Dan Melson: January 2009 Archives

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.

STRONGLY RECOMMENDED

We have an Editor's Choice Award!

"I Can't Pay The Rent" - A Landlords Take on What to Do. This is sane. This is intelligent. The only reason I can see not to do it this way is because you aren't.

Well done!

Your Host submits Fifteen Year Loans: Are They A Good Idea?

RECOMMENDED

10 Tips for Homeowners to Improve their home's value

Follow Real Housing Market Movements With Trend Analysis

Home, Mortgage, Landlords and Renters Insurance explained is aimed at Australia, not the United States, and several critical concepts are different here. Here in the US, liability is a part of all home insurance policies. Landlords (HO 5) and Renters (HO 4) are different forms of the standard homeowner's insurance policy here, mortgage insurance is utterly different, and there are many other differences.

Subsidence Insurance Risk Increases in the Year of the Ox

MET GUIDELINES

It's Time to Estimate the Market Value of Your Home. Um, the first question I would ask is "Why do you want to know?" Unless you have some planning type reason to know, or a reason why you want to sell, it just isn't important. The far more important observation I will make is that there isn't a single automated valuation service that is consistently within ten percent of sales price. Since even 5% off is enough to make them worse than useless, I would avoid automated value mechanisms. Don't confuse yourself with bad data.

Most Common Types Of Mortgage Loans is really talking about amortization types. He makes two mistakes: hybrids are more common than "pure ARMs" and also less dangerous in that there a period of some years where you know what the interest rate will be. Once a loan enters its adjustable phase (immediately in the case of "pure" ARMs) you have no idea what the next adjustment will be.

SPAM AND OTHER RIDICULOUS SUBMISSIONS

A site named Cheapo Groovo submitted a post called "Why Muni Bonds Are A Bad Investment!" that did not so mention as real estate. Nor did it really say why muni bonds are a bad investment - only that some were. I think Cheapo Groovo needs to put the cheap dope down long enough to experience the same reality as everyone else.

A site named Information Marketing, Info Marketing, Blog Marketing, Internet Marketing sent a post that asks the question, "Can blogging kill you?" We can only hope that in his case, the answer is yes, so we don't have to endure his spam. It did not so much as mention real estate, among other sins.

In a "two strikes for one opportunity", he then submitted an article that asks "Will Microblogging (Twitter) kill Blogging?" From the evidence, it will only enable him to increase his spam level, because once again, he failed to so much as mention real estate.

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 one month on February 28, 2009, here at Searchlight Crusade, unless someone else wants to host. Deadline for submissions will be Midnight February 26th.

Bill Gates: School Reform That Works

These successes and failures have underscored the need to aim high and embrace change in America's schools. Our goal as a nation should be to ensure that 80 percent of our students graduate from high school fully ready to attend college by 2025. This goal will probably be more difficult to achieve than anything else the foundation works on, because change comes so slowly and is so hard to measure. . . . If one school's students do better than another school's, how do you determine the exact cause? But the difficulty of the problem does not make it any less important to solve. And as the successes show, some schools are making real progress.

Sane, intelligent commentary on the state of our schools, and getting from where we are to where we need to be. Read the whole thing.

The Biggest Con -- Ever

He means that quite literally, and I agree. $825 Billion that won't accomplish anything positive, just wasted. Or worse, spent subsidizing things of negative value.

But please, let's stop calling this a "stimulus" plan. How does another $650 million for digital TV coupons (why don't we just buy a million new high-definition televisions and hand them out?) spur economic growth? What does $600 million for government vehicles do other than allow bureaucrats to do nothing more efficiently?

Here's one thing of negative value it's paying for: $5.2 billion to ACORN, which committed massive voter fraud in Obama's favor. ACORN is not in danger of going bankrupt, and they don't provide economic benefit anyway. Precisely what is the difference between this and any other political payoff with the public treasury? Do we really want to encourage voter fraud like this?

It�s not the first time ACORN has been entangled in a bailout controversy. In September, House Republicans objected that the original $700 billion bailout package included $100 million for ACORN � a tiny fraction of the sums for ACORN now being considered in the stimulus package.

The European Social Welfare State Bill

Only about 1/7th of the outlays occur in the current fiscal year. Substantially more of the outlays occur in 2012 or later than occur in 2009. How is this stimulus spending?

The celestial choirs of bailouts

More press in the tank for Obama: GOP defies Obama overtures

This is not what I would call an overture: From Republican leader Mike Pence "But know that there has been no negotiation [with us] on this bill - we had absolutely no say."

It isn't bipartisan when you don't bother to ask the other side for input. President Bush was far more bipartisan than this, even when the Republicans controlled both houses of Congress. His folks always asked the Democrats what they wanted on a given piece of legislation, and always compromised - even when they shouldn't have.

(The original version headline said "Analysis: GOP defying Obama overtures of bipartisanship")

Hollow victory: Republicans deliver slap in the face to Barack Obama

Might it be because he was only willing to listen - he wasn't willing to actually, you know, do anything to compromise with them?

Problem was, he wanted only to listen and did not want to act on what Republicans said. When he was asked if he would re-structure the package to include more tax cuts, he reportedly responded: "Feel free to whack me over the head because I probably will not compromise on that part."

Listening is good. But it you're not willing to act upon what you listen to, it's ultimately pointless. And I say good for the House Republicans in that every single one of them voted against this massive compilation of pork (along with 11 Democrats). It may be years too late, but it's a start.

Obama's Blank Screen Deception

President Barack Obama is a beguiling but confounding figure. As he said of himself in "The Audacity of Hope," "I serve as a blank screen on which people of vastly different political stripes project their own views."

It is indeed audacious that he should proclaim this consciously disingenuous attribute. And as one reads his inaugural address, it is hard not to conclude that it was crafted shrewdly to perpetuate such confusion.

Run-of-the-mill politicians try to hide their duplicity. Only the most gifted of that profession brag that they intend to confound and confuse the public. Such an effort is beyond ingenious; it is brazenly ingenuous.

He's saying what I've been saying for almost a year now - that Obama started winning because he was careful not to get specific, projecting a blank public persona onto which people could project their own desires.

(I'm already seeing proposals for a Republican slogan for 2012 (and for that matter, 2010): "Fool me once shame on you. Fool me twice shame on me!")

Questions to ask Leon Panetta before he's confirmed as head of the CIA

Sure it's okay to advocate and expedite the pardon for political cash of a fugitive from justice. At least if you're a Democrat, it'll get you the slot for US Attorney General. Senate panel OKs Holder as attorney general

Obama can say he's looking to have an ethical administration all he wants. So far, his actual actions are pointing in the opposite direction. When it comes to a test of words versus actions, there isn't a whole lot of question as to which is more indicative.

Don't like what a newspaper reports? Don't like the conclusions in someone's book? Sue them

This is nothing new. But each and every one of these nitwits needs to get slapped down hard. Free speech and debate is what makes this country work.

Late last year, we--publisher and author--were named in a defamation suit brought in a state court in Dallas by H. Walker Royall. Royall is a wealthy man who, having volunteered to be the developer in a municipal construction project that involved eminent domain, does not care to have his actions scrutinized by the Fourth Estate

Rangel Rule proposed.

Since it seems to work for Democratic politicians, why not the rest of us?

Sentencing AIDS victims to die in the name of politics

Ill. gov unanimously convicted, tossed from office

Proving that even in Illinois, politicians will do the right thing after they have exhausted all other possibilities. Had the publicity not been so bright, perhaps they could have gotten away with sweeping it under the rug or just waiting until the outrage went away. But the media and comedians made it so that none of them could afford the repercussions of a voting for acquittal, or not voting to remove him.

One of the salient facts of the current loan market is the fact that pretty much nobody is offering "jumbo" loans at anything like a "par" rate

One of the saving graces is that this is a lot less meaningful than just a couple of years ago. In 2005, the conforming loan limit was $359,650, and the median sale in San Diego County was almost $600,000. This meant that for the typical purchase, unless you had a 40% down payment you were looking at a "jumbo" loan even if you were both "A paper" and full documentation. Once you paid a "jumbo" amount, you had to wait years for the conforming limit to catch up to your mortgage. VA and FHA limits were even lower. Well, now both the FHA Limit and the OFHEO conforming loan limit have gone up (to $546,250 for single family residences in San Diego), while the median price of housing has gone down by roughly 30%. This means that if it were possible to get a median priced property without a down payment, it would still be a conforming loan. Yes, the decline in values has meant a lot of pain for overextended borrowers and especially the lenders who loaned them the money, but right now we're looking at the situation for buyers, and providing you've got a 3.5% down payment (or VA eligibility) and a credit score that's not putrid, the situation is pretty darned rosy for buyers. People can qualify for properties they wouldn't have had a prayer of getting, even before the run up in prices we've had the last few years - with a full documentation, thirty year fixed rate mortgage, to boot. The vast majority of the properties out there can be had with conforming loans.

Those relatively few properties that are the exceptions, however, are in a world of hurt. While conforming rates have nose-dived (below 5% if you're willing to pay at least part of a point, mostly just above if you're not), "jumbo" rates for loans above the conforming limit are still high. Not only that, but the lenders offering them don't want to offer anything like a so-called "par" rate. This means that "no points" loans basically don't exist for Jumbo loans. You can get something in the mid to high 6s on a thirty year fixed rate loan if you're willing to pay two to three points, but the only "no points" loan offered from any of my eighty-plus lenders today carried a rate of ten percent. Yep, double digits. I haven't seen rates like that since about 1994.

