patrick.net

Is this ACORN program a big scam or something?

http://acornhousing.org/TEXT/homebuying1.php

ACORN claims this:

With AHC you get:

* Lower down payments and closing costs.
* No Private Mortage Insurance.
* Banks generally require 3 months of mortgage payments in the bank at settlement.
* With our program, they don't, which allows you to buy a home sooner.
* Most banks won't count public assistance or voluntarily child support in determining if you'll qualify for a mortgage.
* With our program, all steady income counts.

Are they just an evil mortgage broker (that's very well organized) in disguise? Or could they actually help people get a good rate?

Honestly, I want to know what kind of parents he has after reading about this killer Cho. His parents are clearly at fault, to say the least, they are negligent. Their son was so obviously, seriously disturbed, they should have sent him to a mental institute.

There was a piece on KQED last summer (fall) about a father who tried to have his psychotic 18+ yo son committed because he was a danger to himself and possibly society. Apparently, it's really hard.

It kind of makes sense if you think about it. You can't really imprison some one who hasn't done anything wrong. (Well... unless the person is charged with something terrorism related these days I guess...) And after 18, a person is basically independent under the eyes of the law.

Randy H said:

It’s to be expected in a group like this that there will be a strong resistance to anyone “defecting”, no matter how much sense it might make for their personal situation. The very choice of the word “capitulation” tells me more about the speaker’s biases than the object of that term. I would hope that each and every person here would ultimately make a decision to buy or not to buy entirely independent of any cheering or cajoling from Patrick.net’ers.

Shit, Randy, I already apologized for using the term --what more do you want, self flagellation? After reviewing the specifics of Mr. X's offer, it clearly doesn't apply.

Jon said:

Agree. I think also that there is a perception that a “fair” deal is impossible in this current environment so anyone that buys is giving in and aggreeing to be a mortgage slave.

Bingo. I just want to find out more about how Mr. X pulled off this minor miracle so I can replicate his results for myself. Most everything in my neighborhood is still going for near-peak wishing price. Maybe I need to move to Cote Country too.

@speedingpullet,

Loved that "Kevin" post from Ben's. That guy has some super-sized cojones --wish he were here in SCAL.

"Even those with double-oh designations?"

Yes, Peter P. Licensed to Shill!

http://en.wikipedia.org/wiki/Shill

Interesting. I had always thought it was just misspelled "shrill"

1- A 30%-50% drop in prices will leave the vast majority of homeowners (who will become so much underwater) with no choices but to default or mail back the keys. So would you feel comfortable buying at a 50% discount in neighborhoods where the majority of houses are foreclosed/boarded or reposed or abandoned, like the worst ghettos in places like ‘downtown Detroit’? And would that 50% discount be a *good* deal given the new nature of the neighborhoods?

2- CA will have to experience a major recession for prices to fall by 30%-50% and most sectors of the economy would be affected. So, except if you work for the federal government, your job would most likely be gone. Moreover, the outflow of people out of CA would be substantial, like what you see in the worst parts of the Midwest. Under such a scenario, would that 50% discount be a *good* deal given the new nature of the CA economy?

More straw man arguments from TOS.

For point 1: the "vast majority" are not living on the finanical edge. They are living their lives as usual, paying their mortgages and what not. If prices dropped even 50% and they aren't planning to move, they shouldn't care. I would feel sorry for those having to move due to life situtations (job, divorce, death, all that kind of stuff). So how would that make the Bay Area like current-day Detroit?

For point 2: This is the typical "threat" argument from the REIC - be careful what you wish for (a real estate crash), because it may come true, but it will mean the economy will go down in flames with it. I personally think an economic recession is in order. There has been a continued propping of loose credit and free money ever since the dot bomb, and the longer it goes on unchecked, the harder the eventual crash is likely to be. Moreover, HARM pointed this out earlier, but this indeed may be a historical first - the first housing crash not associated with an overal recession, given the crazy-a$$ lending practices going on over the past few years finally coming home to roost.

Here's the latest on the potential Federal bailout of subprimes.

http://money.cnn.com/2007/04/18/real_estate/foreclosure_bailouts_/index.htm?postversion=2007041810

A series of speakers at a Congressional hearing of the House Financial Services Committee on Tuesday called for restructuring adjustable rate mortgage (ARM) loans to help solve the subprime mortgage crisis...

Doreen Woo Ho, president of Wells Fargo Bank's Consumer Credit Group, says, "You can pretty much figure an OREO (other real estate owned by the bank, basically, foreclosed properties) will automatically cost 6 percent commission to sell, plus the cost of carrying it on the books for the six months or more it takes to sell and the cost of deferred maintenance. Right away 10 to 15 percent of the value is already eaten by the costs."

