you believe your point of view is correct, why are you so insecure in it that you refuse to allow those who believe otherwise to speak? To argue their point of view in public discourse? We're not talking about military secrets here, we're talking about a public policy debate, and you are attempting to win by forced forfeit, much the same as thugs and dictators throughout history. Is there any reason whatsoever that I should not hold you in contempt?



If you cannot test your ideas in debate with your opponent, your ideas are automatically suspect.



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Publius Pundit talks of something important: Russia is up to its old tricks in Georgia.



Captain's Quarters has more.



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Good to know I'm not the only one who hasn't lost a sense of perspective, as Politechnical shows.



I read what passes for the thought process of these people every day. As bad as the Republicans are, the thought of their opposition taking control of the country should immediately cause any rational American to "vote early and often," as I believe the Democratic catch-phrase goes (else why would they object to paring off those not allowed to vote?) - but for Republicans. As bad as they are, I'm not going with the old "Cthulhu for President - When you're tired of voting for the lesser of two evils!" idea.



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While we're talking about things that are important, go take a look at The Agitator's Cory Maye page. That this man is even charged with a crime, much less was was under a death sentence.



This truly is a case of "That could have been me." Under the same circumstances, I would have likely done the same thing Cory Maye did. He has done nothing to be ashamed of, let alone charged for.



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Something else more important than congressional sex that never was: Eteraz: Stand Against Women Stoned to Death You Apathetic Monsters.



I did it. You can too.



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Coyote Blog on the similarities between creationists and conspiracy fetishists.





So here is this week's message for the Left: Economics is a science. Willful ignorance or emotional rejection of the well-known precepts of this science is at least as bad as a fundamentalist Christian's willful ignorance of evolution science (for which the Left so often criticizes their opposition). In fact, economic ignorance is much worse, since most people can come to perfectly valid conclusions about most public policy issues with a flawed knowledge of the origin of the species but no one can with a flawed understanding of economics.



Postscript: In fact, the more I think about it, the more economics and evolution are very similar. Both are sciences that are trying to describe the operation of very complex, bottom-up, self-organizing systems. And, in both cases, there exist many people who refuse to believe such complex and beautiful systems can really operate without top-down control.





Go Read the whole thing.



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Unarmed, facing an armed threat to all, no shelter, no chance to get away, a hero emerges: Shoot Me First. This particular hero was a thirteen year old girl.



More on heroes and heroism here from someone who gets it: At the Mall



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Instapundit on part of the reason why more troops would be a bad idea for Iraq.


I sold my house in (state) in august 2001 I hired a title attorney whose (local company X) acted as a agent for (national company Y). The facts are that there were errors and omissions which led to negligence in the performance at the closing of the property. The property taxes for the year 2000 were not paid. The title company did not do their duty and gave clear title to the buyer. Now, more than 5 years later Company Y is claiming I owe them these back taxes plus accrued costs. I would kindly appreciate some feedback


Yes, you owe the money.

The title insurance policy you bought insures the person who bought the property. Property taxes are part and parcel of all land ownership. A reasonable person should have paid those taxes. But they didn't get paid.

This doesn't mean that someone didn't screw up. Every title search needs to include a search for unpaid liens that includes property taxes. That's just the facts of the matter.

However, this does not relieve you of your duty to pay those taxes in full and on time. If it was an obscure mechanics lien recorded against your property for erroneously for work that was never done, you'd have a great case. If it was for stuff that you paid, and had reason to think you paid in full even though you were short, you might have a case. But not stuff that every reasonable property owner knows has to be paid, and didn't get paid at all.

Let us consider what would have happened if you still owned the property. The county would be sending a law enforcement official around with delinquency notices, which would include interest and penalties for late payment. If those weren't paid, they'd send law enforcement around another time with a tax foreclosure sale notice. You would have to pay those taxes.

