February 2008 Archives


Volokh Conspiracy on the silence of Justice Thomas in arguments.

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I keep running across this allegation, so:

Snopes on allegations that Barack Obama is Moslem

There are as many reasons as anyone rational could ask for not to vote for Barack Obama, and reasons why he would be severely bad for the country. However, being Moslem or somehow in sympathy with radical Islamics is not one of them.

If you don't want him to be elected president, don't spread this pile of manure. It draws attention away from many other areas where he would do great harm, and false accusations give the impression that he is being persecuted. There are plenty of reasons not to vote for him that are rooted in fact. His economics. His health care plan. His utterly naive and uninformed pronouncements about foreign policy, al-Qaeda, and Iraq. (it's not worth stressing over when the Kossacks or the Huff'nPuffs spout nonsense. But someone who seriously wants to become president needs to be held to a higher standard of sanity)

You want reasons not to support Barack Obama, all the ones you should need can be found at his official campaign website. When you ignore the feel good stuff and focus on specific policy actions, his economics are a suicide pact. Actually, even the feel-good stuff says a lot about him, and what it says isn't good to anyone with a decent grasp of economics.

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Mukasey refuses probe of Bush aides

Attorney General Michael Mukasey refused Friday to refer the House's contempt citations against two of President Bush's top aides to a federal grand jury. Mukasey said White House Chief of Staff Josh Bolten and former presidential counsel Harriet Miers committed no crime.

Executive powers in the Constitution, Long standing use, yada yada yada. There is no case and no crime - only political games.

Democrats say Bush's instructions to Miers and Bolten to ignore the House Judiciary Committee's subpoenas was an abuse of power and an effort to block an effort to find out whether the White House directed the firing of nine U.S. attorneys in 2006 for political reasons.

Republicans call the whole affair a political game and walked out of the House vote on the contempt citations in protest.

The Democrats are using their control of the house as a campaign tool. No different in principle from when the Republicans were in control, but the Democrats are going a lot further with the partisan politics. I don't recall any Republican votes to force Democratic aides of President Clinton to testify, despite much better reason and much better evidence.

Nancy Pelosi is one of the top five "reasons to vote Republican" list for this fall. Most of the Democratic congressional leaders are way up there on the list, as well.

Unfortunately for the Republicans, most of their congressional leadership are on the "reasons to vote Democratic" list.

I know we're a two party system. But does it have to be these two parties?

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On the other hand, we have it much better than Russia: Putin's Presidency Ends, Not His Rule

Still, despite his predictable election as President, Medvedev may be less the heir to Putin's throne than its caretaker. Putin has made clear he will stay on as Medvedev's Prime Minister "for as long as [Medvedev] is President," explained Putin at his annual press conference earlier this month. (Putin has already ensured his accession to the premiership by heading the electoral list of his United Russia party in the carefully orchestrated recent Duma election, in which they achieved full control of the legislature.)

And whereas Putin's own Prime Ministers were obedient technocrats, he has a vastly expanded idea of the office now that he plans to occupy it: "The Cabinet, headed by Prime Minister, is the highest executive authority in the country," he told his press conference, adding that the Prime Minister's responsibilities will include managing the national budget, foreign and domestic policy, and national security.

Kind of like playing a game of musical chairs, where whatever chair Mr. Putin sits him gives him power and immunity from losing it.

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McCain tags Dems on NAFTA

"One of our greatest assets in Afghanistan are our Canadian friends. We need our Canadian friends, and we need their continued support in Afghanistan," McCain said. "So what do we do? The two Democratic candidates for president say they're going to unilaterally abrogate NAFTA.

"How do you think the Canadian people are going to react to that?" McCain said.

The article calls this a false accusation as Clinton and Obama haven't used the word "abrogate" in response to NAFTA. However:

Rather, both Democrats said at a debate Tuesday in Cleveland they would insist on renegotiating NAFTA and would threaten to opt out of the agreement unless Canada and Mexico come to the negotiating table.

"Come to the table and negotiate something better for us or we'll opt out" seems to be extortion as well as failing to live up to our agreements. But it's all for a good cause - getting their favorite person elected!

Powerline reports Obama's head economic advisor as saying it's just campaign rhetoric, and that the Canadian government shouldn't worry.

My question: How does this make it better? To all of the aforementioned stupidity, he's now adding lying with malice aforethought.

Intellectually dishonest doesn't begin to cover it.

Q and O has some information on what happens if we do leave NAFTA. Bye bye, Canadian and Mexican oil. Adios to $380 billion dollars worth of US Exports.

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Volokh Conspiracy has some good stuff on why John McCain is a "natural born citizen" and thus, eligible for the presidency.


NOTE: Congress enacted new legislation which killed these programs in April 2008. I am leaving this up because I did write it, but it is no longer applicable


Somebody who's only looked at the specifications for the FHA purchase program will ask me if I'm on drugs. The answer is yes, I have taken my allergy medication today, but there really are ways to purchase a property through the FHA with no down payment, as I have recently discovered.

This is not the same thing as 100% financing. The FHA doesn't do that. The FHA really wants borrowers to have some of their own money invested into the property. In fact, they have supposedly made it very plain they don't like down payment assistance programs and using them can involve additional scrutiny - but the FHA will accept them if they're done right, meaning that some people are able to buy who would not otherwise be able to.

Here's what the legislation says: The FHA will allow the seller to assist the buyer with up to 6% for closing costs only. No seller carrybacks, and no cash back from seller to buyer (which is fraud, anyway). The owner cannot give the seller the down payment.

But the FHA allows up to a 6% gift for the down payment, and this can come from either immediate family members or from non-profit organizations. If your family members, usually parents, can come up with a gift - not loan - to enable the purchase of a property, that is acceptable to the FHA. Non-profit organizations may also do so. Indeed, there are non-profits that make it their primary activity to do so.

Here's the way it works. The owner (seller) of a piece of property agrees to furnish an amount of money equal to the necessary down payment assistance plus a certain small fee, but does not actually send any money until the transaction closes, at which point escrow is given instructions to . The down payment assistance non-profit then advances the money into escrow, with appropriate contingencies. When the transaction funds, escrow sends the money back to the non-profit for use with the next assistance client down the line.

This is just far enough from direct cash back that the FHA will sign off on it, and most lenders doing business with them will as well. Everything has to be disclosed to everyone - if you're ever involved in a transaction where somebody wants to keep some aspect a secret from some other participant, run away before it happens, or disclose it to them yourself. But there is a difference - a registered non-profit third party, and they are advancing actual cash even though they haven't received any yet. Furthermore, the buyer is not getting cash - what they are getting is money to make a down payment with. This changes the transaction enough that the principles that say cash back is fraud no longer apply, because it isn't cash back from the seller to the buyer.

These grants are in no way, shape or form free money. They come with extensive strings attached. They are an effective way to leverage the current market to make purchasing now, while the market is in the favor of buyers, possible, even for someone who may not have a down payment. Nor do they require repayment.

Why would an owner agree to do this? Two reasons: Price and saleability. First of all, owners who are willing and able to do this have the capability of selling to buyers that other owners do not. This makes the property unique in a way, and provides negotiating leverage because most owners are not willing and able to do this. Instead of eighty properties, a given prospective buyer may only have a choice of three properties. Now their property only has to compete against two others, and those others might not be suitable. The result is quite possibly that a given buyer does business with you or with nobody at all. Now they don't really have the opportunity of walking away from your property. You think maybe a competent listing agent could get significantly more money out of the buyer in such circumstances?

Furthermore, the price the owners might be willing to accept obviously gets raised. If they might accept $400,000 without one of these programs involved, but they have to furnish 3% for closing costs plus 3% for a down payment and $500 for a fee to the non-profit, they need $426,100 just to get the same gross revenue. When you consider that they're paying commissions based upon the higher number. At 6% total agency commissions, that adds over $1500 to what the owners are paying in commission, plus about $60 for owner's title insurance, $30 in lender's title insurance, and roughly $30 extra for each side for escrow, in this case. Your point of equivalence between this prospective buyer is about $427,700, as opposed to a generic buyer at $400,000, but it's very possible to get more than a breakeven amount - not to mention selling the property, where you wouldn't have otherwise.

I have to mention appraisal issues. It doesn't help if the appraisal is below the purchase price, particularly for high value financing. However, this is one area where the factors working to push everybody towards the FHA loan also work in your favor, because due to the decline in prices that has the lenders in full on PANIC! mode, appraisals are generally fairly easy to justify above the purchase price. I've had to ask them if they could hold the value down a couple of times of late. I don't remember the last time an appraisal didn't come back with plenty of value on a purchase.

Another note is that it doesn't necessarily have to be an FHA loan to work with one of these programs, but the fact that the FHA is willing to work with these programs takes away a lot of lender anxiety, because the FHA guarantee is the only thing that has lenders willing to go 97% loan to value ratio at all in most of the country. Once the FHA signs off on the whole transaction, that guarantee eases lender fear, because otherwise the lenders are stopping at 95% or less. So it's going to be a rare lender that agrees to all of this without the FHA being involved.

Finally, it should be obvious that buyers would be better off to come up with a down payment themselves, rather than pay the higher price, especially as we're specifically considering a loan for 97% of value. The higher property taxes, the higher purchase price, and definitely the higher loan amount are all going to be something you have to deal with for basically the rest of your life. The seller gets their money, where it all comes out in the wash, and goes their merry way. The buyer is paying a higher price, more taxes, increased cost of money, has to deal with a higher loan to value ratio if they need to refinance, and will net less money if and when they go to sell. In the example given, I'd much rather come up with $12,000 cash for a down payment than have to deal with a purchase price $15,000 higher (remember it was 3% closing costs plus 3% to the down payment program, so half of $30,000), pay an extra $200 per year in property taxes, an extra $900 per year interest, and end up with $15,000 less money in my pocket if and when I sold. Wouldn't you? But none of this takes place in a vacuum, and if you wait until you can save that $12,000, the conditions at purchase are very likely to be even worse - because right now the market is in the tank, and buyers have more power and properties are likely to be more affordable than they ever will be again. If you can save $500 per month, by the time you are ready to buy it will be two years in the future, and I'm expecting the prices of properties selling for $400,000 now to be significantly higher than $415,000.


Caveat Emptor


The guidelines for this carnival.

As always, I arranged the entries that met guidelines into three levels, based upon originality, usefulness to the consumer, and how much thought and effort and research went into an entry.

There were no strongly recommended articles this week, and hence, no Host Choice Award.

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RECOMMENDED

I know zero about mortgage and property markets and procedures in the UK. But Avoiding Home Repossession from Finance Blog covers some of the high points.

Trusted Advisor sends us Decaying Social Trust and Moral Indignation. For the record, HR 3915 was a bad bill. But he's right that people looking to evade the consequences of their own actions is a large part of the problem, and it's hurting others. The woman described is on the hook for $200,000 of other people's money she could afford to pay but is protected from collection by California law intended to protect primary residences only, has likely been bailed out of the tax consequences by special legislation, and is griping that her credit score is going to drop? Brother Maynard! Bring out the Holy Hand Grenade!

5 Mortgage Lessons to Learn from the Rich makes some points worth making, even if it was mostly pulled (with credit) from another article.

7 Reason You Fail To Sell Your Home is nothing new or original, but some things just cannot be said too often. PS: I wouldn't list with an agent who sold 20 properties per month. I wouldn't even list with an agent who had 20 listings, and probably not one who had 10. There aren't enough hours in the day to understand that many transactions. But the principle remains valid.

Real Estate broker Issues Why would an agent recommend a post that debunks the usual agent talk about what a great investment real estate is? Quite simply, because it takes the focus in choosing an agent off general market return an onto "how good is this agent?" Had he taken it a very small amount further this post had the potential to earn a "strongly recommended"

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MET GUIDELINES

Reba Haas submits The psychology of setting a list price?

American Consumer News sends us Practical Tips for Staying Safe in A Winter Storm

The Financial Bullet sends us Mortgages & Credit Unions. Credit unions aren't very competitive on first mortgages. Every time my wife brings home one of their "specials" to talk about I've got a better loan available. The same applies with the other two credit unions I'm a member of. Furthermore, the study cited is misleading because credit unions originate relatively few loans, and sell almost everything they do originate to banks. Once those loans are sold - so the credit unions can originate more loans for their other members - they count as bank held. Credit unions actually hold only a small fraction of 1% of first mortgage loans in the country. However, the home equity market ("second mortgages", or home equity loans and lines of credit) is a market in which credit unions can be very difficult to compete with, and you should definitely shop your credit union if you're a member of one. I'm not ashamed to say they beat the best HELOC I could do for myself a few years back, so I got theirs instead of mine.

A site named Cubicle Dropout submits Secrets to Real Estate Success. Note: The public cannot access the actual MLS for an area because it contains sensitive information. But there's a public version without the sensitive information that can be accessed by anybody, and this is what most non-agents are talking about when they say they've accessing MLS.