I have two naive questions:
-Who the hell would want to purchase these bond funds for these bailouts?
-Doreen Woo Ho's complaint about transaction costs: aren't these costs what you take on when you "own" a home anyway? Is it that much of a shock that owning a home has carrying costs and selling has transaction costs? What - buying and selling real estate isn't a guarantee of free money? That's news to me!

OO said

"if you have gone through the early 90s when housing bottomed, you would not have said with such sarcasm, because unless you have a big down payment, you wouldn’t be able to take advantage of the bottom pricing at all."

I did buy houses in 95 and 96, which I was able to do because of a "soft" market. At that time, down payments were required to buy investment property (unless you assumed a VA loan, or committed fraud). I believe that the more sane lending policies of that time kept houses affordable. For example, two of the houses I bought were 1500 sq ft 3 bed 2 bath 2 car that were less than $110,000 each, and were only about 2 years old at the time in a newer desireable neighborhood in Newport News (coastal Virginia). Interest rate was 7.5%. I rented the houses out for less than the payments with the idea that these were long term investments, and by using the rent receipts and kicking in some extra I could have paid for rental properties as income for retirement. Not only did I have a negative cash flow, I had to deal with tenants and toilets.

I did not mean to be sarcastic. The point I want to make is that I see no reason why people cannot save up a down payment. If one does not have the discipline to save while renting, they are probrably better off continuing to rent. Before you get annoyed, I know that this philosophy only works in a market that has not been inflated by easy credit. I believe that when sane lending practices are re-introduced, the home prices will come down to a level where it is practical to save a down payment. The problem will be the pain that existing homeowner's will feel, along with the short sighted politically expedient measures State and Federal gov may do to releive this pain, such as bailouts or forced rate cuts. If the current home prices are propped up by such measures, how will future generations afford houses? I do not think preserving the equity "wealth " of current homeowners is worth the price of indenturing future homebuyers with 100 year loans or other misbegotten creative instruments.

surfer x,

We simply don't have enough of a data base (in rural OR) for Zillow to be of much value. There are so few closings and they can be lengthy periods of ownership so AFAIK they look at your initial cost basis, track what you sold for and just carry that appreciation model forward. All other metrics be damned.

There was a link *edog had above where the AZ Appraise-Whores Assoc. is effectively banning Zillow from operating in AZ. BIG step backwards.

My wife would argue (and has) that we coulda/shoulda/woulda bought yet another home in early '04 and STILL had time to sell (or do yet another cash-out re-fi) to have paid for kids college and a wedding. I (after years in the back seat where household finances were concerned) finally had to draw the line! Sure, paying for college and weddings out of pocket sucks. I mean it REALLY sucks!

This has been a HUGE part of my reluctance. Sellers expecting that even though we DO suspect much of this is nothing more than a Ponzi, continue to palm OUR costs and expenses on to the next schmuck. Oh and btw you'll be paying for that wedding/diploma for the next 15-30 years but at least YOU didn't have any immediate financial discomfort?

As Randy H suggests, each of us have our own "utility" factor. Since I'm on the other end of raising children (and congrats! btw) my "utility" is about ZERO. We don't have any pets, I hate yard work and I'm hoping I don't get stuck w/mom. I spent 9 years of my life on a boat or in a barracks so as long as I get the bottom bunk I'm cool. The Mrs. is despondent that we don't have a sprawling McAlbatross to entertain the many guests that surely will arrive for the wedding. Of course 60% of this space will be under utilized to say the least the day after w/29 years and 11 months left on the payments!

I Don't WANT to be "Stanley Johnson"!

Malcolm

My comment about lowballing and the evil dance had a bit of the flavor of the "Evil Buyers" thread title.

I am not really going to gross lowball, or send in any framers. What I did in 95 and 96 when I bought houses was look at the houses, sometimes repeatedly, and wait. After sitting empty for months, the sellers would lower the prices. After that, I would make an offer that was a good deal for me, but not a terrible lowball. The one time I was turned down, I was able to get the same house 6 months later for the same price. Of course this will not work if you have a specific house in mind to use as a personal residence.

HeadSet Says:
The point I want to make is that I see no reason why people cannot save up a down payment. If one does not have the discipline to save while renting, they are probrably better off continuing to rent.

There's something called the 'rental trap', where the cost of rent is such that the would-be buyer can never save a deposit.

skibum,

You are all over it today Sir!

