February 5, 2009
The problem of a fiscally responsible homeowner
By admin
Written by Michael Vass
Maybe it’s just me, but I’m feeling very frustrated of late. It is the talk of the tax credits and benefits for new home buyers and those facing foreclosure. I just can’t help but be annoyed.
As a homeowner, I am listening to how the Government wants to give so much money to people who over-extended themselves. They want to make it so easy for people buying a new house. And those are good things. But for those of us with a home and paying our mortgage, well we just are being ignored.
There is no benefit to me for paying my mortgage on time. I get no accolade, nor tax break or credit beyond whatever has already existed. Yet I too am suffering. Maybe not as much as those that made bad decisions, or came upon unforeseeable problems. Still this economy is no joyride.
The Obama Administration wants to give a $15,000 tax credit to new home buyers. Those in default or foreclosure get to re-negotiate they mortgages, and/or Government aide. That’s a huge amount of money, individually or as a group. Yet because I am fiscally sound, because I made decisions that would provide me the ability to pay my obligations as I agreed to, I am effectively penalized.
The penalty is not just that I receive no benefit from the Government or via my mortgage. The money that has been spent, and will be spent in the near future, is money that will have to be repaid via taxes. That’s coming out of my pocket. Add to that the fact that since I have no adjustment, and I will have to be paying for what others are receiving for bad decisions I am effectively paying their mortgage and my own.
If I wanted to own another house, I would have bought one. But what I am getting is my home, and another place that I have never seen, cannot live in, and gain no benefit from. It’s almost as if the Government is saying
“You have a nice house. This family will be moving in with you. Oh and you will pay them to do it. Thank you for being reliable and fiscally sound.”
But maybe it’s just me. Though I imagine that anyone that is renting would be even more upset as they don’t even have the benefit of a home, yet they are paying for someone else’s in spades.
So how do you feel about this?
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January 15, 2009
Billions for foreclosure, billions wasted
By admin
Written by Michael Vass
So now President Obama seems to be interested in providing up to $100 billion for those in foreclosure or about to be. It’s a really great gesture. It will surely help his approval rating. And it will help guarantee that he receives the full $850 billion he has wanted for the Democrat proposed stimulus plan.
But I am opposed to this. Not because I don’t want people to keep their homes. But because this is a terrible idea.
First there are the homeowners who are not in foreclosure. Those of us that are doing everything we can to maintain our homes are at a disadvantage. We get nothing from the proposed stimulus except the $120 a month that has been stated. Which is little to nothing compared to the cost of a mortgage, and raising a family, while trying to save enough money to ensure that if we lose our jobs we have something as a cushion.
In fact, it seems almost beneficial to allow your home to go into foreclosure these days. The Government is so busy trying to ensure you cannot lose your home that they are basically encouraging people to do so. You can negotiate a lower interest rate, defer payments, extend the life of a mortgage, remove interest, and soon there will be payments from the Government to subsidize your home. Given all that, why the hell is it worth struggling to stay out of foreclosure?
Second, in spending money on the foreclosures it is that much less money spent on the economy. Given I think the stimulus plan is as much of a waste as the Bush stimulus plan, basically a political look good tool or polispeak for the masses. But if spending money is the plan to turn the economy around, why dilute that plan?
In effect the average American will be paying back, at some point in the future via taxes, the money they receive + the money given to homes that are not their own + money given to businesses that made bad business decisions. And that is just the looking forward money (and does not include his new spending for new Government programs). The Government has already obligated us to pay back previous money received + several bank bailouts (which did nothing to improve the stock market and retirement accounts) + auto industry money + bailing out an insurance giant. All while inflation is creeping higher.
And none of the money going to any business or institution has any guarantee of repayment. Nor if there were repayment, any way planned of how that money would be assessed. The money could be used to fund pet politician projects (like ACORN was initially set to receive) or some other Government inspired spending spree. We don’t know.
Which says nothing of the fact that the Government has no idea how the money will be spent, or where it is spent. Billions are unaccounted for at this moment, and the Obama Adminsitration has stated it intends to add tens of billions more into the pot with little better knowledge than before. Unless you believe that Congress got a lot smarter since the elections in November. The majority of politicians that were there before are still there. Like Barney Frank and Chris Dodd, who couldn’t figure out what was happening in the economy until after the problems hit the news. And they head financial oversight committees, still. Think they are any smarter or more adept than 3 months ago?
