patrick.net

Newport News has an “Achievable Dream Academy” that takes high risk kids.

Yeah, we all want them to achieve the American Dream and buy a house with the latest financial innovations. It is that important. :)

Peter P Says:
February 21st, 2008 at 5:36 pm
-Good schools will take the vouchers, add tuition on top and start an arms race the like of which you have never seen before.- Justme

Excellent! Free Market solution! - Peter

This is the typical exchange on this particular topic. It's a funny issue because both sides agree on the outcome but for some reason the side claiming to want to improve public schools doesn't like the idea of allowing bad schools to fail. The argument goes something like, vouchers will mean everyone will flee from public schools and private businesses will make a lot of money. Then I get into the prop 13 argument with people saying public schools are underfunded. With no disrespect to anyone I have to ask, because it really begs the question, if schools are so underfunded why is it that these businesses will make a ton of profits with less public money and at the same time be so offensive as to draw away all the students with superior customer service?

justme Says:
February 21st, 2008 at 5:21 pm
"The lesser schools will decline even further. The less savvy parents will not know what to demand from their schools in return for their vouchers."

Oh no you di'ant. Are these the same parents who hate having their kids stuck in public schools with no other choices? You really believe that a parent concerned about their child's education to the point that they would yank them out of the public school, and actually shop for the best school, wouldn't have an expectation for a result?

http://88.80.13.160/wiki/Wikileaks

To Stop a Leak
Did Bank Julius Baer overstep when it demanded an entire Web site be disabled for hosting a handful of documents?

By Brian Braiker | Newsweek Web Exclusive
http://www.newsweek.com/id/114415/page/1

The Julius Baer Bank claimed in papers filed in U.S. District Court in San Francisco this week that a fired executive stole internal documents and illegally posted them on Wikileaks, a Web site that specializes in publishing anonymous leaks and whistle-blowers. A federal judge ordered the site's Web address blocked for posting the internal documents, which accused a bank branch of money laundering and tax-evasion schemes.

It was, by all accounts, an innovative move: when threatening Wikileaks with legal action didn't get the documents removed, the bank demanded that Dynadot, the domain-name registrar, block traffic to wikileaks.org. Curious Web surfers were, as a result, not only rendered unable to access the Julius Baer documents, but everything else posted on Wikileaks, as well. (Of course, a bevy of mirror sites and alternative Web addresses--including the original numeric Internet protocol address for Wikileaks—remained available, and began rapidly multiplying after the judge's order came down.)

Laywers for both Dynadot and the Julius Baer bank declined to comment on the case. In a statement on one of its mirror sites, Wikileaks responded: "When the transparency group Wikileaks was censored in China last year, no one was too surprised. After all, the Chinese government also censors the Paris-based Reporters Sans Frontiers and New York Based Human Rights Watch ... But on Friday the 15th, February 2008, in the home of the free and the land of the brave, and a constitution which states 'Congress shall make no law... abridging the freedom of speech, or of the press,' the Wikileaks.org press was shutdown." The court has scheduled a hearing on the injunction for Feb. 29.

I am trapped in Merced County and cant find a REpro with a firm grip on reality.

Can you find one in the Fresno area?

February 22, 2008
Rescues for Homeowners in Debt Weighed
By EDMUND L. ANDREWS and LOUIS UCHITELLE
WASHINGTON — Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com.

Administration officials say they still oppose any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans during the height of the speculative bubble in housing.

But with the current efforts to arrest the housing collapse so far bearing little fruit, Washington is being forced to explore new ideas, among them the idea of a federal mortgage guarantee for troubled borrowers.

And policy makers are listening to proposals from industry and community groups to use government funds to purchase and refinance billions of dollars in mortgages now in danger of default.

Many owners are only gradually becoming aware that their homes would sell for less than the debt against them — a phenomenon, said Richard T. Curtin, director of the Reuters/University of Michigan Surveys of Consumers, that is “beginning to weigh on people, making them uncertain and nervous about the future.”

That nervousness is evident across the country, particularly in places like Memphis, a city of nearly 1.3 million people where falling home prices and negative equity are new experiences.

The housing slumps of the mid-1970s and late 1980s were confined to the coasts. The current bust, while leaving some cities relatively unscathed, has cut a far wider path and it comes just when home debt is at its highest level since World War II.

For Stuart B. Breakstone, the problem hit home when he was forced to come to the closing on the sale of his eight-year-old custom-built house with a check for $65,000. The money, out of his own pocket, was to pay the difference between what he still owed on the mortgage for his home and the lower selling price.