Doreen Woo Ho has the misfortune of being the "point man" in the lender's effort to spin these "thinking outside the box solutions" in a way that's at least digestible to the public.

Patrick's first link today from "The Dept. of Homeland Stupidity" explains all.

"There’s something called the ‘rental trap’, where the cost of rent is such that the would-be buyer can never save a deposit."

I do not know apartments, so I'll only speak on single family homes.

If someone wants a 2500 sq ft house, they rent a 1500 sq ft house for a few years. The savings on renting verses mortgage, plus savings by having no bills for maint, taxes, or insurance would go for the down payment. As a previous poster noted, anyone who thinks a landlord can pass maint, insurance, and taxes on to the tenants has not been a landlord.

People who can afford payments on the large home should certainly be able to save a down payment by renting a smaller home. And by forgoing the matching SUVs. Again, I am talking about a market with prices corresponding with sane lending practices.

from the financial times april 17
"Real concern over virtual under-age sex
Virtual worlds are raising some new areas of concern"
says special agent Flint Waters,leading officer for the Wyoming Internet Crimes Against Children Taskforce.
"there are a growing number of virtual brothels,for example,
where it is possible to have sex with an avatar that appears to be a child. This raises difficult questions for us a a society"
he says

It is not just individuals that inhabit these worlds: companies from IBM to Reuters have set up offices, hold meetings or advertise on Second Life.

HARM

I wasn't specifically targeting you. Sorry if I sounded lecturing. My personality is one which is particularly sensitive to any kind of group-think self enforcement. I probably overreacted.

Justme Says
"The reason MLS should be made public and open is that it constitutes a de-facto monopoly. Another part of the monopoly is the “standard” contracts that realtors use, which are not freely available."

First, it is not a monopoly, and second even if it were, monopolies are not automatically illegal. In this country we don't smash proprietary barriers simply because we think it didn't cost that much or because we want access. That is something that goes on in parts of the world that we are trying to liberate.

BTW, a contract can be written on a napkin. To say their forms are a monopoly is just not cogent. Stop throwing around hot button words like monopoly. You sound like some news person throwing around terms like victim, or forced into this or that.

Why should MLS be open?

The current manner in which MLS is operated constitutes a de facto collusive monopoly. Monopolies are fine. Collusion to the end of stifling competition is not, and is supposed to be illegal in the US. Unless the trade groups representing the integrated MLS system are placed under specifically regulated monopoly protection, ala the telecoms or energy companies prior to 1980s, then they are in violation of US antitrust rules.

The only reason no one has prosecuted this successfully yet is that every time the Justice Department starts an action -- and they have one underway right now I might add -- Congress steps in and derails it. But Congress also refuses to establish any meaningful regulatory regime for real estate either.

The MLS "agreement" which members are forced to accept to participate in the system is itself a case study in anti-competitive behaviors.

Is the MLS cartel responsible for the fact that real estate transaction costs have failed to narrow over a period when all other financial transaction costs have dropped by an order of magnitude? The MLS reduces one of the larger cost components of the real estate transaction -- economic search costs. With those costs removed, were real estate competitive, transaction costs would have shrunk significantly. Instead we see the MLS used as a barrier allowing the real estate industry to capture economic benefit away from the consumer. That type of action is illegal in the US if it involves collusion, or various other anti competitive behaviors.

Finally, arguments appealing to "free markets" supporting the MLS status quo are nefarious. Free markets do not mean that companies and their trade organizations are free to manipulate and control markets to their own benefit. Free markets mean companies and their trade organizations are free to compete within markets. By this logic at&t should be allowed to tell half the country which web sites they can go to, and they should be allowed to force companies wishing to participate on their web to sign big nasty agreements to become "members" of their club in order to have a chance to sell their services to consumers.

Monopolies are not illegal in the US. They are legal so long as they are:

a) regulated.
b) natural and do not use their market power to the detriment of consumers.

The current MLS cartel fails both points.

*either a or b

Malcom,

Oh I CAN and I WILL use the term "monopoly" (as applied to the REIC) all I WANT!

If you don't think it's a monopoly, just try setting up shop as a "discount" RE firm and tell me about all the love you're gettin'!

I object to their "cartel" practices as much if not MORE than the prices that result from "agents", brokers, appraise-whores, lenders (and the title companies that sell your name) ALL sleeping in the same bed! You from this planet, or just visiting?

Person,

Hopefully the savings flow, not just the interest earned, would get one out of the rental trap.

