The Fixx (not the band)

An idea came to me yesterday while reading and listening to various opinions and objections regarding the stimulus package. It seems there is a consensus of concern about how to use the money to make the most immediate positive impact on the economy. How do we get it into the system WITHOUT the banks snagging it and sitting on it? What, if anything, will motivate banks to make loans, and get over the “failure” paranoia?

Answer: government backed loans i.e., FHA backed mortagages for refinance or purchase, with a loan limit raised to $2,000,000.

The benefits of such a program, my best guess, are as follows:

1. There is no immediate government outlay of cash, except in the cases where banks need it for solvency;
2. Home buying and refinancing would ensue immediately. Strict lending “standards” regarding borrowers’ ability to repay such loans are already in place. In fact, they are too strict. I imagine we would be shocked at the number of current non-defaulting homeowners that would be unable to qualify for loans equal to the mortgages they currently have. That is not acceptable. The fact that many are able to meet their home loan obligations doesn’t mean they aren’t hurting. Between job instability and a huge wave of the so-called “Alt-A” loans ready to reset to higher rates, there exists a potential tsunami of defaults. Why wait for the wave? Get these people some relief now.
3. The majority of home loans that banks are making now now are FHA loans. Banks like these loans. The profit is good, and they are government backed. The problem is that the limit is far too low to help stave off the aforementioned tsunami of defaults which will arrive courtesy of loans that substantially exceed current FHA limits.
4. Yes, there will be defaults for which the government will be stuck picking up the tab. However, the cost thereto will be far lower than the cost of the proposed stimulus package.
5. As I understand it, housing has led the way out of most recessions. Why should the current conditions dictate a different approach? There is too much on the line to be shooting in the dark, which is exactly what I believe this package represents. Home loans are a known. They are desperately needed, and I don’t see anything in the proposed package that offers direct help in this regard. Nothing will provide growth in employment faster, and at less cost in government funds, than providing a  substantial, if not unprecedented, boost to home lending.
6. I’ve never seen anything as weird as 5% mortgage money that no one can get. I’ve never seen the Fed discount rate at 0%. Doesn’t that mean anything? It means that we, the government, and the banks have to get over the paranoia that the NINJA loans (No income, no job or assets) will recur. Of course they won’t recur as long as no one can get a loan. The pendulum has swung too far, and it is strangling this country for no better reason than, “we won’t let that happen again”. COME ON FOLKS! How long are we going to wring our hands about what has already occurred? No one can do anything about that. It is as if it has been mandated that by making loans impossible to obtain today, we are reaching back in time to punish those that already screwed up. The only ones being punished are those that are here now, working their respective tails off to make ends meet.

If you know why this would not work, I seriously encourage you to express your opinion with a comment on this post. We are smarter than the government, the banks, and certainly Wall Street, will give us credit for.

OUR FUTURE BANKERS

Sen. Maria Cantwell

Rep. Dave Reichart

Sen. Patty Murray

Here they are, our State Representatives. “The Cop”, “The Mom in Tennis Shoes”, and “Whatever, I Need to Work Somewhere”. I’ve tried to locate the email addresses for these folks on-line to no avail. What they offer is a form on their respective pages to be filled out, along with a message, and sent into the ether with the hope that it will find the intended recipient. I don’t care type my message three times, so I will convey my thoughts here, then send them a link via their little forms.

Folks [Dave, Patty and Maria], I have some concerns. First, all of you are too nice to be effective.

Dave’s done a pretty good job of moving up the charts in the House, making it to the Ways and Means Committee. But honestly Dave, how many years of hob-knobbing do you plan to invest before you say something that matters? Are you under the impression that you have to hang around for 10+ years before anyone will listen? Sure, everyone likes a nice guy. But what the country needs right now, and especially us out here in the Northwest corner, is some backbone. I haven’t seen your name in the paper since Nov 4, 2008, and that bothers me.

Patty is working hard for the improvement of the treatment of our veterans. Nothing could be more noble. However, how much more chatting around this subject is necessary? You’re the self-proclaimed “Mom In Tennis Shoes”. I suggest you put on those shoes and move on…to anything else. The veterans issues are pretty well known, but your approach is too nice, and too timid. You have a kick-ass issue there. Get LOUD, and get the changes done. Heck, you’ve been there long enough to throw your weight around. Call Oprah for gosh sake. I bet you have a ton of stories that would quickly fill more than an hour. At least call Larry King. But get moving on this thing. Once the Iraq war is wound down, you won’t get the interest level as high again. In fact, you may have already missed the mark.