What is the State of The Housing Market? (Multiple Choice) makes a decent point about how it depends upon who you pay attention to, but nobody buys or owns property in a national housing market. Any time you start talking about one specific property, you need to consider the local market. Some local markets are doing well, others less so. Consider what is going on in your local market, not the effect of a national index that will mislead you as to what's going on in your local market.

San Mateo Home Sellers in Trouble #10 - The House of Cards is Coming Down gives some very erroneous advice at the end - don't ever simply mail the keys back to the lender. Even if you're going to lose the property, there are better ways to handle it. Furthermore, lots of people get surprised by how much property costs them after they walk away. Don't ever think you're done until everybody involved agrees that you're done.

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SPAM AND OTHER RIDICULOUS SUBMISSIONS

I'm not even going to name the site, but I did get a submission advising people they may be able to keep the property even if they stop paying the mortgage due to lender confusion. This is either pure ignorance or a deliberate lie. All you can do by taking this tack is delay the inevitable slightly while making it worse. And I was really hoping not to have a post in this category for a while.

For those who might object to the treatment their submission received, the relevant information has been in the guidelines since before submissions were being accepted for this carnival. Having been told to read the guidelines, you willingly submitted these posts. Live with it.


Consumer Focused Carnival of Real Estate will return in two weeks (March 12th, 2008), here at Searchlight Crusade, unless someone else wants to host. Deadline for submissions will be March 10th.


This is a temporary program, launched by President Bush and Congress a few months ago. Its goal is to prevent as many homeowners as is reasonable from losing their homes through foreclosure. It won't help you if you bought a property that was far beyond your real means, but it is likely to help a lot if didn't stretch very much.

In order to qualify for FHA secure, you need to have a non FHA ARM that has "reset," which is lender talk for "passed the end of the fixed period, if there was one." FHA Secure probably isn't going to help you anyway if you already have a fixed rate mortgage. The limit on the loan is the current conforming limit, which is $417,000 nationwide (except Alaska and Hawaii) as I type this. We're expecting information in the next few weeks that details how big the loans the FHA will actually insure in a given area are likely to be due to Congress mandating raising their loan limit. Them being a government agency, they have to do what Congress says, but it does take time to implement these things.

FHA Secure mortgages are not like those "free magazine - take one!" offers. You do have to qualify for the mortgage under the normal FHA rules. This means full documentation of income on a fully amortizing loan with a debt to income ratio of 41% in the textbook case. They also have Loan to Value limits of 97.15%

The ONLY "normal" mortgage qualification that the FHA Secure is willing to overlook is whether you were current on your loan after it hit the adjustable period. You must have been current on your existing mortgage for six months before it hit the adjustable period, but if you made late payments or no payments after the loan hit the adjustable period, FHA is willing to waive the usual requirements to have your loan current. They're even willing to consider your loan if you are currently in default.

Another way that FHA Secure mortgages are different from most FHA mortgages is that there is no CLTV limit, and the FHA will allow secondary financing for FHA Secure loans. The primary form this takes is second mortgages carried by previous lenders for amounts over the FHA limits, either in terms of Loan to Value or absolute dollar value. Be aware that in some states, this is going to change your loan from a non-recourse loan into a full recourse loan.The protections given by non-recourse loans are generally over-rated, but it's something you should be aware of. Since the FHA normally funds up to 97% Loan to Value ratio, and conventional lenders and second mortgage holders don't want to go that high right now, they are not going to agree to fund the difference unless they understand the choice they have is between funding the difference and going straight into foreclosure. For example, let's say you've got a $500,000 loan on a property that you purchased for $500,000 with 100% financing on an interest only 2/28. You still owe $500,000, but the property may only be worth $440,000, and the FHA will only fund to $417,000 until the new limits are implemented. This leaves $83,000 (at a minimum) that the new loan is short. If the prior lender can be convinced that it's a choice between write a loan contract for that $83,000 and go straight to foreclosure, where they'll lose a lot more than $83,000, they may agree to carry that second mortgage. Of course, they also may not. It's their money and their choice, and there's no way to compel them if they won't listen to logic.

FHA Secure is otherwise similar to "regular" FHA loans, and it's not free. There's a funding fee of 1.5% charged up front, and an annualized half a percent charged on a monthly basis. The FHA's "Naughty List" also applies.

FHA Secure is not any kind of a cure-all. You do have to qualify for it as regards both Debt to Income Ratio and Loan to Value Ratio. If you stretched way too far beyond your real means - as evidenced by income documentable by tax returns and W-2 forms - this program is not going to help you. If you were late on your mortgage even before it hit reset, this program is not going to help you. If you're a member of that group that's always with us, people who have lost their jobs, careers, or otherwise seen a decline in income, it may not help you even if you originally qualified full documentation. It's also not going to help you if your loan was for $900,000, which is way over any FHA limit currently being contemplated. But if you're a middle class borrower who only stretched a little, figured you'd be okay with a hybrid ARM because of it, and now you're not, this may be the program that saves you.

Caveat Emptor


UPDATE 9/25/2008 I have written how I think an expansion of this program could help the macroeconomic situation immensely in A Highly Leveraged Way to Ameliorate the Financial Crisis

Article UPDATED here


Carnival of Personal Finance

Carnival of Real Estate

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Funny! 42 Methods of Mathematical Proof

My favorites are Proof by Calculus and Proof by Design.

Thanks, Paul!

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A civic quiz

It blows my mind that the average score is only 72%. I wonder what proportion is under 50% - and how many of them vote.

Me? I got the score everyone should, although I don't think there's anything to be embarrassed about if you get 95% (57 right) or better.

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Armies of Liberation has a report that an American convicted in absentia here is wandering around Yemen free, even though he's theoretically wanted there too.

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Stupid driver tricks: Dropping my older daughter at her school (K-8), I had just pulled back into traffic to get out of there when the full sized SUV in front of me decided they were going to turn around on the narrow street right in front of the school. Three full hems and haws to turn that beast around, stopping traffic when everybody was trying to get their kids there, and more importantly, obviously no clue about what was in front or behind - that is, whether or not there were young children there, among other things. It's an elementary school, for crying out loud! Going around the block would have been quicker, and a lot safer.

Please people, think about what you're doing with thousands of pounds of metal. The minute you stop thinking and planning before you do it, is the minute you might run over (in this case) a young child. Maybe your child who's coming back because they left something in the car. They're not responsible - that's why they're called children. You're supposed to be. That's what the license is about.

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A reform effort I could support: The 'spouse tax' on military wives

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The Road to Serfdom at Volokh Conspiracy

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Captain's Quarters takes a USA Today Editorial and builds a far more convincing case that Obama and Hillary Clinton's proposed spending programs are in fact, unaffordable.

Sadly, he announces that he's going to be closing down Captain's Quarters and moving to Hot Air. I do wish him well at his new site, where I'll be reading because of him.


I want to state that I am in no way shape or form an FHA loan guru. But with the new developments in the market rapidly transforming FHA loans into being the most likely savior of the market, I invested in a class to learn some more about them. Between my general knowledge of loans and this information from someone who is an FHA guru, I think I can make some sense on the subject. Besides, one of the best ways to understand something better is trying to explain it to someone else.

FHA will guarantee loans up to 97% of the purchase value, not 100%. This means that you do need a minimum of 3% down from some source. The FHA will allow seller paid closing costs only of up of 6%, and the really cute thing is that they will also allow the down payment component to be a gift from family members or non-profits (provided they are not otherwise involved in the transaction), which opens up some interesting possibilities I'll write more about in another article. FHA loans can also be interfaced with some types of locally based first time buyer programs, although whether there is money in the budget at the time you apply for those programs is subject to funding, which usually goes quickly.

The first thing you need to understand about FHA loans is that they are intended to enable people to transition from renting to ownership of a primary residence. They are not intended to help anyone grow a real estate empire. For this reason, they will not work with investment property except in the case of non-profits. Second homes are only allowed where you already own a home elsewhere and can show an employment related need. Vacation homes are not allowed.

Refinancing is possible for existing FHA loans, up to a maximum of 85% 95% (see Mortgagee Letter 2005-43) loan to value ratio, provided it was purchased via FHA owner occupied loan. The only exception allowing FHA refinance of non FHA loans is the FHA Secure plan, which I'll write about in another article. There is no prepayment penalty on FHA loans, and they can be refinanced into conventional loans anytime you can qualify for conventional financing. Most folks do refinance FHA loans into a conventional conforming loans as soon as they can, because FHA rates aren't as good as conforming and conforming loans don't carry financing insurance. It's something to be decided on a case by case basis, on the basis of what is best for a given homeowner.

I did say conforming loans. FHA has loan limits which has mostly precluded them being a big player in most areas for the past several years. With the decrease in housing prices that has hit many areas and new legislation raising the conforming and FHA loan limits (which we're still waiting for hard numbers on), they are likely to be what saves the market as traditional lenders are seemingly more fearful of high loan to value ratio loans every day. Truthfully, I anticipate FHA loans as being what saves the bacon of traditional lenders and provides the upwards impetus to the market that will cause traditional lenders' fears to ease and relax their restrictions.

With loan limits preventing them from lending upon most single family residences these past few years, you'd think FHA would be friendlier to condominiums. Unfortunately, government bureaucracy being what it is, condos have to be approved by the FHA before they will fund loans upon them. Since relatively few developers care to do that, that means that most developments don't have blanket approval from the FHA.

Just because the FHA hasn't issued blanket approval to a condominium development doesn't mean that you can't get spot approval, however. The requirements, in addition to the usual ones, are no ongoing class action suits open or pending, and 60% or more owner occupancy for the complex. This last tends to be the most difficult requirement, as it's a little unusual that a particular complex has 60% owner occupancy.

Like all government programs, FHA loans require full documentation of sufficient income to afford the loan. No stated income or lesser loans will be funded. This is another reason they've been unpopular in recent years, as mortgage products for those with eyes bigger than their wallets proliferated, and agents and loan officers became accustomed to qualifying people for properties and loans far beyond their means. Now that that's all over and we're back to solid fundamentals as far as loan qualification, you can decide to stay within the budget for a loan you can prove you can afford, you can put a significantly larger down payment on the property to qualify for conventional financing, or you can do without buying any property at all. But FHA does not do stated income loans.

Matter of fact, the FHA doesn't do "interest only" financing, either. All FHA loans are fully amortized. However, the FHA does accept some hybrid ARMs as well as fixed rate financing. But no interest only, no stated income, no negative amortization. You must qualify for an FHA loan based upon the fully amortized payment and full documentation of income only, which eliminates most of the ways that people were being qualified for loans beyond their means in recent years, and is one more reason why the FHA has not been a major provider of loans in recent years.

Allowable debt to income ratios are 29% 31% front end and 41% 43% back end, according to the written guidelines. However, the 29% front end can be gotten around and the 41% can be subject to increase in the case of strong credit , high reserves, or a stable job. For instance, owner of a stable business of long standing. Nobody fires owners. Large amounts of money in retirement accounts is one that the instructor specifically mentioned as being a possible reason to get the debt to income ratio increased. The range of 45-49% is supposed to be reasonably possible to get the FHA to approve. Beyond that, exceptions are fewer and significantly harder to get.

There is no requirement for reserves with an FHA loan at all. With that said, however, having reserves can be a major point in your favor, particularly above 41% back end ratio. People with hundreds of thousands of dollars in retirement accounts that they could fall back upon if they had to is something the FHA will consider while traditional lenders would not. They'll even allow non-monetary reserves, the example given being a collector of old motorcycles which could be sold. Jewelry, automobiles, and other non-liquid assets may be considered. Of course, it's a very good idea to source and season every dollar you're using to justify the transaction, but the FHA has even been known to accept "mattress money" for down payments (not generally reserves), which is unheard of in other loans.

Here's the really cool part about an FHA loan: It's not FICO driven. You don't even have to have a credit score in order to be approved. With that said, however, I'm told that below a 600 credit score things do get tougher to get approved, and below the equivalent of about a 575 it's not likely to be approved. You can also use alternative credit , of which utility bills are probably the best example. Especially in some cultures, credit can be a thing that people aren't accustomed to having or using, so these capabilities are very helpful. You don't even have to be a citizen, but you do have to have the right to work in the United States.

Prior bankruptcy is allowable. Chapter 7 with two years of seasoning and re-established credit, chapter 13 with one year payment history and court approval.

Even prior foreclosure is not an automatic disqualification from an FHA loan. They will, however, require documentation of extenuating circumstances such as major illness. Job transfer is explicitly disallowed as an acceptable extenuating circumstance, so people who walk away from properties thinking they're going to get an FHA loan are going to be disappointed. What the FHA really seems to be looking for is debilitating illness, either one which you personally went through, or one where you had to care for an immediate family member.