There's a reason for all this. Right now the markets are very nervous about jumbo loans. Why? Because on the secondary mortgage bond market, they are traditionally part of the same nonconforming market as stated income loans - which were one of the root causes of the meltdown. Nobody wants to buy those bonds, because of the default rate they have been subject to for the last couple of years due to stated income shenanigans. Yet with stated income all but dead (a few portfolio lenders are willing to do them. Ask me if you have a need), the lenders are well aware that the secondary mortgage markets are going to figure it all out soon, after which jumbo rates are likely to fall. Upshot: They will have funded all of these loans, paid the salaries of the people necessary to fund them, etcetera, and then not made a profit on the loans. So they want a stroke of profit they can show their stockholders and investors right up front. This profit is taking the form of discount points. For brokers and correspondent lenders, I can't find a single jumbo loan in the sixes or sevens that the lenders are willing to pay as much as ninety-nine cents on the dollar for - which means they (we) have to charge discount amounting to more than one full point just to break even - and in the real world, nobody does loans just to break even. They can call it discount, they can call it origination, they can call it a the hokey pokey, but it all amounts to the same thing in this case. The lenders want what amounts to an immediate profit on the loan in the form of cash paid, to make up for interest they don't think they'll be getting later.

There is always a tradeoff between rate and cost on real estate loans, but the lenders can change that tradeoff in light of current market conditions. A traditional tradeoff between rate and cost is about two points of cost for one percent on the rate of the loan. For conforming rates right now, the tradeoff has gotten much steeper in the "below par" range. When I was looking at rates today, I could do 4.75% for one total point, but buying the rate down to 4.25% would cost almost the California statutory limit of six points. The lenders set that kind of tradeoff to discourage people from getting rates below par because they don't want to be stuck carrying a 4.5% loan for thirty years. But for "jumbo" rates, the tradeoff is as shallow as as the tradeoff for conforming is deep. 6.375 could be had for three points, 6.875 for two - standard enough between those two points - but to buy the total points down to zero, you had to go all the way up to ten percent - a difference of over three percent to buy off two points - less than one sixth of the traditional margin. FYI, it takes about eight months to break even on that kind of slope between the two points. Save two percent on initial costs, spend three percent per year on the rate. There are exceptions, but if you think you'll be able to refinance at a lower rate in eight months, it's generally going to be a better idea to wait. However, if you are one of those exceptions, for instance, someone whose short term hybrid has adjusted to nine and a half percent, you are being very strongly encouraged to pay two to three points to refinance. The zero points loan doesn't do you any good, and so if you can't afford your current rate, you're going to have to come up with 2-3 percent of the loan amount from somewhere - cash or your equity.

The tradeoff on jumbo hybrid ARMs is similar. For one of my long-time favorites, the hybrid 5/1 ARM, the curve looked very similar, albeit shifted downwards a significant bit: 9.125 for no points, 6.375 for two, 5.75 for three, and you could get as low as 4.875 if you were crazy enough to want to pay nearly six points.

(lest anyone be mistaken, by the time this article is published, these rates will be yesterday's rates, and one thing you can count on in the "A paper" loan world is that tomorrow's rates may be similar, but they will be at least slightly different. I looked at rates what will be day before yesterday to do a Real Loans for Real People but didn't get it posted, so had to do it all over again what will be yesterday. As is the case about 75% of the time, Tuesday's rates were slightly better than Monday's)

I am normally a big fan of low to zero points loans, or even zero cost loans. I normally get a lot more hardcore about that preference for jumbo loans, because on jumbo loans one point is anywhere from a minimum of $5500 on up, and the last set of government statistics I saw show most people refinance at intervals of about 28 months. But at today's jumbo rate/cost tradeoffs, in 28 months you have recovered those two or three points of initial cost about three and a half times over. That is likely to make those two or three points the lenders want for a reasonable rate likely to be an investment that is well worthwhile. Even if you do refinance before then, it only takes about eight months to break even. I am pretty certain jumbo rates are going down within the next year or so, but I can't tell you exactly when, and if anybody thinks they can, ask what kind of insurance they're willing to sell you and at what price. Chances are that if you are one of those people who has a jumbo loan and a good reason to refinance now, the cost of refinancing now will be cheaper and doing so will serve you better than than any such insurance policy.

Caveat Emptor

Carnival of Personal Finance

Carnival of Real Estate

Obama is sounding an awful lot like Bush. At least in some contexts.

Even John Stewart has noticed.

The Return of Carterism?

Among the first duties of the Obama presidency, all agree, is the restoration of America's standing in the world. Poll after poll has shown how unpopular America is overseas, from London to Damascus to Beijing. Nor is there much disagreement as to the reason. As Fareed Zakaria puts it in The Post-American World, the reason is the "arrogance" displayed by the Bush administration--an arrogance that has blinded Americans to the fact that they can no longer push other nations around at will, and that their country now inhabits a multi-polar world.

Read the whole thing

All in all, to listen to Bush's myriad critics, Russian President Dmitry Medvedev had it just about right in assailing "the arrogant course of [an] administration which hates criticism and prefers unilateral decisions."

Translation: he wouldn't give despots what they wanted: the ability to enslave their people even further and expand their influence so they could enslave other people.

Do we really want these detainees on American soil?

Those policies, however, were always preferable to bringing detainees here. Under current law, once a detainee sets foot in the United States, it's possible that he eventually could be walking the streets. Obama's executive order commits to closing Guantanamo in one year and, in addition to calling for the continuation of efforts to repatriate detainees, directs administration consideration of the possibility of bringing some detainees to the United States. Because most of those detainees who could safely be sent to other countries were dispersed long ago, the new administration will be hard pressed to find appropriate countries to take the roughly 245 who remain. That means a ticket to Kansas, or perhaps, as Representative Jack Murtha suggested, Pennsylvania.

Or they could be found innocent by civilian juries who don't understand the international law of war. I know I don't - which separates me from 99.9% of the "close Guantanamo!" and 100% of the ACLU lawyers who have been trying to win this one by attrition. Civilian judges who have no idea and no willingness to learn the relevant treaties. And then we end up with truly dangerous people released to strike again, possibly from within the country.

Is there anyone willing to bet me $10 that none of these people will join our enemies once again? That none of them attack civilian targets here within the United States?

Thus far, of the detainees released, a minimum of 61 (out of about 450) have been confirmed as once again fighting American troops, and those are the ones we thought were more or less safe to release. It's like if we repatriated the Afrika Corps to Germany just before D-Day. There is a reason enemy combatants are held until there is no longer a danger they will re-join the fight. If you want an example as to why, look up how many Japanese soldiers were still fighting World War II ten years after the surrender was signed, and the cost in lives to finally end it (some were still out there in the 1980s). Then consider that the Japanese lived by the code of bushido, as opposed to what most of the Guantanamo detainees fight by. Consider not just the danger to our military, but also to our civilians. Our previous president wanted to close the detention center at Guantanamo - but thus far, nobody has yet come up with a better idea.

It's not reality, it's Scrappleface:

Pelosi: Cutting Poor Babies Accelerates Economic Growth

"Poor people are a luxury we just can't afford,' said Rep. Pelosi, "They cost us a lot of money to maintain; what with food stamps, housing and health care. So if we can rapidly reduce the number of poor people through contraception and abortion, that's a net gain for federal and state budgets, and a fast track to economic recovery. Every poor baby prevented is like money in the bank."

But all good humor has a core of truth. "Nice" people might not want to talk about it in public, but it is there.

Michael Barone: Democrats' Support of Teacher Unions Has Worked Against Inner City Kids

Whitman notes that the kind of people who run these schools tend to be politically liberal, the sort of people who enthusiastically back Barack Obama. Yet Obama and the Democrats have to a large extent supported the teacher-union, education-school model of education which has so dismally failed inner city children and which the people who have created the schools Whitman and Mathews describe have profoundly rejected. The teachers unions and education schools have done a great job of feeding money into the Democratic Party, and the Democratic Party has generally done a great job of feeding money back to the unions and their members. But they have done much less for the kids.

Victor Davis Hanson: Unreal Expectations? President Obama Asked for Them

For nearly three months since the election, we have been warned by President Obama, his staff and the media not to burden him with unreal expectations that no mere mortal could meet.

But why then consciously borrow from Abraham Lincoln's speeches? And why re-create Lincoln's historic train ride to his inauguration especially by flying back from Washington to Illinois to then return to D.C. by slow-moving railcar? Lincoln took the train because it was the only feasible way to get to Washington in 1861, not to copy the grand arrival of some earlier American savior.

I admire Abraham Lincoln quite a lot. But the President who led us through the Civil War and issued the Emancipation Proclamation is the same President who suspended habeas corpus in the entire United States, instituted the first draft, caused the biggest riots in US History, used federal troops to put those riots down with grievous casualties, instituted (unconstitutionally!) the first income tax, and unconstitutionally dismembered the state of Virginia. It is to be noted that even the Emancipation Proclamation was arguably a violation of the takings clause of the Fifth Amendment. My point is this: While Lincoln's achievements were worth the constitutional price we paid, that price would have been too much for any lesser achievement, and Mr. Obama has already demonstrated that he's no Lincoln.

(Mr. Lincoln was very unpopular near the end of the Civil War. Had he lived to the end of his second term, he might well have been impeached himself - as Andrew Johnson was, mostly for continuing Lincoln's policies towards the South - and it might have taken until the 1960s to rehabilitate Lincoln's reputation. Sound like any recent president to you?)

If this doesn't ruin your whole day, I don't know what would: Good news: Iran to be nuke-capable this year, says think tank

I laughed when Drudge put the siren up for this, not because the news is predictable but because the think tank that issued the report actually has been predicting it for years. How slow has this slow-motion trainwreck been? May 2006: IISS pronounces Iranian nukes "inevitable." January 2007: IISS warns that Iran could have the bomb in two years. May 2007: IISS describes how Iran's built its own nuclear black market, one which, if the Times of London is to be believed, is now suddenly running low on yellowcake. Too late, alas:

Amazing how two years is up in only two years. Congratulations to all those who wanted to tie President Bush's hands; we now have a nuclear Iran.

Obama nominee got Constitutional issue wrong in testimony

Boy did he. By his thinking, if sex is legal, the government should pay to provide it for any citizen that wants it (and it's amazing how many want their sex from supermodels...), and require all citizens to engage in it. If porn is legal, the government should pay for that, too.