Maria, Maria, Maria. What are we to do with you? You’ve been there how many years? And you have all the punch of a loaf of white bread. Then, out of the blue, I read that you plan to vote, or have voted, in opposition to the Bush proposed, and Obama endorsed, bailout plan. Yes, there is great uncertainty there. But there is no uncertainty concerning the state of the economy. Then again Maria, are you unsure about what’s going on out here in the land of reality? Maybe you should call your Mom. Ask her how her neighbors are doing. Maybe she’ll tell you about her checker at QFC that’s been working doubles for the last six months because her husband was laid off, not to mention the five year arm that is in its last 6 months before that bomb goes off. Since the Feds have cranked up the heat on the quality of mortgage applicants, the checker doesn’t qualify to refi the house she bought 5 years ago. I really have no idea what it is that you do. But I am acutely aware that I have not heard your voice, or seen your name in type……for…..years.

Patty and Maria, [Dave's off the hook because he wasn't in the game yet] I wrote to you prior to the first vote for the first allocation of money for Bush’s war in Iraq. Check your archives. It should be around. I still have the responses you sent back. At that time I warned you that funding the war was wrong, and that it would uncategorically create financial havoc in our fragile economy. I wasn’t anti-war in the pacifist sense. I was anti-war because it was stupid and fiscally irresponsible. No WMD’s, not much Al Quaida, but we sure did a good job of shortening the life span of about 500,000 innocent people. Although the actual number may never be known. I believe that I touched on the fact that it’s only been 150 years since our own civil war, and it was unreasonable to expect the tribes of Iraq to reconcile their differences and become a democracy overnight……because we tell them to. Anyway, I have to get this off my chest: I told you so.

Now, for the matters at hand. ARE YOU DEAF AND DUMB??!!??!! You, our Washington contingent are sort of the exemplary wimps of our Federal Government. Where is the incredulity at what is occurring ON YOUR WATCH? You can’t send out a statement about your anger at the early bonuses for the Merrill-Lynch crooks? You have nothing to say about the AIG $500,000 retreat? You’re OK with the same guys running the show, both on Wall Stret, and DC, that have run us into the ground?

It was the funniest thing in the paper today. It is being considered that The Fed become the big watchdog over all financial institutions, where they now only watch over 800+ banks. This may sound crazy, but my guess is that most believed, whether it was the SEC, IRS, The Fed, or even Homeland Security, that someone was watching the store. GEEZE, it was only a few years ago that the country was about blown away by ENRON. Doesn’t anyone learn, or follow-up on stuff like this? Corporate tendancies that indicate that business is not being conducted normally? Was no one at all paying attention when WAMU reported…..FOR YEARS… that it was booking unpaid interest on its negative amortization loans as profit….year….after year……after year? And everyone shuddered for months that might fail. Anyone who knew that one aspect about that bank knew, then and there, they were done.

So now we have a bigger problem, and it’s just like 1991, only worse.  Can you remember back that far? Desert Storm and the S & L crises. Things were going pretty good. Not as crazy as 2007, but pretty good. Then a bunch of overextended, overspeculating savings and loans failed, ala Charles Keating and the like. That was not a good time to apply for a loan. Like now, with the Feds looking under every bank teller’s chair, the pendulum swung waaay too far over, suffocating legitimate businesses that had done nothing wrong, but their business lines of credit were chopped, right when they needed them most, with no more explanation that we are getting today.

Here’s the big question for all three of you: if the banks are not going to lend the taxpayers dollars you keep giving them, what’s the point? I implore all of you to get incredulous, get loud, get angry, but get that money moving out the doors of those bank recipients, or all will be for naught. Are there no conditions on those funds? The money is just handed to these knuckleheads with no accountability about how to use it? There is no time limit?

