If I happen to "disappear" in the next few months, this letter may be the reason. It was written in answer to an email from the man who has sworn to protect the Constitution and the interests of people living in my part of the country. His email was an open invitation to a come-to-Jesus meeting of lenders and government types to help people save their houses from foreclosure.

Quoting from the Houston Chronicle:

Foreclosure Provokes Suicide

A 12-hour standoff ended this morning with a north Houston man lobbing Molotov cocktails at Houston Police before taking his own life rather than vacate a home he'd lost to foreclosure.

James Hahn, a chemist, had told police he would not be taken from the home alive, said Capt. Bruce Williams, an HPD spokesman.

" 'You know what I do for a living and you know what I am capable of,' " said Williams, recalling one of the conversations police had with the man on Wednesday.

The standoff began at 1:10 p.m. Wednesday when police said Hahn pulled a gun on Precinct 4 constable deputies who had attempted to serve him with a warrant for eviction at the home in the 21000 block of Covington Bridge in Spring, authorities said.

It would appear that Hahn had prepared for the standoff. He had nailed plywood over windows and doors and stuffed insulation into cracks. A cache of weapons and explosive devices were found in the home, along with a gas mask, chemical suit similar to those worn by Haz-Mat crew members.

Williams said it explained why Hahn didn't vacate the house after police shot tear gas into the residence on three separate occasions in the hopes of bringing the standoff to an end.

Williams said Hahn was recently divorced, depressed and struggled with financial problems and drug addiction.

"We believe this particular individual was not going to go peacefully," Williams said.

***

"We're not leaving today. And this is only going to get worse for you come out now," a SWAT negotiator said.

An hour and a half later, Hahn shot himself as officers closed in on his home.

Residents noted there had been a number of foreclosures in the neighborhood lately.

But none imagined that Hahn would take his life rather than leave a home that no longer belonged to him.

 

Comment: The needless death of anyone is a tragedy. An untimely death precipitated by nothing more than a financial problem is doubly tragic.

Some of us who question the morality of having a government entity (the police) collect our debts or enforce contracts by the use of deadly force have a bit of experience you may not. Any time I've had to do a forcible eviction, the problem with the tenant seemed obvious from the start, in hindsight. So if anyone had gotten hurt, I might have felt ever-so-slightly responsible. Even though I believe that someone who makes a contract with me and deliberately refuses to perform is stealing from me and mine, just as surely as if he'd burglarized me or robbed me with a weapon.

In this case, of course, the police didn't fire a single shot, and the man would likely have ended up dead sooner or later because of his mental condition.

I wouldn't hazard a guess what exactly happened there, but I can tell you that police do not have a great deal of skill in handling a situation where someone is distraught. My cop friends (current and retired) agree that this is an area in which there seem to be no "right" answers. Having once stood literally nose-to-nose with a cop who was screaming at me to "calm down," I can assure you that the threat of force never helps in a situation where someone is already angry or depressed. "It's only going to get worse" was probably not the right thing for the SWAT negotiator to have said, however honest an assessment it may have been.

And yet, without the threat of force, no contract or law would be enforceable, at least among some people. We delude ourselves into believing that if the government (i.e., law enforcement people) are the ones to exert that force, it is somehow superior to our having personally done so, or having hired a bounty-hunter to work for us. The financial stalemate is broken, and our hands seem to have remained clean.

It's a situation where no moral choice exists.

Mr. Cummings' latest newsletter to us constituents arrived here on September 28, contained the following statement (redacted here):

Fighting the Fallout of the Subprime Mortgage Crisis

We are in the midst of a serious national crisis in the housing market—particularly where subprime mortgages, geared toward borrowers with low credit scores, are concerned. Subprime loans are not inherently dangerous, but in the wake of an explosion of the subprime market, predatory practices within the industry have turned the American Dream of home ownership into more of a nightmare. The effects of this crisis are not just forcing millions of Americans into homelessness;...

This problem does not just hurt the families who are losing their homes, though. When a home goes into foreclosure, it drops the property value of the surrounding homes in the neighborhood-- sometimes reducing values to levels below what homeowners paid for them. Foreclosures have cost the City of Baltimore alone roughly $1.8 billion in reduced property values in the past five years. 

Last week, I joined my colleagues in passing H.R. 1852, a bill to revitalize the Federal Housing Administration, allowing it to offer more services to borrowers—including those who are forced to take out subprime loans. This is a good start in fixing the crisis, but it is not nearly enough.