Obama post partisan? Not so much. It took him less than a week to attack a political opponent personally - something that "horrible partisan" George W. Bush didn't do no matter how personally they attacked him.

Data point two: Wizbang

In an exchange with Rep. Eric Cantor (R-Va.) about the [$825 billion stimulus] proposal, the president shot back: "I won," according to aides briefed on the meeting.

"I will trump you on that.

Can you imagine the hullabulloo that would have resulted had George W. Bush ever said something like that?

Sorry, Mr. President. Things haven't worked that way in Washington for eight years. Democrats, of superior values and virtues we are told, fought tooth and nail to destroy every one of President Bush's policy proposals that did not come pre-approved by the DNC. Republicans have every right to embody the values and virtues of Democrats and fight tooth and nail to stop Barack Obama's dangerously large and ill-conceived debt-funded government give-away.

Dissent is the highest form of patriotism, remember?

Datapoint: For eight years, Democrats fight George W. Bush tooth and nail, no matter how much he tried to work with them, and despite the fact that he won election - twice. Datapoint: As soon as President Obama is inaugurated, Democrats want all dissent from his policies to stop.

Not even George Washington expected that. He included his smartest, strongest political opposition (Thomas Jefferson) in his cabinet - and listened to him. No, the presidents who wanted to stomp out all political opposition were the ones like LBJ and Richard Nixon. Great antecedents there. Even while I lamented their irrationality, I was supporting the Democrats right to disagree - and I will lament the irrationality of Republican opposition every bit as much (assuming it happens, which I am certain it will)

But then I'm a libertarian. It's not exactly difficult for me to find things I disagree with both major parties about.

Via Instapundit, 10 Reasons to Whack Obama's Stimulus Plan

Here's number 11: false report turns out to be pretty close

From what I can observe of the "stimulus bill" it appears to be an attempt to create another permanent constituency dependent upon government aid. Guess which party such constituencies favor at the polls? Motive - Opportunity - Method. It may not be good enough for a conviction, but it's good enough to establish reason to investigate. Unfortunately, the press that was so rabid about its "watchdog role" with regards to President Bush (and before him, Presidents Reagan and Bush pere, although not President Clinton, for some reason) is declining to fulfill that role with President Obama. Do you notice any trends there? Any correlations?

How Modern Law Makes Us Powerless

Americans don't feel free to reach inside themselves and make a difference. The growth of litigation and regulation has injected a paralyzing uncertainty into everyday choices. All around us are warnings and legal risks. The modern credo is not "Yes We Can" but "No You Can't." Our sense of powerlessness is pervasive. Those who deal with the public are the most discouraged. Most doctors say they wouldn't advise their children to go into medicine. Government service is seen as a bureaucratic morass, not a noble calling. Make a difference? You can't even show basic human kindness for fear of legal action. Teachers across America are instructed never to put an arm around a crying child.

You cannot remove the ability to do evil without also removing the power to make a positive difference. A small number of determined people is the only method that has ever changed the world for the better - but entropy assures us that it will get worse. Eternal Vigilance is the Price of Liberty, and we have decided as a society that the price is just too high, so we're going to deny anybody the opportunity to improve things.

1) Law sets boundaries that proscribe what we must do or can't do -- you must not steal, you must pay taxes.

2) Those same legal boundaries protect an open field of free choice in all other matters.

The forgotten idea is the second component -- that law must affirmatively define an area free from legal interference. Law must provide "frontiers, not artificially drawn," as philosopher Isaiah Berlin put it, "within which men should be inviolable."

For instance, the Constitution and the Bill of Rights.

Feel Like a Chump?

If not, you will. Soon.

Security Theater

Much scarier than anything Stephen King ever dreamed up.

A while ago, I wrote Sourcing and Seasoning of Funds. You'd think I have a set spiel I give out, and I do. But I just had a case where I didn't think I'd need it, and it burned me. Nice clean loan, plenty of down payment all sourced and seasoned, and then almost $100,000 appears in the account on the last statement as I'm getting ready to close it. Instant can of worms - Oops.

Any time money mysteriously appears, the mortgage loan underwriter is going to take an interest. I don't need all your financial statements, I just need enough to get the loan approved. But don't go dumping large amounts of money into the account, just like you shouldn't go apply for a non-mortgage loan while a mortgage loan is in process.

These two items are related because whenever a large amount of money appears, the underwriter's presumption is that you got another loan. Whereas there is nothing inherently wrong with doing so, when you get a loan, you're going to have to make payments. Those payments affect your debt to income ratio, the most important measure by which you qualify for a loan. The underwriter is going to want to know what the terms of that loan are, how much the payments are going to be, whether those payments are fixed or variable, and all of the other things that help them determine whether you qualify for this new loan even with making the payments for that other loan.

So when a large amount of money appears, the underwriter wants to see sourcing and seasoning of those funds. They want to know where the money came from and how you got it and how long you've had it. If it was a gift, they want to know how the person who gave it to you got it, and they want evidence that no repayment is expected. If you can't provide this information, the presumption is going to be that you got a personal loan of some sort. Obviously, if it's a loan, you're going to have to make payments. The payments are going to add to your monthly debt service, which adds to your monthly cost of housing to determine your debt to income ratio. Every dollar you add to either one of them is a dollar that might mean you don't qualify for the loan on your new property.

It's a horrible lie about people from Missouri, but think of underwriters as Missouri accountants. If you want them to believe anything but the worst possible interpretation of a given fact, they want you to show them on paper. That's their favorite phrase: "Show me on paper." It doesn't matter how much down payment you have, it doesn't matter how much equity in case of default. Lenders are not in the business of repossessing property; they are in the business of making loans that are going to be repaid. Especially in the current environment, they don't want to take any risks that your property is going to be one more property in their already too high inventory of lender owned properties.

When you move money from one account to another, you need to show that it has been in the previous account for a while, or where you got it from. You're going to need a paper trail back just as far as all of your other funds on this new money. If you got it from selling your previous property, the underwriters are going to want to see the HUD 1 form from that transaction. If it's a gift, they want a signed letter attesting to this fact from the donor, as well as a source of that money. If you got it from selling something else, the underwriter is quite likely going to ask for copies of the bill of sale. If you're going to be buying property in the near future (or refinancing), keep all the paperwork from anything you sell. And for crying out loud, before you move any large amounts of money around, talk to your loan officer about what you're going to need in order not to kill your loan. Even if you've got all the paperwork, it can make the difference between an easy, straightforward loan, and one where the underwriter takes it into his head that there's something funny going on. You really don't want them to do that, because when it does happen, they can start demanding more and more information, imposing more and more conditions to approving your loan, and in general, delaying your transaction and making the completion of it difficult. Every time one of their loans goes south, an underwriter is potentially in danger of losing their job - so when they think something may be not quite right, they are going to protect their job by requiring all of the information they can think of that might show something isn't quite copacetic. If they should find something specific they can point to, your loan will be declined, and your credit file could very well get an 'attempted fraud' tag. You don't want that, as it can lead to your loan being rejected not just at that lender, but everywhere. So you need to be very careful, and very clean, about moving money around, especially within a couple months of applying for a mortgage.

Caveat Emptor

Article UPDATED here

Because most loan providers will not guarantee their Federal Good Faith Estimates or California MLDS forms, I've been telling folks that the best suggestion (other than doing their loans myself, of course!) that I can give them is apply for a back up loan. But some mortgage loan providers will guarantee their quotes, and this article is about those guarantees, their limitations, and what to watch out for.

Loan officers are not the only ones who play games with the truth in the mortgage world. Borrowers do it. A lot of borrowers do it. Some are actually intending fraud, some just want a better loan and don't see anything wrong with painting their financial picture a little rosier than it is. Furthermore, there are reasons that lenders will decline loans that are not obvious. It has happened to me that I couldn't do a loan at all because of fairly obscure points that the borrowers weren't trying to conceal, they just didn't know they were important, and I didn't think to ask because of their rarity.

Keeping this in mind, loan providers are leery of offering guarantees, and indeed, since only an underwriter you will never meet or talk to can authorize the loan, for a loan provider to make a guarantee that there will be a loan is nonsense. The most they can say is, "Based upon my experience, I see no reason why this would not be approved," or, better, "Subject to underwriter approval, your terms will be this." That's a key phrase. Keep in mind that loan provider guarantees are few and far between, and as a result, there is no standard terminology to use. I, as a loan officer, cannot promise the loan. I can promise, however, that if the loan is approved as submitted, it will be on a given set of terms.

Now it happens that loan officers can manipulate you by submitting a loan that they know will not be approved. This is a lot of work and often "poisons the well" at that particular lender, but then they can tell you sorry, you do not qualify for that loan, but there's another one over here that you do qualify for, and now that you've already selected them to do your loan, they are no longer competing on price, and they build a much higher margin into the newly proposed loan, secure in the knowledge that you're unlikely to be shopping other lenders at this point.

You can counter that by asking what the guidelines are for the loan they are submitting. What is the maximum debt to income ratio? How much income do you need to qualify? Ask them to compute it out for you, and watch what numbers they use. What loan to value ratio is the rate predicated upon? What does the property need to appraise for in order to make that happen? (This can also help you spot hidden fees, albeit rarely. Comparatively few loan officers can tell you how much it's really going to take to get the loan done.) How much time in the same line of work are required? Here's a whole list of questions you should ask prospective loan providers (the most important mortgage article I have written).

Now, as to the form the guarantee should take: It should include the type of loan, to include an industry standard name for that loan type, so other loan officers you shop with know right away what they are talking about. It should also include the cost to get that loan. How many points of origination, if any, and how many discount points, if any? How much in total closing costs? How long of a lock is included?

You should beware the term, "thirty year loan," unless the words "fixed rate" are in there. A thirty year fixed rate loan is the standard loan that most folks aspire to, but it's usually the highest rate out there. The words "Thirty year loan" can also describe an Adjustable Rate Mortgage (ARM), or a hybrid ARM. A few loan officers will even describe hybrid ARMs as "thirty year fixed rate mortgages," because they are fixed for an initial period. So ask them "how long is that fixed rate fixed for?" here is one example of one way to disclose it right. So you always want to ask, "How long is it fixed for?" if they do not volunteer the explicit information.