It's no different because you sold. Because it's a valid existing lien on the property, albeit one they missed during title search, they paid it to clear the buyer's title, as the policy requires them to do. On the other hand, when an insurance company pays a bill like this, and title insurance is insurance, they acquire the right to collect payment via subrogation. This fancy word just means they paid the damage on behalf of someone, and now they have the right to collect payment, just like auto insurers who pay for the damage to your vehicle and go sue the party at fault, for which that person's liability insurer usually pays. The person with the liability to pay that property tax bill is you. Now, I'm not an attorney, so I don't know, but there might be a case you can build against the person who did the title search for the interest and penalties that have accrued since the search. Before that, the bill was all yours, and given that it was for 2000, should have been paid before August 2001. On the other hand, that title company might not have had a duty of care to you, despite the fact that you were the one who paid the bill, as the insured was your buyer, not you. Furthermore, the cost of paying the attorney can often go to several times the cost of paying the taxes and penalties. You'd need to, you know, talk to an attorney for more information. You might want to call company Y and ask if they'll settle for the bill as of the sale date, because they don't want to pay for an attorney any more than you do, and they did screw up, and if they hadn't, you would have paid the bill back then, right? Company Y can then recover the balance from their agent, company X.

Any lien that exists before the sale, discovered or not, is your responsibility. The only time that I think you are going to get off the hook is if you are dead and your estate probated and distributed before the lien is discovered. Basically, you've got to die to get away with it. Perhaps intervening bankruptcy might do it as well. I don't think so, but I'm not a lawyer. If you had died, the title company would still have paid, as the policy requires to protect the buyer, but would have had no choice but to eat whatever amount they paid, because there would be nobody alive who they would have a valid claim against.

Caveat Emptor.

UPDATED here

Straw Buyer Fraud

| | Comments (5)

I've gotten several emails to articles recently having to do with straw buyers, and more search hits. Red flags preceded home-fraud lawsuit and Fraud case hits home seem to cover one of these weasels particularly well.



A "straw buyer" is someone whose credit is used to purchase a property and secure financing. Sometimes they cooperate willingly and sometimes they are victims of identity theft, but it's always illegal. It is also, as these two articles illustrate, hazardous to your financial health.



Person A wants to buy a property, but convinces person B to step in as a "straw buyer" to obtain terms that person A could not. Alternatively, person A steals person B's identity, and forges all of their information on the purchase and loan papers. In both cases, person B is not the person really purchasing the property, but their name is on the mortgage. In the first case, person B is fully responsible for the loan and everything else that goes on, as well as having committed FRAUD. In the second case, they've got a long hard row to hoe to convince everyone that they weren't involved, because with hundreds of thousands of dollars on the line, it is worth the lender's while to be as hard-nosed as possible. The lender does not particularly care about justice in this case; what they want is the money they loaned out to get repaid.



The closest thing to benign that happens in straw buyers is when one relative, let's call him Junior, convinces another relative, call her Mom, to use her good credit so that Junior can afford the payments on a house he really does want to live in. Please note that this is still fraud - you are deceiving the lender for the purpose of getting a better loan than you would otherwise be able to obtain. Good agents and good loan officers want no part of this, because it doesn't matter how benign the intent, the fact of the matter is that it is still fraud. The lender discovers it, or if payments get missed, that agent or loan officer is legally toast. Note that this is different from Mom buying Junior a property for Junior to live in, or helping Junior afford property Junior wants to buy. There is sometimes a thin but always bright line between legal and illegal activity, and starting to deceive people - telling anything less than the whole truth and nothing but the truth - is always a sign you have stepped over the line.



Now, once you get away from this most nearly benign straw buyer scenario, things degenerate quickly and there are many scams and frauds that can be pulled. Many of them involve appraisal fraud. Most common is that someone persuades you to allow them to apply for a loan on your behalf to buy a property for them, which has supposedly appraised for $700,000. You end up responsible for a $700,000 loan on a $400,000 property, and the people who pull this scam walk away with $300,000 (or more) free and clear.



There are also all kinds of scams involved with people that want someone else on the mortgage, but themselves on title. If you quitclaim off of title, this does not absolve you from the mortgage. In general, the only way to absolve yourself from the mortgage is for them to refinance in their own name, and since they are claiming they couldn't do this, that just isn't going to happen. It's one thing for one spouse to qualify for the mortgage on their own but legally quitclaim it themselves and their spouse, husband and wife as joint tenants with rights of survivorship. It is something else entirely to quitclaim it to Joe Blow (or Jane Blow), but allow yourself to remain on the mortgage. If Mr. or Mrs. Blow does not pay the mortgage, guess who is liable? I get hits on this site every day asking, "How do I remove myself from a mortgage?" The answer is that you don't. The lender has your signature on the dotted line that says "I agree to pay..." The only way they are going to let you off is if the people remaining qualify for the loan without you - by which I mean a refinance. Even most loan assumptions (for loans where assumption is possible and approved) are subject to recourse for at least two years, usually longer. This is one reason that for divorcing couples, it needs to be part of the dissolution agreement that the property will be sold or mortgage refinanced before the dissolution is final to protect the spouse that isn't keeping the property (they're often entitled to some cash from the equity, as well).