But again on the foreclosures. I have enough trouble paying my mortgage, my household expenses, taxes, and preparing for higher corporate taxes. It’s hard enough to do all that in an economy that is just flat, and this is anything but. Now the Obama Administration believes I should add on someone else’s house? Which I will never get a benefit from.
That’s a hard sell to me. Probably why I did not vote for President Obama. These are no surprises. But they are as bad a set of decisions as I expected them to be. This is not going to help the economy, though I expect it to temporarily help the approval ratings of Congress (which needs it badly).
I don’t entirely blame President Obama though. This entire stimulus plan was the idea of House Speaker Nancy Pelosi. She has been fighting for this for months, increasing the amount each month as she went along. Pelosi has had the distinction of being the worst Speaker of the House, with a Congress of the lowest approval rating, that accomplished the least things, at a higher cost, than I believe any other Congress has done in 111 sessions. That’s like betting on the horse that went lame and was pulled from the race. Obama made the bet so he gets that blame, but Pelosi made the horse lame and that’s on her all the way.
Spending tens of billions on foreclosures sounds nice, but that’s all it is. Polispeak. It is almost entirely probable that it will have no effect except a long-term negative. In fact it may speed up the downward trend President Obama was elected to fix. But it’s going to happen, so be prepared.
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October 5, 2008
Mortgages and bailout: real answers with Gregg Cordero
By admin
Written by Michael Vass
I have been talking about the economy and the repercussions of the failures in the financial markets for some time now. Back in 2007 I was discussing the effect that oil would have on the economy, and I hinted at how the sub-prime loans would affect banks from New York to China.
But in all that is the fact that while I was an experienced stockbroker, I am not an expert in mortgages nor real estate. With the bailout plan being debated and now finalized I wanted to get a more accurate view of what to expect. So I went out and found a more credible source of information to ask questions of.
The result is my interview with Mr. Gregg Cordero, owner and primary broker of Remax in the Binghamton and Broome County of New York State. The interview has been transferred to video for you to view. The interview took place on Thursday, and the delay was resulting from the limitations on getting the video edited and made into a video clip.
I expect that the conversation will provide some insight and answers for the questions homeowners, real estate owners, and those interested in any aspect of real estate markets might have. And I expect that particularly shrewd minds will be able to see their own opportunities and forecasts on the economy.
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May 11, 2008
The real effect of the mortgage crisis on a real person
By admin
Written by Michael Vass
Looking over the housing markets, and considering the negative sentiment out, I decided that this was a good time to purchase a new home. Rates are around 5.875% fixed and many home prices are depressed currently. And I’m not alone in my decision to pick up some property. So I wanted to share my experience so far, and at the end of this post I have 2 questions for you my reader.
Many who have good to excellent credit ratings, and available cash are out looking for a new home or a first time buy. But don’t believe this is exactly a buyers market. Even in a dying economy that is the Binghamton New York experience, home prices have held firm if not risen up. In fact I would say that prices over the last 6 months have risen about $3,000 on median. Because many like myself are entering this troubled market.
Still there are bargains to be found. I am looking into a couple as this is being written, and is part of the reason why I have not been writing as much as normal. [Of course the deal with TV One is a factor as well.]
Part of the process in getting a home is the mortgage pre-approval process. For those that are unfamiliar this is the initial amount that you may be able to get a mortgage for, the loan rate, and all other terms you might run into. It is affected by your credit rating - heavily, cash on hand, and income as per taxes filed.
Now without giving away too much of my finances (some points I will deliberately extrapolate on – so the figures on income and pricing are inaccurate but the situation and rates are accurate) I will make you aware of what the world is like for me. You can decide if my skin tone and last name are factors or not.
My first stop in the process was my local bank, NBT, which I have had accounts with for several years. I believe I had 1 check bounce in the entire time I was with the bank, and that was because of a bank error in depositing funds into the proper account. I also know and speak with a couple of managers on a regular basis. Thus you can say my relationship with the bank is favorable to friendly.
I initially was given an indication that my pre-qual rate would easily be what I had asked for. My credit rating is 750 (after rebuilding my credit after a career change in 2001) with at least one agency ranking me at 766. That is considered good to excellent. It would normally grant a lower credit rating as I am a low risk. I also have no long-term debt. Thus the initial loan rate mentioned was 6.11%. I have a witness to this.
I was rather pleased.
But after looking at several homes, and having requests from the bank for additional tax records for my corporation and myself – which I provided promptly – I received my pre-approval line. 7.11% and a reduction in the dollar loan amount of 27% [ie. if I asked for $100,000 they approved $73,000]. But I was assured that this is not accurate and I could be approved for more if I found a home in the range I was initially looking. Though no mention was made of what interest rate would go with this higher loan dollar amount.