If it's a balloon loan, that means you must refinance or pay it off before the end of the loan. Must in this case means it is mandatory, it is required, there is no more loan after that point. If it's an ARM or hybrid ARM, you also want the margin once it does start adjusting and the name of the underlying index to become part of the guarantee. You don't have to refinance hybrid ARMs, and you're welcome to keep them as long as you like what they adjust to, but most people refinance before the end of the fixed period or very shortly thereafter.

Finally, you most especially want whether or not there is a pre-payment penalty to be part of your guarantee, and if yes, the nature of that penalty. A loan with a prepayment penalty should be a much cheaper loan than one without, as you are looking at agreeing to pay about $12,000 around here if you refinance or sell while it's in effect. The phrase, "What would that be without the prepayment penalty?: is one of my favorites. But you have a right to know, and a loan with a prepayment penalty is likely not as good a loan as one a quarter to a half percent higher for the same cost, without a prepayment penalty. If you already know you're going to need to sell before it expires, it needs to be more than that. So make sure you find out, is there a prepayment penalty, yes or no? If Yes, how long is it for? Is it a hard penalty (incurred even if you actually sell the property) or a soft one (waived if you actually sell), and does it strike from the first extra dollar or only after you pay down more than twenty percent in a year? These all make a difference, and you should be aware of their nature, and it should be honestly disclosed to you when you are shopping for a loan.

Caveat Emptor

Original here

My take on the matter is "mostly no", but they do have some uses.

The one advantage that they usually carry a lower interest rate. There have been exceptions to this, just as there have been exceptions to the 5/1 hybrid ARM carrying lower rates than a thirty year fixed rate loan. There was a period about a month ago where for exactly the same cost I could deliver a 30 year fixed rate loan three eighths of a percent lower in the interest rate than the best fifteen year fixed rate loan then being offered. I just checked again, and the world has gone back to normal in this regard - the fifteen year fixed was almost three eighths of a percent lower rate for the same cost. So that is one benefit - lowered interest rate and lowered cost of interest. For a $300,000 loan amount, that would save you $1125 per year in interest charges, or $93.75 per month to start with, and increasing as time goes by. Solid benefit. Mathematical Fact.

Now let's consider the drawbacks. The first is that the payments are much higher. Why? Because you have to pay that principal ($300,000) off in half the time. I'm considering rates to be had at wholesale par as I'm writing this article, but these are equally valid in other contexts. On a $300,000 loan at 4.75% for a fifteen year loan, you're paying $2333.50 per month, versus $1633.47 at 5.125% on a thirty Suppose you have unexpected expenses, lose your job, or take a pay cut. On a fifteen year loan you are still obligated to make that additional $700 payment every month. The payment isn't twice as big, and it does save you a very large chunk of change if you pay your loans off. But there's nothing stopping you from voluntarily paying extra on a thirty year fixed rate mortgage, either. A month ago, I was telling people who wanted fifteen year loans to do exactly that. If the rate on the thirty year fixed rate loan is lower (as it was then), it's a 100% gain to get a thirty year fixed rate loan and simply add extra to the principal payment every month.

Let me make another observation: most folks don't pay loans off - even 15 year loans. Statistically, the number of folks who haven't sold or refinanced before five years is is less than ten percent. Some situation will arise which makes it better to pay off that loan early, via a sale or refinance. When it happens and you have been adhering to a fifteen year payoff schedule (whether you have a fifteen year loan or thirty year fixed rate loan you've been paying extra on), you get a large extra chunk of cash back on a sale, or you owe a lot less on a refinance. Bully for you, good show, and all that. But don't kid yourself that it led to an earlier payoff of your loan.

If you're the sort of person who is just buying their primary residence, going to pay it off without ever refinancing, just going to spend the extra money when the loan is paid off, and would never consider investment property or alternative investments, that's about the limit in complexity we're talking about here. Verdict: yes, get a fifteen year loan. But if any of those assumptions is not valid, then we've got some more work to do.

First off, if you're the sort of person who is looking to get into investment property, especially more than one: Higher minimum payments hit your debt to income ratio (and cash flow) hard. It would be very easy for me to come up with a scenario where you would be accepted on three or four thirty year fixed rate loans, putting the power of leverage to work for you where it does a lot more good, where you would be rejected for a second 15 year loan, simply because the debt to income ratio doesn't work. With the impending final death of stated income, this is going to bite an awful lot of people and keep biting. Where you could have your own property and three investment properties all with positive cash flow on thirty year loans, you could quite likely be stuck with your own property and possibly one investment property on fifteen year loans, and even if the loans were approved, be in serious negative cash flow land. Negative cash flow is a very bad thing for real estate investors - it's the number one reason why real estate investors are forced to do bad things they don't want to do, like sell in a tough market. If you've got positive cash flow and sustainable loans, the question is "How long is it going to be before I sell for a huge profit?" not "can I hold on another month?"

Second, we haven't considered a hypothetical alternative investment yet. Let's look at this very situation, and suppose we can earn an annualized 9% with alternative investments (right now, with the financial markets in the state they are in, I would bet on the historical average of about 10% being too low, for people with the guts to buy into a down market). Let's consider what happens when we take that extra $700 per month the fifteen year loan would require, and invest it. After 15 years, it has become $264,770 - which is actually more than enough to offset the difference in what you owe ($204,868 versus zero), despite the fact that the thirty year loan carries a higher interest rate. Start investing that $2333.50 every month in exactly the same investment at exactly the same yield. Carry it out another fifteen years, and where both loans are paid off, that thirty year and invest the difference strategy has netted you $1,281,520.44, versus $883,009.86 if you waited the fifteen years to start investing while you paid off your property, a difference of almost fifty percent. Mind you, this does presume you actually make that investment every month, but if you're just treating it as an abstract problem to see which use of the same money nets you more money at the end point, the thirty year mortgage and invest the difference strategy really does come out way ahead. In the real world, nothing pays a smooth 9%, and there will be fluctuations - but those fluctuations are more likely to benefit the strategy that starts investing earlier.

If this seems counter-intuitive, consider that by taking the fifteen year loan, you're taking money you could earn 9% on, and using it to pay off a tax-deductible 4.75% debt. Doesn't make a whole lot of sense to me, and the numbers in the previous paragraph don't even take into account tax deductions for home interest, which will cause even more advantage to the thirty year loan. An accountant probably wouldn't bother running the numbers unless you insisted upon knowing exactly how much it would cost you..

One final item before I go: It is much harder to recover the cost of points on a fifteen year loan than on a thirty. Most people never do get the money they spend back on thirty year loans, but on fifteen year loans, it can be truly horrid. For the rates in effect today, it takes over half again as long to recover the cost of two points on a fifteen year fixed rate loan as it does on a thirty year fixed - and since the loans are for a shorter period, you won't get them back as many times over, even if you do keep the loan long enough to pay it off. I have seen rate sheets where the payment actually works out lower for a higher interest rate, due to the costs of buying the rate down. In such circumstances, you literally never recover the additional costs. Watch your actual costs, and things that may not be costs like prepaid interest and money to seed an Impound Account. On fifteen year loans, they become proportionally much more important than on thirty year loans when they find they way into your mortgage balance, especially if the payment was something you only marginally qualified for to begin with.

Caveat Emptor

Article UPDATED here

Congratulations, President Obama.

Hilda was home sick sick Tuesday with the flu, and I had it as well. Since it is a special day that happens only once every four years, I suggested we watch the Inauguration, and we sat and watched the last fifteen minutes or so of the leadup, plus the Inaugural and Obama's Inaugural Address.

Now we get into actual deeds and actions, not just talk. I don't believe Obama will be good for the country. But I also hope I'm wrong, and I will not hesitate to agree with him any more than I hesitated to disagree with President Bush.

Leave the New Deal in the History Books

As a short-term matter, the moves of the Fed and other central banks have been correct, but in the long term a return to growth will depend on dynamic job creation by American business -- not the U.S. government. Under a two-year plan designed to create three million to four million jobs, Mr. Obama's plan would have the federal government begin distributing funds for public-works projects carried out by the states. With government already spending 20% of GDP, federal government, not private enterprise, will become the growth industry.

The effect of these policies, like FDR's, will be to lengthen the pain.

Seduced by the Saint

President Obama entered the history books our children will read. His presidency bookends an era that began with segregation between blacks and whites and ended when he became the 44th American president and the first black man in the White House. No one can take that away from him. Nor can anyone doubt his charisma or political skills.

However, the inauguration is just a moment in history. While Obama's toastmaster skills are exceptional, his performance as President is an entirely different and more uncertain matter. Yet if the liberal media's performance to date is any guide, predetermined judgments in favour of Obama will infect coverage of his presidency.

Someone who is still fooling himself as regards the Palestinian goals:

Arabs in the Middle East should learn the lessons of Martin Luther King.

What the vast majority of Arabs have been slow to realize, however, is the profound connection that exists between the history of the struggle that opened the way for Obama to become president, and the future of their own fight for freedom and dignity, and not only in the face of Israeli occupation, but under the tyrannies of so many Arab dictators. We talk about remembering Martin Luther King because of the power of his vision, of his language, of his morality and of his faith. But mainly we remember him because he adopted a strategy of nonviolent confrontation with an insidious and pervasive system of repression--and broke it--and broke through it. We remember him because his way worked.

What we know about the Middle East today is that wars no longer end in victories, and the process of peace never delivers more than the process itself. A new approach has to be found, and the leaders of the governments in the region don't seem up to the task. The most promising is nonviolent resistance: mass protests, boycotts, refusal to obey unjust laws.

He's right in a way. If the Palestinians were willing to accept the same sort of goals Martin Luther King was after, that would work. Actually, there wouldn't be a lot of work to be done.