For how easy they are to work with for individuals, however, loan providers find themselves with many additional requirements, which is yet another reason FHA loans have been less popular of late. In addition to everything else, in order to originate FHA loans, originators have got to go though an annual audit with an accountant who's specially certified FHA auditor. This audit costs a minimum of about $5000 just for the auditor, never mind the cost of the originator's own time or that of anyone else they may have to pay. The FHA does not permit an agent to hang their license with one broker for real estate and another for loans, either. If your broker does both, however, it may be permitted. The extensive paperwork means fewer providers - especially discount providers - are interested due to the increased costs, which drives things exactly opposite to what you'd expect the government to want - it drives prices of FHA loans up, by restricting the supply of those willing to do them. It is hoped by many that FHA modernization will change some aspects of this, but that has been stalled in Congress for over a year. It's pointless to speculate as to what will and will not be included in FHA modernization until Congress sends an actual bill to the president.

One thing not likely to change is the FHA's blacklist. It's not called that, but that's what it is. Once a real estate agent or loan provider is on their list, they are on it for life, and the FHA scrutinizes all transactions for anybody affiliated with it being on their "no way" list. If someone should default on an FHA loan, the insurer is going to look for a reason not to pay the guarantee, which insures that every FHA foreclosure gets scrutinized for fraud and a number of other offenses. If the agent or loan officer was involved in such an offense, onto The List they go, and they are forever barred from transactions involving an FHA loan. For this reason, it's probably a good idea for consumers to ask about this in their first meeting with a prospective loan officer or real estate agent - on the phone would be better. Just say that you're going to be needing an FHA loan, so if they're on the FHA's "naughty" list, they might as well tell you now, because they're going to be wasting their time. If they try and talk you out of an FHA loan, well, that should tell you everything you need to know. FHA loans are superior to anything that isn't conforming A paper, and if you haven't got the qualifications for that, FHA beats A minus, beats Alt A, and beats subprime like a drum (OK, so the VA is a better deal than FHA as well).

The FHA does not normally permit secondary financing, either in the form of second trust deeds or seller carrybacks. The one exception to this is in the FHA Secure program, which will have to be another article.

One final thing: FHA loans aren't free. There is an upfront cost of 1.5 points to fund the loan. This is over and above all other loan related fees. This pays for an insurance policy that insures the lender against loss, much like private mortgage insurance on conventional loans. In addition, there's an annualized cost of half a percent on top of principal, interest, taxes, insurance, etcetera - and this is included in debt to income ratio calculations. This will continue until the loan to value ratio is 78% or less, and if the loan period is over 15 years, cannot be removed for five years. If the loan period is 15 years or less and the loan to value ratio is initially less than 90%, there will be no continuing (i.e. the annual component) mortgage insurance charged, but the only way to elude the 1.5 point initial charge is by having a loan to value ratio of 80% or less. Since in any of these cases, it's overwhelmingly likely there will be better choices available to the consumer, essentially all FHA loans are going to have this financing insurance. The continuing cost is one of the main reasons people refinance to non-FHA mortgages, incidentally.

With lenders becoming increasingly fearful about the state of the market (far too late to avoid damage), FHA loans are an excellent way to qualify someone for financing that's at least close to 100%, and legal avenues do exist that can enable FHA financing to be essentially 100% financing. Given the state of the housing market, particularly the starter market, and the recently passed legislation which will enable FHA limits to be raised, the FHA loan is likely to be a very powerful force for market stabilization, leading to market recovery. It's a good alternative for consumers who cannot currently qualify for conventional loan financing.

Caveat Emptor


Article UPDATED here


McCain's Wisconsin Victory Speech in Wisconsin

I will fight every moment of every day in this campaign to make sure Americans are not deceived by an eloquent but empty call for change that promises no more than a holiday from history and a return to the false promises and failed policies of a tired philosophy that trusts in government more than people. Our purpose is to keep this blessed country free, safe, prosperous and proud. And the changes we offer to the institutions and policies of government will reflect and rely upon the strength, industry, aspirations and decency of the people we serve.

and

I don't seek the office out of a sense of entitlement. I owe America more than she has ever owed me. I have been an imperfect servant of my country for many years. I have never lived a day, in good times or bad, that I haven't been proud of the privilege. Don't tell me what we can't do. Don't tell me we can't make our country stronger and the world safer. We can. We must. And when I'm President we will.

I don't think John F. Kennedy could have said it any better.

As someone else has already observed, it's so wonderful to hear anybody talk about what he or she owes this country, rather than what the country owes them, much less a person who spent 22 years in the military, 5 of them being tortured as a military prisoner of war.

HT: Don Surber, who agrees with me on the character of the man.

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Blame everybody but the perpetrator department: Belgrade's US Embassy Set on Fire

Serbs controlled Yugoslavia, and they ran pretty roughshod over all of the other groups. It was no wonder everyone else decided to leave. Then they used their dominance to threaten everyone else into not leaving, and their tactics got steadily worse. Slovenia went without much trouble, but then Croatia, Bosnia, Macedonia and Montenegro departed, and Serbia still didn't clean up it's act, so finally Kosovo, which may have been historically part of Serbia, left (This was the location of the battle where the Ottoman Turks defeated Serbia in 1389, is in Kosovo).

But rather than admit their transgressions, they strike out at the cops who enabled their abused spouse to escape their abuse.

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Department of Chickens Coming Home to Roost: Duke lacrosse players sue school, city

Treated as guilty despite the evidence, despite the fact that only a small subset of them was even accused, had their season canceled, they were tarred as a group with the alleged crimes of a few . Is this kind of treatment Ringing any bells? Any bells at all?

No similarities here either.

None here, either

(end sarcasm)

Just because they're mostly white males, largely of privileged backgrounds, doesn't mean they're not entitled to the same protections under law as everyone else.

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Hurray for Utah!

Judging by the reasonably even-handed treatment this story got out of definitely left of center CNN, the tide of debate may have shifted. About time.

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The results of tax the rich? Ask CA

Unless you're talking about turning into a communist dictatorship - e.g. Cuba and the former USSR - people always have the option of voting with their feet.

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The Other "Other" Israel

FYI, I attended a class on FHA mortgages, FHA Secure and down payment assistance programs this morning. I'll probably have two or possibly three articles in the next week or so. In the meantime, if I can help with a loan in California, please Contact me.

We still do not have hard numbers on what the new FHA and conforming loan limits will be. I've heard estimates that say anywhere from another week to another eight weeks before all of that information is available. In the meantime, I must point out that, as I said in Conforming Loan Limits and the Economic Stimulus Package, the enabling legislation says that the limit can be up to 125% of the median sales value in your MSA most recent information here in pdf), up to a limit of $729,750. In other words, it will not be more, but it very well could be less. Nobody knows until Fannie and Freddie, and the FHA separately, publish their new guidelines. There is no safe harbor guess, no matter where you live, and all speculation will do in advance of publication of the actual numbers is get people mad or disappointed when the actual numbers hit.

If you live in California and want some strategies that make sense for you in a purchase or loan, Contact me. Otherwise, we all need to wait for official announcements from Fannie, Freddie, and the FHA, and I am planning at least two articles out of this morning's information.


Rates move up and down constantly. This is one of the strongest reasons both Intelligent consumers and intelligent loan officers love zero cost loans. Every time rates drop, I call or send an e-mail to those clients who signed up for low cost loans since the last time rates dropped this low, and voila, I'm saving them money for basically nothing.

A streamline refinance is a refinance where there is no cash out by Fannie and Freddie's definition. The rate must be lower, the payment must be lower, and the equity situation must qualify for at least the same program the borrowers had last time. If you roll the expenses into the balance cannot be higher than what was approved last time. Most streamline refinances are with the same lender, but there are a very few lenders who will or have in the past allowed streamline refinancing of another lender's loan.

Here's how and why it works. There is always a tradeoff between rate and cost. Rates have actually come back up considerably since a month ago, but that's good fodder for an example. I'm going to assume a $400,000 current loan. Closing costs on that loan are $2815 including appraisal, escrow, and title insurance. Usually, appraisals are not required for streamline refinances, but right now, lenders are in panic mode, so they are. Those who have the gold make the rules for lending it out. The A paper rates for the day I'm writing this (no longer available by the time you're reading this) are a thirty year fixed rate loan at 5.875% for two points, 6.25 for one point (actually about 3 tenths), or 6.375 for zero points. Here's a table listing new rate, new balance, monthly interest cost, and how long it takes to recover the cost for the loan via lowered cost of interest in months as opposed to the 6.75% loan that I can do for no cost to the borrower at all.

Rate
5.875
6.25
6.375
6.75
New Balance
$411,035
$404,025
$402,815
$400,000
interest/mo
$2012.36
$2104.30
$2139.95
$2250.00
breakeven
46.4
27.6
25.6
-0-

Now once you've paid those costs, they're sunk into the loan. Furthermore, your rate is locked into concrete. Just because better rates come along does not mean the lender is automatically going to lower your rate, any more than they can raise it if rates go up. That Note is a binding contract on both sides. So if you want to refinance before you've broken even, any money you haven't recovered yet is just gone. The alternative is not to refinance at all, and keep your old loan, horrible though it may be by the standards of a later time. And if you do want to refinance again, it doesn't matter what your current rate is - you're going through the entire qualification process anew, and you have to pay closing costs again as well as, if you want them, discount points to buy the rate down.

Let's say it's a year from today, and rates drop to where they were a month ago. 5.25 for two points, 5.5 for one, 5.75 for zero points, and 6 percent even for zero cost. Let me stress for the hard of understanding who may be reading this that this is a purely hypothetical supposition. Depending upon the loan you chose today, here's your situation in twelve months:

Rate
5.875
6.25
6.375
6.75
Balance
$405,869
$399,291
$398,204
$395,737

At our hypothetical rates one year from now, the person who chose 5.875% today cannot be helped without spending some money. In fact, I can move anyone who chose a loan costing one point or less down to a rate almost as good as what you spent $11,000 to get for absolutely zero cost. So their balances stay exactly the same, and here's the new situation

Orig Rate
5.875%
6.25%
6.375%
6.75%
New Rate
5.875%
6.00%
6.00%
6.00%
Balance
$405,869
$399,291
$398,204
$395,737
Interest/mo
$1987
$1996
$1991
$1979

Notice that the person who chose that zero cost loan in the first place has a monthly cost of interest that's $8 to $17 lower than anyone else - and he owes thousands of dollars less on his loan! The people who spent money buying the rate down will literally never catch up to him! Even though the interest for the guy who keeps the initial 5.875% interest rate is a little lower, with thousands of dollars difference on the balance, you're still talking fifteen years or so for him to break even with the people who initially spent less to buy the rate down, straight line computation, never mind time value of money!

This isn't magic, and it isn't totally hypothetical. This is almost predictable. A few years ago the median age of mortgages was down to sixteen months. I can't seem to find it in the current Statistical Abstract, but I've heard it's all the way up to 28 months - still less time than it takes to break even for the costs of the expensive loan above, and pretty much the same as the break even for the loans where you spent some money to get the loan. Why in the name of whatever divinity you worship would you want to spend money that most people are never going to get back?

Now, considering this information, there's another loan that actually makes even more sense for most folks - a hybrid ARM. This is a thirty year loan with an interest rate that is initially fixed by the loan contract for a certain number of years, after which it will become an adjustable rate mortgage. For about 15 years, I've been doing 5/1 ARMs for myself. Even when the rates on thirty year fixed rate loans were ten percent, I've always been able to get a 5/1 ARM around six percent or less. For the last couple of years, the rates on 5/1 ARMs have been essentially the same as for thirty year fixed rate loans - meaning there's no real reason not to buy thirty years of insurance that your rate won't change. Why not, when it's been cheaper than 5 years worth of the same insurance? But ARMs are now diverging significantly below the rate/cost tradeoff of thirty year fixed rate loans, so now we're getting back to the normal situation, where people willing to relax just a little bit on a mental requirement for a thirty year fixed rate loan can reap substantial rewards. A month ago, a 5/1 ARM at zero cost was at 5.75%. Now it's around 6.125. So for the same zero cost of a 6.75% thirty year fixed rate loan, you can get a five years of fixed rate at 6.125%. On a $400,000 loan, this saves you $2500 per year - more than a full month of interest on the thirty year fixed rate loan. Furthermore, we've already covered the fact that the vast majority of people aren't going to keep their loan long enough for a 5/1 ARM to turn adjustable anyway. If you're among those 95% of all real estate borrowers who aren't going to keep the loan five years, there isn't any practical difference between a thirty year fixed rate loan and a 5/1 ARM except that you pay five eighths of a percent less interest - slightly over $200 per month saved in this instance. You can pay the same as a thirty year fixed rate loan and apply the interest savings to principal - which means you'll owe $14,000 less at the end of five years, assuming you keep it that long, and that rates don't drop so you can refinance at a lower rate, again for free. Another alternative is that you can invest the difference, in which case you'll have over $15,000 extra in an investment account, assuming an average 10% return per year. Who cares if you then need to spend $3000 of it refinancing if the rates never get this low in that period? Okay, I care, but since I'm still $11,000 or so ahead after I spend it, if I need to spend it, that is one heck of a good investment!