Mr. Breakstone, a 42-year-old lawyer, and his wife, Lori, chief of customs agents at Memphis International Airport — who together earn more than $250,000 a year — managed to extricate themselves by paying off the mortgage. But millions of others are trapped in their homes. They have jobs, make their mortgage payments on time, but cannot raise enough cash to cover the shortfall.

Some eventually default, surrendering to foreclosure. But the vast majority — embedded in their communities, their children in public schools, their reputations at stake — wait nervously in hope that prices will bottom and rise once again, eliminating their negative equity and restoring their freedom to sell or refinance.

“People can’t believe this is happening to them,” said Robert Moulton, president of the Americana Mortgage Group in Manhasset, N.Y.

In Washington, it will be difficult to engineer a bailout similar to the one for savings and loan companies in the early 1990s, because Democrats and Republicans alike cringe at the very word bailout and fear a backlash by people who never became overextended.

But with millions of homeowners already underwater and the prospect that millions more may face the same situation, Democrats and Republicans alike are scrambling for ideas to keep people from simply walking away from their homes and to help those struggling to pay their bills.

Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans.

The bank warned that tightening credit conditions were leading to “escalating levels of delinquency and default among borrowers” and “an unprecedented number” of homes that would enter foreclosure.

Administration officials have given the Bank of America plan a cold reception. But the idea is similar to one proposed by Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee.

The Federal Housing Administration, meanwhile, is examining ways to expand its new insurance program, known as FHA Secure, to help people replace their costly subprime mortgages with federally guaranteed fixed-rate mortgages.

Mortgage industry executives have complained that the F.H.A.’s eligibility requirements are so restrictive that the new program has helped only a trickle.

Credit Suisse executives said they have held lengthy meetings with F.H.A. officials and have urged the agency to relax rules that currently disqualify many borrowers.

One idea, company officials said, was to allow borrowers who had simply made six payments during the course of their mortgage to qualify.

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, has ordered his staff to come up with options for a broader rescue bill. An aide to Mr. Frank said his bill would, among other things, allow the government to buy up at least some troubled mortgages.

A more modest plan is being developed by John M. Reich, director of the Office of Thrift Supervision, the agency that regulates savings and loan companies. His plan, still in rough form, would create a voluntary system under which mortgage lenders would reduce debt and monthly payments to reflect the diminished sales value of a home.

It would take the remainder of the mortgage as a “negative amortization certificate,” a lien that the investor could recoup if the house were later sold for its original mortgage value or higher.

In an interview, Mr. Reich said he hoped that most of the old mortgages would be replaced by cheaper mortgages insured through the F.H.A.

“It isn’t a bailout,” Mr. Reich said. “It is a market-driven solution.”

For Americans caught in a mortgage trap and owing more on a home than it would sell for, consumer spending and confidence are the most immediate casualties, Mr. Curtin reports. But the damage goes deeper.

People cannot move easily to jobs in other cities if they have to sell their homes at a loss. The $168 billion federal stimulus package is likely to be less effective than intended because many homeowners may simply use their government checks to pay down their debts.

Housing prices in Memphis fell by 2.5 percent last year, only the second decline since records began to be kept in 1968, and by far the largest dip, according to Chandler Reports, which gathers this data for Greater Memphis.

The Memphis metropolitan area highlights the larger national trend, with the average first-mortgage debt, at $153,764, edging above the average home price, $152,815, for the first time. And that does not count refinancing and home equity loans, as well as closing costs.

Collie Tuttle, in her early 60s, is caught in this bind. Four years ago, she purchased a newly built four-bedroom three-bathroom house in the Memphis outer suburb of Olive Branch, Miss., for $270,000. She put nothing down, relying on her six-figure income from selling furniture to pay down the mortgage, reducing it to $248,000.

But then she lost her job, and in her next one — also selling furniture, but at lower pay — she is being forced to choose between her home and the rest of her life.

“It was a big mistake on my part to buy this house,” she said. Divorced, with two grown sons, she rattles around in it alone. She had thought the house would add to her wealth.

But now, to sell it for the $269,000 a potential buyer was recently willing to pay, “I would have to come up with $6,000 from my pocket,” Ms. Tuttle said, explaining that she cannot afford to invade her meager retirement account. “All I’m asking is for enough so that I come out even.”

Her house payments and utilities come to nearly $2,400 a month. That is affordable, she said, on her present income. But very little is left over to replace her 11-year-old car, to travel, to pay down her credit card debt, or even to buy new clothes.

“I’m stuck,” she said. “I’ve tried everything and I can’t get rid of this house.”