Now I am insulted. I went from a very good interest rate and a decent yet highly affordable mortgage (fixed rate 30 years) to a bad rate – 1% higher than initially suggested and documented and 1.235% higher than the national rate – and a dollar bracket that provided access to homes far inferior to what I had wanted.
I will add that I have an income that surpasses the local area average, in excess of 2x’s, and never had a bankruptcy. There was a surplus of cash in my bank account - as there has been for over a year - that easily surpassed the 3% required for the loan by the bank. I have been operating my business for 2 years, and have been in the field of work for over 7 as an independent consultant. I have never been sued and was a successful stockbroker for roughly a decade.
I believe the increase in rate and decrease in dollar loan amount is insulting. I was given a reasoning that my credit report had bad notations (which I have reviewed for well over a year and cannot find), I have inadequate cash reserves (which I noted above), I do not make enough money for what I was requesting (which I and the initial loan officer determined I had far in excess for the amount requested beyond the local area average), and I failed to have enough funds to meet the 3% closing requirement (which I had in excess of 7% sitting in the bank).
Now what factor could be the reason for the change? What could motivate such an extreme reaction?
The loan officer that questioned me, and needed additional documents, never met me. He did speak to me (getting my last name wrong a couple of times). So what changed? Could it be that my actual last name (which is Spanish and yes Vass is a registered alias I use for business to avoid racial prejudices since I was a stockbroker) was too ethnic? Was it that my income too far exceeded the income of most of the 3% African American population in this area – as well as exceeding the White population income average.
Obviously I went on to seek out a separate mortgage loan via a broker that is Hispanic, and the brother of a friend. My preference was not his background but that I knew his brother whom I speak with regularly.
It has been over a week since placing my documentation with him. He is quite successful in getting mortgage loans, and owns his own brokerage. He too had high expectations for my loan. His opinion was that my dollar loan amount was very reasonable and in my affordability range. He could not understand why a bank I had been doing business with for years could not provide me a better rate, which he believes will be in the 6.4 – 6.6% range. Based on my cash on hand he believe that he might be able to get that percentage down to 6.25% (obviously the difference [from 5.875%] is for his own operating profit, which I do not begrudge him. This is business after all and we aren’t doing this to not make a profit).
Why am I facing a delay? Because the bank has suspicions that I am hiding money. Because I own my own business the bank that the broker has gone to believes I may be laundering money. Now the United States Government, via the IRS, has had no problems with my finances. My income has been steady with a respectable increase to my top line revenue for years. Every dollar that comes in is documented, and every write-off is noted and within legal allocations. I do not make excessive amounts of money (Bill Gates, or even several stockbrokers I know, make significantly more), I am just a regular small business owner.
So what could be the reasons? My last name is the reason some friends have mentioned to me. I’m ethnic and not generic like Smith or Hannity, or O’Reilly. I am immediately identified as at least Hispanic, and noted on some government documents as Black and Puerto Rican. And I live in an area that is 95% White, and comparatively a small town. Not to mention that a high percentage of those in the mortgage crisis are African American and minorities – though why they were selected and focused into these one-time highly profitable (for the lender) loans is unknown (sort of).
What do you think? Can you imagine a reason why banks would have a problem loaning money to a low-risk, no debt, middle-class income, single, business owner, who normally pays taxes (no refunds for me) is in his affordability range and has never had a bankruptcy or problem with the IRS?
Do you think if I was White, with exactly the same conditions I would be treated the same?
Before you answer here is another fact. Less than 3 weeks before interest rates were lowered, and prior to my first loan query, I had a friend that was pre-approved for a mortgage up to 75% greater than what I asked for. They had a 750 credit report. They are a single parent. They make 50% of my own income. They had a gift provided to cover closing costs and down-payment (which I do not begrudge).They are almost 20 years my junior. And the final loan amount was for a home in the range I am seeking, with an interest rate of ~6.75% (closing after rates dropped).
The big difference between us? Besides the income, that I am a business owner and not an employee, my age, and that she is a parent is that she is a White woman.
And for those wondering what the big deal about an extra 1.235% is that over 30 years (which I can affordably pay off in 5-6 years) there is an extra $20 - $50,000 dollars in interest to be paid.
So now I ask, why do you think I have been treated as such so far? Is this something others are experiencing across the nation?
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