Tag Archives: mortgages

You Didn’t Build That: A Parenting Experiment

Monopoly 2

This past week, while vacationing in the Great Smoky Mountains, I discovered a unique opportunity to teach my two children something when they least expected it. It all began on the third day of our trip, when rain forced us to spend the morning inside our beautiful cabin.

My son (6) had spent two hours making exactly 26 beautifully-designed weapons with his K’nex toys. There were elaborate crossbows with multi-pronged arrows, daggers, and an assortment of Chinese star type gadgets. He called me back to show off his arsenal, and I responded with a now-famous Obama line. “You didn’t build that,” I said. “Somebody else made that happen.” Even though I was smiling, he was NOT amused. He rolled his eyes and quickly pushed me out of the room.

I chuckled at myself, but as I went on to plan our day of indoor activities, I devised a plan to conduct a little experiment. Inspired by the Olympics, which we had been watching in between our adventures into nature, my daughter (10) recommended we have our own cabin version of the Olympics. So we made gold, silver, and bronze medals out of art paper. We decided we would compete for these medals by playing a series of games. Each game would yield a point for the winner. The first to three points would win Gold.

We played Monopoly first. My son, being a natural risk-taker, quickly bought up property and put houses on nearly everything he owned. My daughter was not far behind him. When they got low on money and began mortgaging their properties, I made a sign that said “Underwater Mortgages” and put it on the board next to their mortgaged title deeds. Soon after, I made another sign that said “This house has been seized under Eminent Domain” and began taking the houses away.

I didn’t discriminate; in an effort to avoid too much scrutiny, I “seized” my own property, too. I was not the banker, so they questioned my authority to do this. They fussed, pouted, whined, and shouted, “What are you doing, Mommy?!” When I refused to explain in an acceptable way, my daughter threatened to quit. She continued to play, but shed many tears after losing. My son went on to win the game, incidentally bankrupting both my daughter and me with exorbitantly high rent on the same piece of property.

Next, we played UNO. We’ve played this game no less than 200 times, and everyone knows the rules well. However, every time my daughter or I played a Draw Two card to my son, I made him draw four. Girls only had to draw two. He kept saying, “That is not fair!” and finally had enough and said, “You’re giving her a break just because she’s a girl.” Bingo. Nevertheless, with this gender advantage, my daughter quickly won the game.

We played a slew of games during our Cabin Olympics: Yahtzee, Pictionary, BananaGrams, and Clue. We even counted a swim race at the pool as one of our “events.” With each game came some slant that was meant to trigger in them the idea that something they earned was being taken from them without their consent. I loved that each little wrong I did to them made them mad. I did notice, however, that over time, they began to expect something to dampen their success, and their outrage diminished somewhat over the duration of the experiment. They became a bit numb to it all. If I were going to drive the message home, I would have to step up my game.

The next day, we tallied up the points, and it was time to award medals. We erected a makeshift podium out of couch cushions (mountain cabins have a lot of pull-out couches, so it turns out there are plenty of cushions). My daughter had earned Gold; I had earned Silver; and my son had earned Bronze. However, as Commissioner of the Games, I decided we would all get Gold medals. Here was the justification I shared with my daughter, who was the rightful and single owner of the Gold medal: “Your brother never wins anything, and if he doesn’t get Gold, there will surely be a fight. Plus, I don’t look good in silver.” I tried to keep it very simple.

I just knew my daughter would have a fit. But she had earned that gold medal fair and square. And how could I let him get the same medal as me anyway, when I earned more points than he did? Was I crazy? Why was I playing games so wrong all of the sudden?

My son had no objection to the change in rules, and neither did I. After all, Gold was a step up for both of us. The penalty affected only the minority (the single winner of the games), and her voice wasn’t strong enough to influence the rest of us that the new rule was unfair. She was depending on me, her representative, to do what was right for her, to stand back while she reaped the reward of her hard work, that which she had earned honestly.

Instead, I had done something extremely self-serving, something intended to appease the majority. I had abused my position of authority. I could see I was at risk of losing her trust, and the trust my children have in me is sacred, so I knew the experiment had to end there. I came clean with all that I had done to wrong them, and we had some very interesting conversations about the real definition of “fair.”