Some people prefer other ARMs. I see people encouraging the 10/1 and 7/1 for people who think the 5/1 isn't long enough. And if you're one of those folks who is going to lie awake every night for five years because you don't have a thirty year fixed rate loan, the difference between a 5/1 ARM and a thirty year fixed rate loan makes a difference of about $6 interest per night. Split two ways, for you and your significant other, that's $3 each for a good night's sleep. A good night's sleep is worth $3 to me, it's worth $3 for my wife, and I presume your sleep worth $3 per night to you, also. There's nothing explicitly wrong with choosing a 7/1 or a 10/1 as opposed to a 5/1, either. It's mostly a mental comfort issue. Most folks don't keep their loans 5 years anyway, so if I'm one of that huge majority of homeowners, why would I want to buy seven or ten years worth of insurance that my rate won't change? The only answer that makes any sense other than mental comfort is if the rate/cost tradeoff for those loans is cheaper, and that is only rarely the case. At today's rates, you're giving away three eighths of a percent for the same zero cost loan on a 10/1 basis - 60% of your savings, although the 7/1 is almost exactly the same cost as the 5/1, so that's a good choice. Most folks won't use the two extra years, but if it's essentially free, why not take it in case you do? For the 3/1 ARM, on the other hand, it's actually slightly more expensive at the zero cost level we're considering today, and even if it was cheaper, you're getting down closer to average holding period, so perhaps a third of the people who got it might want to hold it longer than the fixed period. Furthermore, I don't think I've ever seen a zero cost 3/1 more than an eighth of a percent lower rate than a 5/1 at the same cost. Let's say you could get one at 6% today for that loan, instead of 6.25. You save $41 extra per month - $241 over the thirty year fixed - but you've only got a maximum of 36 months of savings. $241 times 36 is only $8676, as opposed to $200 times 60 months, which is $12,000, not to mention more ability for compounding to have an effect in the case of the 5/1 ARM, and that the idea is refinancing to a favorable rate before the end of the fixed period. For all of these reasons, I can't really see choosing a 3/1 for any set of circumstances I can remember seeing any time in the last fifteen years or so.

To summarize, rate/cost tradeoffs between loans go up and down constantly - the rates for A paper change every business day, at a minimum. Nobody can predict exactly when they will rise or drop again, but that they will vary over a given range is pretty much axiomatic. Furthermore, there is always a tradeoff between rate and cost for any given loan type at any time, and if you choose a loan with low rates but comparatively high costs, it will be years before you have recovered your initial investment via cost of interest. Since by that point it is very probable that rates will have fallen below today's rates, and you will have wanted to refinance, this is only rarely a good investment. A better way to cut your cost of interest is to choose a hybrid ARM with a fixed period likely to cover the period of time you will keep a given loan in effect.

Caveat Emptor

Article UPDATED here


The same as in every other area of life: Get out in front and stop it from becoming a problem.

I do not understand why many people approach real estate transactions like a casual outing. Go window shopping, decide on an impulse purchase, expect to sign a few papers and you're done. That might be appropriate for a toaster oven or microwave, possibly even for a refrigerator. In all of these cases, you're dealing with huge companies and products that are basically commodities. All the important stuff like price, size, and functionality is right out in the open, and you're spending $50 for the toaster oven, $100 for a microwave, maybe $2500 or so for a top of the line refrigerator with lots of bells and whistles. Furthermore, the huge companies that make and sell these need to sell millions of these to other people. It's not only not worth it, but actively counterproductive to their bottom line if they don't deal with complaints both quickly and generously.

Contrast this with the situation in real estate. First off, you're not dealing with a major company whose deep pockets are going to bail you out. You're dealing, at most, with a franchise operation that's paying big bucks to license a name, and consumers have no claim against the franchising organization. Here is a list of California license actions in the most recent three months for which information is available. Not one heavily advertised household name among them, although every one of those household names was affiliated with someone on the list. The big names might have some neat bells and whistles in the way of agent tools and client interface, but that's a distraction, especially in these days of expanding MLS capabilities, where any agent can set up a client gateway and get a link to the public portions of MLS on their website.

More importantly, the amounts at stake are, instead of fractions of someone's monthly salary, multiples of their yearly gross income. What this means is that the amounts at stake are many times larger, and therefore the potential reward. I don't know anyone who will cheat over a penny, and not many over a few dollars. But when the amounts at stake inflate to hundreds of thousands of dollars, that's a different level of temptation, and the list of people that can be trusted shrinks drastically. A smart agent working for you will always be on the list, if for no other reason than you can sue for breach of fiduciary duty and expect to win more than they could ever make for that breach. Unfortunately, as has been made clear to everyone who's paying attention, not all agents are smart.

Most important of all, a large fraction of the important issues aren't out in the open. Indeed, the amounts at stake are sufficient for the other side to do their best to bury them. Spotting these issues, particularly before a client has wasted time and money on the property, is one of the prime characteristics of good real estate agents. Whether or not you spot them is not the determining factor as to whether these issues are present, nor does keeping quiet make them go away. Even when called upon the facts, however, many sellers and their agents will still try to brazen it out in the best tradition of the communist party, by denying the issue. Several years ago, when buyers outnumbered sellers 4 to 1, many of them got away with it. Getting away with it is a lot less likely in a buyer's market like today. Furthermore, deceits of this nature are fertile ground for lawsuits, but despite the fact that it is far better - for both buyer and seller - to deal with all of the issues in a straightforward manner, there will always be those who think they can vanish with the money if only they can get that money wired into their account. They can't, but it can be more trouble than it's worth to track them down. Better just to deal with the issue in the first place, even if it's by choosing not to pursue that property.

When a good agent takes a listing, they have all the issues from appropriate pricing on down the line dealt with before the property actually hits MLS. The seller has to have restrictive showings? Reflect it in the asking price and tell everybody when and why in the property profile. There's an issue with the property? Make it clear in the property profile - showings where the prospective buyer aren't willing to deal with the issue do nobody any good. Even if you can hide it temporarily, you can't hide it forever, and the effects when the deception are discovered are going to hurt more than if you were honest in the first place.

When a good agent considers a property for their client's purchase, they consider it complete with shortcomings. If there's an issue with traffic, noise, structure, schools, or anything else, I want my client to be aware of it, and I want to have a plan to deal with it in negotiations, before my client says they want to put an offer in. Yes, this makes it more difficult to persuade a client to put an offer in, but if your agent hasn't explained that there is no such thing as a perfect purchase situation long before you get to the stage of making offers, something is wrong. I haven't seen a property yet that was an exception to this. They've all got problems and issues. The question is whether these problems and issues are ones that the client is comfortable dealing with. Even if there are no other problems, the issue then becomes, "Is your client happy paying the extra money not to have them?"

Any time the problem gets in front of an agent, they are playing catch-up, much like a Cessna pilot trying to handle a high-performance military jet. It's controlling them more than they are controlling it, and the same applies to real estate. Pilots have a saying to the effect of "he (or his body) got to the crash site fifteen minutes after the airplane." Real estate is no different, except the time lag is usually measured in months instead of minutes, and only gets caught up when a lawsuit is filed. I've seen agents - usually "team leaders" trying to pack in more business than they can really handle - so far behind the power curve on actually solving real problems for their clients that the client would have been better off with a fresh licensee on their first transaction, who at least aren't so busy delegating that they can keep track of what they need to know and what they need to deal with before it bites their client. Those subsidiary functions that busy high producing agents "delegate" to lower paid "team members" (which is 95% industry code for "poorly trained low-paid employees who have no idea how that piece of paper relates to everything else about the transaction but enable the agent they work for to rake in more commission checks")? You'd be surprised how often the details that bite agent and client both are buried in them, and any time an agent puts their focus on production, the quality is going to suffer. A better agent may not live so high on the hog, but their clients come out of the transaction much happier.

Caveat Emptor

Article UPDATED here

Carnival of Personal Finance

San Diego Special Edition

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Climate change: China - Victim, US - Culprit

This one is so utterly transparent that I can't think of any reason not to spot it.

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Jay Tea over at Wizbang makes a great point about "Gun Free Zones" in The "Zone" Non-Defense

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Little Ramona loved Disneyland! We took her on Star Tours, and she came off saying, "Do it again!" I suspect my wife, who is not a roller coaster person, suggested Space Mountain thinking to scare her off, but she came off that cackling with glee, too. Didn't get to go on Matterhorn (line had gotten too long and they'd taken it off FastPass, - Grr!) and we just didn't get to the area where Big Thunder Mountain was, but I suspect she'd have been fine with that also. One compensation for dealing with Toddlerzilla - she makes all the height restrictions! We went on the Rocket Sleds a couple of times and Buzz Lightyear also because Hilda isn't a roller coaster person, either. I felt really bad for my wife that King Arthur Carousel was closed, but gave fist pumps on a couple occasions as we walked by that "It's an Earworm after all" was closed for the next several months. Question: Why is Peter Pan's Flight always so dadburned crowded? And not on FastPass, either! It's been many years, but I don't remember it as being particularly good even before the old ticket books went out of service (which says something about how long I've been going to Disneyland). But little Ramona's favorite character is Tinkerbell, so we kind of wanted to go on that for her, and were completely frustrated because the line was always huge. First thing she did was try to get to Tinkerbell just inside the main entrance. We took both kids to meet Mickey, of course, and they also met Goofy also Toontown, as well as Winnie the Pooh, Eeyore and Tigger (brand new Tigger suit - the orange was actually painful to look at). The only time we had any real trouble was on the Snow White Ride when the Queen turned around as the Witch, and that wasn't bad. We took a break midafternoon for nap and dinner, then went back until almost eleven PM, which was pretty good even if little Ramona was dead to the world before we got out of the park. We got a picture at 9:30 the next morning, showing them both still completely zonked out. Of course, Ramona and I were completely exhausted for two days afterwards - when you're both as old as we are, it really takes it out of you to keep up with young children like that.

(By the way, seems like every time I come back from the north anymore, traffic on the 5 is horrible from just south of San Clemente, no matter the time. It took over two hours from there to get to where we left my wife's car in Mira Mesa - less than fifty miles, on a weekend with no significant traffic events any of us saw or knew of. I don't see anything like that on the 8 except for a short period at rush hour or when there's been a major accident. 94's about the same, and even the 52, which may take longer to clear, doesn't stack up outside of rush hour. One more reason to consider East County!)

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Satire so real it seems ripped from tomorrow's headlines: Castro Quits: Clinton-Obama on Short List?


With the market turndown, Liquidation auctions are becoming a big thing. They were just advertising one on all the stations around here. The other agents in my office asked if I was going, and I told them, "There will be no bargains there." Two of them went anyway, one going so far as to take a client.

To be fair, this only applies 100% to one specific auction house, which I'm not going to name - but the tactics and terms are pretty standard. Here's the claims they make: "Huge selection" (which means, in this case, 222 properties of all sorts, 147 of them in the county, 75 out of the county, as opposed to 20,600 active residential properties in San Diego County MLS on the day in question), "Easy financing" (they rent some space to one specific lender). In fact, they do their best to restrict choice of lenders - giving some minor preferred terms if you do business with their tame lender, which isn't known in the business for being a good lender to do business with. This violates RESPA, by the way. "Perfect for families." If you believe this, I own not only beachfront property in Florida but also a bridge in Brooklyn and an albino pachyderm, and I want to sell them all to you for a low discount package price -contact me for private details. You've got to be some kind of idiot to believe that it's a good idea to bring kids - a genetic and conditioned emotional distraction - to a real estate auction. Their commercials have sound bite interviews with people right after they win an auction - excited that they "won" an emotional battle for a house! Of their very own! Not later, once they've discovered how rotten the situation is that they have gotten themselves into.

Reading the fine print, it didn't take much to figure out what's really going on here: They want to get buyers together in an emotional auction environment where it's psychologically very easy to overbid for a property, get them committed to buying the property, and cut them off from all of the really good due diligence they're allowed to do on every other property out there. Lock the buyers into what they do in the heat of the most emotional moment these artisans can create - while the sellers are free to reject the deal on a whim. They allow the prospective buyers no "cooling off" period at all. This is legal for purchases, but isn't a good situation to be getting yourself into as a buyer, particularly not in the current environment for most of the country.