There are good and strong reasons why straw buyers are illegal, reasons that start at fraud and run through confidence games of all sorts, which are also fraud, albeit with a personal as opposed to corporate victim. The games that can be played on you when you cooperate with a straw buyer request start at major financial disaster, and often include felony jail time.



Caveat Emptor

UPDATED here

No politics, just my heart goes out to these people: Milk man kills girls at Pa. Amish school.



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neo-neocon sums up my thoughts on Bob Woodward and State of Denial.



Wizbang on asking for Rumsfeld's resignation.



Q and O has more on the press reporting headlines which are not borne out by the story within them. For some reason I can't comprehend but couldn't possibly be Democratic bias, all of these headlines seem to be unfavorable to Republicans.



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Iraq the Model reports on the results of a poll in Iraq.



Only 97 reasons?



Something is rotten in the state of Iran, and the Iranians know it, even if it hasn't been reported in the west. Confederate Yankee has details.



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Michelle Malkin has it right on the Foley mess, which I'm trying to gove no more importance than it is due, which isn't much. Nail him to the wall if he did anything illegal, which it appears he did. But as compared to anything else making the rounds, it just is not important.



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Stuff nobody can make up because it's too weird: Forget airbags, silicone breasts will do. Sorry about the Yahoo link.





"The two cars were crumpled past recognition in the crash but the woman's silicone breasts acted as airbags and saved her life," Standart wrote, citing eyewitness reports.



But survival as well as beauty comes at a price as the woman burst her silicon implants in the crash.





If my wife ever wants them, I'm still going to try to talk her out of it. Our vehicles all have airbags.



No, I don't know any prominent politicians or news commentators. Why do you ask?



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Kim Jong-Il sings "I'm so Ronery" yet again. North Korea says it will stage nuke test



(No, I do not recommend "Team America", but having gotten through it I'll get what mileage I can out of it.)



Maybe we ought to just give Japan enough old nukes to plaster North Korea. Missiles also. South Korea can have an identical set also if they ask nicely.



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It took a comedy to revive Gandhi's ideals in India



I could suggest any number of Americans who could benefit from such treatment. Washington, Adams, Jefferson, Madison, Jackson, Lincoln, and in the twentieth century, Theodore Roosevelt and a largely forgotten man named George Catlett Marshall.



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Just because we've got first amendment rights doesn't mean we can't be sued for libel: Courts are asked to crack down on bloggers, websites. And that's the way it should be. You should be able to write the truth - especially if you can prove it - but don't make up stuff as some of these examples did.



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Food may be like a drug for some, study shows



This explains a lot.



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Q and O has another reason why, as disgusted as I am with the Elephants, I won't be voting Donkey any time soon.



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Victor Davis Hanson in NRO on turning our backs upon the Enlightenment.



On the same topic, if you are not sickened by the indoctrination put on by public employees in this Michelle Malkin article, something is wrong. It happens I don't agree with most of the sentiments, but even if I agreed with them, indoctrinating children that young is not what the public school system is paid to do. Matter of fact, they are theoretically paid not to indoctrinate. If I lived in Los Angeles, I'd be phoning my school board member right now.

Carnival of Personal Finance Recommended: Aridni (some stuff more important than money)



Carnival of Real Estate



Carnival of the Capitalists Recommended: Econbrowser (debunking another oil conspiracy myth), San Diego Home Blog (doing business with Redfin. Makes me glad I don't list many)



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The Age of Miracles is not yet past: Digger's Realm notes that the Senate has finally passed an immigration enforcement bill. I can do without the party loyalty stuff in the post, but it's good news!



