I had some time today to write a few words. I’m waiting on a response — I spend half my life waiting on responses. Some people are prompt responders, some are slow, some are UNresponsive.
I was talking with the head relocation person for Gulfstream Aerospace this morning and she was telling me a story about one of Gulfstream’s employees, head muckity-muck of hiring, and how she made a referral to a local agent to help him with housing relocation who never called him. HEAD OF HIRING AT GULFSTREAM AND THE AGENT DIDN’T RESPOND! How does this happen?
Gulfstream is our biggest employer. She also confirmed what a lot of us have been talking about — new hirees coming to Savannah for employment are choosing to hold off on buying. We both concurred it’s the psychological effect, mostly. There is a some legimate cause for fear of the unknown in a shaky market and it’s understandable that people just starting in a new place might be afraid to make the committment to buy a home with so much uncertainty; however, underneath all that is a market opportunity to buy at the lowest point they’ll likely buy at for quite some time.
So, we wait. I am not into convincing people to buy when they are afraid. I give my opinions, identify them as such, show them some numbers and probabilities based on those numbers and let it go. In midtown Savannah this past twelve months there has actually been an increase in home prices — downtown is flat with a slight decrease. But, we wait. A few buy, but the rest, we wait and see how things go for a little while longer.
I have a suspicion that the psychological effect will break after the elections in November. I think many people subconsciously consider that a turning point, and end of some sort, a beginning of some sort. I don’t think anyone knows why, and most don’t consciously hold that position, but they will be affected none the less.
It WILL be a new beginning after eight years of Bush (eight years of any president makes us weary). I personally don’t put much stock in changing administrations within an unchanging machine, but I believe many people do (and perhaps this election I do too) judging from the talk and the reactions and the polls and such.
I think Mccain will win, but I’m not positive. What we have a yearning for is CHANGE (yes, CHANGE, there’s that word), but I’m not sure that McCain is a big enough change for the American people, and I think Obama is too much of a bad change for the American people — then to think about Clinton after eight years of the other Clinton, then there’s that Bush/Clinton/Bush/Clinton trap — where do people go this election for a FRESH change? This is an odd situation for voters. It’s too bad a viable third party hasn’t arisen — this would be a good opportunity.
I truly do fear that Obama might win as a reaction to no good choices, and he has beaten the drum of CHANGE loud enough that people might close their eyes, pull the lever and hope for the best. I believe Obama is the worst choice. He has socialist ideas, but no one understands socialism well enough to recognize the potential danger. Not that he would have the power alone to effect any great changes, but it would further desensitize people to socialist ideas. In a way, sticking closer to true definitions, Obama would be a new-age Statist, in the sense he would have private ownership as it is, but attempt to use government control to make private ownership meaningless — that is if he had his way. But just influencing young people to believe that government SHOULD control free enterprise is dangerous for our future. Socialism would be goverment ownership of all enterprise and not even Obama could believe that’s possible in the US — but it is possible to give government enough control over free enterprise to create a new-age Statism.
Statism (or Etatism) is a term that is used to describe:
- Specific instances of state intervention in personal, social or economic matters.
- A form of government or economic system that involves significant state intervention in personal, social or economic matters.
This is the danger of an Obama presidency — the influence he would have in pushing free enterprise further under the control of the state, making it more desirable to give up freedoms to a “compassionate” government that knows how best we should all live. It could be disastrous for freedom in years to come if this direction is accepted, embraced and committed to.
Private ownership is important to us as professionals in real estate, so we should be paying close attention to this election. It is people like us in the very midst of free enterprise who can be affected most negatively by more state control over private matters. Oh, it’s not likely to affect us immediately, but if you are concerned about the next generation and the generation after that then you should be concerned about direction. And not just as realtors, but citizens who are tasting a newer form of freedom on the internet as we are all connected in unique ways we never knew was possible. A controlling, statist goverment will find the internet troublesome as time goes on as it will all forms of free expression and true diversity.