Here's the skinny: First off, prospective buyers need a $5000 cashiers check made out to yourself, which you will endorse over to them, and the balance of 5% of the purchase price in the form of a personal check or something similar. What this means is that no matter what, the lender is getting $5000 of that buyer's money. Period, end of sentence. Furthermore, they have to put 5% of purchase price into escrow. This is way above the "traditional" 2% which is far too high for most transactions nowadays. Putting it into escrow means that, at a minimum, somebody else is holding onto it until and unless all parties agree to release it or a court tells them to. Given that you have to use their special "purchase contract" which wasn't available ahead of time, what do you expect that the terms of that contract are as regards to things like liquidated damages and money owed to the lenders for the "privilege" of sitting in escrow on a property where there's no real due diligence done? Their brochure said the purchase contract was available on their website, but I couldn't find it, and I not only checked their site map, but clicked on everything that I thought could conceivably be associated with it - which was basically everything. It wasn't there, but I don't have any reason to distrust their claim that it renders you liable for damages if you don't carry through on purchase. In other words, you find out a reason why you don't want the property, you still pay for the fact that you had the high bid. Not to mention their purchase contract is completely mandatory, and you can't negotiate anything about it, and you don't even find out what those terms are until after you've agreed to the price. Since contract terms can move the price by thousands or tens of thousands of dollars in regular negotiations, it shouldn't stretch your imagination to figure there's a reason they're waiting to spring all of this upon you - most likely a contract people wouldn't have signed at the peak of the seller's market in 2003. Furthermore, you're required to sign a "winning bidder confirmation" immediately upon making the high bid. What that says also wasn't subject to prior investigation - which is a polite way of saying they want it to be a deep dark secret until you "win" the auction for a given piece of property. Use your imagination for a moment, and ask yourself, "Why would they want to keep it secret until then? What might such a document say?" I'll bet you millions to milliamps the reality would be worse. These folks are professionals.

Did I mention that you're agreeing that you've already done your due diligence? Yes, but I didn't go into what it really means. They supposedly have three open houses for inspection, but how many people are really going to drag an inspector, an appraiser, a termite inspector, etcetera out to the property just because they might be thinking about bidding on the property? That's sinking anywhere from $800 on up into the property just on speculation of winning the bidding. If a prospective buyer does this due diligence ahead of time, it psychologically prepares them to be willing to go higher on the bid (they've already spent money). If they don't do this due diligence ahead of time, they're putting that 5% of the purchase price - however many thousands of dollars - at risk. Suppose you bid $400,000 and it's accepted. You need to put $20,000 into escrow immediately! If a prospective buyer thinks they might bid on two properties, that's twice as much. Furthermore, although the purchase contract wasn't available, I'm quite willing to take the word of their brochure that there are no financing or appraisal contingencies allowed in that contract, even for their preferred lender. Their verbiage is adamant on the point of "as is, where is, including all faults." They're very explicit about no liability by sellers, which is basically standard for lender owned property, but they're not going to accept any requests for repairs either, which isn't. In fact, in some circumstances, it's illegal. Not to mention that you normally have seventeen calendar days to do your due diligence after there's a fully negotiated purchase contract, even with lender owned properties, before your deposit is likely to be in jeopardy.

They use a "property previously valued to" come-on, which is disclosed in the fine print to be the highest of 1) an appraisal 2) asking price, 3) assessed value or 4 ) broker's price opinion. You shouldn't need to be a Rhodes Scholar to figure out that this means the asking price - the exceptions just make for something even more cockeyed. It's been on the market for months, and it didn't sell for that price. If it had, they wouldn't be auctioning them off in these circumstances.

There's also an undisclosed reserve price. What this means is that if the auction doesn't get high enough to go over the reserve price, you don't get the property even if you have the high bid. Furthermore, reading through the fine print, you find that the auction has planted other bidders in the crowd, who can and will bid the price up. If claims they won't go over the reserve price, but since neither the identity of the plant nor the reserve price is disclosed, it's somewhat difficult to verify this. The job given these plants is plain and simple: Get the bidding going, and get it emotional, so people will keep bidding for a long time. Since the auctioneer knows both the plant and the reserve price, they can collude quite easily to a common purpose. As a matter of fact, the fine print says the owners don't even have to accept the reserve price. What does this mean? If, after all the psychological games they can play with you, you don't bid enough to make them happy, you still don't get the property! In fact, they've got 15 days to turn you down. You, on the other hand, are required to close escrow within thirty days, which means you had better get working immediately, even though they reserve the right to pull the rug out from under you.

If all of this isn't enough, they reserve the right to alter terms and conditions as they go, specifically including, "Advancing the bidding," which is a euphemism for jacking up the price for no apparent reason. In addition to that, there's a 5% surcharge on all winning bids in order to arrive at the final sales price. So someone knows their limit is $300,000 and advances the bidding to $297,000 before winning - only to discover that this translates to a "real" price of $312,000 - a price they already know they can't afford! Result? Minimum of $5000 in their pocket (your endorsed cashier's check), and they offer the property for sale again right away.

Have I mentioned the psychology of an auction yet? Particularly one with inexperienced bidders? Most of whom have no idea of the risks they are taking, let alone the fact that they should be compensated for them, or how much? I've heard too many inexperienced people saying that "Everybody knows" that foreclosures and auctions are great deals. I'd like to meet this Everybody, because he's spewing rank fertilizer in the form of unsubstantiated rumors that are far from universal even if they are sometimes valid when you've got a sharp agent on your side in a high transparency situation where both sides have to come to the table as equals. That's not the case here.

I looked through their book of available properties. There was precisely one that I had been in. It was a 3 bedroom 1.75 bath property on a lot that was mostly level because the developer had terraced it fifty years ago, with a deep crack in the foundation the entire width of the house - you could even see the evidence on the outside, for crying out loud. Nice paint, great view, some other nice touches - but flat roof I couldn't see, no yard, no close parks, no place for kids or pets, all the fixtures and surfaces other than the carpet were original, it sat on a busy connector street, and I couldn't tell you whether that house was going to be there tomorrow without a soil engineer's report on how well the leveling of the lot was standing up, how well the soil had been compacted, etcetera. I suspect problems, because the foundation wouldn't likely have cracked if there hadn't been soil compaction issues. I remember thinking, "Maybe $300,000, if the soil report comes back solid. Otherwise, you couldn't pay me to take this property." They were telling people it was valued at $429,000. Seriously, I would rather have a 1970s vintage townhome less than a mile away listing for $279,000 - and this includes HOA dues and dealing with a homeowner's association in the first place. More usable yard, a couple of small communal parks and a communal pool, and less environmental noise - not to mention that even if that condominium had structural issues I didn't spot, dealing with them would have been a communal issue as well. This seemed about average for what was being offered. The less desirable areas seemed to be heavily over-represented in their offerings. This is about as coincidental as falling down when you trip. All the usual war zones that people don't want, even when they think they're getting a deal.

The point of all of this is to get people foolish enough to bid on these properties locked into deals, where the sellers are not locked in at all. Get them emotional, so they bid up the price, and if they can't do that well enough, the seller has the option of taking their marbles and going back to what they were doing. So you can imagine that I wasn't very surprised when my two co-workers called me about halfway through the proceedings to say, "You were right. We're leaving. There are no bargains here."

Caveat Emptor

Article UPDATED here

Q and O on why we can't afford a President Obama. Least of all the poorer portions of the population.

neo-neocon on Obama's "over-promise and under-deliver" campaign.

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Something that needs to be said about Title Insurance

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Classical Science Fiction I find relevant to the election of 2008

"The Masculinist Revolt" by William Tenn (aka Phillip Klass). This short story was nominated for a Nebula in the 1960s. It probably should have won. This story seems to be different to just about everyone who reads it, so don't be surprised ifyou don't have the same reactions as everyone else. An emotional interest group just barely fails to get its way when an even stronger emotional urge wins the day. No logic involved. It strikes me that the Democratic primary is the collision of two such groups. The Republican primary seems to be one such group who have lost but won't give up.

Unfortunately, we've gotten to the point where our major decisions are ruled by emotional interest groups.

Two more short stories come to mind as having applicability in our current election: "Marius" by Poul Anderson, and "The Liberation of Earth" also by William Tenn. But that last one has been echoed in every election on the planet since it was written.

All three of these are worth reading, and fairly easy to find. None of them takes more than about ten minutes to read.

The story Robert Heinlein couldn't bring himself to write about the rise of Nehemiah Scudder (which regime's eventual fall is told in "Revolt in 2100") would also be applicable, although not only or even primarily to Mike Huckabee. Religion takes all kinds of forms, as Al Gore demonstrates. This story, you have to extrapolate from "Revolt in 2100" and a few others of Heinlein's works, but the main points are pretty obvious.

Yes, Obama's feel good populist soak-the-rich rhetoric rhetoric really has started to frighten me. And I don't scare easily. I can only hope that after another eight and a half months of this economic idiocy, people are smart enough to turn away from this easy, seductive message.

I know I said only a few days ago that I'd rather have President Obama than President Hillary. What's that saying again? Oh, yeah : "Be careful what you wish for. You may get it."

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Off to take my family to Disneyland! It's the first visit for Ramona (the three year old)! Supposedly, the room has free wifi, but if the site isn't updated for a day or two, you'll know the reason.

I know I've been lazy as far as new articles the last couple weeks. I'll try to put out more in the next couple weeks.

If you've noticed the site being slow, I've been Google-lanched regarding the article Conforming Loan Limits and the Economic Stimulus Package - thousands of hits on that one article the last two days, 99% plus via google search.

(NOTICE: This article was written in response to President Bush's 2008 stimulus package. I have written another article About President Obama's 2009 Help for Homeowners package. You might want to keep this window open, as how well I did on predicting this one should inform your opinion on how well I'm likely to do on predicting the effects of the current bill)

Sometime today, February 13, 2008, President Bush is scheduled to sign the Economic Stimulus Package into law. Maybe it's already happened by the time this publishes. I've made my opposition plain from the time it was first proposed, but it's going to be law effective today.

Ever since it was proposed, people have been going crazy with suppositions on what the increase in the conforming loan limit is going to mean. Except that Fannie Mae and Freddie Mac, who buy conforming A paper loans, are mostly private corporations. In fact, the limit of how big the loans they want to buy is what really determines a "conforming loan", as in "Conforming to the underwriting requirements imposed jointly by Fannie Mae and Freddie Mac." How big the loans they want to buy is really up to them, and it's only been a couple of months since they decided not to raise their conforming loan limit for 2008.

Here's some text excerpted from an e-mail I got February 12 from one of the biggest lenders in the business:

As you are likely aware, the House and Senate recently passed the Economic Stimulus Package, which includes increases to standard GSE (Fannie Mae and Freddie Mac) loan limits and Federal Housing Authority (FHA) loan limits.

It is likely that the bill will be signed into law by the President as early as tomorrow, Feb. 13. We would like to let you know what to expect from DELETED once the bill is officially signed into law. We will follow up with additional messaging as we learn more from the GSEs and FHA about timing and availability.

Several steps must occur before DELETED can accept applications with the higher loan amounts in the bill, including:

• First, the GSEs and FHA must assess their internal impacts to determine the delivery approach they will require of mortgage lenders and investors.

• Second, GSEs and FHA must communicate their requirements to mortgage lenders and investors.

• Third, DELETED will work to identify impacts and implement the changes as quickly as possible.

Due to these necessary steps, the higher loan limits offered by the GSEs and FHA as a result of this bill will not be immediately available to our clients (higher loan limits are available through our non-conforming product offerings). (emphasis mine)

High-level Details of the Stimulus Package

Details of the GSE/FHA requirements are not finalized; however, outlined below is some information regarding what is expected as a result of the new law:

Overall

• The increases are a temporary solution for some high-cost areas based on Metropolitan Statistical Areas (MSAs).

• The higher loan limits will not be immediately available. (emphasis mine)

• Changes related to FHA Modernization were not included in the Economic Stimulus Package.
GSE Loan Limits

• Loan limits may be as high as $729,750; however, $729,750 will not be the nationwide loan limit (emphasis mine).

Increases will be available in high-cost areas based on the median area sales prices and will follow the standard HUD mortgage limit calculation process.

• To determine high-cost areas, the calculation factor will increase to 125% of the area median sales price (emphasis mine).

• The increase applies to loans originated from July 1, 2007, through Dec. 31, 2008.

FHA

• Loan limits in high-cost areas may increase to as much as $729,750.

• To determine high-cost areas, the calculation factor will increase to 125% of the area median sales price.

• The increase applies to loans with a credit approval issued prior to Dec. 31, 2008.

Please watch for more detail in the near future as we learn more about timing and availability.

In short, it's temporary, and it's based upon the median sales price in your MSA. In order to hit the $729,750 limit, the median sales price in your Metropolitan Statistical Area has to be $583,800. San Diego just barely makes it, and the Bay area blows it away. Orange County makes it handily. LA just barely makes it. Honolulu is the only area outside California I see that makes it to the maximum. I don't see any others on the list that make it (Manhattan is only a small part of the New York MSA).

Furthermore, as the email said and I've been explaining to people for weeks, just because Congress raised the conforming loan limit doesn't mean Fannie and Freddie have to buy them. FHA yes - that's a federal agency. But Fannie and Freddie are mostly private corporations these days. They're certainly going to give weight to what Congress has indicated it wants them to do, but they're not going to completely ignore actuarial concerns, and the bigger the loan, the worse the consequences if it should default. I'd expect Fannie and Freddie to raise their limits, but until they say that their limits have been raised, all of the lenders have to keep the old conforming limit of $417,000.

Want more information, or hard information for your area? here is a .pdf of the most recent data available by MSA. 125% of those numbers is the maximum, and this should get pretty close. For hard numbers, we're going to have to wait for the FHA, Fannie, and Freddie to release them to us. They're the ones who have to apply the law, and tell us what they will and will not fund.

