Thursday, March 26, 2009

Foreclosure Flood

As appeared in the T&G March 2008 AD

To Whom It May Concern and It Should Concern All Americans.
I have been a licensed Massachusetts Real Estate Broker for nearly a quarter of a century and have seen the industry evolve. Every upward and downward market spiral has a rational explanation for its occurrence (especially after the fact!) However, I have never experienced a market quite like this one. Although a correction was anticipated no one perceived its potential severity. Because we are a global economy this condition has had worldwide consequences.
Real Estate, like any commodity fluctuates with supply and demand, a basic economic principle, but its impact on the entire economy is now evident. Presently, we have an abundance of properties on the market, largely due to the sub prime fallout but also due to jobs being lost or out sourced to foreign countries, the increasing cost of food and health care and the horrendous prices of home heating fuel and gasoline which renders borrowers unable to make their mortgage payments.
In December 2007, I e-mailed the Governor’s Office with what I considered to be a reasonable, fairly simple and most importantly rapid resolution to the “foreclosure flood”. I followed up with several phone calls which were not returned. Nor was my e-mail even acknowledged in any form. Let me tell you if I did not return phone calls or e-mails I would be out of business! In February 2008 my call was returned and I was informed that the Housing Secretary was exploring all available options. I have yet to hear any version of my plan suggested by any bureaucrat.*
At any rate, here is my suggestion to tunicate the hemorrhaging! I think it is a Win-Win proposal. The borrowers get to keep their homes and the lenders get the full amount of their investment back. And, people who have to sell their homes for whatever reason, job relocation, economic or personal factors would not have to compete with as many bank owned homes thus fostering stabilization of prices. Both lenders and borrowers must take responsibility for their decisions and taxpayers who are already overburdened by correcting choices others may have made should not be forced to pay for these mistakes.
Many borrowers did not due their “Homework” regarding mortgages. They initially took loans at a discounted rate in order to purchase a property. Now that the rate has adjusted upward, they can no longer make their monthly payment.
Certain lenders can not be held harmless either. Sadly, there are several predatory companies that prey on the less informed public.
Here is my solution if refinancing is not an option: Do not re-write the original note just change the terms. If a borrower can still make the initial monthly payment but not the increased adjustment, extend the term of the note to the number of years that would equate to the total pay back to the lender, a simple mathematical equation. Even if the note had to be extended to a term of 40-50 years or more to allow the borrower to continue to make payments that they could afford would enable the borrower/homeowner to keep their home and credit rating so that when their circumstances change, they can either sell in a better market or refinance their note. This would also not require a new appraisal and could be done between the original lender/ servicer and borrower involving only the parties responsible for their actions. Since so many people financed 100% of their mortgage and now their homes are not worth what they initially paid for them this would not become an issue as the lender who originally issued the note would have to take on the risk that they were so eager to do in the first place. Again, placing the responsibility duly on the parties that are involved and not the taxpayer. Obviously, this won’t work for everyone but I believe it would work for enough people to make a difference and help restore consumer confidence which is so desperately needed at this time.

Sue Meola, GRI, CBR, LMC
West Boylston, MA

* It is unfortunate that this idea was sent to the Governor’s Office in 2007 and there was no response from government. I then approached Rep. Jim McGovern who informed me of a public gathering in Marlboro in September 2008 at which Rep. Barney Frank was unveiling his “mortgage solution”. I repeatedly and vehemently conveyed my idea to Rep. Frank and it was summarily and condescendingly dismissed…and what is Congress doing now?…exactly what I suggested in December 2007! Think of the homeowner’s that could have been rescued and what a different housing market we might be experiencing today if only politicians listened to the people whom they profess to represent! UP NEXT: Government’s reward of BAD Behavior

Where's My TARP?