Read the history of statism in other countries if you want horror stories that are real, or if you think this is an exaggeration. It was compacency and misplaced trust that got them, too.
Todd says:
Correction – a Bush or a Clinton has been in the White House since 1980 ( That’s 28 years ).
If there was a candidate that I thought agents could rally around it would be Obama, contrary to the status quo propaganda in the above post.
Housing, lending and the associated industries are in ruin. Pick someone who isn’t beholden to maintaining the status quo. McCain was born in 1936, he is not the right person to think of NEW ideas to solve today’s problems.
April 21, 2008 — 3:22 pm
Tom Bryant says:
Mike is stating an opinion; that hardly qualifies as “propaganda.”
I wouldn’t consider voting for Obama for these reasons alone:
1) He is on record as favoring raising the capital gains tax rate from it current 15% to 25-30%.
2) He does not want to extend the Bush tax cuts which expire in 2010.
3) He wants the government to run health care. I can’t think of anything more personal, and consequently anything I want to see the federal government less involved in, than my family’s health and medical decisions.
He promises relief to the masses by taxing the “rich”, but like John Kerry, he considers anyone making over $200K as “rich.” His rhetoric blasts greedy CEO’s and billionaires, but his tax policies would have a bigger negative effect on small businesses.
April 21, 2008 — 4:43 pm
Mike Farmer says:
“Housing, lending and the associated industries are in ruin. Pick someone who isn’t beholden to maintaining the status quo. McCain was born in 1936, he is not the right person to think of NEW ideas to solve today’s problems.”
I don’t think anyone in government has answers to these problems, especially Obama. As a matter of fact, I think government intervention has been a contributor to the problems. More and different government intervention is unlikely to prove effective.
I think the whole “problem” is in the notion that government of any sort can fix free enterprise problems.
But out of curiosity, please explain how Obama will solve the problems of housing and lending and associated industries.
April 21, 2008 — 5:23 pm
Robert Kerr says:
I have a suspicion that the psychological effect will break after the elections in November. I think many people subconsciously consider that a turning point, and end of some sort, a beginning of some sort.
Turning point or not, who’s going to buy the houses in November?
With a median family income in Savannah of ~$40K, and a median SFH price of ~$185K, 4.6 times median income, in the absence of ninja financing, how can families afford to enter the marketplace?
April 21, 2008 — 6:51 pm
Dan Sullivan says:
More Bloodhound Real Estate topics, less politics. That’s how I’m voting.
April 21, 2008 — 8:23 pm
Terry McDonald says:
“I think the whole “problem” is in the notion that government of any sort can fix free enterprise problems.”
No, the problem is folks who don’t know their history, the same ones “doomed to repeat it”. They’ve “managed ” the economy the way you want it before, you just don’t know it, or pretend not to know it. The government had a hands off policy on the economy, just like you describe, right up until the election of 1932. I’m sure you’ve forgotten, like so many, that it was business, big business and small business alike demanding the government do something, demanding the new Democratic President do something, ANYTHING to get the country out of the financial ruin and the deep hole of darkness dug by those same “free market’s” (more often controlled and manipulated by a handful of very rich men) that had brought this great nation to its knees.
Last week I saw the movie Leather-heads, and while it struggled to rise above average, it was about “professional” football in the 20’s. Problem was, it looked more like mall ball, because they had no rules,everybody was just holding everybody else, fights always breaking out.
Thats what our economy looks like when there are no rules. Government, through our elected officials and in consultation with all the teams, (stakeholders) makes the rules (policies) for doing business in the US. Then, there is an enforcement mechanism, from the Executive branch, (officals) and on some matters a judiciary responsible (the commissioner and instant replay) for enforcing these rules.
So how’d we get in the mess we are in? Why did the government have to bail out Bear Stearns to the tune of $30B (bail out our economy really) This administration and it supporters decided they really didn’t need five officials at the football games so they just sent one, after all, they teams won’t cheat. And when all of the players were piling on one- Bear Stearns- they went in and pulled them out using your money and mine– actually using Chinese money, borrowed from your children and mine.