Caveat Emptor

UPDATE: (March 6th) FHA has now announced their new conforming loan limits. I expect Fannie and Freddie to follow as quickly as they can.


The Guidelines for this carnival.

As always, I arranged the entries that met guidelines into three levels, based upon originality, usefulness to the consumer, and how much thought and effort and research went into an entry.

There were no submissions that made it into the Strongly Recommended category, and hence, no Host's Choice Award.

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RECOMMENDED

A Case of Too Much Information? Real Estate and Stock Investments Compared talks about comparative mental effort and stress involved in real estate versus stock investing, and the irrationality of people who act thus.

Until the last paragraph, I was going to reject Being an agent isn't always a safe job... see the recent warning notice below, but that last paragraph has an important warning for owners of real estate that I think makes it worth reading, despite the fact that most of the article talks about being an agent.

Withdraw EPF Money for Home Loan Installment: How it affects your Retirement Fund deals with an way of using your pension fund to invest in real estate - at least if you live in Malaysia.

Your host presents The Self-Fulfilling Prophecy of Lender Fear, talking about the current macro-economic state of the loan market and its effects upon consumers.

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MET GUIDELINES

Five Considerations For Refinancing Your Mortgage does no research, no calculations, doesn't consider reduced cost of interest when it talks about extending the term, and links an online quote site, which is a highly misleading way to end up with a rotten loan. Nonetheless, it does meet guidelines as it doesn't actually shill or make any explicit errors of fact.

Effects of the Mortgage Crisis reads like a laundry list you can find any of hundreds of places. No thought, no recommendations on what to do about any of this. But it does meet guidelines.

Get HUD Homes For Sale - 50% Off!. The title says it all - but you have to be a police officer, fire fighter, or teacher to take advantage of it. Not to mention that these homes are generally not in anything like "move in" condition - and it's usually not just cosmetic, either. You want a fixer? I can find better than most HUDs at a lower price, and I'm not the only one.

Buy Solar Cells: Be Your Own Power Plant and Get Rid Of Your Electricity Bills talks about using solar to cut your electricity bills. My question is: What's the tradeoff? Being green is nice, and worth some bucks to me, but if it costs more than you'll save for the lifetime of the solar system, is it really to your benefit? Is it even to the environment's benefit? If you borrowed the cost of the solar system, would the reduced bills pay your cost of interest? Is it possible that the people who design solar systems need to lower the cost and raise the efficiency?

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SPAM AND OTHER RIDICULOUS SUBMISSIONS

A site named FYI About submitted a straight shill pitch that wants to sell major appliances. This article did not so much as mention real estate. Completely clueless about the nature of the carnival, and probably a paid shill post as well. Zero research, zero thought, zero value.

A site called Rob Moshe submitted a post talking all about his future plans to "help" people that did not so much as mention real estate. Somebody bragging about plans to "help," who doesn't actually submit a post with any useful information or thoughts. Why do I wonder if his plan to "help" people involves countries with asset hiding banking regulations and no extradition agreements?

You'd think a site named Heart of Wisdom Blog might have some kind of clue that a carnival named "Consumer Focused Carnival of Real Estate" might expect there to be some information that's useful for consumers of real estate in something you submit, as opposed to vaguely religious talk about a relationship with god. You'd be wrong. I don't know about Heart of Wisdom, but Brains of Wisdom are evidently some kind of black hole.

A site named Money Blue Book submitted a shill post advocating paying your mortgage with a credit card for the rewards. Of all the stupid tricks people can pull with their money, this one ranks right up there with, "Borrow money so you can convert it to cash and set it on fire" Come on people, this isn't some game show for inbred imbeciles where the stupidest possible answer is greeted with applause and cries of "good answer!" Every link in the article "just happened" to go to a credit card application page. Even if you paid the card off in full every month, the higher Rate Cost Tradeoff you're stuck with will more than eat any possible reward. If I didn't have an "as family friendly as practical" policy, I'd say a few truly pungent things. Some people will fall for the most idiotic schemes as long as you give them cash. This is the same basic "come on" as mortgage accelerators, but is even less intelligent. Please people, apply a little skepticism to what you read on the internet!

For those who might object to the treatment their submission received, the relevant information has been in the guidelines since before submissions were being accepted for this carnival. Having been told to read the guidelines, you willingly submitted these posts. Live with it. You might try submitting a higher quality post, or one that's not spam.

Consumer Focused Carnival of Real Estate will return in two weeks (February 27th, 2008), here at Searchlight Crusade, unless someone else wants to host. Deadline for submissions will be February 25th.


Carnival of Personal Finance #139: Valentine Edition

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The Smears against McCain are already starting

Jules Crittenden predicts we'll see accusations of PTSD from the left. I kind of doubt it. That will only prompt people to ask of either of their candidates, "So what life experiences do you have from that will enable you to lead our nation and make the big decisions correctly in highly stressful situations?" There just isn't a good answer to that.

My grandfathers fought in World War II. My father (born 1930) was out just before Korea, where my uncle served. The situation is remarkably similar in my wife's family - except that they had at least one combat death. Every one of the survivors came home and lived productive lives But one thing that people who know combat veterans know is that, contrary to Hollywood movies, it encourages fast, clear, levelheaded thinking - because that's the best way to live through it. It may be tense, it may be emphatic, and it may be frantic because the enemy was going through the same cycle. Sometimes it's just plain stupid luck who lives, one way or the other. But clear, fast thinking makes a real positive difference in life expectancy. And only people who don't know any combat veterans could think otherwise.

You know, I'm thinking that a guy this reviled on both the right and the left might have a little more going for him than I thought.

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What is the school's The 'Multiculturalism-to-Math Ratio' ?

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"Religion of Peace" my ***. Captain's Quarters reports on a plot to kill a danish cartoonist - more than two years after he drew an incredibly mild series of cartoons about Mohamed.

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Diary of an Insurgent In Retreat

Abu Tariq's diary ended with a list of people still working for him. There were 38, although he had written two weeks earlier that he had "20 or less" fighters left.

Some of those on the list had remarks next to their names, such as "We have not seen him for more than 20 days so far" or "Left three days ago."

"And that is the number of fighters left in my sector," Abu Tariq wrote.

HT: Captain's Quarters


I knew that people, particularly first time buyers, were going to be forced into condominiums in San Diego, I just didn't know how soon.

Most people, particularly first time buyers, want 100% financing. Actually, most first time buyers don't have a down payment and couldn't put a significant down payment (5% or more) if they had to. And since 5% of $400,000 is $20,000, and 10% is $40,000, that's a significant chunk of change. Especially when you think in terms of lifespan to save: a family that makes San Diego area median income ($69,700 per year) and manages to save a full 10% of their gross salary - $580 per month - takes almost three years to save a $20,000 down payment, and 69 months to save $40,000! Never mind closing costs, which can be anywhere from another $4000 on up, depending upon how many points you want to buy the rate down. Considering the psychology of the average American, these time estimates are hopelessly optimistic.

For at least the last ten years, 100% financing has been available, and the means to qualify for it have been routine. Since the vast majority of all buyers need a loan, this availability has been priced into the market. Indeed, it was one of the early factors that led to a run-up in prices in many areas. Nor is there anything wrong with 100% financing, per se. When you look at fully amortized fixed rate loans done on a full documentation basis, the levels of default and lender loss are not significantly higher than the most hidebound "traditional" loan standards.

It was only when the standards became so relaxed that this was too much to ask for that everybody got into trouble. There is a reason why less sustainable loan types - interest only, short term hybrid ARMs, and negative amortization loans had always required a much larger down payment - greater risk of default! Lenders with an eye on selling the loans to Wall Street figured there was no down side to loosening loan standards until even "fog a mirror" was asking a little bit much. The assumption was that prices had gone up several years in a row, so "of course" they were going to keep going up forever - and ignored anyone who tried to tell them otherwise.

Well, we all know by now how that one turned out. Unfortunately, everybody in positions of responsibility at various lenders is now in full blown damage control mode - by which I mean playing CYA by slamming the barn door after all the horses have departed. For good measure, they're locking the doors to all the other buildings as well - even the ones that never held horses. Among these are full documentation 100% loans.

The best and cheapest way to get 100% financing was split the amount into two loans - a first for 80% of the value and a second for the remaining 20%. Unfortunately, as I reported a little over six months ago, second mortgage holders found out that they were the ones really holding the sack for all of this, and stopped approving anything over ninety percent of value. As I said then, this made things worse, especially for everyone trying to get out of unsustainable loans and those who lent to them.

The second way to get 100% financing was with Private Mortgage Insurance. PMI rates had gotten very cheap when they were competing with another option for 100% financing. It was still more expensive than splitting the amount borrowed into two loans, but it was possible, and if the debt to income ratio was lower for A paper, it only made a marginal difference on qualification of approximately 10%. Even when PMI rates suddenly jumped, things were still manageable. The decline we had already had here in San Diego more than covered it.

But now lenders have withdrawn all 100% financing programs except the ones backed by government or quasi-governmental entities - FHA, Fannie Mae, Freddie Mac. And here's the rub: The income necessary to qualify for the base purchase amount plus PMI on properties bumps up against the maximum income limit of $97,800 for those programs (assuming a rate of 5.75%) at around the current conforming limit, and that's assuming no other debts whatsoever. The increase in the conforming loan limit isn't going to help 100% purchasers at all.

So what happens when 100% financing suddenly isn't available? People who could have bought and were willing to buy suddenly cannot. This constricts demand for housing, as there are fewer people able to qualify for the loans. Prices fall, when they would have been stable otherwise. Because of this, people are unable to refinance. Whether it's because they cannot refinance or there was just no way they could really afford the property in the first place, people who sell are unable to sell for enough to pay lenders in full, and those lenders, predictably enough, lose money they otherwise would not have. Poetic justice to a degree, but the lenders aren't the only ones paying. Just like when things were going crazy, This is all a vicious cycle - except in the other direction

Furthermore, even if you are able to qualify, via one of the governmental or quasi-governmental programs, the added cost constricts what you can afford. If your family makes area median income ($69,700 in 2008), you can't afford a $300,000 property at 6%, even if you have no other debt. About $270,000 is the absolute limit.

Who are the big winners? Two sorts of folks, and for either one this is a real buying opportunity, the sort where if you buy now, you will be very happy in a few years. The first is people eligible for a VA loan. That's the only 100% financing program available right now without PMI or its equivalent. Since PMI for 100% financing is more expensive than property taxes, it makes a big difference. Furthermore, there are ways to leverage it for a property of up to about $600,000, instead of the current conforming limit of $417,000. Someone eligible for a VA loan making area median income can stretch to about $330,000, and I don't know of any income limits on VA loans. Assuming the new limits come in, a family making $100,000 per year will qualify for $500,000 with no money down on a VA loan. When you can qualify and other people can't, that's negotiations leverage. The current owners can keep waiting and hoping for a prospective purchaser in the who makes $120,000 or more per year, but that's about two more standard deviations. Look up the normal probability distribution - at $100,000 per year you're already looking for about one family in 10,000 who might qualify, and most of those already have the property they want.

The other winners are people who have cash for a down payment. All this stuff about PMI doesn't constrict people who don't need PMI, or who at least have enough so that they don't need 100% PMI. If you get up to 10% down payment, now you've got the possibility of a second mortgage, and once again, PMI goes away. So if you have a 10% down payment on a $400,000 property, not only are you only borrowing $360,000, but there's no PMI on that money, either. This saves you $480 per month on your first mortgage, $453 per month on PMI, and if it costs you about $293 for a second mortgage, you're still saving $640 per month, meaning you can qualify as if you were a purchaser who makes an extra $1420 or more per month - $17,000 per year!

Suppose you don't fall into one of these two categories? There are about four alternatives. First, you can "settle" for a lesser property, which is probably the smartest alternative for most folks. The best way to save for a down payment on the property you really want is to buy something less expensive now. Second, you can wait until you have saved the difference, fighting against leverage the whole time. Most folks never save enough to make the property more affordable. Third, you can find an owner with enough equity to carry back a large part of the transaction, a consideration for which they are going to demand a much higher price. For one thing, that money is their down payment for the move up property. To say this is not a good way to get a bargain may be the understatement of the year. Finally, you can do completely without - in other words, stay a renter until the situation changes. Now every time I write one of these articles, I get some clueless watchers of immediate cash flow who have no understanding of leverage, real estate markets, or the fact that the crashing of the market is putting significant upwards pressure on rents, for two reasons. First, the people who have lost property have no choices except renting and homelessness for at least two years. Second, the leverage that was working in the landlord's favor these last ten years, encouraging them to keep rents relatively cheap, has disappeared with the housing bubble. Locally, I've seen the average rental price in the areas I work jump by $150 per month or so just in the last year, and this is just the leading edge of the adjustment. Paying attention to only the cash flow as it exists now is a way to make a bad decision - you need to look at the entire situation as it is going to be for the rest of your life.