The problem with this suggestion is that the Palestinians want to actually kill all the Jews. Israeli laws are pretty darned good on the subject of not discriminating (much better than French or German or just about anywhere else outside the US and Canada). Non-Jewish Israelis are found in all walks of life, including the Israeli army (where they volunteer, rather than being drafted like the Jewish population). All they have to do is stop killing Israelis, and Israel accepts them (e.g. the Druze, among others)

But Hamas (and to a lesser extent Fatah) still want to kill all the Jews or drive them out, i.e. conquest and ethnic cleansing. I am unaware of any historical precedent for accomplishing this sort of goal non-violently. Even if the Israelis went willingly to the slaughter, killing them would still be an act of violence.

Seven reasons for healthy skepticism

Top Ten Disturbing Aspects of Obama's Choice of Treasury Secretary

I wish it were a David Letterman routine.

Department of "I do not think it means what you think it means":

Obama Seeks Halt to Legal Proceedings at Guantanamo

In one of its first actions, the Obama administration instructed military prosecutors late Tuesday to seek a 120-day suspension of legal proceedings involving detainees at the naval base at Guantanamo Bay, Cuba -- a clear break with the approach of the outgoing Bush administration.

Here I thought the issue was holding people who might not be enemy combatants even though they hadn't done anything, and we were therefore giving them military trials to see if they were combatants or had committed war crimes, and if not, we could let them go. Silly me!

Of course, the 120 day moratorium will only mean that anyone who might actually be innocent will have to wait that much longer to be freed.

This is what we call a "token gesture"

Obama freezes salaries of some White House aides

The pay freeze, first reported by The Associated Press, would hold salaries at their current levels for the roughly 100 White House employees who make over $100,000 a year. "Families are tightening their belts, and so should Washington," said the new president, taking office amid startlingly bad economic times that many fear will grow worse.

Let's say these 100 people lose $4000 each as a result of the freeze.

That's $400,000. Drop in the bucket, even by the standards of the White House Budget, let alone the entire Federal Government.

Don't get me wrong - it's a good thing, as far as it goes. But freezing the pay of 100 white collar federal workers who aren't exactly hurting is not going to solve the problem. Given the yearly deficit projection of 1 trillion dollars that's being batted about, he's cut .00004% of the problem. By my calculations, just over 12 seconds of deficit. And I'll bet it took him longer than 12 seconds to freeze those salaries. Heck, his new and counterproductive spending plan will waste more than that every minute of every day for the next four years.

This is not productive problem solving.

Obama's new lobbying rules will not only ban aides from trying to influence the administration when they leave his staff. Those already hired will be banned from working on matters they have previously lobbied on, or to approach agencies that they once targeted.

Two words in refutation: Secretary (designate) Geithner. Two more: Secretary Clinton. How many more examples do you want? It's great to have these high goals, but actions speak much more loudly, and the actions of the Obama administration are already speaking so loudly I can't hear their words.

If I had to pick one thing prospective home buyers need to understand and don't, that fact would be it. There is always a reason for a low asking price. Sometimes that reason is something you can deal with, sometimes it isn't, but until you know, you're risking your money on an unknown.

Look at the situation from the seller's point of view: They have this valuable property. They want to get as much money for it as they possibly can. So unless it's your mother or favorite uncle or similar family member giving you a deal on property they've owned forever, get religion about the fact that there is a reason why they're asking fifty thousand dollars less than all the comparable properties. It could be that there's a broken slab. It could be that there's a condemnation about to start. It could be the golf course is about to close, or that a chemical manufacturing plant is about to get built. It could be something you can't see that will cost loads of money down the road, such as a broken water pipe undermining the foundation. It could be any number of things. Sometimes the reason is because their agent persuaded them to put a low asking price on it as one way to get lots of suckers to come out and bid against each other and run the price up.

Usually, the asking price on properties of this sort should be even lower. It only seems low because you don't know what's wrong with it and what it's going to take to fix the problem - if it can be fixed. Lots of prospective buyers don't seem to understand this. The "get rich quick" scams never point it out - doing so would severely restrict their supply of people willing to plonk down hundreds to thousands of dollars for whatever "system" they're trying to sell. But it's true, nonetheless. There are any number of reasons for a low asking price, but there's always a reason.

Every once in a while, the reason is "because they need a quick sale." Right now this is fairly common. But just because they tell you that doesn't make it true. Even if it is true, doesn't mean it's the only reason, or that you know the reason why they need a short sale. Just because you know one reason, doesn't mean you necessarily know all the reasons for the low asking price.

If you read between the lines on MLS, you can often figure out what the reason is before you even go out to a property - or at least an agent who does this all the time can. But it takes careful reading, and thinking about what they're really saying - or what they're not saying. Keep your eyes open when you visit the property, and the reason for a low asking price usually becomes obvious - or at least one such reason does. Fairly often, there are one or more secondary issues that aren't so obvious that may well cost even more to fix than the obvious issue that leaps out and grabs you.

If you're certain you know what the issues are, and you are able to deal with them, that's what people call an opportunity. But that is a very different thing from walking in cold and taking somebody's word for the fact that the little old lady who used to live here needs to sell because the nursing home needs the next month's payment (Hint: this doesn't happen. Granny can get a Reverse Annuity Mortgage if she's that desperate, and whereas I recommend against RAMs in almost all cases, this is one exception where they are the lesser of two evils, as compared to just giving away a big chunk of equity).

When there's a low asking price, be thinking in terms of things that most buyers can't deal with. Defects that prevent some or all loans from being funded. Probate where there is no money to rectify even safety and habitability issues. Things that prevent your average buyer from actually carrying through on an intention to buy a given property.
Sometimes, as with lender owned properties, it's merely that no one knows if there are problems or not. Maybe it's just cosmetic stuff like paint and carpet, maybe it's a bad floor plan, and maybe it's something a lot more serious. Get yourself a good buyer's agent and go into the property with your eyes open. Be religious about investigating the property; you're risking the full purchase price, not just the down payment, whether you realize it or not. Plus interest due on the loan, of course. Buying a property like this is always a risk - but it's what insurance underwriters call a speculative risk. As opposed to a "pure risk" where there is only opportunity for loss, speculative risk means there is opportunity for gain, as well. Gambling is the poster child for speculative risk, and when you buy a property of this sort, there is opportunity for both gain and loss. It's never difficult to understand the opportunity for gain - people will stand in line to point those out to you. It's the opportunity for loss that you've got to watch out for. A good buyer's agent will save your backside on this score more often than most people would believe.

Caveat Emptor

Article UPDATED here

This saying comes to us courtesy of our military. They use it in the context of ten million peasants armed with stone age weapons will swarm one man, no matter how well armed or how well supported. In my work, I use it in entirely different contexts, and it is an amazingly versatile phrase for real estate. The context of the moment right now is that because price has fallen by more than enough, buyers are swarming no matter how tough the times. Requiring a low quantity of dollars will cause the buyers to come out in droves in the expectation of a deal. Quantity (low price) has a quality (buyer appeal) all its own.

A lot is getting made of the state of the economy, how many people are losing their jobs, companies closing, etcetera. The unemployment rate is up to seven percent nationally. What they aren't emphasizing is the margins between that and the best unemployment rate ever: something just over four percent. This means that ninety-three percent of the people are working in horrible times, as opposed to ninety-six percent in the best times ever. Difference: about three percent, or one person in thirty. Bad if you're that one person in thirty, but not too much difference if otherwise. Maybe a few more people than normal are also less secure in their jobs than at other times, but there's always quite a bit of that. The bottom line is that eighty to eighty-five percent of the people out there are secure in occupations that aren't going to vanish, working for companies that aren't in any danger. Unless that company decides it's worthwhile moving overseas to avoid excessive US regulation and costs of staying in business, their jobs are going to securely stay right where they are. These folks are actually sitting pretty right now, because their money is worth a lot more than it was not very long ago, and especially in real estate, much more than it will be worth two or three years from now. The difference in the economy is on the margins, and these people are not on the margins.

They're figuring it out, too. The areas where I work here in San Diego, the absolute inventory isn't down that much in the last few months, but what there is is selling much more quickly, and that's just at a first glance. In time terms, we're down from about eighteen weeks inventory to about ten weeks inventory here in East County, but there's a distortion in that due to the fact that most short sales stay in the "active" list all the way to the actual sale, as opposed to moving over into "pending". This in the period of the year that is usually the absolute worst for getting property sold. I don't have a crystal ball, but my projection for what happens this spring when people start thinking about moving once the kids are out of school is a little bit scary.

People can afford a lot more than could when unsustainable loans were the order of the day. I'm in escrow right now for just over $400,000 on a property that last sold for over eight hundred thousand. Another property I'm in escrow on is about three and a quarter on a property that would have been worth $650,000 at market peak, and probably would have sold for seven hundred or a bit higher. These properties are closer to being the rule than the exception. Yeah, the market comps I'm getting are about ten percent higher, but even a $360,000 property is a lot more affordable to the median wage earner than a $650,000 one, and a lot more people can afford $400,000 than can afford $819,000. Since incomes have an approximately normal distribution, a lot more than twice as many people can afford a property that's half as expensive.

Several months ago, I did a study on what people can afford in San Diego. Those numbers were based upon 2006 wages, those being the most recent I could find a distribution for, and then-current rates. Well the rates now are a lot lower. When I did that study, I assumed an FHA type loan at 6.5%, by which I really meant a tad over 7, as the FHA charges 55 basis points per annum for financing insurance. The rates as I type this are 4.75% (plus the same 55 basis points) for exactly the same loan. That person smack dab in the middle of the largest group of wage earners, who could afford the loan, taxes and insurance on a $302,000 property all by themselves at $2343 per month, is only spending $2016 per month on exactly the same thirty year fixed rate loan, taxes and insurance on exactly the same property at exactly the same price - a difference of over $325 per month. This means it's a lot easier for them to afford exactly the same property. You shouldn't make decisions on real estate based upon payment (at least not beyond a blanket rejection if you can't make the payment), but people do it. Quantity of dollars out of the monthly budget has a quality all its own, as every crook who's ever preached "Low Monthly Payments!" knows very well.