By the end of the week-long trip, having unknowingly experienced Obama policy in action – and having watched literally two dozen anti-Obama campaign ads during the Olympics primetime events – they were fairly schooled in the ideas of Capitalism and Socialism, Individualism and Collectivism. When I asked them what they thought about all my new rules in the games, I expected variations of “They were horrible!” But what I didn’t expect was for my six year old to say, “Mommy, when did you start acting like Obama?” I couldn’t help but smile at the connection he had made.

I think my kids’ future social studies teachers will be impressed with their understanding of the concepts of individual achievement and the role government plays in either supporting or hindering that success. Admittedly, I had a lot of fun conducting this little experiment, but it turned out to effectively illustrate a great lesson in American ideals. Mission accomplished.

Study Reveals Impact of Real Estate ‘Shadow Inventory’ on Recovery

ATLANTA, June 30, 2011 /PRNewswire/ — Despite steady gains in key industry sectors, the nation’s housing market continues to exert pressure on the overall rate of economic recovery. While financial conditions across multiple financial sectors suggest economic stabilization and growth, delinquencies still exceed pre-recession levels due to continued turbulence in the mortgage marketplace, according to Equifax (NYSE: EFX) national credit trend research for May 2011.

Slowing today’s economic recovery are the challenges posed by high shadow inventory levels, which are contributing to the continued rise of severe mortgage delinquencies and write-offs. According to Equifax research, write-off dollars for home finance, which includes first mortgage and home equity installment loans as well as home equity revolving accounts, are still climbing and have yet to show signs of peaking. In fact, home finance write-offs reached $304.6 billion in 2010 compared to a combined total of $126.7 billion for 2006 and 2007.

Equifax data shows that severe delinquencies among these loan vintages have remained nearly constant since the first quarter of 2010. Further analysis reveals that as of May 2011 there are approximately$319.7 billion in 2006 and 2007 first mortgage vintages that are in the initial foreclosure process – many of which may be written off.

Real estate owned (REO) properties represent another roadblock to recovery. According to Equifax, first mortgage REO rates remain high as lenders struggle to divest of properties unsuccessfully sold through a short sale or foreclosure auction. While various factors over the last few years have led to fluctuations in the number of REO properties, REO rates since March 2011 are on the rise and causing continued economic strain. Equifax data shows that in May 2011:

  • Three percent of all U.S. first mortgages representing $21.8 billion were REO properties.
  • Foreclosure complete rates of 1.45 percent were almost in lock step with bankruptcy rates of 1.6 percent – suggesting that the majority of REO properties are the result of bankruptcy proceedings.

 

“Shadow inventory and real estate owned properties are still playing a dominant role in today’s mortgage market and slowing the pace of economic recovery. While we are seeing stabilization across multiple sectors of lending, there remains a significant volume of delinquent first mortgage loans, which has slowed the foreclosure process. Until these foreclosures are processed, the mortgage market will continue to impact economic growth,” said Craig Crabtree, senior vice president and general manager, Equifax Mortgage Services.

Mortgage Banking Giant Agrees to Pay Homeowner $30,000 as Part of Settlement Agreement

With pending counterclaims of fraud and predatory lending, Deutsche Bank agrees to pay defendant $30,000 and issue a letter to correct credit to settle a New Jersey foreclosure action

PHILADELPHIA, June 14, 2011 — Shaffer & Gaier, LLC announced today that its client has agreed to a $30,000 cash settlement with Deutsche Bank in an action filed by the banking giant to foreclosure on a New Jersey investment property worth approximately $65,000.00. As part of the terms of the settlement, the homeowner is entitled to retain the property and collect rental income for an expected period of 15-18 months, free of mortgage payment obligations, after which time he will walk away from the underwater property. The bank has also agreed to issue a letter to correct credit to the defendant, which will be distributed to the three credit bureaus to repair any credit blemishes caused by the suit.

Deutsche Bank, the plaintiff in this case, was acting as the trustee on behalf of Morgan Stanley ABS Capital Inc., Trust 2006-NC5, Mortgage-Pass Through Certificates, Series 2006-NC5, the mortgage pool that claimed to own the defendants loan. While the bank was able to produce an assignment dated and recorded prior to the filing of the foreclosure complaint, one of the most commonly raised foreclosure defenses, defense counsel was able to challenge the bank on several other issues of standing, but ultimately it was the counterclaims of fraud and predatory lending that drove the settlement.