The reluctance to sell at a loss helps to explain why the number of homes listed for sale in the Memphis area has climbed to more than 13,000 from 9,000 a year ago.

Jane and Kevin Naus, in their mid-40s, have had their home on the market since last May; their attempts to sell for a price that covers their debts are skewing their lives.

Mr. Naus took a job in Greenville, N.C., last March, at a local bank. His wife stayed behind, putting their house up for sale, just a month before prices began to unravel.

But there were no offers at the $239,000 the couple asked for their four-bedroom brick house on a one-acre corner lot, so they gradually cut the price to $220,000, barely enough to cover the $192,000 in mortgage debt and an additional $22,000 in closing costs and broker’s fees. It still did not sell.

Mr. Naus says prices are under downward pressure because of competition from the auctioning of foreclosed homes at bargain prices. There were 5,714 foreclosures in Memphis in 2007. “In our neighborhood alone,” Mr. Naus said, “five houses were sold last September and October, and four of the five were foreclosures.”

Mrs. Naus joined her husband in Greenville in December but he lost his job in January, when his division was shut down. The couple decided to stay in Greenville, to be near the family of Mrs. Naus, who has multiple sclerosis and no longer works.

Her $1,800-a-month in disability pay, however, falls short of the $1,400 in monthly payments on the Memphis house and the $700 in rent for an apartment in Greenville. The Nauses make up the difference with his severance pay, and occasional dips into their savings, which have fallen below $100,000.

“We don’t want to lose the house or cut the price,” Mrs. Naus said, “and end up owing money.”

“Basically,” she added, “we are praying that the house sells before my husband’s severance runs out.”

The Breakstones are similarly in danger of sinking, despite their high income. After forking over $65,000 on the house they just sold, they are struggling with $670,000 in debt on their present, larger home — perhaps more than the house itself is worth.

The Breakstones, each previously divorced, married in 2006, bringing three children to their union. They needed a bigger house than the one Mr. Breakstone had built.

Mr. Breakstone thought that he could sell his other home quickly, but it sat on the market for 17 months and finally brought only $170,000. He covered the shortfall by borrowing against his present home — bringing it closer to being underwater, too.

Now the Breakstones are saddled with $4,000 a month in house payments, and $14,000 more in fixed outlays, including child support, car leases, taxes, consumer debt and utilities, using up the bulk of their income.

“I used to think,” Mr. Breakstone said, “that I would pay the piper later and enjoy life now. I’ve totally reversed that view.”

Edmund L. Andrews reported from Washington and Louis Uchitelle from Memphis and New York.

The less savvy parents will not know what to demand from their schools in return for their vouchers.

The less savvy people will not know what to do.

As a result, the government should decide for everyone. Cute!

"The $168 billion federal stimulus package is likely to be less effective than intended because many homeowners may simply use their government checks to pay down their debts."

Ha ha ha, someone's been reading the blog. OMG, weren't we all just talking about what we would actually use the money for? Holy crap! Thanks Permarenter, this is great reading.

Cash rebate is a demand-side measure. I am not optimistic about its effectiveness at all.

Instead, they should consider exempting long-term capital gains tax for investments acquired this year.

I'm thinking maybe I'll stick it to 'the man' by using my rebate to sponsor some hungry kid somewhere in the world.

I’m thinking maybe I’ll stick it to ‘the man’ by using my rebate to sponsor some hungry kid somewhere in the world.

Or buy an ounce of gold. :)

No, that would mean further participation. BTW, OO, I have to say it's looking like you may win the point on which way gold will go. I still think it is overpriced especially in comparison to its "purchasing power," I'd still be very cautious about buying into it at this point, but I sure wouldn't encourage people to short it if that is even possible to do.

The fact that I might be wrong on gold scares me because it is bascially a statement as to how far we've let our trade deficit go. In my latest readings it seems Chinese and Indian jewelry demand is fueling a lot of this. If they can really afford jewelry at $950 an ounce then that is truly a measure of individual wealth. Permarenter's article is basically saying 1 in 10 American households now have negative home equity and Chinese people can pay cash for their overpriced jewelry.

It could still turn but I have to concede it has gone slightly further than I thought it would. I think it will either fall short of crossing $1,000 per ounce, or it will go well above it. It is not a rational market, I still say it is a bubble of its own.

BAP33 - what area are you looking in?

I would be interested to know. Thanks

OO Says:

> Just out of curiosity, how much do these teachers
> at Harker make? What about the real elite boarding
> school teachers at Philips Academy?