November will bring a welcome change in Washington. I’m all for having an ongoing “rules committee” like the NFL that constantly examines the state of Federal regulations. Most provisions and regulations offered by Congress should sunset after 5 years, or re-prove their necessity and effectiveness. New programs should have to prove it annually. I am all for accountability. I’d love a whack, a free hand, at the Federal budget.
I still believe as our founders did, that we have the greatest form of government on earth.
It’s just that it has been broken by those who didn’t believe in it.
Last, it is no accident that the US became an economic superpower after the war. Through effective regulation, the US government stabilized first the banking industry, then the stock market in the 30’s. Business then knew what to expect,they knew the rules. At the end of the war, the US established the international trading system- through he Bretton Woods agreement- that has allowed free trade to flourish and enrich the world- the international rules. Then in the post war, our government launched the most successful government program in the history of the nation- the GI Bill, or the Veterans bill that sent millions of Americans to college and helped them buy their first homes. Abroad, they invested in Europe through the Marshall plan, and stabilized democracy in Western Europe and kept the Russians out at the same time. And there were those who voted against these programs then, saying we shouldn’t be using taxpayer money to help our veterans, or foreigners… sound familiar?
In November, we will put intelligent thinking leaders in charge again, and I hope we as a nation demand their best and hold them accountable.
If we do that, optimism will come back, the market will turn, I can’t wait.
April 21, 2008 — 8:53 pm
Dave Barnes says:
“More Bloodhound Real Estate topics, less politics. That’s how I’m voting”
Ditto.
April 21, 2008 — 9:02 pm
Greg Swann says:
> The government had a hands off policy on the economy, just like you describe, right up until the election of 1932.
This is false to fact. The purpose of the 1789 Constitution was to interpose the Federal government into what had been largely free commerce. The Federal government grew steadily until the Civil War, after which it it grew at a much more dramatic pace. During the Progressive Era at the start of the Twentieth Century, intrusions into commerce grew at all levels of government, with the most grievous intrusion being the Federal Reserve system. Governments all over the world pumped their economies full of fiat money all through the teens and twenties. The stock market collapse of 1929 was caused by this hyper-inflation. As is typical, government offered more poison as the antidote for its past poisonings, massively increasing in size. By forbidding markets to self-correct from the damage done by past government intrusions, the Great Depression ensued. The United States became a global economic power because its capital investment per head exceeded that of other nations. This is all well-established economic fact.
It is plausible to argue that the history of the United States since 1789 has been a transition from Mercantilism (legislation written by and for the benefit of the merchant class) to Fascism (putative private ownership coupled with comprehensive state control of economic resources). It is not plausible to argue that trade in the United States since 1789 has ever been fully free. To the contrary, the progression has been all the other way, with that progression toward greater and great state control of commerce accelerating through time. And while actual free trade is not without defects, national or even global economic disasters are only possible where governments exert comprehensive control over the economy, especially over the money supply.
I don’t want to quarrel about this. The economic history of the United States is well-documented, most notably by Friedman. The underlying economic theory is very well-defended, particularly by Hayek and von Mises. If you are like most Americans, you were fed a line of bull by state-funded schools, but that’s a correctable nuisance. It remains that virtually everything we identify as economic problems are artifacts of government, not of free trade. Increasing the power of the state will result in even greater disasters, leading in turn to calls for even more government. This progression, if unchecked, will lead to full-blown Totalitarianism.
April 21, 2008 — 10:06 pm
David Sherfey says:
“More Bloodhound Real Estate topics, less politics. That’s how I’m voting.”
Yup, indeed but….since Mike started it, what the heck? The diversion is refreshing…
The United States of America is no patsy, and even our current guy can’t screw it up bad enough for it not to survive. I can’t (well, I can actually) imagine what McCain will look, sound, or act like in four years, and I cannot fathom listening to the sound of Billary for even one more second (please make it stop!).