Property values are going to come back. For one thing, as soon as prices stabilize, expect 100% financing alternatives to become more available again. Since their absence had a negative effect on the markets, what's going to happen when they become available again? If you answered, "A one time shift back upwards in property values," give yourself a pat on the back. If you followed it with, "Which will have the further psychological effect of causing everyone who's been putting off purchasing to rush back into the market for fear of getting priced out again, putting further demand and causing another shift upwards in pricing," then you have some memory of how the general population chases last year's returns and the effects thereon. Fear and Greed, just like last time. Some people never learn. But if you buy before the great mass of humanity gets their fear and greed up, that will amount to a nice large chunk of change in your pocket, especially if you then want to move up. I expect San Diego to at least recover most of what we've lost very quickly once the average person gets it into their head that current price levels are unsustainably low, which they are.

Caveat Emptor

Article UPDATED here


Anti-impotence pill could boost high flying pilots

Just what we need. Military pilots usually suffer from testosterone poisoning anyway.

Not to mention it's certain to be used to increase the amount of spam in our email.

The Israeli air force, which funded the study, is not planning to make use of it:

(Because of the different circumstances) there is no significance for medical treatment of any drug for pilots in the Israel Air Force ... and it has no intention of using any form of drug,

Not to mention it's kind of difficult to devote your full attention to anything when you've got something uncontrollable going on below the waist. Far more important to be able to plan your air-to-air combat without distractions than to get a marginal improvement in black out point or oxygen usage.

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Buffett: Bank woes are "poetic justice"

Buffett, one of the world's wealthiest people, appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.

"It's sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end," he said.

I can't say it any better than that.

"I wouldn't quite call it a credit crunch. Funds are available," Buffett said during a question and answer session at a business event. "Money is available, and it's really quite cheap because of the lowering of rates that has taken place."

He added: "What has happened is a repricing of risk and an unavailability of what I might call 'dumb money,' of which there was plenty around a year ago."

Which is what I've been saying for months.

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I said I wanted him to stay in, at least for now, and I am disappointed that he didn't:

McCain seals GOP nod as Romney drops out

John McCain effectively sealed the Republican presidential nomination on Thursday as chief rival Mitt Romney suspended his faltering campaign. "I must now stand aside, for our party and our country," Romney told conservatives.

H is only suspending his campaign, as John Edwards did, so he could get back in in the event of a brokered convention, which has now become quite unlikely. I am sorry it got so personal between McCain and Romney, because otherwise he would have been a good VP choice. Not as good as Fred Thompson, but much better than Huckabee. Duncan Hunter would also be an excellent VP choice - solid conservative credentials, tough on terror, and together with McCain's maverick status, might be able to put California in the R column. The Donkeys don't stand a prayer in the electoral college if they lose California. I don't know anything about the Florida politicians that boosted McCain there and various folks are predicting McCain will give heavy weight to, but California has twice the electoral votes. Just sayin'.

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A Modest Proposal for Middle East Peace over at Private Papers

a small sample:

diplomats might find common ground about displaced populations, many from the post-war, late 1940s. Perhaps it would be best to start with the millions of Germans who were expelled from East Prussia in 1945, or Indians who were uprooted from ancestral homes in what is now Pakistan, or over half-a-million Jews that were ethnically cleansed from Egypt, Jordan, Iraq, and Syria following the 1967 war. Where are these refugees now? Were they ever adequately compensated for lost property and damages? Can they be given promises of the right to return to their ancestral homes under protection of their host countries? The ensuring solutions might shed light on the Palestinian aspirations to return to land lost sixty years ago to Israel.
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Wizbang covering McCain speaking at CPAC

Captain's Quarters seems to largely agree.

Michelle Malkin doesn't, but at least she's now calling for conservatives to work for candidates they believe in rather than trying to form a circular firing squad before the election.

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Something for the eight year old in all of us:

A friend of mine (Hi, John!) sent me this a while ago and I promptly forgot about it. Meet the Disintegrator: 24 barrels of rubber band minigun madness

It's tripod mounted!

There's video of it in action!

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Whoa! The Democrat race just got nasty personal! Obama suggests Clinton show tax returns

Fools rush in where angels fear to tread and all that. I agree unconditionally that transparency is a good thing where it won't get our warriors killed, but Hillary can't afford this issue. Damned if she does and damned if she doesn't.

Note that I don't think it's likely that I'd agree with most folks on what the really damaging information would be. Lots of people get all worked up about sheer amounts of money made, where I tend to look at where it came from and what people did for it (and in Hillary's case, whether the amount is really believable for what she claims it was for). Furthermore, recurring patterns are of more concern than single events, however large they may be, so one year's returns are likely to ask a lot more questions than they answer. Finally, it's not like I expect there to be an entry like "$15 million dollars from Mr. Hsu in consideration for..."

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Carnival of Real Estate Podcast is up. I hadn't done a podcast before. I hadn't even listened to a podcast before - I read much faster than I type. But this was kind of cool.


Wizbang on the ongoing implosion of Massachusetts' universal health care experiment.

Every once in a while, there's a time to stand on principle even if you get politically flattened in the process. If you're at all reasonable in general, you will recover politically, and if handled correctly, can actually score lasting points for standing up for principles. Romney blew this one, badly. As a businessperson, he should have known the likely effects even a best case scenario would have. As someone familiar with government programs and advocacy politics, he should have known the projections being made were hopelessly optimistic. As any kind of politician, he should have known how to make his disagreement work in his favor, even while he lost.

I want to snark to the effect of he's obviously betrayed conservative principles, but that would be misleading as well as fatuous because I don't care about conservative principles except insofar as they will work out to the country's long term good. Unfortunately for Romeny, committing this large a portion of government funds to a black hole like unrationed health care is fiscal suicide. And he wants to tell me he's a businessman first, or brings a business perspective to office? What utter nonsense, as this demonstrates.

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An interesting email over at NRO

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Debunking a popular myth: Livin' Large at Reason.tv

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I don't think items of this nature can tell the entire story, but I just took this online candidate matching quiz and surprise! John McCain shows up first at 32, with Mitt Romney a distant second at 22. I'm not taking it as gospel, and I had already voted before encountering it.

Okay, I'm pleased at the results of Super Tuesday last night. I'm not going to call for Romney or Huckabee to quit because of those results, no matter how much I'd like Huckabee to quit. Both candidates scored well enough to still credibly win the nomination, particularly if the convention is brokered. Romney is supposedly consulting his congressional supporters, which is traditionally something candidates do when they're considering an exit. All things considered, I think I'd actually rather he stayed in at this point. Maybe it'll come back to haunt me. But just because I don't support him doesn't mean I don't think his supporters don't have valid points, and once they believe those points have been listened to, maybe they'll calm down.

On the Democratic side, Hillary had the stronger night, although not near strong enough for Obama to go home. I'd rather the Republican nominee faced Hillary than Obama, because too many people know too much about Hillary to deny her true nature, while Obama's record is sufficiently obscure that many people who are ideologically opposed to him might not understand it, and the mainstream press and media have shown themselves ill-disposed to illuminate the public on things he's said and done while out of the national spotlight. He sounds like Reagan, a perception the press is quick to encourage but when it comes down time to act, he has basically nothing in common with Mr. Reagan, or me for that matter. If somebody were to prove to me that the Democratic nominee will be elected, I'd rather it be Obama, but that's like choosing to be devoured by a slightly lesser eldritch horror, as far as I'm concerned.

**********

Private Papers on the illusion of Muslim moderates.

I believe in judging people by what they do. By this standard, I have yet to see any credible evidence of moderates actually influencing other Moslems away from the eventual goal of conquest.

(Every time I post something political, I lose readers. I'm doing it anyway, because the arguments in favor of sane government are a lot more important to the country and the human race are a lot more important than how many people read this particular website. Put bluntly, I'd rather influence ten people towards sanity in the US Government than have ten thousand daily readers to no good purpose. If it bothers you too much to stick around but you still want to read my real estate related stuff, go here. If even that is too much, goodbye and farewell.)

I have to agree that this presidential campaign is already the biggest disaster since 1996 at least. All of the candidates I liked are already out. The choice before me is "who is the least bad candidate left standing?", but this has been the nature of my choice in every election since 1984. Without tantrums on the left and right, it wouldn't occur to me to try to "punish" my party for some alleged failure to nominate a True Conservative or True Progressive, which I couldn't possibly care less about. The choice as to who is least bad is clear, at least to me. But if the choices before me are all evil to one degree or another, I refuse to not vote for the Least Possible Evil. I'm not taking my vote and going home. I'm not voting Cthulhu for President in the hopes it will scare people to my point of view in a few years time, nor on the basis that people of my particular persuasion can disavow Cthulhu's actions. For better or worse, we are going to choose a President for the next four years that will have an enormous power - both given in the actual Constitution and through use of the Bully Pulpit and de facto party leader that being President will give him/her - to enact their particular agenda. Congress couldn't lead a dehydrated man to water - but a strong President can lead the whole country away, and within the Constitution, at that. Any damage done will hurt all of us whether or not we are members of the President's party, and whether or not we voted for that particular candidate.

No matter who you think will get elected in 2012 or 2016, they'll be starting from a better point if they don't have to undo quite so much damage. It's also a heck of a lot easier to win if you're not fighting an incumbent.

Furthermore, I happen to believe that a further four to eight years will only make correct choices on all the important issues increasingly obvious to the electorate, whomever wins the general election in 2008.

If you can stand some foul language, Rachel Lucas (with some help from Bill Whittle in the comments, which are also spectacularly worth reading), makes this point.

I'm not happy with him at all. But he's made some amends of late, and I (for all his demonstrated faults) believe John McCain has also demonstrated himself to be a man of his word. I've made up my mind to vote for him in California's primary (by the time anyone reads this, I will have voted), and, assuming he wins the nomination, I will vote for him in the general election. If the nominee is Romney, I'll vote for him in the general, as well.

You may disagree, and vote for the candidate of your choice, and I will respect you. But if you vote for the Democrat or some third party candidate or don't vote at all because "McCain's not conservative enough!" you will find nothing but disgust and derision here. Ditto if you happen to be one of my few "progressive" readers: Vote the nominee who's closer to your views! I can respect that. In fact, I promise not only to respect that, but to respect the results of the election, even if they're not what I want. I have never gotten everything I want from a candidate, much less a nominee. That's part of living in a republic. For conservatives, even if McCain only moves your way fifty percent (or to use some violent hyperbole being thrown around, twenty percent, when it's more likely about seventy percent) of the time, the fallout from the next few years will be a lot less unpleasant to you and to me than either of the Democratic possibilities. So don't hold your breath, hoping for some kind of White Knight being elected by acclamation or four to eight years. Not. Gonna. Happen. This is a prime example of False consensus.

(While I'm at it, Wikipedia has a really neat list of cognitive biases that creep into decision-making. You can avoid a lot of the worst ones by being aware of the possibility they exist. The largest part of consistently good decision-making is learning how to outsmart your inner poop-flinging monkey, not to mention reptilian hind brain. The largest part of good negotiations is figuring out how to make the other guy's inner poop flinging monkey and reptilian hind brain want to do it your way)

FYI, that weak willed waffler Winston Churchill didn't just flirt with changing parties - he actually did it. Twice. Considering that he was the essential man in the right place for winning World War II, and it was largely his defiance which put spine in a demoralized public, I don't have a lot of sympathy for the viewpoint that because someone isn't somehow a "True Conservative" or in the past flirted with changing his affiliation, they somehow don't deserve the Republican nomination. One more piece of further information: Note that it's called the Republican Party, not the Conservative Party. There is a reason for that. Conservatives are only one part - albeit a large and influential part - of the Republican coalition. Learn, like the evangelical and (diminished) libertarian wings have, that it's better to have someone who agrees with you part, or even most of the way, than somebody who believes the exact opposite of everything you do.

I would draw the line at Huckabee, who apparently has all the corruption of the Clintons and none of the competence. Voting for Huckabee would be essentially choosing the abortion issue as being more important than everything else - and he still wouldn't be able to get justices that would overturn Roe vs. Wade onto the Supreme Court without sixty supporting senators, which isn't going to happen, nor would he be able to outlaw it in any states if it did get overturned. Not to mention that while I think Roe vs. Wade was a severely bad decision (definitely top ten legal mistakes of all time). I nonetheless believe abortion should be legal. Huckabee has all of the bad points of Jimmy Carter and Bill Clinton combined - with a few of his own thrown in. Obama seems like a great guy I'd love to sit down and have dinner with, or a political argument over a (for me) soda - I just wouldn't vote for him because of his record and the disagreements I have with it. The interests of the Clintons do occasionally coincide with the interests of the country, and so Hillary could be expected to occasionally accomplish something good for the country. Huckabee would be an unmitigated disaster for much the same reasons as John Edwards, or for that matter, Hugo Chavez, and I really hope he doesn't end up the veep choice, either, because I'd have to ask myself if the probability of McCain or Romney living through his term healthy and in command of the country, is worth the possibility that he won't.