March 17, 2009

Where’s My TARP?
I am a scared and very, very angry American. Angry, because this great nation of ours, despite what inept politicians rebuff, finally admit we are experiencing a recession… Scared, because we are rapidly losing our democracy at the hands of our own government. These same politicians who live in their ivory towers, fly to the Vatican, enjoy the best healthcare, daycare and pensions, all at taxpayer expense, vote themselves raises, accept “perks” from lobbyists, which most assuredly influence their votes and bank balances as well as those of their “friends’ and family and as our employees decide when they will and won’t actually do the work that they were hired to do by the people.
No wonder these positions are so coveted…especially when most candidates don’t have a clue how business actually works. They were so exhausted after being “in session” laboring over the Stimulus/PORK package that apparently none of them read, they rewarded themselves by taking a week off! I’ll bet most hardworking Americans and especially small business owners, who wear multiple hats would love to take a week off with pay after working overtime(which, incidentally is the norm not the exception for most of us)…and still get paid not to work! And here lies the first problem with government…they use our tax dollars to pay people not to work…and reward bad behavior starting first and foremost with themselves! Wouldn’t you love to get paid for not doing your present job while applying for over a year for a more lucrative one?
i.e. The Elections
Elected/Appointed “public servants” can not run for another office while currently holding one. If they do, there must be a consequence for their action as in the private sector, a risk/reward ratio. Politicians must resign from the office presently held and reimburse the taxpayers for the cost of a new election to replace the position being vacated. Candidates vying for and ultimately holding public office must be held to a high moral standard, be accountable to the people as well as maintaining complete transparency…a chorus refrained repeatedly during the last election but one we are still awaiting. I guess the CHANGE that we were promised referred to all that we will have left in our pockets after Congress taxes everything but the air we breathe. I know my $13/week stimulus will make a real difference in my life…now I might be able to get a bagel with my coffee!
Suggestion# 2
Candidates running for office would all have 1-3 months prior to the election to campaign. Each would have equal funds to work with as their first test of fiscal responsibility and creativity working within a finite budget. This would eliminate special interest groups and lobbyists from securing influence and preclude candidates from “buying” elections.
Term Limits/ The Washington solution, in fact, the government(local, state) solution is to “throw” hard earned taxpayer dollars at a problem and if that doesn’t work, “throw” some more…in an attempt to correct an issue that they had a hand in either directly or indirectly. The Mark to Market rule in banking and of course, doesn’t forget the Community Reinvestment Act which was the catalyst for the housing crisis. What I find so irritating is how government continues to reward “bad behavior”. Consider our new Treasury Secretary, who is also head of the IRS, who neglects to pay his taxes and according to Washington is the best candidate that America has to offer from all of its citizenry. Are you kidding me? Not to mention his amnesia when it came to the AIG “big wigs” multi-million dollar bonuses funded again by American taxpayers. Have you noticed that every time Geitner speaks the stock market tanks? Where has the press been when it comes to investigating and being the “watch dog” for the people? Why aren’t they finding the connections between campaign funds and AIG?...follow the money …it will astound you!
Hard working Americans will now have to postpone retirement or even work ‘til they drop while still contributing to another ill run government program…Social Security that will probably be bankrupt by the time most of us “qualify” to receive it.
Our homes, that not only serve as our refuge but likewise our “nest eggs” have plummeted in value. This was inevitable when Congressmen like Chris Dodd, Banking Chair, gets a “sweetheart deal” on his mortgage from the very lenders he is in charge of regulating and claims he didn’t realize he was getting such… Banking 101? Barney Frank, Finance Chair, who strong armed Freddie and Fannie which ultimately diminished qualifying requirements by lenders was instrumental in placing us at the point at which we have now arrived. What experience have these two ever had in these respective fields and for that matter what have any members of Congress had in the private sector? It is a lot easier to make the rules than follow them. It is a lot easier to criticize and regulate than create and generate. Term Limits would preclude politicians from wielding the power to which they have so be come accustomed. Remember the old adage, Power Corrupts and Absolute Power Corrupts Absolutely! If, as American citizens we represented ourselves instead of allowing career politicians to determine our destiny, the constant turnover of members would reflect the needs of the public and not the self-serving wants of the politicians.
As a pre-requisite for those holding public positions especially those that entail a working knowledge of finance one must have had to balance a budget in the private sector. How difficult is it to spend money that does not belong to you? And when you run out you just print some more or borrow it from a Communist country?
Inflation Beware!!!
Who can fathom that Congress would “give away” millions of our dollars to corporations with no caveats only to “grandstand” now by “bullying” the VIPS of these companies to deflect their own stupidity, lack of business acumen and common sense with an arrogance that is unbelievable. These same politicians who have the audacity to even question the mode of transportation by which these “execs” arrived in Washington ought to take a look in the mirror. These companies claim that they had prior contractual obligations to pay out these bonuses to the “best and the brightest” or they would seek employment elsewhere. Aren’t these “whiz kids” the reason for the necessity of a bailout in the first place? Again, bad behavior is rewarded. If these same companies filed for bankruptcy or collapsed…then what would these contracts be worth…NOTHING!

The Tarp/ Stimulus- Renegotiate these bonuses and fire the parties responsible for the decisions made that jeopardized the solvency of their respective corporations.
Instead of bailing out these ill run companies divide the TARP amongst legal, taxpaying Americans i.e. give each $60k(that’s about what it will cost each of us)…this would be an immediate stimulus. Those in foreclosure could pay down the balances on their notes, which they rightly owe. Finally, those responsible people that pay their bills, educate their children and pay their taxes on time can either save,(which would help the banks) replace lost retirement funds or splurge a little and buy a new car or replace an old appliance or just purchase. This would infuse the economy immediately…this would be a true stimulus and the bonus is that it is already our money that we sent to Washington!
…Greed is what catapulted us to this point in time. Greed for Power, Greed for capitol and material possessions. Our forefathers must be rolling over in their graves as they watch the antics of our present government. When the ends justify the means and the win at all costs attitude prevails over integrity we are in trouble. Doing the right thing is never the path of least resistance or we would all choose it the first time. I hope our leaders will make an honest attempt to do so or I truly fear the consequences.
On the upside the housing market is starting to correct itself.(without the aid of government) It will take time but it is moving in a positive direction. Interest rates have never been better and first time Buyer incentives are available. If you have any questions, about purchasing your first home or are looking to upgrade, please give us a call or email.