We are not dopes, and we know that very little of what any of the three of our choices say or do right now means a whole lot for the true future of our country. I will take my chances with an unknown like Obama, hope like hell for a miracle on the order of Abe Lincoln’s leadership, and see what happens. Follow the money – I like the way Obama has raised it. He is outspending Billary because his peeps told him to do so.
Remember, we get to do this all over again in four years. Country Joe told us we’re all gonna die, but some of us are still here, right? Nothing is ever going to be perfect, and the promise of O is better than any we have had since ’68. Let’s give the peeps a chance to do something cool – if they don’t, well, what the heck?
What does any of this have to do with Real Estate? I’ll bet on this: Bloodhounds are going to be making money four years from now regardless. THAT won’t be a what-the-heck, baby, it’ll be a what it is…
April 21, 2008 — 10:45 pm
Allen Butler says:
Sorry Folks, Greg is right. Like it or not, government is the problem, not the solution to the problem. Seems I’ve heard that before. Oh yah. . .that was Reagan.
Allen
April 21, 2008 — 11:12 pm
Mike Farmer says:
“With a median family income in Savannah of ~$40K, and a median SFH price of ~$185K, 4.6 times median income, in the absence of ninja financing, how can families afford to enter the marketplace?”
The $40,000 number is skewed. We have lots of wealthy people moving into the Savannah area, and most of the growth is outside Savannah about 15-30 minutes away from the city. We’ve done well here sonce the beginning of the 90s and it appears growth has just begun — they are presently expanding the downtown area by 54 acres.
Look it up by Googling Savannah River Landings.
Since no one like politics, I will not feed the argument, but like Greg, I recommend Ludwig von Mises as a starting point to understand the history of this topic. Read “On Human Action” and “Socialism”.
April 22, 2008 — 4:44 am
Mike Farmer says:
since
BTW — I’m a little surprised at some of the responses. I’ll post more real estate focused topics here in the future.
April 22, 2008 — 4:47 am
Terry McDonald says:
No, we can all select the revisionist historians of our choice, obviously a benefit of superior private school education.
However, one can not argue with the economic success of this nation, all post 1932, post New Deal, and an activist government, nor the boom and bust economy that preceded it for 150 years.
And I know this is going to break a lot of hearts, but Ronald Reagan was WRONG on the facts- Government is Not the problem, Bad government is a problem. Our government is made up of people like you and me. Unaccountable big intrusive government is a Big problem. And I’d be the first to admit that both political parties are to blame for the last 30 years of bad government, or that this government has done little right since the mid-70’s… but that does not mean a free market solves all problems, just as it shouldn’t surprise us when you put an Arabian Horse Association president in charge of FEMA and be surprised when it fails in crisis.
Maybe you are all more informed than Winston Churchill, when he stated his belief that our liberal democracies were the worst of governments, except for every other type ever tried.
Maybe you are all more informed than Jefferson and Franklin who believed public education, and an educated citizenry were vital to a healthy democracy. One only needs to look to central and south America to see first hand the result of private education choice- now those are models of a corporatist government to follow.
But, breaking some more hearts here, the great Republican experiment with our nation is over. The country voted on R ideas in 2006, and the R’s were trounced.
Lower taxes does NOT lead to smaller government, neither your hero RR or the incumbent could do that.
Lower taxes and de-regulation do not grow an economy like investing in its future, and
Deregulation is not nirvana- no its Bear Stearns, Enron, The Savings and Loan Bailout, lead paint in our baby toys, the airline industry
(playing with 5 officials is better than one in football- and in our economy too because people cheat)
Either Obama or Clinton can beat John McCain, but Obama will have longer coat tails… enough I believe to increase the majority in the house and a get to a 60 seat majority in the Senate. Did you see the latest fund raising? Obama 44M, McCain 12M and Clinton… was it 8M? If thats a true expression of voter preference, I’d hate to be a R this year…perhaps that is why there are so many R retirements? And I agree with the writer on how Obama’s raising the money- he will be less beholden.
The great American experiment continues.