Over the years I’ve dated women who were teachers at Town School in SF, North School in Hillsborough (where I went as a kid) and Castilleja (where my fiancé went to HS) and none of them made a lot of money, but none of them became teachers because they wanted to make a lot of money…

> I believe that public school teachers only make about
> $50-80K in the Bay Area, which is really not a lot given
> that such positions require certain certification/training
> beyond undergrad education. It is hard for me to imagine
> that you can recruit any quality teachers at Harker at a
> salary below that.

Teachers don’t make a lot “per year” but they don’t do all that bad “per hour” since a young teacher works about half as many hours per week as a young analyst at an IB or VC firm. Many women that work at A list private schools are not doing it for the money but to meet young high achieving couples who will introduce them to their single high achieving friends so they can get married…

"I believe that public school teachers only make about $50-80K in the Bay Area"

Only.... Ha ha, you guys kill me. No one believes me when I tell them that I talk to people from the BA who think people who make less than 100K per year are poor. That is actually a pretty good salary down here.

Just out of curiosity, how much do these teachers at Harker make?

What about the real elite boarding school teachers at Philips Academy?

To add to FAB's anecdotes, the "elite" East Coast prep schools pay similarly low wages to their teachers. I have friends teaching at places like Deerfield, Roxbury Latin, and Milton Academy. Believe me, they are paid less than their peers at most public schools. And these all happen to be dudes, so they didn't go into it to get introduced to "single high achieving friends so they can get married." There's the prestige, there's the luxury of teaching to generally motivated students, and there's the romantic notion of being just like Mr. Chips or Robin Williams in Dead Poets' Society...

You gotta love this - the wifey showed me a post on a forum at her office intranet... some poor schlub at this (Fortune 100) company is hawking her "collection of designer handbags, some only a few months old, all of them in top condition and very sparely (sic) used". For some reason, she felt compelled to share the reason for selling - "real estate investment problem forces sale".

The address is in the Silver Creek neighborhood of San Jose. Looks like somebody just got a visit from the NOD fairy...

How do you make "six figures" selling furniture around Memphis?

"collection of designer handbags"

Good Lord. Must be SOME... collection to raise enough cash-ola to fill THAT hole-a!

Isn't there some children's nursery rhyme about an Old Woman that lived in a designer handbag?

Now how's that one go..?

DennisN,

How does one go about making six figures in Memphis, period?

Guys I like to pass along good experiences for other people's benefit. I just completed my girlfriend's taxes and am almost done with mine. I can't think of a better value than using www.taxact.com. It is very easy to use and has great advice and self checking. I'm impressed with it, and it also lets you do signature free E-filing.

Not tax, or sales advice, just passing along my testimonial.

Malcom,

I'm hoping a friend can e-mail the link on those that are so eager to file... they overlook major deductions! I think he said it was in Money Mag. Don't get me wrong, I get itchy to see where I stand too (but don't hit "submit" until the "Shot Clock" is winding down!)

On Turbo (and Tax-Cut) they both search for updates (I assume primarily for the AMT Patch) and I have (2) differing results? Anyone else run into "I am, I might/might not be in the AMT?" Just curious.

I hope a few hundred million is enough to buy adequate personal security; ski slopes can be quite dangerous... ;-)

Dinner at Spago: at least Peter P will approve.

Speaking of ski disasters:
www.idahostatesman.com/newsupdates/story/302439.html

The CEO of Tamarack, Jean-Pierre Buttplug, said "We were caught by surprise."

The real problem is this. "The resort has presold 90 percent of the condominiums in the village, but terms of the buyers' contracts say the homes must be finished by Dec. 31 or buyers can cancel their purchases."

And where were they planning to get construction financing?

"The resort was counting on money from the sale of land for the Fairmont Tamarack Resort, a luxury resort and vacation-home development. That sale should have closed in the summer, but Fairmont asked for an extension of the option to buy."

Does $118 Million count as a non-conforming "jumbo" loan?

How does one go about making six figures in Memphis, period?

Count both sides of the decimal point!

Collie Tuttle, in her early 60s, is caught in this bind. Four years ago, she purchased a newly built four-bedroom three-bathroom house in the Memphis outer suburb of Olive Branch, Miss., for $270,000. She put nothing down, relying on her six-figure income from selling furniture to pay down the mortgage, reducing it to $248,000.

But now, to sell it for the $269,000 a potential buyer was recently willing to pay, “I would have to come up with $6,000 from my pocket,” Ms. Tuttle said, explaining that she cannot afford to invade her meager retirement account.

How can you spend so much after receiving a "six figure" income to not have $6K mad money to get out of a house?

DennisN,

I don't think the man's name is "Buttplug" o.k? (But with a statement like that it should be!)