Here’s an idea: the goverment should just take over B of A. Use all of the money to refinance those that have not already lost their homes, get those credit lines going again with the hundreds of thousands of small businesses across this country. People would start to feel good again in a big hurry. Waht happens when people feel good? They spend money. As for the car companies? forget about them. As evidenced by their collective private jet junkett to DC to plead for cash, they don’t deserve anything. Their labor union needs to have a long conversation with itself. It will have the time to do that when most of them are unemployed. The workers are arrogant, and the products are uncompetitive… have been for years. Heck, I just watched “An Inconvenient Truth” for the first time about a month ago. It was uncanny how accurate Gore’s auto production charts were back then. It was dead on with what we are seeing today. How can the auto industry base its product on the price of gas today when it takes, according to them, up to five years to design and build something new? They say they can’t afford to design more efficient cars? Can they afford not to? Again, that union has to have a VERY serious conversation with itself. The concessions they have won over the years may cost them all of their jobs. Heck, I was talking with a lady the other day that was saying that her father, a retired autoworker, was worried that he wouldn’t get his free, brand new car every year. What the heck does a retired guy need with a new car every year? If they have health insurance they’re doing better than about half the country to begin with.

My big concern is that darned pendulum. It has swung too far. No bank is sure if they can write a loan for anyone. Fannie Mae and Freddie Mac raised their fees?…….NOW? That’s just outright craziness. Another wrench in the gears. Again, they mismanaged themselves, so we get to pay for it. Seriously, folks. We need a Federal Bank, and we need it now. You say the government cannot be in the banking business? Well guess what? You already are. Either you accept the fact and learn to run it, or get ready to accept the blame when this thing really crashes on your head.

Damn Banks or…..Why Is it Taking So Long To Recover?

How do banks make money? They make loans.

What if they don’t make loans? They sit on the money they have.

What if they don’t have money to sit on? They threaten to fail and the Federal Government gives them money to sit on OR they “arrange” a managed failure with the help of the Federal Government, in the course of which they are taken over by another big bank that curries favor with said Federal Government.

The Federal Government, via the media, has made it clear that the recovery is not happening because consumers are not spending. Consumers? That’s the problem? How about the thousands of small businesses that continue to go out of business and cast thousands of “consumers into the unemployment lines because BANKS WON”T MAKE LOANS?

A $600 rebate is going to help me help the economy? Are you kidding? How about putting that $10+Billion sitting at B of A to work? Do you have any idea how much a billion dollars is? I’ve been told that one billion dollars, laid end to end, would stretch around the circumference of planet Earth 8.5 times. Think of the mileage we could get out of one billion dollars if it were put to work in the form of loans to the businesses that need them for payroll, inventory, expansion, etc.

I currently have several accounts at Bank of Arrogance, one of the kings of the BBB’s ["Banks sitting on Bailout Billions"]. I am considering moving my accounts to a credit union. I doubt B of A will miss me, but it is my small way of saying that I am appalled at the arrogance of these institutions. We have trusted our legislators to help the banks so that the banks will help us. New flash: IT”S NOT HAPPENING!

So the problem is us silly consumers. Chrysler is failing, so I should go out and buy one? I might consider it if my tax dollars hadn’t already been contributed to saving this failing company. Spend more money? Why should we spend to help the economy while the BBB’s sit on billions of tax dollars? I think there is failure on the part of The Feds to understand that we aren’t as stupid as they would like to believe. So let me be clear: WE’LL START SPENDING WHEN THE BANKS START LENDING.

I ask that you consider moving your accounts to a credit union, or to a BSCA ["Banks 2 Small 2 Care About", i.e., they don't make mega political contributions to The Feds]. You will find the service friendlier and the fees lower. All you will miss is that you won’t find a branch on every corner. The Boeing Employee Credit Union office is located right inside Safeway at the Bear Creek Shopping Center. It’s a lot easier to access than risking your life getting to the B of A on Redmond Way.

Happy New Year 2009

 So arrives another new year. Live your life!

As 2008 closed out amidst concern, if not angst, over the economic turmoil that has consumed our collective national consciousness, I am perplexed. Is it the power of the media that has us running for cover….because it tells us to? Granted, major financial institutions and auto manufacturers failing is going to grab headlines. But how many of us does that directly affect?