Although predatory lending and fraud claims are common allegations in the foreclosure defense arena, foreclosing banks are usually successful at overcoming the charges with a “holder in due course” defense, hiding behind a securitization process that serves as smoke and mirrors for the true parties to a mortgage transaction. Michael Gaier, partner at the Philadelphia-based law firm of Shaffer & Gaier, LLC, with the help of his partner Michael Shaffer, and a team of mortgage experts, paralegals and associates, has dedicated the last two years of his life to crafting a legal argument that has survived summary judgment motions, overcome protective orders to depose high-level banking executives and gained nine dismissals or settlements in the last 10 weeks alone. “I’m especially pleased with the outcome of this case,” said Mr. Gaier. “This was not the most compelling story of our cases. It was an investment property that was purchased with a limited down payment and has been earning income for the last two years. The issue is that my client never should have been approved for this loan in the first place. The lenders grossly inflated his income on the application, and then hid that from him, and disclosed a rate and payment vastly different from what he ended up with at the closing table and pressured him to close with the threat of forfeiting a deposit. Bottom line is fraud is fraud. I anticipate there will be many more settlements going forward.”

 

The Official Start of the Current Tea Party

“We’re thinking about having a Chicago Tea Party in July!”

These words were spoken from the floor of the Chicago Stock Exchange by CNBC’s Rick Santelli.

The silent majority became the “Not-So-Silent Majority” on February 19, 2009.

Ron and Rand Paul were speakers at the Boston Tea Party 2008 in December of 2007. There were also many rumblings and undercurrents from around the country calling for a rebirth of the Tea Party some time before either of  these events. For me personally, this day, this video goes down in history as the official start of the current Tea Party movement!

It had been building for a long time- within a 2 month period the 2 sparks of the Official Boston Tea Party 2008 and Rick Santelli’s  rant lit the fuse that became what we have today.

China Seeing Record Inflation After Too Much Stimulus – Familiar?

A Bloomberg.com article stated that even a government-run economy can go awry when it pumps too much liquidity into the market under the guise of “stimulus”.

“China’s banking regulator plans to review debt levels at some real-estate developers on concern the companies’ borrowings are fueling excessive gains in property prices..”

More the concern is what happens when that stimulus is removed.  The U.S. economy faces the exact same threats.

Mortgage Bubble Started Crisis, Isn’t Getting Better

Last year the economy crashed.  Now, the stimulus has stimulated, the Federal Reserve has eased, Geihtner has.. well done whatever he does, and Obama has spoken (certainly that should have fixed everything).  So how did we hit 9.8% unemployment since the stimulus was an emergency action that would keep unemployment from going over 8%, pumping massive amounts of liquidity into the economy should have loosened credit, little Timmy G. and Obama bought GM, AIG and Chrysler and they helped everyone buy a new car that wanted one?  It must be that G.W. Bush must still be affecting the economy from his ranch in Texas…

Today, the Mortgage Bankers Association published it’s index of applications.  The measure of home mortgage applications dropped 14% last week.  When broken-down, the measurement of refinancing applications decreased 17% and new home purchases declined 7.6%.  When combined with  yesterday’s less-than-stellar housing starts report, it’s apparent that between TARP, ARRA (stimulus), the Fed, government buyouts, the first-time buyers credit, and a truck-load of printed money.. the housing crisis is still glaring us in the face.

The trouble isn’t that the government isn’t doing enough – thankfully.  The trouble is that due to too much federal meddling, we never let the bubble fully burst.  Economies go through boom-and-bust cycles.  Even socialist countries deal with economic cycles that go up and down.  By propping up a bursting housing market we end up with artificially high housing prices and no one that can afford them.  Mortgage rates can’t get any lower and demand still isn’t there.  If you have too many goods (houses) being chased by too few dollars… that’s deflationary to that market.   Our dollar is weakening due to the government’s reckless printing.

A Yahoo! Finance article states that economists expect home sales prices to decline more than 11% by June of 2010.  That’s fairly rapid and could trigger the second half of a double-dip recession when combined with the commercial loan crisis about to hit the financial industry.

So now those few dollars chasing mortgages aren’t worth as much (notice your gas prices the last seven days or so – welcome to inflation).  The Fed has kept rates near zero so now they can only go up – and they are.  All this means those houses have got to get cheaper to get sold.  Meaning destroyed wealth for millions of Americans as their house values plummet.  The housing bubble will certainly bust and the more the government props it up, the worse that crash will be.