That same $2343 per month under exactly the same circumstances now stretches to a $342,000 property. The loan by itself would allow a further stretch, but those pesky property taxes keep going up by purchase price. This enables people to set their sights on more desirable areas of town, or bigger, better, more attractive properties within the same area. Instead of a 1000 square foot 3 bedroom 1.5 bath property, people can now afford a 1500 square foot 4 bedroom 2 bath property next door for exactly the same payment. Maybe it isn't quantity having a quality all it's own, but higher attractiveness and more value becoming obtainable for the same price (as these folks think about it) will also cause more folks to sign on the dotted line.

Lower rates are also allowing more people to save their property. They couldn't afford the adjusted payment at eight and half percent, but they still have equity, and their debt to income ratio supports five and a quarter percent, where it didn't support seven percent, let alone the higher adjusted rate. If they have equity, they are refinancing. If not, they are getting loan modifications - the lenders are willing to give them at lower rates when the rates are lower, and they're certainly preferable to the lender losing the money and being forced to sell the property in what has been an uncertain market. The lenders have also (finally!) figured out that if they stop flooding the market with inventory they don't have to, prices might stay a little bit higher, and recover more quickly, so they get a better price and lose less money on the properties they do have to put on the market.

The backlog of people who want to sell is dropping. The number of people who have held their property off the market was only large, not limitless. We're burning through the people who didn't or don't have any choice but to sell - the short sales with adjusted loans and lender owned properties, and I don't see another wave of foreclosures here in San Diego. People are assuming it takes three years after loan adjustment and thinking that some loans were fixed by up to five years after initial purchase before adjustment, but there just weren't many of those in San Diego - the dangerous loans were all two to three years before the payment adjusted - the exceptions are insignificant, statistically. Furthermore, people are deciding to get out now and get the pain dealt with, even though there are a lot of reasons why they shouldn't. It's been two years plus now since the last of the Make Believe Loans (January 2007), and over three years since the bottom started falling out of the San Diego market (October 2005). My point is this: of those who are going to lose the property because their loans adjusted, the vast majority of those adjustments have already hit, and people are deciding - wrongly - that the smart thing to do is stop paying their mortgage now.

Of those in other situations, where they have a choice, some people have decided to stay in their current property, while others have decided to wait until prices recover and still others are waiting for conditions to be right for a move up. These last can afford a slightly more expensive property, but some of them need a little bit more equity for the down payment on the new property. They will be in a position to get it soon, and when they are, the market is going to heat up still further.

The only thing causing prices to go down - the only thing that can cause prices to go down - is excess inventory (Conversely, the only thing that can cause prices to rise is excess demand). That excess inventory is starting to clear, at least here in San Diego. I don't know how far the rest of the country is behind us, or any given area, but it will happen, sooner than most folks probably think.

Caveat Emptor

Article UPDATED here

Plane crashes in NYC river after bird cuts engines

A US Airways plane crashed into the frigid Hudson River on Thursday afternoon after striking a bird that disabled two engines, sending 150 on board scrambling onto rescue boats, authorities say. No deaths or serious injuries were immediately reported.

Federal Aviation Administration spokeswoman Laura Brown says the US Airways Flight 1549 had just taken off from LaGuardia Airport enroute to Charlotte, N.C., when the crash occurred in the river near 48th Street in midtown Manhattan.

Brown says the plane, an Airbus 320, appears to have hit one or more birds.

Bird strikes are potentially a really big deal. For small planes, even a sparrow can mess up the airfoil of the propellor or possibly break it. Even for big planes, swans and geese and eagles, some of which can go up to forty pounds, are a real issue. Think about the damage your thanksgiving turkey could do to a jet turbine rotating at 20,000 RPM. No matter how tough those blades, they're going to take some damage, and it doesn't take a lot to seed the progressive self-destruction of an engine operating at that speed in short order. Since this airplane lost both of its two engines to bird ingestion (did it hit a flock?), it was going down, and the pilot didn't really have a lot of choices as to where to put it.

There's an urban legend I first heard about 1980:

The US Federal Aviation Administration has a unique device for testing the strength of windshields on airplanes. The device is a gun that launches a dead chicken at a plane's windshield at approximately the speed the plane flies.

The theory is that if the windshield doesn't crack from the carcass impact, it'll survive a real collision with a bird during flight.

It seems the British were very interested in this and wanted to test a windshield on a brand new, speedy locomotive they're developing.

They borrowed FAA's chicken launcher, loaded the chicken and fired.

The ballistic chicken shattered the windshield, broke the engineer's chair and embedded itself in the back wall of the engine's cab. The British were stunned and asked the FAA to recheck the test to see if everything was done correctly.

The FAA reviewed the test thoroughly and had one recommendation:

"Thaw the chicken."

Well, the version I originally heard was Boeing doing the loaning and DeHavilland (a British company that Boeing really did try to warn about square windows in the DeHavilland Comet, having gotten the experience from high altitude military aircraft in World War II) doing the requesting, but while the frozen chicken is urban legend, the chicken gun is quite real, and it is a real test that commercial aircraft face (mostly the engines, in reality). Snopes has quite an article that is well worth reading.

(I love the cat embellishment - another urban legend, so far as I am aware:

Just before lunch, the engineers set up the chicken-cannon, loaded a frozen chicken into it, and left for the canteen. The chicken would be just about defrosted by the time they got back to do the test. When they came back, they got behind the protective wall, started the high-speed cameras (to play back in detail what happens), and fired the chicken at the canopy. Normally, it should just bounce off, or make a nasty dent. This time, the canopy was destroyed. Bits everywhere. Having checked the cannon, and looked through the (expensive) wreckage, they decided to view the film, to see if it would provide any clues. It did. During lunch, a cat had climbed into the cannon, lured by the smell of fresh chicken, became part of the test.

PS: Incidents like this one, losing multiple engines at low altitude and slow speed, are why pilots deserve to make the big bucks. Lots of them go an entire career without an incident like this one - but there's 150 survivors who owe their lives to the skill of the pilot who brought the airplane down well enough so that everyone could get off alive. And once it had lost those engines in that situation, it was coming down, with a rapidly narrowing list of options for where and how. There's a reason they practice losing an engine, so much that it has spawned its own jokes. Here's one:

It is time for Santa to have his Biennial flight review. Anyway the CASA inspector arrives and is very impressed with how well Santa has prepared the sleigh, the reins are oiled, the brass is all polished and the reindeer have all had a bath, it really looks a treat. The inspector comments "Santa I am very impressed, if you have prepared for the rest of the flight like you have the sleigh then the check should be a formality" Well Santa is much buoyed by this and after a short preflight he asks the inspector to climb aboard.

As Santa is buckling up and starting his checklist, he looks across and notices for the first time a large bore double barreled shotgun sitting across the CASA inspectors lap. A little perturbed and very much perplexed Santa tries to put it out of his mind and focus on the all important check ride. If he fails then the kiddies will not be getting their presents this year. The checks completed, Santa starts to taxi out for take off and again notices the shotgun. Finally his curiosity gets the better of him....

He turns to the inspector and asks, "Before we take off, I really have to know, what's the shot gun for?" The CASA inspector looks over both shoulders conspiratorially to check no one is looking, leans over and whispers into Santa's ear "Look I really shouldn't be telling you this but... you're going to lose an engine on take-off"

(this is where I got that one so that I didn't have to type it all)

Hawaii takes closely watched digital TV plunge

Hawaii residents lit up special TV help center phone lines Thursday as the state was shutting down all analog broadcast signals, more than a month before the rest of the country is scheduled to make the now-contentious switch.

I'm not certain I'm ready. But I've got cable, so losing broadcast TV, or even all TV (if that happens) for a couple of days while I buy a converter box is no big deal to me, in a major city with load of other options (like broadband internet) and lots of places to buy the converters (plus I think I've watched about two hours of TV total in the last six months). If we go TV-less for a month, that's a price I'm willing to pay - in fact, I'd probably cancel cable TV too, if it weren't so cheap to add basic TV service to the phone and internet package (my wife really likes the old movie channels when I'm not home). Out where there may not be other ways for people to be informed, it might be a major problem, and there might not be any converters in stock anywhere you can get to. If this describes you, get on it. February 17th is just around the corner.

Hawaii was moving to all-digital TV before the Feb. 17 date set for the rest of the nation because of an endangered bird, the Hawaiian dark-rumped petrel. Broadcasters and park rangers want to take down analog transmission towers on the slopes of Maui's Haleakala volcano before the bird's nesting season.

Look out Harry Potter! Yet another illustration of Clarke's Third Law

Science closing in on cloak of invisibility

Researchers at Duke University, who developed a material that can "cloak" an item from detection by microwaves, report that they have expanded the number of wavelengths they can block.

In 2006 the team reported they had developed so-called metamaterials that could deflect microwaves around a three-dimensional object, essentially making it invisible to the waves.

Keep in mind that for all the obvious military and espionage uses, being invisible has its hazards. The other guy can't avoid what he can't see. And if you're flying a Harrier, people for miles around are still going to hear it. Not to mention that in the real world, what's on the inside uses that same light that gets deflected around the bubble to see with, making you invisible but effectively blind.

I can envision work-arounds for the effective blindness issue, as I'm certain pretty much anybody could. But there's a long way to go on the engineering yet.

Victor Davis Hanson on Obama as Bush III

What are we left, then, other than a sort of campaign con? Obama will better articulate the old Bush positions. The hard Left will quiet down about the Patriot Act and Iraq, and cease the anti-American rhetoric, as upbeat diversity rhetoric trumps the old downbeat unilateralism. Michael Moore won't be making any more documentaries about a fascistic President, and Knopf won't be publishing any novels like Checkpoint about a sitting President. I think Obama, with a few low-level appointments, an occasional pep talk at the annual ACLU meeting, or an invite to the editors of the Nation for a chat in the Oval Office, can pretty much count on an inexpensive 10-cents-on-the dollar bought ride from the once vociferous Left.