April 22, 2008 — 6:26 am
David Richey says:
I think that we seem to overlook the fact that people would rather own their own home, but due to the loss of jobs/income they can’t make their house payment. The Bush tax cuts for the wealthy (they are good because the money will create jobs) did not create jobs or increase pay checks. The “crusade” in Iraq has cost us dearly in many areas. We need to get back to where we were at the start of “Bush league economics” with a budget surplus and separation of banks and investors. Re-separate church and state.
We also need to vette the credit report scam that has specialized in error and ineptitude and thus forced people with “bad” credit into risky loans as a way to own a home. If the FICO score purveyors were made to adhere to the law and make their reports accurate a lot of this could have been avoided or blunted.
April 22, 2008 — 7:03 am
Greg Swann says:
> I’ll post more real estate focused topics here in the future.
Do as you wish, but take note that you heard no complaint from me. Most often the best way to understand something is by looking at it from one level up on the ladder. To see the instance, we examine it from the category, and to see the category we look at it from the class of categories. This is a very Greek way of thinking, and nothing of the Greeks should be alien here. Helping real estate professionals understand that government destroys wealth in the short run and destroys the capacity to create wealth in the long run seems like a pretty important “real estate focused topic” to me.
April 22, 2008 — 7:27 am
Greg Swann says:
> we can all select the revisionist historians of our choice
I cited three primary academic sources, two of whom won the Nobel Prize for Economics. As I said, I don’t intend to quarrel about this. If you want to understand economics, put down your newspaper and study economics.
April 22, 2008 — 7:35 am
Mike Farmer says:
Yes, Greg, I knew you would have no problem with it, but as a guest I don’t want to turn readers off to subjects they are averse to.
I, like you, think it’s one of the most important real estate subjects to consider if we care about prosperity and growth.
Of course, once I criticize Obama and the mindset he characterizes, the reaction is to label me as a right-wing propagandist rather than discuss the merits of my opposition to his left-wing policies — these arguments go in circles.
At least I’ve stated my position, and although any suggested proof, like reading Mises, will be dismissed as revisionist, it’s a stance, nevertheless, I’m ready to take and hold.
There are so many holes, assumptions and fallacies in Terry’s response, I’d have to write a book for my response, so I’ll let it go — everyone is free to find the facts and take their own stance.
April 22, 2008 — 7:43 am
Mike Farmer says:
It also reminds me of what Herbert Spencer said:
“There is a principle which is a bar against all information, which is proof against all arguments and which can not fail to keep a man in everlasting ignorance-that principle is contempt prior to investigation.”
I studied socialism for five years to come to my conclusions — noy in a private school, but on my own because I wanted to understand both socialism and capitalism and how ideas affect our lives.
April 22, 2008 — 7:53 am
Dave Shafer says:
Interestingly, FICO scores, errors and all, seem to be pretty adept at adjudicating risk.
April 22, 2008 — 8:09 am
Greg Swann says:
> I don’t want to turn readers off to subjects they are averse to.
I don’t want for you or anyone writing or commenting here to be inhibited. I sometimes refer to BloodhoundBlog as a salon or a living room, but the right way to think of it is as a cocktail party in a large home. If you don’t like the conversation that is going on right here, snake your way over to a different corner of the crowd. There is no reason for anyone to feel a need to play to the audience. That’s just the opposite of what I want.
We are what we are because we don’t give the people what they want, but, rather, what each one of us thinks they need to hear. If readers don’t like a post or a comments thread, they can skip ahead to the next. But I don’t ever want for BloodhoundBlog to be anything other than a place where thoughtful people can feel free to think out loud. This is how we learn, and, to be frank, my primary purpose for being here is self-improvement. If people want feel-good pabulum, it’s ubiquitous — more is the pity. But if real estate professionals want to hear arguments they don’t already know like the hymns in church, they come here. That’s as it should be. I wouldn’t want it any other way. I can’t imagine anyone else would, either.