After hearing testimony last week before the Joint Economic Committee, on which I sit, I decided to find a short-term solution to help ease the havoc being wreaked by the subprime market. I am in the process of developing two pieces of legislation. The first will make one simple change to the bankruptcy code...

The second will require a one-page, user-friendly document to be provided to buyers during the closing of a home sale. This document will provide essential information outlining the terms of the buyer’s mortgage to help prevent users with adjustable rate mortgages from being blindsided by unexpected ballooning payments.

 

Mr. Cummings,

As much as I might admire your compassion for people who have gotten themselves into a financial bind, the federal government has no cause to stick its nose farther into the subprime mortgage mess.

Having been a real estate salesman for six years, about a decade ago, I understand the degree to which lenders coerced people to overextend themselves financially with the loans they've made under the rubric "subprime." However, I also know that lenders have long been under pressure from the Equal Housing Opportunity crowd to approve mortgage loans to minority applicants, even when they are marginally qualified. When I was selling houses, there was a subtle, but palpable pressure to make certain that any minority prospect got qualified for a loan on the house he or she chose, if the numbers were even remotely close. The result of this reverse-discrimination practice is that the proportion of foreclosures among minority home buyers have always been higher.

How this led to the sub-prime mess, I am not quite certain. But I do know several things that may not have occurred to you, in your rush to "do something."

Lenders invariably lose more money on foreclosures than on "work outs," where the terms of a loan are renegotiated. One one commercial property I owned, the cash flow from rents was at least $15,000 a year less than my expenses, because of chronic vacancy problems, bad debts from deadbeat tenants, and maintenance that the former owner had neglected to perform. Rather than reach for bankruptcy, I sought out the one tenant whose business was growing the most and negotiated a sale of the property to him, at a price just high enough to keep me from paying money at the settlement table. Knowing the sale was in the works, I was able to persuade the mortgage lender to accept reduced payments for several months, in anticipation of the payoff of the loan. Everyone walked away happy. Me, less than some other parties, but nevertheless I was able to close that chapter of my life on my own terms.

THUS, lenders who have portfolios of sub-prime loans ought to be encouraged to renegotiate these loans, rather than foreclose. I have heard it said by knowledgeable people that the entire problem could be rectified by renegotiating these loans, extending the term of the loan to 40 or 50 years. With the cost of housing increasing faster than the average income, this is bound to happen in the marketplace anyway.

On the other hand, to use government funds (MY money) to help out either a buyer who was foolish enough to get too deeply in debt, or a lender who was greedy or foolish enough to lend to a marginally qualified prospect, is grossly unfair to me, and others like me who have lived a financially conservative life. I've been in the same house for 32 years, and it is paid off. The newest of our two automobiles is a 1999 model, and we have bought the last three vehicles we've owned cash. We keep a motor vehicle an average of eleven years or more.

To increase taxes in any way, in sympathy with these befuddled lenders and buyers would be to punish people like me for having lived prudently all our lives. It is a redistribution of wealth, which in my opinion is NOT within the scope of government, nor is it desirable.

I DO wish you would disabuse yourself of the notion that every time a person stumbles, someone from the government ought to be there to help them. Because those who stumble and are saved by something other than their own effort and sacrifice do not learn what they need to know to avoid stumbling again. Thus, by your good intentions, the government stifles people's growth.

As always,

Stan M-------

 

I managed to avoid using the phrase "redistributionist bullshit," but just barely.

And today I received a commentary from the Center for Individual Freedom, entitled "Why A Subprime Bailout would be Unfair and Unwise." I think this piece makes an even better case for government non-action than my letter.

Developer Builds Around Woman's Home

SEATTLE (AP) - When 86-year-old Edith Macefield refused a $1 million offer to move from her Seattle home, a developer started building a five-story project around it.

Macefield said that she doesn't need the money and that she doesn't want to move from her home, where she has lived since 1966. A concrete wall looms within feet of her kitchen window as the project rises.

Macefield's 108-year-old house is the last home on the block near the Ballard bridge.

Macefield said that she doesn't mind the noise of the construction site.

Construction workers watch out for Macefield, particularly superintendent Barry Martin who says it's like having your grandmother around.

So much for the urban planning and building permit process in Seattle.

Three decades ago, we lived in a rented house on a side street in Towson, the county seat of Baltimore County. "Our" house was fit to be condemned because of its poor condition, but an inexpensive rental that enabled us to save the down payment on our own place.