It would seem that it affects all of us if we are to believe what we are told. But seriously, unless you were laid off, how did Washington Mutual’s failure affect you? Probably not at all. If there are no new Chevrolets, will you stop buying groceries? Not likely. These events are not going to affect your day to day activities, unless you decide to allow it.

Suggestion: Turn off the tube. It’s an aberration of what is already loosely termed “news”. Read the newspaper instead. I like  page three when I want to learn something. TV news broadcasts are entertainment, pure and simple, garnering advertising dollars based on viewership.

Are you old enough to recall the debut of “60 Minutes” many years ago? Initially panned as doomed to fail, much like “Monday Night Football”, it broke all the rules and soared to higher ratings than the producers could have ever imagined. Today we have not only dedicated “news” programs ad nauseum, we have a host of “news channels”.

Other than the weather channels, I think it is all a bunch of poorly reported, inadequately researched, largely unverified, crap. Conservatives accuse “the media” of being too liberal. Liberals accuse the media of being too conservative. I think they’re both right. Truth be told, the media is simply sloppy, thus the accusations. It is the inaccuracies inherent in reporting too fast, too carelessly, that gets the talking heads rolling.

Tv and radio talk show hosts live on the edge of truth for the sake of ratings. If it’s not controversial, who’s going to  watch or listen? OK, so how to make boring news controversial? Spin it. Make a story out of a non-story. Take the Governor of Illinois….please!! The guy’s a loser. We get it. Do we need to get beat over the head with it? The newspapers were largely done with this guy after a week. The electronic media has beat this story to death for a month. Why? His stupid hair? His goofy accent? Oh no, the interest is sagging. Spruce it up with highly dubious (read untrue) Obama tie-ins. More pics of the dumb guy with the dumber hair.

Why does this formula work for the electronic media? Maybe it’s because they know what we are not willing to admit: the TV is on in too many homes ALL THE TIME.

I walk by my family room and the TV is on, and no one is in the room. I go work in my office for a little while, come out to go to the kitchen to get a cup of coffee. Walking past the family room, the TV is on again, and there’s no one in the room. This can happen several times a day. It doesn’t matter what I say to the household, it’s just the way it is. I think my room mates
are fearful of silence. Heaven forbid it is quiet enough to contemplate ones own thoughts. Horrors! It is something that I have accepted as a cost of working at home. I think it will be my New Year’s resolution to limit the number of hours that the TV is on. I am also swearing off talk radio. They’re not all bad, but the worst are on during the hours that I am most likely
on the road.

I didn’t mean to lose my way here, but I had to get that out. My point is that I fear that we are sliding down a precipitous slope for no better reason than we are being told that we sliding down a precipitous slope. Most of us have the same job, car, house, family, etc., that we had 12 months ago. I don’t doubt that people in finance, real estate, and car sales are having a tough time. Heck, I ought to know. But I’ve been through downturns before, and survived. Each time we have been told, “we’ve never seen anything like this”, “there’s no end in sight”, “this could be the beginning of a depression”, etc. The World was transfixed by the news stream from the Mideast during Desert Shield in 1991. The World seemed to stop as all air traffic was grounded following 9/11. Out of the mayhem emerged strong economic runs. It will happen again. It’s not a matter of if, but rather when, a turnaround will occur. Just as when many over-speculated on the premise that the recent run up in real estate would never end, it is a mistake to believe the current downturn won’t end.

While it is always good to be prudent, I am focusing on being well positioned for the rebound when it comes. So I urge all to turn off the so-called news channels, turn away from self-fulfilling prophecy conversations, enjoy what you have now, and have faith that things will get better if we simply think for ourselves.

Diana Moves Her License to Prudential NW Real Estate

 

Diana moved to Prudential a few months ago. Why? Well, as many of you know, Diana’s specialty par excellence is relocation. It is a strength at Prudential, a national company. Not quite so at Windermere, a regional company. But as Diana has been indoctrinated into the Prudential system, we’ve been introduced to some surprisingly refreshing ideas pertaining to residential real estate marketing and technology. In short, Prudential on-line systems make Windermere’s look like two tin cans and a piece of string. Don’t get me wrong. I’m still at Windermere and have no intention of leaving Big Blue. But Prudential’s systems are 2 or 3 years in front of the local pack of Windermere, John L Scott and Coldwell-Banker-Bain.