Amending this: There are 20+ comments to this post. That’s how much people hate it. Be yourself, Mike. It’s all I ever wanted, and you’re great reading just the way you are.
April 22, 2008 — 8:14 am
David Richey says:
Dave, Your response on FICO scores is characteristic of someone who has not had to grappel with this very inaccurate and misleading system. A lot of buyers could have bought their home without a “neutron” mortgage. They would have paid less to start with and would be paying less now and probably would still be in their own home making their payments. The inaccurate, low credit scores are part of the problem- and not a small part.
April 22, 2008 — 8:39 am
Teri Lussier says:
>I don’t ever want for BloodhoundBlog to be anything other than a place where thoughtful people can feel free to think out loud. This is how we learn, and, to be frank, my primary purpose for being here is self-improvement. If people want feel-good pabulum, it’s ubiquitous — more is the pity. But if real estate professionals want to hear arguments they don’t already know like the hymns in church, they come here. That’s as it should be. I wouldn’t want it any other way. I can’t imagine anyone else would, either.
Beautiful.
April 22, 2008 — 9:02 am
Mike Farmer says:
Thanks for the confirmation, Greg.
Sometimes we think so much alike and have such a similar “sense of life”, it’s scary.
April 22, 2008 — 10:19 am
Greg Swann says:
> Sometimes we think so much alike and have such a similar “sense of life”, it’s scary.
🙂 I’m pretty sure if I went through your library to pick our your favorite books, I could keep the error rate under 15%. That doesn’t make either of us right, but it does make us a lot alike.
April 22, 2008 — 10:30 am
Peter DuPont says:
Thank you for the great article. The exchange of ideas and discussions are wonderful to read and have helped me with my business.
Lenders and Realtors do have to remember the government has helped us expand our business by the creation of FHA, VA, FANNIE, FREDDIE, and GNMA.
Keep up the wonderful work!
April 22, 2008 — 10:52 am
Robert Kerr says:
The $40,000 number is skewed. We have lots of wealthy people moving into the Savannah area, and most of the growth is outside Savannah about 15-30 minutes away from the city.
Mike, the wealthy don’t exist in a vacuum. The vast majority already own a primary residence and unless someone will buy their $400K home, that family can’t/won’t move up into the $500K home.
And likewise, all the way down the property ladder to the bottom rung. If new homeowners can’t get in, the conveyor eventually stops. It may take a while for the effects to ripple up to the top rungs, but given enough time, it will.
April 22, 2008 — 11:16 am
Dave Shafer says:
Really, low credit scores have no bearing on one’s future ability to make credit payments?
Hmm, the whole matrix is critically flawed?
Why?, How?, Evidence?
April 22, 2008 — 12:16 pm
Mike Farmer says:
Robert, what can I say, Savannah is doing just fine. It may collapse next year, but real estate has been healthy here for years. I had my best year in this profession in 2007 — this year is slower but homes are selling at all levels.
April 22, 2008 — 12:19 pm
David Richey says:
Dave, For starters take a look at this link:
http://tgalleg.typepad.com/my_weblog/2008/04/a-clarion-call.html
and after you are finished reading click on the link to “Maxed out”
The info regarding credit and credit scores is all to real. You are fortunate to not have had the frustrating credit “score” experience most people have had. And a lot of the problems these people have had are caused by
malfeasance and misfeasance by the FICO purveyors. YES the whole matrix is critically FLAWED. Well said!
April 22, 2008 — 12:47 pm
Dave Shafer says:
Wow, you make quite the jump from the initial comment on credit scores to all that. For the record, I generally don’t believe in debt consolidation loans for the exact reason the blogger said. Those credit cards just end up being jacked up again. And for the record, I am fully aware of the predatory nature of lending, especially credit card lending to college students. I have a great story about the GM credit card my mom had when she died that still makes me so mad that I refuse to entertain the idea of owning a GM car. So you are preaching to the choir here!
But what does all this have to do with the efficacy of FICO scores for predicting who will and who won’t pay back debt?