Next door to us lived Mrs. Herzog, a sprightly lady in her late seventies, who shared the house with her widowed sister. The place we rented, along with the two on the other side of it, were owned by a developer who was assembling a chunk of land for a big apartment project. But because Mrs. Herzog had been there since the house was built, she had no intention of moving. Because she stayed, so did four other homeowners on her end of the block. The result was that the developer had to change completely his plans for this tract of land. Mrs. H. and her house are long gone now, but their presence in the neighborhood can still be felt.

Individuals do not have much power to fight City Hall, but it takes only a handful of determined people to prevail against an overbearing and corrupt government.

WASHINGTON (Reuters) - Next year will likely bring a second annual decline in existing home sales, the National Association of Realtors predicted on Monday. [December 11]

Sales of existing homes are expected to decline 8.6 percent to 6.47 million for 2006 and contract another 1 percent to 6.40 million units next year. Still, the housing sector should see a rebound by the end of next year, said David Lereah, the association's chief economist."By the fourth quarter of 2007, existing-home sales will be 4.6 percent higher than the current quarter," Lereah said.Sales of new homes should fall a sharp 17.7 percent this year and another 9.4 percent next year, the Realtors said.

About three-quarters of the country will see a sluggish expansion of existing home sales next year, Lereah said.The health of housing markets across the country will vary, he said, but "general gains in value next year will be modest by historic standards."In the last three months of 2005, homes across the nation were appreciating at a 12 percent rate, according to the Office of Federal Housing Enterprise Oversight. From July to September this year, home price appreciation had slowed to a 3.5 percent rate.Lereah also predicted that 30-year mortgage rates would increase to 6.7 percent by September. Those rates were at 6.11 percent last week, mortgage finance company Freddie Mac reported.

 Among those of us who follow the real estate business closely, the predicted rebound seems optimistic. Economists with nothing at stake (unlike those who work for the Realtors) have predicted a serious increase in the number of foreclosures and short-sales, as the promotional mortgage rates that fed the recent house-buying boom expire. Many new homeowners are expected to find themselves unable to afford payments, once introductory adjustable rates expire, and some of these will find themselves owing more on the property than they initially paid.

Moreover, the NAR's experts fail to take into account the changes we can expect to see with the shifting balance of power in the federal government. Sooner or later, people will finally tumble to the fact that we are engaged in the third world war, and sooner or later, other people will insist upon radical measures to deal with that: tax increases and the renewal of military conscription, to name only two. We're also reading that the average commuting distance for US workers has continued to increase. With fuel prices remaining unstable, and the very real possibility of motor fuel supply problems, it would be foolish to insist that the US economy will continue on its current path.

Meanwhile, Realtors being professional liars, the probability is zero that Suzie Q. Real-a-tor will counsel prospective sellers to be modest in the sale prices they can expect. The industry has largely been built on the untruth that housing prices will always increase, and to compete as a real estate agent in the USA requires a person be able to lie about the probable sale price of a house to "get the listing," then tell some more lies down the road when it remains unsold, to get the price reduced to where it needs to be.

Those who over-spent, and those who are too pig-headed to work where they live, will suffer the worst. And they will deserve it.

" ' You don't have a (low-income, first-time home buyer) program and have people traveling all the way to Towson,' said Lansdowne resident Theresa Lowry, co-director of the Southwest Leadership Team that serves Baltimore Highlands, Lansdowne and Riverview."

I respectfully disagree. Owning a home is a pain in the neck that requires planning and sacrifice. And a person who cannot find a way from Lansdowne to Towson for one crummy evening seminar will probably fail as a homeowner the first time a toilet backs up, the roof leaks, or only cold water comes out of the "hot" tap.

While we are about convincing people that owning their home is The American Dream, we need to convince them keeping that house in shape and keeping the mortgage paid is Job One. As with having children, home ownership is a tremendous burden; one which not everyone is suited to bear. There are many for whom clothes, a fancy car, and "partying" will always be the prime attractions. When do-gooders go out of their way to qualify such people to purchase a house, they are often setting in motion a chain of events that is bound to end in failure.

The SELP programs have been around long enough now that some follow-up ought to be possible. Ditto for all the mortgage qualification schemes that burden borrowers with debt beyond the tried-and-true 28% figure. Before throwing good money after bad, the county government ought to determine whether there is a correlation between foreclosures and purchase transactions in which someone has gone to excessive lengths to qualify a purchaser.

