mortgage

Biting the Hand that Wants to Feed Us

flickr image by revdancatt

President Obama flew into Arizona to announce his blueprint for a $75,000,000,000 mortgage bailout known as the “Homeowner Affordability and Stability Plan.”

REALonomics has digested the preliminary outline of this program which claims to “…offer assistance to as many as to 9 million homeowners…” through a combination of loan modifications and propping up of Fannie Mae and Freddie Mac, support for state housing authorities and financial incentives for lenders to re-tool existing loans for a predefined set of homeowners whose mortgages fall into specific qualifying categories.

How does it Work and who are the Beneficiaries?

Will the President’s plan make a difference and if so, to whom and when? And, is the plan a sound economic model that will actually help homeowners facing foreclosure, as claimed by the administration? Is this another step in the direction of creating a dependency upon the federal government for and on the part of some Americans and lending institutions?

Let’s take a look at the plan and ask some hard questions.
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mortgage

The Federalization of our Financial System at your Expense

REALonomics Editorial

We now own what we cannot control. We are witnessing the Federalizaiton of the Financial Systems of America. Backed by a fickle Congress and flanked by Federal Reserve Chairman Ben Bernanke, President Bush and Treasury Secretary Henry Paulson, contrary to their former political beliefs that government should stay out of the private sectors of the economy, took measures today to endorse the Federalization of our money systems.

Q1 - What does this mean to the real estate industry?

Clearly we are entering spooky waters wherein we dared never enter before. REALonomics believes the move by the government will paralyze the industry making home buying and selling incredibly difficult, if not impossible, in some already paralyzed markets. Home and commercial property values will assuredly decline even more, reducing the networth of the industry and its investor and home owner base.

Q2 - What does this mean to the mortgage industry?

Expect huge consolidations greater than the Bank of America’s absorbtion of Countrywide and Merrill Lynch. With this consolidation of the financial titans, mega titans will be created and essentially be required to submit to a new set of tightly regulated lending rules. It will be harder and harder to borrow and lend. This will create a over-regulation of the market and further drag on mortgage recovery.

Q3 - What does this mean to Americans?

Each of the more than 300 million people in America, including those born yesterday, will end up with at least a $100,000 debt hanging over their heads. This is the representative figure that is the accumulation of the current escalation of the national deficit and the new estimated $2 trillion dollar bailout of the financial markets.

The government bailout of the private sector of the market means that each of us was just handed a tax bill or, we might call it a “cash call” because we are collectively the new owners of the private problems of borrows and lenders.

Ron Paul (R, TX) was correct when he told Ben Bernanke, in essence, “you are going to bankrupt the American people with your money policies.”

The average American family is essentially, on paper, wiped out by this move and the impact on the real estate and mortgage industries was just extended to perhap a decade or even more.

Q4 - What does this mean in terms of the election?

This is the easy question and the answer is more finger pointing, more investigations, excessive government snooping (there needs to be some), lots of drama on the political stump and a great deal of harm to John McCain, who is already having difficulty coming out from the shadow of Bush’s foreign and domestic policies.

But it also means trouble for Barack Obama. He can forget about his national health care program for all Americans, he can forget about taxing anyone, much less those earning incomes above $250k and he can kiss his “no-new-energy-if-it-means-drilling-coal fired plants-and-nuclear-power” policy good by.

In essence the damage done to both candidacies is substantial and the next 45 days are going to be like the wild-wild-west as we run up to election time. To vote in the Presidential poll, visit www.iVoteAmerica.com.

The most remarkable thing about today’s move to “take-over” is that it represents a profoundly fundamental shift in our capital market value system and establishes a whole new mechanism for creating a way to further tax the American people. Make no mistake about it, you just got taxed and to pay the tax bill you were forced to financed the payments over time. There was paperwork, no disclosure and no recource for any of us. All of this is taking place right before our eyes without much of a whimper or a voice of protest.

mortgage

RateSpeed: Inching Us Toward Mortgage Transparency

As a real estate industry change agent, Jeff Corbett certainly ranks high on the mortgage list. His blog, The XBroker, is a quality diatribe that weaves a clear picture of the confusion and chaos that exists within the mortgage industry and its relationship with the consumer.

Good change agents have an edge to them, typically a sharp edge. Exceptional change agents have a sharp, well informed and analytical edge to them that will cut ones mind open so that it soaks in the message of transformational change. Jeff is a sharp, well informed, analytical agent of change. He is on the march against predatory lending and other kinds of mortgage lending practices that have contributed to a large degree to the current financial state of the union.