And finally, the statements in the movie info that mortgage lenders would rather foreclose on a loan than use good underwriting protocol is just… stupid. They don’t want to foreclose on loans because it costs them lots of money to do something they are not designed to do. They thought they would never have to foreclose on loans because the value of RE would continue to escalate and if the borrower got in trouble they could sell and at least pay off their loan. Now that was equally as stupid.
Finally some lawyer says that 90% of Credit reports have mistakes in it???? Mine doesn’t and I go over the scores with folks line by line and my experience says that they get it right over 90% of the time.
Credit bureaus have alot to dislike about them, but in general I think they are trying to get it right.
April 22, 2008 — 2:33 pm
Sue says:
Interesting political discussion. IMO the security of our country is the most important thing because without that, little else matters. The question becomes who can handle that most effectively.
April 22, 2008 — 6:53 pm
Louis Cammarosano says:
Greg Swan:
“We are what we are because we don’t give the people what they want, but, rather, what each one of us thinks they need to hear. If readers don’t like a post or a comments thread, they can skip ahead to the next.”
Contrast with Sam Zell of the Tribune
http://www.youtube.com/watch?v=LDy7vn7-LX4
April 22, 2008 — 7:09 pm
Ryan Ward says:
Take it easy here or you will have someone commenting on how we live in a democracy and that the constitution guarantees us the right to vote too! Neither of which is true.
I typically try to stay out of political commentary on my local blog, but, I too believe that a better understanding of these issues directly affects us in our industry. A perfect example of how these issue cross lines is Clinton’s take on how to correct the mortgage crisis by freezing rates – a government solution that has historically backfired and would backfire if it were to become law here as well.
I say fire at will with these posts if you have the itch.
April 22, 2008 — 8:36 pm
Mike Farmer says:
Sue, yes, security of our country IS a legitimate function of the government — that and policing the streets and handling matters of law in court — so when choosing a president, these three functions should be of primary concern.
Which candidate will be the best commander and chief, serving to promote our national interests and protect our borders?
Which candidate will lead the way to strengthen our police forces to provide law and order?
Which candidate will execute the office through appointments and influence in a way that promotes rational judges in courts of law who protect individual rights and freedoms?
April 23, 2008 — 4:18 am
David Richey says:
Dave, This kind of brings us back to my original comment on April 22, 7:03am. We wouldn’t have anything like the situation we do if people hadn’t lost their jobs/income. They would have kept making their payments.
Real estate values would not have taken a nose dive. The credit score problem needs to be fixed so people can get affordable mortgages, then real estate will sell and mortgage payments will be more fair (and payable).
You didn’t mention the Bush tax cuts and the failure of this move to pay off in the creation of more jobs. It was nothing more than a scam to cut taxes for the wealthy. And WE were dumb enough to fall for it.
So here we are, jobs continue to disappear, people are losing their homes at a record rate, and most homeowners are losing equity even faster. The middle class is disappearing. One last comment regarding your statement about mortgage underwriting and stupidity…
I think you are right on the money. It is greed driven with no regard for the borrower/homeowner – the people expected to pay every month. The proof is in the marketplace: this is a very corrupt system and eventually people catch on and walk away.
So we can continue to say “90% of the time” is good enough, blame the customer etc., or accept the fact that this is going to tear our country down and do something about it.
I wonder if we will ever have the collective will to not follow a political appeal to greed (like we did) and then suffer the calamity we now see.