One by one, Diana is cranking out “Property Investment Profiles” ["PIP"] for our past clients. You can view a sample PIP HERE. This is a snapshot market analysis that is generated automatically on a predetermined schedule, then sent via email. There is a great deal of information in these reports. The best part is being able to readily see, without logging on to anything, what is taking place with properties located in your market area. If you are interested in receiving a PIP report send me an email and I’ll move you to the front of the list.

2012: Welcome to Al-Qaidastan

One of our greatest concerns regarding Al-Quaida is that they find a way to obtain a nuclear weapon. I submit that perhaps our concerns have been misdirected, as I believe that our gravest threat is that within a few short years, waaay before Iran develops a nuclear weapon, Al-Quaida will obtain a nuclear country i.e., Pakistan. While we have dithered about chasing Al-Qaida, and their lackey Taliban brethren, around the various dirt farms of Afghanistan, they have been surgically eliminating, tribal head by tribal head (literally), all resistance to their presence in Northwestern Pakistan tribal areas. With advent of the removal of President Musharraf from office, and the murder of Benazir Bhutto, Pakistan is ripe for a fundamentalist Muslim revolution. If the US thinks Iranian President Imanutjob is a threat, just wait until Al-Quaida gets control of a state with a real nuclear arsenal backed by an actual Western style economy. Too bad about Musharraf. He seems like a decent guy, but we hung him out to dry for far too long, allowing extremists to infiltrate the political core of his country.

As Robin Williams has asked, “How come we can’t find a guy that is 6′7″ and has to be hooked up to a dialysis machine?” Forget Iran and find Bin-Laden. Soon it will be too late. It still appears that this is the only way the spread of this cancer will slowed, if not stopped.

Federal Way Sign Ordinance: Not Rocket Science

I’ll be brief: Real estate open house signs are a time honored tradition. The regulation thereof should be simple and straightforward. Her is how I would propose that any municipal and/or county sign ordinance should read.

1. Open house signs shall be no larger than 24″ by 24″;
2. Said signs shall bear the name of the licensed real estate brokerage that owns and places said signs;
3. Signs shall not be placed in a manner that impedes foot traffic, or that causes undue distraction to motorists;
4. Hours of placement of said signs shall be limited to 9:00AM to 6:00PM. Signs that are left outside of the the prescribed hours will be confiscated. Confiscated signs may be recovered from the jurisdictional authority by payment of a penalty per sign in the amount of $10.00.

It is unconscionable that Federal Way authorities would arbitrarily target open house signs at a time when this relatively new municipality is losing over 1,000 jobs at Weyerhauser, its largest nearby employer. This, coupled with an unusually slow market has many home sellers hamstrung with virtually no way to promote their properties for sale in the traditional manner. Agents are facing tougher times than they have in years, and open houses are the one way that they can keep working, networking, and promoting their listings in a professional manner.

It is understandable that Federal Way is concerned about signs. Many retail businesses have resorted to A-board type signs to enhance visibility while Pacific Hwy South (99) has been under construction for many months. Excavation, heavy equipment, blocked lanes, dust, barricades, paving machinery have all combined to make 99 a bit of a war zone, uninviting to those that would visit the many small businesses along this corridor.

The problem is the haphazard design, size, placement, and hours that these businesse are using A-board type signs in an effort to keep from going broke. If the business owners were properly educated and adhered to the regulatory points above, all should be able to co-exist.

Another common offender the marketing of new construction. New construction sites are often held open several days a week. Prooblems arise when agents/site representatives get complacent and rather than remove their signs, they will sinply fold them and lean them up against the nearest telephone pole, street sign or retaining wall. This is unacceptable, not to mention unprofessional, and a poor reflection on the many agents that dispatch and recover their signs in a proper manner. Such signs should be susceptible to confiscation.

Seller Responsibility: Clean the House and Take Your Junk!

 What is it with Sellers that think it is OK to leave all kinds of garbage behind for their Buyers to deal with? We’ve seen it all, from engine blocks to garbage bags filled with used diapers. A favorite is old paint cans with colors that haven’t been used in the house in 20 years, or old broken hollow-core doors that have been replaced. Stacks of ancient, rotting, insect infested firewood are truly a treasure every home buyer covets.