What is low yield? 12 week Treasuries are around 5%. Is this what you consider low?

How does the MLS collude to keep you from reading Home Trader, or opening your newspaper? It is a tool, and most all of your points are unsupported. Again, you throw around terms like collusive monopoly or a cartel for the emotional aspect and don't support it. You then let you argument completely slide off the scale when you assert that they control the market, and have prevented discount brokers. Discount brokers like Ipay1 have literally entrenched themselves as a new standard, and if you think the MLS players can 'control' the market, then why are prices falling?

Randy H,

GREAT post. Your post should be included as evidence for these congressional hearings. I'd only add that the probable reason Congress has derailed any MLS cartel-breaking plans is that the NAR is one of the largest political donors in the US.

Randy H,

GREAT post. Your post should be included as evidence for these congressional hearings. I'd only add that the probable reason Congress has derailed any MLS cartel-breaking plans is that the NAR is one of the largest political donors in the US.

Malcom,

Did you read the part about "being from this planet"?

NFW discount brokers are getting so much as a toe hold against the 6% Cartel (TM). Not even close! They are black-balled, have their signs torn down, get threatening phone calls and are met with legislative stone walling like "minimum standard services". (All for the "benefit" of the consumer of course). Seriously, you just visiting?

You then lay down your choice of criteria for a monopoly to then shoot down to make an incorrect point. Yes, monopolies can exist if they are natural so why didn't you stop there. The MLS is not propped up in an unatural state. A company operating off of a patented or licensed technology is NOT regulated so your point fails entirely there. I still don't see a bunch of independent businesses being a cartel for using a database, and furthermore the free market has given you access through Realtor.com, hardly seems like a colluded cartel to me, but I guess if you assign a shocking term even something as benign as a lockbox seems like oppression.

DINO, you are falling into that trap as well. Now you are talking about specific illegal actions to then make it seem like it is industry practice to tear down signs, or blacklist people. Prove it in court and walk away rich, but at least argue your point honestly.

skibum,

Along with the NAHB, building suppliers, lenders etc. all working to make sure you and I "get the best possible products and services" naturally.

Btw, I know the moon walk was faked b/c the earth shown in the background was round *not square. I'm done, it's a monopoly.

DINO
"If you don’t think it’s a monopoly, just try setting up shop as a “discount” RE firm and tell me about all the love you’re gettin’!"

In this market, are you kidding me? But your key word is try. You have no guarantees, only the right to try. It's a scary world in business, and you don't succeed always trying to get the rules rewritten because you don't like something someone else has.

Malcom,

I used to go to school with a guy that made his arguments this way. Everyone would utterly decimate his flimsy and half-baked position and yet, the guy would walk away smug! I guess as long as you can walk away with your head held high you were right!?

It's a little bit late in the game to be debating this, and counter productive. The "debate" should be about how do we dismantle it and put something resembling sanity in it's place. I'm done now. It's a monopoly.

The word of the day is innovation, that's how you do it.

You don't even know the meaning of the word.

And no, the debate isn't what you think it should be. I see a pattern in your thought process, you remind me of many people I see who think life is about accomodating your needs.

Different Sean-

In the eyes of the IRS it would be taxable. Since no after the fact transaction of sale by buyer has occured, 'constructive rect' would quaility income and not quaility for any exclusion. I IRS would see this unearned income... someone giving you money under the table... Thats what Al Capone went to jail for, unreported income. Its that simple.

Dismantle it, who the hell are you?

Malcom

US Antitrust Law specifically prohibits any use of market power (which is a legally defined and quantifiable term*) to the detriment of consumers.

Natural monopoly, collusive monopoly, oligopoly, even monospony all are subject to this test.

Does the existence of MLS serve to harm consumers by keeping transaction costs high?

Does the MLS "cartel" (group of cooperating entities, if you wish) represent significant market power? What does MLS rank in the HSR index for its industry? This work has been done, and it is available.

Don't just cry "shocking terms", or "you're as bad as the media". Why don't you demonstrate to me to whom the economic benefits of reduced search costs have accrued. The consumer or entities colluding within the MLS system?

Or more simply, answer me this. Why do so many MLS member agreements requires specifically that the member *not* participate in any competitive networks or systems? Justify that for me and you'll be a long way towards convincing me the MLS is benign.

"you don't succeed always trying to get the rules rewritten"

What rules? Who exactly "wrote" these rules? You may be right, (especially when they're written in STONE) and kept that way by special int. groups. NAR Rulez, and there's not a thing anyone can do about it.

Enjoy your visit! :)