ENTER “RATESPEED“

Jeff wants transparency in all things related to mortgage. When we spoke recently, we briefly discussed our respective efforts within the industry but digressed almost immediately to his “RateSpeed” widget for the mortgage industry.

As is usually the case within our industry, disclosure is at the core of RateSpeed. The RateSpeed widget spews out mortgage pricing analysis and its resultant solutions are the kind of transparency that sets the consumer at ease with a sense of “complete” knowledge about the financial ramifications of a mortgage commitment.

Although the RE industry and its biological twin, the mortgage wing, need a dose of RateSpeed widgetry, what we need more than widgets, good as they are, is a dose of the mentality and leadership behind the widgets. Jeff’s widget stems from a mental image of what the mortgage industry’s business model should look like, what it can deliver to the customers in this, our Third Economic Wave, the Consumer-Centric Era.

To REALonomics, RateSpeed is not a widget…the widget is the expression of a kind of business model…of course, that’s what REALonomics thinks about day and night…MODELS.

Behind Jeff Corbett’s RateSpeed widget is a business blueprint and behind the blueprint is a design that delivers a solution to the industry and the consumer. BRAVO!

ENTER “RATESPEED RESISTANCE“

REALonomics admittedly knows less about the fundamental practices of the mortgage industry than it does those of the real estate brokerage industry. But there is an initial and fundamental response to our mutual calls for transformation and transparency…resistance.

Moving from corporate hierarchy models to cooperative and collaborative platforms that embrace complete disclosure will always be met with initial skeptical cynicism and resistance. Nevertheless, the Jeff Corbett’s of this industry are to be recognized for thrusting their widgets into our faces, forcing us to think about transforming a now very sick industry into a new, vibrant and fully fluid, consumer-centric delivery model that our clients love…yes, “LOVE” is what I said.

REALonomics applauds Jeff and all of the rest of the Jeff-like transformers who are inching us forward in our “Qwest for Model Perfect.”

Try RateSpeed. Visit The XBroker.

mortgage

Bush: Federalizing the Economy?

REALonomics Editorial

President George Bush wants to overhaul the regulation and control of America’s financial markets. Under the Bush plan, the Federal Reserve (Chairman Bernanke) will become the designated controller of our economic markets and be fully responsible to regulate their stability.

In addition, Bush wants the central bank to poke its regulatory nose inside the tent of every part of the financial services industry in the United States. All financial services, not just commercial services, will be under the scrutiny and powers of the central bank.

The Crowning of Mr. Bernanke

Under the Bush scenario, Bernanke will be coronated as the royal controller of all currency, money management, commerial banks and every type of financial institution in the United States. The Fed, under Bernanke, will become the market stability regulator, something like a throttle control on an engine, empowering it to tinker with every aspect of lending in the country.

Included in the plan is a knee-jerk reaction to the sub-prime lending debacle that designates another bureucratic office to oversee consumer lending issues to insure standardized compliance.

This plan evokes a number of questions the real estate industry must ask itself. Are we federalizing the economy, such as many second and third world countries have done? Is this the socialization of lending in the United States? MORE IMPORTANTLY, what does this action, if implemented mean to the real estate, mortgage and title industrys? Will such action actually benefit the economy and the consumer or, will it serve to further stagnate growth, delay recovery, stiffle free market innovation and release us all from entreprenuerial solutions?

Let’s Remember not to Forget

Let’s not forget that the former Federal Reserve Chairman, endorsed and encouraged sub-prime lending before his convenient departure from office.

Let’s not forget that one of Bernanke’s financial aces has alwasy been to print more money, thus further weakening the value of the dollar in the international markets.

Let’s not forget that in the past the markets corrected and self-regulated themselves, weeding out corruption and bad practices.

Let’s not forget that history clearly demonstrates that intrusive federal tampering with the free market system inevitably leads to a weaker stock market.

Let’s not forget this is an election year and the heat has been turned up in the political kitchen forcing politicians to create solutions to the mortgage mess for the American consumer.

All of us should take a close look at what is occuring and ask ourselves if the solution Bush proposes is the right one and whether long term financial and market stability should be put into the hands of Washington.

REALonomics believes that too much federal control and regulation of the monetary supply and the financial markets is like giving it the power to regulate and ration water.