Wake up! Nobody wants your junk! Pardon me if I offend anyone, but selling a house is NOT the same as vacating a rental without a damage deposit.

There is a nice little provision in a Northwest Multiple Listing Service Form that is part of nearly every Purchase and Sale Agreement: Form 22D, Paragraph 5 states:

Items Left By Seller. Any personal property, fixtures or other items remaining on the Property when possession is transferred to the Buyer shall thereupon become the property of the Buyer, and may be retained or disposed of as Buyer determines. However, Seller agrees to clean the interiors of any structures and remove all trash, debris and rubbish on the Property prior to Buyer taking possession.

I bring this up because we had an issue….again….last week when our Client, the Buyer, arrived at his house with the keys in anticipation of a clean house. What he found was a garage full of JUNK! and the both dumpsters were packed to the brim. We notified the Listing Agent of this little problem and were ignored. We advised them that unless the Seller was going to clean out the garage, we would hire a company to take care of it. Still no response. We hired a trash hauling company. The total bill, which we paid as required by the vendor, was almost $500. We faxed the invoice to the Listing Agent who promptly handed it to the Seller. The next morning Diana received a screaming earful from the Seller over the phone: “How dare you blah blah blah…..”

I sent an email to the Listing Agent. [This is a guy that always wears a suit, never gets his hands dirty, and found this garbage issue well beneath him.] His response was that “he has no control over what his Seller chooses to do”. I replied that that was not a good answer, along with a few other sternly stated facts. An hour later I received his phone call and he agreed that a reimbursement check would be sent out right away.

So Sellers, be mindful that you are legally bound to remove ALL trash from the property, even the trash that was there when you bought the place.

Agents, if your Seller is too pressed for time to take care of it, the right thing to do is to take care of it yourself, at your expense! You make enough, unless you are a Redfin agent or a member of some other low hanging fruit company, so take the initiative, demonstrate some professionalism, and take of it for your Seller.

Every Buyer has the right to expect a clean property upon their arrival. It is the reponsibility of all Sellers and their respective Listing Agents to make certain it is so.

The More I Learn, The Less I know…..

As if things weren’t strange enough, the subscription service that brought you Monday Morning Coffee for the last few years ceased operations in June. Since then I have been musing as to what to do for the many subscribers that have enjoyed those weekly snippets of wisdom. A dear long time friend and client jarred me back to responsibility last week asking, “what happened to Monday Morning Coffee? Did you drop us from your list?” No. I’ve just been thinking about what to say, if anything, as a replacement.
In keeping with the turmoil surrounding us in today’s real estate market, and just about everything else in our lives:

But Noooooo…..

Last week HUD announced to it’s thousands of mortgage brokers across the country that a full 3% fee would apply to all loans, all borrowers. Well, that’s about the end of that. Thanks, Uncle Sam. Instead of the carrot we were anticipating, we get beaten with the stick. Bear in mind that the same thousands of mortgage brokers paid up to $7,000 each to become FHA certified lenders, all in anticipation of FHA loans providing the needed path out of a deep hole. Now it would appear that they flushed that $7k down the toilet. No one is going to want these loans. They are now absurdly expensive.

The More I Learn, The Less I Know.

Although I’ve been at this real estate game for over 25 years, including the down markets surrounding Desert Storm, the Dot Com Bust, and 9/11, this has to be one of the weirdest periods I’ve seen yet. Suffice it to say that I learned a lot from those down markets in terms of strategy, tenacity, and faith. What I did not learn is how badly our financial systems have been in need of repair. With each of the aforementioned downturns, band-aids were applied. Small fixes that were just enough to restore confidence in what were dilapidated systems. Have you ever used “stop leak” in a failed radiator? It might get you to the repair shop, but no further. When the band-aides have been applied to our financial systems, we thought all was well, and drove right on by the repair shop.