I think Mr. Davis is kidding himself. Obama's voting record is hard left, and to the extent he tries to change the Bush policies he has criticized most harshly is the extent his administration will fail. It's just that for his appointments, the Democratic party really only has Clinton administration folks with actual federal administrative experience, as it has been almost thirty years since we dumped Jimmy Carter in the biggest no-brainer election we've had since 1932. The appointees will take their talking points and their goals from the man at the top. But Mr. Obama might surprise us, which is why I'm limiting myself to talking about actual actions. Anyone can say they can fly to the moon by flapping their arms. Until they actually do it, or at least actually try, it doesn't make any real difference beyond superficially making them appear to be of limited experience. Unfortunately it appears that approximately 52% of our electorate doesn't understand this.

The Minnesota Recount Was Unconstitutional

Consider the inconsistencies: One county "found" 100 new votes for Mr. Franken, due to an asserted clerical error. Decision? Add them. Ramsey County (St. Paul) ended up with 177 more votes than were recorded election day. Decision? Count them. Hennepin County (Minneapolis, where I voted -- once, to my knowledge) came up with 133 fewer votes than were recorded by the machines. Decision? Go with the machines' tally. All told, the recount in 25 precincts ended up producing more votes than voters who signed in that day.

Then there's Minnesota's (first, so far) state Supreme Court decision, Coleman v. Ritchie, decided by a vote of 3-2 on Dec. 18. (Two justices recused themselves because they were members of the state canvassing board.) While not as bad as Florida's interventions, the Minnesota Supreme Court ordered local boards to count some previously excluded absentee ballots but not others. Astonishingly, the court left the decision as to which votes to count to the two competing campaigns and forbade local election officials to correct errors on their own.

Mr. Franken appears to have successfully stolen an election in the same manner Florida Democrats tried in 2000. The only consistency I can find for ballot counting in Minnesota is "Whichever way is in the Democrat's favor". Ballots with identical issues, excepting only the party the voter apparently meant to vote for, were treated in diametrically opposite manners. Both Hot Air and Powerline have been following the recount, and the more I learn, the more something stinks in Minnesota ballot counting.

History will show that George W Bush was right

The decisions taken by Mr Bush in the immediate aftermath of that ghastly moment will be pored over by historians for the rest of our lifetimes. One thing they will doubtless conclude is that the measures he took to lock down America's borders, scrutinise travellers to and from the United States, eavesdrop upon terrorist suspects, work closely with international intelligence agencies and take the war to the enemy has foiled dozens, perhaps scores of would-be murderous attacks on America. There are Americans alive today who would not be if it had not been for the passing of the Patriot Act. There are 3,000 people who would have died in the August 2005 airline conspiracy if it had not been for the superb inter-agency co-operation demanded by Bush after 9/11.

George W. Bush, Winner

This is a man who endured countless savage attacks on himself and those of his administration, and spoke not one bitter word in return. A man who, in stark contrast to his predecessor, cared not a whit about public opinion when it came to our national defense, trusting instead that future historians will do what their current counterparts refuse; to treat him fairly.

So this is the message to our liberal friends in the media: you didn't beat this president, he beat you. You and your allies in Washington failed time and again to take this good man down. Indeed, he was elected and re-elected despite your historic efforts to the contrary.

What will the unhinged left do once Mr. Bush's term has expired? I think they better figure it out pretty quick.

Putin has given us a wake-up call: we're vulnerable to blackmail

It is hard to decide which is more despicable, the virulent untruths issuing from the Kremlin or the readiness of gas-starved European politicians to gang up on Ukraine. Russia's insistence that the gas is there, if Ukraine would only pump it through, is pure KGB-speak.

Tyrants often have their eyes on the implications of this crisis on the next one. Most democracies are interested only in keeping their citizens from voting them out today. This is only one example.

Don't get me wrong. Democracies have strengths that more than match up. But without a statesman such as Churchill, Thatcher, or Reagan, we pretty much muddle along in "minimally painful for right now" mode until we have something we can't ignore, and then we wonder why things got so bad.

Yemeni Security Shoots Protesters in Aden, Five Wounded

Yemen is in the bottom five for poverty globally, largely a result of massive corruption, and child hunger is at a critical level. The following video shows people being shot in the street earlier today and is graphic. This happens at nearly every protest, security forces randomly shooting into the crowd. Here is the link and to follow the embedded version.

I could come up with words like "disgusting" and "tragedy" all month long and not come close to describing the hellhole that is Yemen thanks to the current regime. Thanks to Ms. Novak for shining the Searchlight upon one small corner of the world that is emblematic of so many others.

I really should apologize for an extended case of burn-out. I've been updating a lot more articles than I have writing new ones. Part of that is being busy, which is a good thing as far as it goes. Part of that is that I've been having difficulty with what a gamer like me might call "making my saving throw versus 'I Don't Wanna'". I have very little appetite for rehashing more of the same old thing in an entirely new article when it's so much easier and more efficient to update and re-publish an older one. The facts don't change. The basic computations don't change. Only the market changes, and I don't republish state of the market stuff.

I have entirely new articles I want to write. One that I've been thinking about today starts with a line I got from the military: "Quantity has a quality all its own." The article is created, the bones of an outline are present. The problem is self-motivation to actually flesh it out when I've been working completely hairy weeks and dealing with some stress-inducing individuals. When I'm done with all that, a turn of Stars! and a half hour reading on the couch with Julia before bed sound a lot more appealing than grinding away at the keyboard.

But it appears that the stress level and burn out may be receding. If you want to help them go away, make a comment, say something nice, or ask a question. You could even donate some cash - I've got domain re-registration coming up and it would be nice if this site actually paid for its costs. But I do apologize for the intermission, and I do think it may be ending.

Israel acts because the world won't defend it

The poverty and the death and the despair among the Palestinians in Gaza moves me to tears. How can it not? Who can see pictures of children in a war zone or a slum street and not be angry and bewildered and driven to protest? And what is so appalling is that it is so unnecessary. For there can be peace and prosperity at the smallest of prices. The Palestinians need only say that they will allow Israel to exist in peace. They need only say this tiny thing, and mean it, and there is pretty much nothing they cannot have.

The Mideast's Ground Zero

CAN THE JEWS HAVE A ROOM HERE? Hamas rejects any recognition of Israel. By contrast, the Fatah-led Palestinian Authority, which controls the West Bank, has recognized Israel -- and vice versa. If you believe, as I do, that the only stable solution is a two-state one, with the Palestinians getting all of the West Bank, Gaza and Arab sectors of East Jerusalem, then you have to hope for the weakening of Hamas.

Rich people versus politicians

Legalized corruption is widespread, and that's the job of 35,000 Washington, D.C., lobbyists earning millions upon millions of dollars. They represent America's big and small corporations, big and small labor unions, and even foreign corporations and unions. They are not spending billions of dollars in political contributions to encourage and assist the White House and Congress to uphold and defend the U.S. Constitution. They are spending that money in the expectations of favors that will be bestowed on them at the expense of some other American or group of Americans.

Read the whole thing. This game of trying to get everyone else to pay for my goodies has got to stop. The people who actually end up paying for all of the goodies are taking their toys and going elsewhere. What happens when they're all gone? Or just enough of them? California is starting to wake up to precisely that situation.

Audience Atomization Overcome

That journalists affirm and enforce the sphere of consensus, consign ideas and actors to the sphere of deviance, and decide when the shift is made from one to another-- none of this is in their official job description. You won't find it taught in J-school, either. It's an intrinsic part of what they do, but not a natural part of how they think or talk about their job. Which means they often do it badly. Their "sphere placement" decisions can be arbitrary, automatic, inflected with fear, or excessively narrow-minded. Worse than that, these decisions are often invisible to the people making them, and so we cannot argue with those people. It's like trying to complain to your kid's teacher about the values the child is learning in school when the teacher insists that the school does not teach values.

Rates were higher when I originally wrote this, but the principles remain the same

Right now X is offering me a loan that looks something like this:

80/20 No down payment

On the /80: 6.5% FIXED interest for 30 years, interest-only payment option for 15 years
On the /20: 8.75% FIXED interest for 25 years (amortized to 30) 6-month lock for 1-point ($3800) refundable fee with float-down option

Devil is in the details.

Is there a pre-payment penalty?

They want 1 point to lock for 6 months? Cash, I presume? Quite frankly, the usual cost for locking in six months out is about three points. Nor is X usually that cheap on the lock. They have some excellent rates, but what they're quoting you is a market current quote for a 30 day lock. Long term rates are expected to rise, and long lock periods aren't free. There's something they are not telling you.

What are the discount/origination on the underlying loan? How much are they going to charge in closing costs to get it done?

Will they guarantee their quoted costs (as in they eat the difference if there is one, not you)? You might want to ask them all of the questions you should ask prospective loan providers

A developer's condo sell out is not the most difficult loan, but it's a long way from the easiest, as well. There are a lot of lenders that will not do them. Furthermore, what's being presented to you looks much cheaper than is likely to be true. If you insist on going with it, call me thirty days before the place will be done, and I'll do a back up loan, because I don't think what they're offering you is real.

he did get back to me as to what lender X's response was:

Is there any pre-payment penalty on this loan? NO.....

What is the total refundable cost for the 6-month lock? YOU PAY 1% UP FRONT AND IT IS REFUNDABLE IF YOU CLOSE WITHIN 6 MONTHS (emphasis mine)

How much will the closing costs be to get this loan done? I DON'T KNOW WHAT YOUR ESCROW AND TITLE COSTS WILL BE. YOUR LENDERS COSTS WILL BE APPROXIMATELY $1,200. (emphasis mine)

Is the rate being quoted based upon full documentation, stated income, NINA or EZ Doc? 100% FINANCING IS FULL DOC

Do I have to pay any discount points, points of origination, or any other points to get the quoted rates? NO POINTS NOR ORIGINATION FEE (ONLY THE 1% LOCK IN FEE OF WHICH WE SPOKE) (I prefer no points)

Regarding third party costs, can you tell me, or will the papers you send me make clear, the following third party costs:
- Appraisal fee: THIS SHOULD BE AROUND $400 BUT IS PART OF THE $1,200 I QUOTED.