April 23, 2008 — 5:07 am
Dave Shafer says:
Maybe I am dumb, but I simply don’t see the connections you are making. The government supplied their own sub-prime product called FHA where the interest rate was low. There was a funding fee to cover the expected increased foreclosure rate. My blog post on it is here: http://shaferfinancial.wordpress.com/2008/04/09/trouble-in-fha-land/
You and I probably agree on the basic premises that loans were given to folks who had no business getting them. Was that predatory? I am not so sure. After all what did the consumer really lose? If they put no money down, and had poor credit scores to start with their losses were only in terms of worst credit scores. If they had equity in the home and refinanced out that home equity then lost the house, once again they got the use of their equity. Now if they put money into the deal say 10% and then lost it, they did lose out, but that is really part of whole package. People do lose jobs, get sick, etc. and lose out because of it. The bottom line is that sub-prime mortgages were really meant to be bridge loans until the folks could get their credit scores up high enough to qualify for a loan under better terms. See this post: http://shaferfinancial.wordpress.com/2008/04/18/foreclosure-lessons-learned/
FHA loans are gaining popularity now because they don’t use FICO scores for underwriting. But that only means that we will all pay for the foreclosure rates instead of the private lenders. Just take a look at how many lenders have gone out of business, how many banks and Wall St. firms have seen their values decimated. So your rant on predatory lending seems a little short sighted. Yes, greed certainly paid a part in this but to not include the greed of folks who bought real estate with little or no money and expects to be bailed out now that they can’t make their payments has to be included.
But of course the majority of people even in the sub-prime market are making their payments and behaving in a responsible way. I feel sorry for the folks who lost their job or got sick and couldn’t keep up, but certainly don’t feel sorry for the folks who thought they could make a killing by buying a house they couldn’t afford and flipping it.
April 23, 2008 — 8:07 am
David Richey says:
Dave, Consider that a lot of borrowers were forced to use dangerous (to their financial health) mortgage products because of the abyssmal performance of the FICO purveyors. I have no remorse for speculators who lost out. Business has no guarantees. FHA will not cause the problem you think. Reason: FHA is to dysfunctional to do enough loans to endanger anything. They have a proven track record over time and have a reserve built up (from the fee’s you pointed out) to cover losses.
My concern is that nothing is being done to curb the violations of fair credit scoring that had a very large hand in driving borrowers to use preditory mortgage products in order to get a home of their own. If people were able to get fair treatment when faced with credit malfeasance we would have had a whole lot more mortgages that did not explode and cause them to lose their home. You can’t look the other way and think that this will fix itself. And now the results are affecting us all and does threaten the real values of this country.
April 23, 2008 — 9:06 am
Dave Shafer says:
I simply don’t buy this credit malfeasance argument. When I had a client with poor credit scores I went over the credit report line by line with them. Only occasionally, did they say there was wrong information on the report. And frankly, most of the time this wrong information if corrected wouldn’t have changed their scores significantly.
Read my FHA blog post. FHA is now in the red!
Used to be you could go down to FICO 640 at least and still get a conforming loan. Scores low enough to capture most anyone that has a decent track record of paying their bills.
I got someone with a recent BK and 650 FICO a fixed rate of 7% last year. Nothing predatory about that rate!
April 23, 2008 — 1:24 pm
David Richey says:
Dave, I complement you on helping someone who is deserving get a good mortgage. That is a very important way to “give back” for all you have received.
Re: FHA – Couldn’t happen to a nicer bunch. Unfortunately, FHA will stick around like a ring around the bathtub. A reminder that government intervention in the wrong places does not work in the long run and will hang on forever.
Our problem is that government intervention doesn’t seem to show up in the right places. You are fortunate to have a client base that only occasionally has a FICO score problem. Great work if you can get it!
Reality is that there are huge numbers of people that are left out of the running for a home because of the
extreme difficulty of correcting a credit report that has multiple and many duplicate errors and much misreporting. Some of the reporting is legally actionable but people are not aware of that fact. And, humans being what they are, have taken what they thought was the path of least resistance and obtained a mortgage product that was booby trapped.
We can say “caveat emptor” and look the other way and get the results we are faced with now. Or we can somehow find the collective will to face up to reality
and start to do something about it. It has to, sooner or later, start somewhere. Someone like you, who doesn’t have daily multiple experience in this type of situation can delve beyond your own world and consider that there are things going on that you weren’t aware of and start to realize that this is seriously affecting all of us. I think you did the right thing by engaging in this discussion. I hope more will do so.
April 24, 2008 — 6:10 am