Folks, we’re facing a bit of a perfect storm. People want to buy houses, and people want to sell houses. The only impediment to transacting business is obtaining decent loan terms.
The one entity over which the Federal Government asserts complete control is Housing and Urban Development ["HUD"], which in turn is the administrator for Federally insure home loans ["FHA"]. Since raising the FHA loan limits to a level almost relevant to to day’s prices, in the past 6 weeks HUD has vascillated wildly as to how to charge borrowers. For weeks it was stated that the insurance premium cost would be based on risk assessment of individual borrowers. Makes sense. The driver that has 3 DUI’s pays more for auto insurance than the driver that’s never had a ticket. The borrower that has never paid their bills on time should pay more for their loan than someone that has never been late.
Next on the hotsheet of not-so-good news: FNMA and FHLC, because of their own problems, just announced that they are now going to charge lenders 0.5% for loans that they buy. It has been 0.25% since, well, forever. Of course this cost will be passed on to borrowers in the form of 1.25% origination fees instead of 1%. Or the APR will simply be higher in order to preserve the 1 point fee and still pass on the added cost. That should be a big help……..to no one. Fewer loans, less volume, slower recovery.

Why is it that lenders, when the easy money stops rolling in, assert draconian fees and costs on those that are still doing business? IndyMac Bank, the California based lender that failed last month, is a case in point. Inexplicably, IndyMac announced early this year that it is their policy, on all of the second mortgages they had made, that they would NOT allow subordination of their loans for the sake of homeowners attempting to refinance their FIRST mortgages. For those with toxic first mortgages, this left them no way out. They either had to sell, or walk away. In either case, when told by their lender that their refi was dead because IndyMac had effectively blocked the process, how long do you think it took for these borrowers to decide whether or not they would continue to send payments to IndyMac? As soon as I heard this I said, “dead bank walking”. Sure enough, it’s dead.

I keep visualizing these really bads decisions being made by a very few sweaty little men in windowless rooms. All they look at is printouts ananlyzing cash flow, and then they hit the panic button. They have no faith, and they have no vision. They’re hanging on so tight the blood doesn’t get to their brains. Who put them in charge? When busines is slow at a Seven-Eleven do they turn off the lights and beer cooler to save money. No. They cut prices to entice MORE buyers, get the volume up to compensate for lower margins, and keep prices low until things improve. If they turn off the lights and the beer cooler, they may as well lock the doors. Why don’t lenders, especially that which is run by the Feds, get it?

I suggest that we all start writing to our Federal representatives. Does yours have a clue as to what is at stake?

Not to get too political:

6 years ago, before the congrssional vote was taken on whether to attack Iraq, I wrote to Patti Murray and Maria Cantwell. While it was admittedly self serving at the time, I asserted that war [unabated ego], combined with tax cuts [shameless vote buying], could bring ruin to our financial markets. When the government starts borrowing money, it depletes the pool of cash available for everything else, and drives up interest rates. Well, here we are. Money is tight, and getting tighter. Banks are failing. People are losing their homes. All for lack of liquidity because the goverment is spending more than it takes in. And people are worried that a Democrat will raise taxes, spend more? If traditional politics are to be believed, then Bill Clinton was the best Republican President we’ve ever had.

The current goverment cash burn rate is unsustainable. It won’t matter who is in charge when the bill comes due. Tax cuts were a great idea to stimulate growth, as long as the thin ice held out. How about those recent tax rebates? Not even a blip on the radar. We can’t buy our way out of this mess. We are going to have to work harder/smarter, spend less, and pay taxes commensurate with the expenses incurred. Honestly, would the Iraq war have lasted 6 years if taxes had been increased each year to pay for it?

The More I learn, The Less I know. So teach me something.

How To Replace Interior Doors

Interior door replacement can be done in many ways. Concerns vary, but the overarching issue is generally whether your doors should be stained or painted, in accordance with the existing millwork in your home. In my humble opinion, painted doors with stained millwork looks odd, even if they are nicely painted 6-panel doors. Until recently, stain grade doors were very expensive, oftentimes North of $250 each for pre-hung units. Now there are door stores that will take your old hollow core flush doors and mortise new stain grade doors of your liking to match your existing hinges and door frame. You take them home and finish them to match your existing millwork, attach the hinges, and hang them. Simple.

Then again, if your plan is to convert a tired stained millwork package and doors to a formal painted look, pre-hung doors are the way to do it right. Attempting to paint old stained millwork is more labor intensive than it is worth, and usually the results are disappointing.

Here is an excellent article on the advantages of pre-hung doors that you will find helpful.