- Total title charges: ??????????

- Escrow fee: ???????????

The builder has already assigned an escrow and title company for the property — may I use this company with the (lender X) loan? YES!

How much, total, will I be expected to pay X upfront, out of my pocket, to get this loan? THE $400 FOR THE APPRAISAL AND THE 1% TO LOCK IN....

How much, total, if any, will be added to my mortgage balance on top of what is quoted? ????????????????? NOTHING IS ADDED TO YOUR MORTGAGE.

If I agree to this loan after reviewing the papers, are the rate and closing costs guaranteed, and will X cover the difference (if any) between the quote and the actual final cost? WE'VE BEEN IN BUSINESS SINCE X. WE CONTINUE TO STAND BY OUR COMMITMENTS. (emphasis mine)

Now for the emphasis points, last first

-The question of "Is the rate guaranteed?" requires a simple yes/no response. This evasive reply tells you the answer is no, but that they don't want to admit it. If this answer is not yes, none of the other stuff is written in anything more permanent than beach sand somewhere below the high tide line. It's funny they mention commitments. Neither a Good Faith Estimate nor a Mortgage Loan Disclosure Statement (the California equivalent) is a loan commitment, or any kind of commitment at all. Regulations leave so much room for the unethical to maneuver without running afoul of the law that either one of those forms is nothing more than the loan officer or company wants it to be. A few are right on, and those companies will typically guarantee their quote. More are somewhere in the ballpark, amazingly enough usually noticeably on the low side. And quite a large fraction are nothing more than an exercise in creative writing. He didn't guarantee his quote. Tell me this: Two companies are bidding on doing building work for you. Both are large firms. The first company asks you all sorts of questions about specifications, and guarantees they'll get it done for $5000, and if there's a problem on their end, they will fix it for no additional money. The second says they think they can do it for $4500. Which would you feel more comfortable with? If you know anything about building contractors, the latter is a joke compared to the former. Lenders and estimates on the initial paperwork to get you to sign up are, if anything, worse. They're talking a good game to get you to sign up, knowing that once they've got your cash deposit, you will do what is necessary to protect it, no matter how different their final loan is. That's assuming you're one of the forty percent who even notices the difference.

-I do business with this lender. Their costs are $1295 not including the appraisal to brokers, who perform some of the services they charge their "in branch" clients for performing. By the time you've added escrow and title, you're roughly at the $3400 mark for closing costs.

-It's easy to talk a good game to most folks who aren't experienced with how the game is played. The point of this particular game is trying to lock you in with that 1 percent cash upfront payment, so that when clients discover that he's not going to be able to deliver what he's talking about, they'll be thinking about recovering/losing that money, rather than focusing your attention on getting the best loan. This is called creating a distraction, and is in accordance with the tell you anything to get you to sign up school of thought.

When it comes time to close, he'd be licking his chops due to the fact that the client paid $3500 (or whatever one point comes to) cash upfront, and when he delivered something different, the client believes they have no choice but to agree in order to save their money. I've offered people in that situation a loan that was more than 1 point better, and they still went with the guy who had rooked them out of the 1% upfront, because they're worried about that cash when they should be worried about the rate/cost tradeoff.

He also went to the builder's lender

If I'm interested in getting my monthly payments down lower and I consider getting a 5/1 ARM loan to do so, is that a completely horrible idea, or could I refinance into another 5/1 ARM after the first five years to continue getting a pretty good rate, if for example the 30-year fixed rates have gone up a bunch in 5 years?

That's precisely what I've been doing for the past fifteen years. On the other hand, with the difference in rate/cost tradeoff being so narrow right now between a thirty fixed and a 5/1 (roughly a quarter of a percent interest rate wise), there's a strong argument to be made for the loan you never have to wonder about. Where I thought I would never have a thirty year fixed rate mortgage, I'd consider it if I were going to buy or refi right now. Don't know if I'd do it, but I'd think about it. (And at this update, thirty year fixed rate loans are actually the lowest rate cost tradeoff, at least in for A paper conforming loans)

80/20 No-down 5/1 ARM No pre-payment penalty Total loan amount: $379,900

80%, $303,000: 5.25% fixed & interest-only for 5 years, payment: $1329.65
20%, $78,000: 9.5% fixed for 5 years, interest-only for 15 years, payment: $601.50

Total monthly payment: $1931.15

Aside from the fact that the putative loans total $381,000, which is likely picking nits, I don't believe that loan exists, as 5/1 ARMS are running up around 6.25% at "par" right now. I couldn't find a lender that is even offering 5.25, no matter how many points you paid, and that's wholesale. He attached some GFEs which show $4180 in points charges (plus $875 in pure junk fees and about $150 in well padded costs on the first loan and shorted the likely interest, in addition to all the real stuff), adds $5000 that he's evidently already paid to the closing costs, requires another $3200 plus at closing, and still comes up with final first loan of $303,920.

On the second, the loan required another $1140 in fees but a loan amount of only $75980, thereby balancing the 80/20 requirement correctly, at least, thereby negating the nitpick in the previous paragraph.

(I'd also shoot his agent for not negotiating any givebacks, given the current market, except I'm prepared to bet he didn't have one. I've covered some of these issues, precisely as they relate to this particular situation, at the end of this article), of which which I'll reproduce the relevant section here

Unfortunately, you've already (probably) put a deposit down and you said in subsequent email that the home has appreciated while it was being built, so the developer has incentive to throw roadblocks in your path. Your transaction falls through and not only do they get to keep your deposit but they can turn around and sell the home for more. Preventing this kind of nonsense is what buyer's agents are for (it also gives you someone easy to sue if something goes wrong!). Unfortunately, most developers will not cooperate by paying a commission to buyer's agents for precisely this reason, which means that the average buyer will decline to pay an agent out of their own pocket and try to do the transaction on their own, which leads to situations like this.

Now getting back to the loans, this is how lenders Play The Game of getting you to sign up. They are looking for you to build what sales folk call commitment to a loan before they tell you the whole truth - usually by springing it on you at closing. They make it look better than it is for a while. They can do this because the only form that has to have correct accounting is the HUD 1, which comes at the very end of the process (It's usually prepared by the escrow officer. You should get a provisional when you sign loan documents and a final within 30 days of the end of the transaction). In the case of a purchase, this is usually at the last possible instant, which means that if you haven't prepared a back-up loan there is no time to get one before the deal goes south, which means your choices are limited to sign or lose the property, the deposit, and all that time and aggravation. This is providing that you even notice. Industry statistics say that somewhere around half the folks won't, and even on refinancing, where people can almost always just keep the loan they have without bad consequences, eighty-five percent or so of those who do notice will cave in and sign.

Caveat Emptor

Original here

Carnival of Personal Finance

Milky Way grows in stature

Actually, no. It's always been essentially the same size. It's just that we measured again, and we now think it's bigger than we used to.

Of course, that's mostly pointless if we're stuck on one planet in one solar system out near the fringes.

Want to gripe about stolen elections? here's a stolen election

When I checked my traffic on New Year's Day, it appears this site got its 3,000,000th visitor sometime early on December 14th.

Thank you all for stopping by.

Microsoft's Zune players freeze on New Year's Eve

Thousands of Microsoft's Zune media players -- the software company's answer to Apple Inc.'s iPod -- unexpectedly conked out Wednesday and showed users an error message, prompting references to "Y2K for Zunes." The problems appeared when people tried to start up their devices.

Good thing Microsoft doesn't make airplanes. Or hospital equipment.

And if Microsoft made my parachute, I'd think very hard about staying with the airplane that's going down in flames.

Offshoring Is One Sure Thing

In the meantime, someone should ask Gov. Richardson exactly what tech jobs can't be outsourced. Moving skilled U.S. jobs offshore may be a trend that's already taken off, but why should Washington provide the airplanes? Perhaps that should be question No. 1.

I don't want often say this, but Michelle Malkin has this one absolutely correct: Jimmy Carter & Habitat for Humanity built shoddy homes

But now that it's striking a media darling charity, the legal environment that has raised the cost of housing for everyone substantially is suddenly something bad.

These defects are survivable. Given the benefit of a Habitat for Humanity home, I would happily deal with a cracked slab or settling or repair issues.

Those who have the same issues who bought their homes from a for-profit developer have some additional justice on their side - but they should still be required to come up with specific reasons why the developer is liable. If I want to sue my neighbor, I have to convince a jury that neighbor did something specific and actionable to me. But in the case of suing developers or the wealthy in general, the case that gets made is essentially, "They're wealthy and I'm not!"

via Instapundit, Howard Jarvis Taxpayer Association says we are facing a Pension Tsunami

Actually, he tells only part of the story of malfeasance. When California and municipal coffers were full with property taxes from the real estate bubble, the correct thing to do would have been to pay down debts and invest for the inevitable crash or at least slowdown. Instead, they not only spent all of the extra on new projects, but committed themselves to continuing to do so for the forseeable future, and borrowed even more money on the assumption that the good times would not only continue unabated, but accelerate. They invested less money than they were supposed to setting aside (per their own actuaries), but in highly speculative fashion which might have made up the shortfall if the good times had somehow continued. And when the inevitable collapse finally arrived, they were left in basically the classic Wile E. Coyote position by their own doing.

The financially prudent thing to do was obvious all along, but fiscal prudence doesn't translate well into buying votes for incumbents. Classic Roman bread and circuses. Look into the real - economic - reasons why the Roman Empire fell apart. If you don't understand now, you will have your eyes opened.

The parallels with US Politics of today are eerie. And the largest differences between the situations aren't working in our favor.