Yeah, uh... celebrity names and attracting investment dollars. Can't wait to stay away from it! Same result when Demi Moore was "on the board of directors" for a... Hard Rock Cafe she and Bruce opened up your way back in the 90's?

I don't think anyone is getting their deposits back... if that's the next logical question?

Ooops...I guess I let a typo in there.

OT

http://www.marketwatch.com/news/story/talk-housing-bailout-leads-more/story.aspx?guid=%7BB4CEFD07%2DBD47%2D44CB%2D939B%2D1DB5F76F63D9%7D&siteid=yahoomy

They were eager to make money on all of this and now they are going crying to the government because they are now losing money - didn't hear a peep out of them when they were all making huge profits!

The government should demand all the profits back from the banks and mortgage brokers to pay for all of this - I don't hear anyone suggesting this!

I say - no bailout! And some of course are suggesting we are already paying and should be pro the bailout because our 401k's are taking a hit - well if we lost 50% in our 401k (sad to say) it would still be less than what hopefully the houses will go down by in our area of CA.

And remember a lot of these people were quite happy to raid their housing ATM's for crap they didn't really need and holidays and fancy cars and were gleeful as to how much their house was worth - well, you know, I don't want to have to pay for their cars and holidays because in the good times they sure wouldn't have returned the favor if I had asked!

RANT OFF

Bruce Willis actually owns much of the town of Hailey and IIUC is a primary investor in Soldier Mountain ski resort. www.soldiermountain.com

I am still skeptical of 401K.

However, I have learned the lesson. Next time there is a large-scale financial orgy (like the housing bubble) I will jump in headfirst.

Claire,

Oh I didn't think it was a rant at all. Just straight talk. I too have wondered why they haven't just liquidated some of these lenders, sold of their remaining assets or placed them in some form of recievership?

Here's the reality. We actually HAVE opened the flood gates and they ARE finally allowing class action suits for investors to sue their 401k's! I haven't been able to find much about it yet, I just caught a quick blurb on MSNBC as they were concluding their market wrap on Wed.

Now I have NO IDEA what this all implies? You're suit is against Vangard/Fidelity? Your employer? (God forbid, he doesn't control that) Your broker? So I have no idea if this is "what's good for the goose"? Turn-about or whatever? I've long made the claim there was no one to bail US out (10 Mar 2000 - April 2003) so why all the bending-over-backwards for over leveraged specuvestors?

Anyone have anything on the 401K Class Action Auth?

LaRue v. DeWolff

pacer.ca4.uscourts.gov/opinion.pdf/051756.P.pdf

Just another little something to fuel Peter P's paranoia about 401k's!

In my lay understanding the guy totally has a legit claim. I also feel the Enron employees that were shut out of their accounts as Enron "changed retirement plan providers" (while the stock was tanking) is legit as well.

My question is if these were isolated incidents (inability or unwillingness to complete the trade and move those that wanted to go to cash and were *not executed) why clear the way for class action?

DinOR Says:
February 22nd, 2008 at 8:01 am
"Malcom,
On Turbo (and Tax-Cut) they both search for updates (I assume primarily for the AMT Patch) and I have (2) differing results? Anyone else run into “I am, I might/might not be in the AMT?” Just curious."

I'm holding off on hitting submit for my taxes til a little later, but the software is very good. AMT is not affecting me this year, but somehow it is the only doubt I have as well since I of course don't want to miss out on any rebate of it which is one of the questions about prior year AMT. My actual AMT tax a couple of years back was a little under $2,000 but in a way it was good because for some reason it caused my tax person to not have to add back in my state refund from that year which I never understood. I didn't have AMT last year, but that phrase prior years has me doing a little research. I've simplified my situation a lot and have found tax advice to be a self fulfilling cycle. I actually overcontributed to an IRA a couple of years ago (didn't know you needed earned income, I make mainly passive income) and would have paid the 6% penalty again but then TaxAct had a suggestion of just withdrawing the excess. No preparer, not even my original CPA said to do that, I just ran down to the bank yesterday and filled out a simple form specifically for excess contributions.

Actually I think I remember why the state tax refund didn't need to go back in, because AMT replaces the itemized deductions which is what the state taxes paid are normally deducted from and then the refund is added the following year. Yikes! See it's not all fun and games.

New thread: Poetic Justice strikes Banksters: Judges say, “No tickee, no forclosee.”

@Malcolm:
Yeah, with regard to public schools and the money crunch there--one does wonder what the heck they are doing with the high Cali income taxes and the high Cali sales taxes. Something is deeply wrong somewhere.