But McCain I can live with. The limits of the damage he can realistically do the First Amendment have, to be frank, pretty much already happened with McCain-Feingold. You may not have noticed that, unlike legislators we can all name with continuing axes to grind, that there hasn't been anything new on that front in recent years. Keating Five? I think his experience there explains a lot of his character since - basically honorable man who's learned his lesson, and perhaps given it too much weight, ergo McCain-Feingold. Immigration reform and his support of so-called "shamnesty"? He has recanted, and I happen to believe it's real - see the effects Keating had on his character. Gang of 14? Anti-Idiotarians everywhere are going to be grateful for that if Republicans lose the White House as well as the Senate. Personally forswearing earmarks and fighting government pork? Brothers and Sisters, if that doesn't make you want to sing "Hallelujah John!" then you don't understand what the real basic problem with our country and our system of government is. Run "Tragedy of the Commons" through a search engine of your choice. Read the references until you understand what they're talking about. That's our federal budget in four words. Romney doesn't do nearly so well on either that level or the War on Terror, itself a critical problem and an even more immediate threat to the security of the country. If we're conquered and become dhimmi, we won't have the chance to go bankrupt in forty years.

I disagree with John McCain about many things. I disagree with most people about many things. But there is no doubt in my mind he's an honorable man who loves his country. He didn't spend five years getting tortured by the North Vietnamese when it would have been so easy to cave in because he doesn't love the country, or is afraid to work to do what he sees as the right thing. He will do what he sees as the best thing for this country, and for all of my disagreements with him, those disagreements are a lot less serious and less important than any potential Democratic nominee. Given that either the Republican or Democratic nominee is going to win on November 4th - and that's not changing until we get preferential balloting, which will be never - the choice between those two choices is clear. Consider it a vote against the Democratic nominee if you'd like - most Republican votes will be canceling Democratic ones. I can only hope and work towards there being Republican votes left over at the end when all the Democratic ones are canceled.

So to those who say "McCain isn't conservative enough!" I reply in classic Monty Python "intercourse the penguin!" You've got your eyes fixated on this beautiful illusion on the horizon that not nearly as many people see as you seem to think, and you're about to be gutted and filleted by an ugly reality close at hand - in fact, you're threatening to aid and abet that gutting. You're throwing away the good, or at least not-so-bad you can have because of the illusion of something better that you can't. You're throwing away the very real present in favor of wishful thinking for the future - because McCain's defeat will not cause the Republican party to nominate your dream of a "true conservative" - instead they'll nominate the most left-wing person in sight who's willing to put that R after their name. That's the real lesson electoral defeat teaches a party - that they haven't moved far enough to capture the majority of the electorate. McCain's the closest thing to your "true conservative" the Republicans have considered nominating since Reagan, and if you torpedo his election, it will move even the Republican party further left and completely torpedo your ambitions of moving the country right. That's damnfoolishness, and if you're not mature enough to stop throwing temper tantrums because you can't have everything you want, please do stay home on election day. Primary as well as general. If you can't take what you can get now while casting a vote that might really cause the country to go in the direction you want it to go later, then you are not adult enough to vote, in my opinion. The adults in this country will make better decisions for your absence. Even if it is even less in keeping with my immediate desires. That's the nature of a republic. Everyone votes, every pair of opposing votes cancels, and the one with votes left after all the cancellations wins the election. When your party loses, that means you get nothing, and the message it sends the party coalition in this case is to move even further from what you want in hopes of winning the next one.

One of the things I keep getting told by people is that my loans are the same as everybody else's. I quoted a 5.625% with no points a few days ago, and got told, "That's the same rate someone else quoted me!"

Rate, yes, but what's the cost of getting that loan? There's always a tradeoff between rate and cost, and focusing only on the rate ignores half of that very important equation.

It turned out that they other folks wanted to charge him more than a point for the exact same loan I was able to do for no points. Seeing as this was a $340,000 balance payoff, it was the difference between a new balance of $343,000, with a payment of $1974.50 and monthly cost of interest of $1607.81, versus about $346,500 with a payment of $1994.64 and monthly cost of interest of $1624.22. Don't think that's a lot? Then consider the difference of $3500 in what you owe and $16.41 per month in cost of interest, every month you keep the loan.

I've heard similar things from people I was offering a lower rate to, for less money. For instance, that was a 5.375% loan with a bit less than a point at that time. So for actually a bit less than a balance of $346,500, he could have had an interest rate of 5.375. In the interest of keeping things simple, I'll even use the same balance when it would have been a little less. That drops the payments to $1940.30 and the monthly cost of interest drops to $1552.03, saving over $70 per month! If you keep it a statistical average 28 months, that saves you $1960! If you keep it the full 30 years, that's a difference of over $19,000! But I can't tell you how many times I've heard, "Is that all you can save me?" Hello! Do you really need a better reason than thousands of dollars?

It just doesn't seem like all that much, because people think in terms of payment. Clever salesfolk will seize upon this as a method of selling inferior loans to people who don't know any better. Salesfolk, after all, get the difference in pay for the loan right away. Therefore, they understand in their bones what a big difference those small differences make over time. If you multiply it out, you should understand as well. This is all real money coming out of your pocket!

Far and away the biggest component of any new loan is what you already owe, or what you've agreed to pay to acquire the property. This can make differences seem small, but I guarantee it wouldn't seem small if someone was asking you for $3500 cash out of your pocket! .I've said this before, but don't let cash make you stupid. $70 per month is $70 per month, every month for as long as you keep the loan, and money added to what you owe with this loan will quite likely still be there when you sell or refinance, converting it into a strict liability. That's money you won't have, and additional interest you'll pay because you don't have it!

The differences may appear to be marginal, but they're not. Would you rather add $3500 to what you owe, where you'll pay interest on it, or keep it in your pocket, or at least out of your mortgage balance? No, it's not paying off your mortgage entirely, but it is saving you money. Over time - and most people will have mortgages for the rest of their working lives - it makes a substantial difference. If you refinance every three years, this makes a difference of $35,000 over thirty years. Would you like that money in your pocket? If not, why don't you hit my tip jar up there on the right? If you're not getting any use out of the money, I certainly can.

Caveat Emptor

Article UPDATED here


Carnival of Personal Finance

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January visits were up: 71,138 visits, 804,805 page views (not counting webspiders and bots and other automation). Running totals: 2,315,945 visits, 9,639,449 page views. If the current pace of just shy of 26000 page views per day continues, the ten millionth (human) page view will happen around the middle of February.

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A sad day for Western Civilization

Quarter of Brits think Churchill was myth

He was larger than life, but quite real. The man who led Britain vicorious through WWII has only been dead 43 years.

I can understand why 47 percent think Richard the Lion-Heart was fictional - his association with the Robin Hood legend. But Richard himself was real. Mahatma Gandhi, Florence Nightingale, and the Duke of Wellington - who beat Napoleon Bonaparte, and was himself later Prime Minister, as was Churchill - also were believed fictional by significant fractions of the populace.

One the other hand, many Britons thought Sherlock Holmes was real.

It's almost enough to make you hope there is no afterlife, just so those heroes won't know this sad state of affairs. It's also a sad commentary upon the state of schools everywhere. My 7 year old gets taught all sorts of nonsense about minor figures of PC adulation - but if my wife and I didn't take the time, she'd be really in the dark about really great and pivotal men in American History. She hasn't yet heard the names Abraham Lincoln and Thomas Jefferson in school. George Washington, they've talked about once. Not to take anything away from Rosa Parks and Harriett Tubman, but this is focusing upon bumps in the road when you're on the shoulder of a great mountain, looking out upon a great vista afforded by standing upon their work, and while the work of Martin Luther King is itself another great mountain, it stands upon a foundation built by Jefferson, Lincoln, and Gandhi. All of these were great people, including great imperfections. But whose shortcomings we ignore, whose we pretend do not exist, and whose we emphasize, says a great deal about us.


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Navy Tests Incredible Sci-Fi Weapon

"I never ever want to see a Sailor or Marine in a fair fight. I always want them to have the advantage," said Chief of Naval Operations, Admiral Gary Roughead. "We should never lose sight of always looking for the next big thing, always looking to make our capability better, more effective than what anyone else can put on the battlefield."

Amen!

They've got video.

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I live in California - and this last week is the first time I've ever been subjected to presidential campaigning. Tomorrow, I go to cast my ballot in a Presidential Primary that actually matters. Okay, I'd rather not have my phone ringing with autodialers and recorded messages. But for the first time, the most populous state in the union matters to the nominating process.

I did have some fun with one telemarketer who called asking if I supported Obama or Hillary. I do regret what I said, which was, "I hope someone throws them both out an airlock." After a couple minutes of me explaining the flaws in both candidates record, she asked, "Are you a Republican?", as if that was the ultimate zinger in her pantheon of insults.

MY answer to that? "No, I'm a libertarian. But tell me truthfully, if your candidates were white males, would you be supporting them?"

She hung up. Since this is the penultimate victory over any telemarketer, score one for me. The best is being able to ding their employer or sponsor for something like a Do Not Call violation. I do my best to make the practice economically unprofitable. If everyone else did their share, we wouldn't have telemarketers.

Now, if we can get California to the point where it isn't so blue that it gets ignored in the general election (Prediction: at 8:01 PM on November 4th, every network covering the election will call California for the Democratic nominee, on the basis of less than 1% of polls reporting), we might start to matter on the national stage.

Carnival Of Real Estate #76

| | Comments (1)


For the second time, Searchlight Crusade plays host to the Carnival of Real Estate.

I want to mention that Searchlight Crusade is also the keeper of the list for the Consumer Focused Real Estate Carnival, which appears on alternate Wednesdays and highlights the best (non-commercial) posts aimed at individual buyers and sellers and owners of real estate. Guidelines for submission are here. Please consider submitting any appropriate articles you may write, and we could also use some future hosts.

With that said, on the the carnival submissions. Let's start with the ones that "made the cut" In no particular order:

Silicon Valley Real Estate Guide talks about Licensee Working for the Know-it-All Client, or Not: "Sir, How Long Do I Have to Keep Making You Look Good in Front of Your Wife?". We've all had the client with misinformed opinions that completely armor their skull, rendering it completely impervious to real information.

Investment Property Insider submits Create Personal Wealth Beyond Your Small Business, Part 3, discussing the decision to lease versus buy commercial real estate.

Sacramento Real Estate Gal sends us REO Buyers: Three Things to Watch For, discussing dealing with lender owned property.

Best Home Selling Tips sends us HUD 1 Form - Real Estate Settlement Statement Explained, discussing the only form in the whole process with a real requirement to be correct.

Minneapolis Luxury Real Estate Blog talks about why Why City Councils Should Stick to Business, or rather their own business, rather than trying to make life difficult on lenders.

Real Sage Advice asks the burning question: Senior Housing Wish List-What do Boomers Want? The answer is everything, but only when they want it. Nor do they want to pay for it.

Single Guy Money submits The Real Cost of Homeownership, discussing costs of home ownership.

Salt Lake Real Estate Blog sends us Fed Rate Cut Fallout, which is really more of a discussion of macroeconomics and psychology.

The second level of the ziggurat is next. Now we get to the posts that might have been worthy of consideration as top post of the week. Again in no particular order:

Mortgage Rates Report sends us A Nation of Subprime Borrowers?. I disagree with Brian about the state of the southern California economy - I see a lot of very strong indicators on the state of the local economy. A large part of it seems to be major media spin - they were reporting worse numbers as wonderful a very few years ago when a different president occupied the White House (really - check for yourself!). But let Brian make his case.

Fiscal Musings sends us Why I Like Real Estate, Part II: Leverage. Leverage can either help you, as illustrated in the article - or hurt you, as many people are discovering now. Usually it's helpful, though.

Your host presents Dealing With Looming Foreclosure - Get Out of Denial, from my other site. The sooner you face the reality, the less it's likely to damage you.

Columbus Real Estate Voice with 4 Ways Buyers Sabotage Their Perfect Home Purchase


Next we come to the hardest decision I had to make, between two excellent articles on entirely different subjects. Unfortunately, I could only choose one, but silver is still excellent:

Real Estate Radio USA brings us The Five Competitive Forces That Shape Strategy, a look at the factors controlling competition in the real estate business, and how the NAR may not be the best body for determining the future of the industry.

We've all been waiting for this moment, and now I'm happy to announce that we have a winner!

Up2Date talks about Rent Control - The Property Owners "Right to Life" Issue. One consequence he doesn't mention is that with rent control, there is little incentive to maintain rental property, or to build more of it. In fact, property owners begin looking for alternative uses for the property - causing a further constriction of the rental supply. In short, the "cure" only makes the disease worse.

Thank You for joining us. If you've never been to this site before, please take a look around. If you write articles focused upon the consumer end of real estate, please consider submitting (one per carnival) to the Consumer Focused Carnival of Real Estate. The Carnival of Real Estate will return next Monday at Property Grunt

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This page is an archive of entries from February 2008 listed from newest to oldest.

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