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Watched Gettysburg again over Friday and Saturday nights after the girls went to bed. It's one of those movies that inspires you by showing you people at their best when things are at their worst. The fate of the war would have been far different without General Buford (whose dismounted defense in depth was the reason the Union kept the high ground), or Colenel Chamberlain's Charge, and thousands of ordinary people who became extraordinary, who stepped up to the line and put their lives on the line doing what was necessary when the task was put in front of them.



The film focuses far more upon the Confederate commanders than the Union commanders, showing them as men with misunderstandings, most spectacularly General Lee, who ordered Pickett's Charge, the mistake he could not make and still win the war, no matter how brilliant he was.



The real fate of the war was decided at Vicksburg that same day, when its surrender split the south in two. Both Union and Confederacy paid much too much attention to the war in the east, and not nearly enough to the war in what was then the west. But the men at Gettysburg were no less for that.

Of all the investments out there available to be made, the 529 is neither best or second-best, but it is right up there near the top.



Back when I was actively working in the financial planning business, it was one of the easiest to sell, as well. It holds one of the best sets of tax advantages, and is surprisingly flexible for something designed to fund a college education.



The State-run 529 works in relation to the IRS's gifting rules, and is subject to those and other limitations. There is a limit, that varies from year to year, on the maximum total contributions. However, it has a couple of powerful benefits that most investments do not have.



First off, you can front load it with up to five years worth of gifting contributions. With this currently at $11,000 per year, this means that an individual can give up to $55,000 and a married couple up to $110,000 all at once tax free.



Second, any investment income earned by the 529 is tax deferred until you take it out. So you're earning interest on any money you might otherwise have paid as taxes until you actually make a withdrawal.



Third, you, the donor, retain control over the investment, and can transfer it to another donee if your initial pick decides to skip college or wants to buy a motorcycle with the money. This contrasts with most college accounts, such as the Coverdell, that money is theirs, totally and irrevocably, on their 18th birthday, and they can sue you if you don't want them to buy a motorcycle with it. The 529 is the only account I'm aware of with this reservation. You can even recapture it for yourself in many circumstances, if you decide to. Nor is the money committed to any given learning institution (or group of institutions, and earning little to no income if the prospective client decides to go elsewhere, or skip college altogether.



With estate tax gone, the fact that investments in a 529 are no longer part of your estate is less important, but 529s pass with full tax deferral, immediately and outside of probate to named successor owners or beneficiaries, as applicable, and they have the option to keep them going rather than taking the money. Most other investments do not afford anyone else except a spouse this opportunity to keep the account going as it was.



Finally, if you use the money for college or college related expenses, the withdrawals are tax free. Even if you don't, the penalty is only ten percent of earnings, which is much smaller than, for instance, the Traditional IRA. Other neat facts adding to the flexibility: No matter where you live, you may use any state's 529 program, and go to college anywhere in any state you like, and still enjoy the full benefits.



To really illustrate how flexible this is, let us consider, hypothetically, the case of a 60 year old with a 40 year old child. Not too many 40 year olds go to school, but the 529 can be useful even so. Suppose the 60 year old has $50,000 they don't think they'll ever need, and they want to make certain the 40 year old gets it when they die, but wants to keep control of the money in the meantime, and wants a lot of bang for their buck. Consider the hypothetical of a 9% yearly return, every year. The 9% return is likely to be slightly low on the average, and the stock market never returns a consistent figure from year to year, but let us consider it. Suppose the parent lives 20 years. That $50,000 has turned into $280,000, same as a traditional IRA. But now the child has the option of keeping it going, which they do not have if it's in a traditional IRA, and they only have to pay tax on $230,000 if they withdraw it all at once. Put into a taxable account, even if it earned the same 9%, and assuming a 28 percent tax rate, it would only be $175,500. Assuming the same 28% tax rate, even withdrawing all of it at once leaves them with $215,600 - a $40,000 difference just for putting the money in a better account. Or the beneficiary can withdraw it a little bit at a time, to pay for, say, their own grandchild's college, during which time the remainder continues to earn income tax deferred.



There are limits as to how far Congress and the IRS will allow it to be stretched. Consult a financial planner in your area. But if you want tax deferrred, possibly tax free market returns and a lot of flexibility, most people choose investments significantly worse.



Caveat Emptor.

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