Contrary to common belief, no lender profits when a house ends up in foreclosure. And the losses on those deals end up passed along, in the form of increased loan costs, to the people who are willing and able to delay gratification and make owning their residence the primary goal.

Frankly, the rest don't even make suitable tenants. As a small-potatoes landlord I had all too much experience with tenants who would skip the rent payment to buy Christmas presents for the kids, another case of beer, etcetera. Hardly anything is more galling than having a tenant call on her cell phone to tell you she "won't have the rent this month," all the while puffing on a cigarette purchased at $4 a pack.

There is no helping people who are poor because they have bad judgment.

BALTIMORE - There may be help on the horizon for residents whose security is being threatened by foreclosure.

A coalition of public organizations and advocacy groups will come together Thursday in an effort to develop a strategy to help stem the tide of rising foreclosure rates in the state.

“The objective is to bring those organizations that care about the issue of rising foreclosure rates together to look at trends … and find solutions,” said Doug Robinson, a spokesman for NeighborWorks America, a national nonprofit created by Congress to provide financial support, technical assistance and training for community-based revitalization efforts.

The unvarnished truth is that most foreclosures happen because mortgage lenders and realtors have stretched too far to qualify people for loans.

Several years ago, the guidelines for approving a loan were that the combined principal, interest, taxes and insurance costs could not exceed about 28% of an applicant's gross annual income. That's assuming the applicant had a satisfactory credit and employment history. Now it's not unheard of for people to buy houses with expenses approaching 65% of their gross income.  That leaves very little margin for unexpected circumstances.

When I was selling houses as a licensed agent, most people expressed discomfort even at the 28% level, but with the recent sellers' market hysteria, that healthy skepticism went out the window.

Moreover, ten or fifteen years ago, realtors were being encouraged by their brokers to go all-out to stretch the numbers and get minority buyers qualified, lest they be accused of some illegal discrimination.

The number of foreclosures has also increased as the loan-to-value ratios have increased. Within my lifetime, a buyer needed a 20% down payment, plus closing costs (primarily taxes) to become a home owner. Recently, between HUD lending programs and other economically unsound initiatives, it has become possible for a person to buy with almost zero down payment.

Economics aside, that is just bad business psychology. The less a person has at stake in a transaction, the more likely they are to walk away from it. That's the reason agents advise their seller-clients to reject or counter an offer that does not include a substantial deposit. Legally, a contract to purchase would be binding on the purchaser with a deposit of a dollar, but as a seller you'd be foolish to agree to such an arrangement.

The only thing that will reduce the number of foreclosures would be a return to sound lending practices. But politicians--elected, appointed or self-anointed--will resist this, claiming it's "unfair to poor people," or invoking the tired shibboleth about home ownership being "The American Dream."

Meanwhile, whatever has happened this week with O'Malley et. al. is mere window-dressing, an attempt for the aspiring governor to buy votes in a city where the quality of life continues to circle the drain.

Baltimore homeowners who face foreclosure have a new ally, thanks to a coalition working in conjunction with government groups.

Mayor Martin O’Malley on Wednesday will announce a counseling support group that will help financially troubled homeowners avoid foreclosure.

“It’s not an unusual problem,” said Carol Gilbert, program officer with the Goldseker Foundation, a 30-year-old Baltimore foundation that supports nonprofit organizations helping communities and individuals in the Baltimore metro region.

The Goldseker Foundation funded a report by The Reinvestment Fund that shows the depth of foreclosures in the area. That report and the counseling support group will be made public at 10:30 a.m. Wednesday when O’Malley hosts a news conference in the Belair-Edison neighborhood at the corner of Parkside Drive and Kavon Avenue.

Joining O’Malley will be Paul T. Graziano, commissioner with Baltimore Housing; Marietta Rodriguez, director of NeighborWorks Center for Foreclosure Solutions in Washington; Colleen Hernandez, president of the Homeownership Preservation Foundation in Minneapolis; Mary Louise Preis, vice president for community relations with CitiFinancial in Baltimore; and Vincent P. Quayle, executive director of the St. Ambrose Housing Aid Center in Baltimore.

Gilbert said 3,600 filings for foreclosures were made in 2005, down from the 2000 level of 5,000.

“That’s still high,” she said, though a filing for foreclosure does not mean the mortgage holder foreclosed a property.

What convenient timing. The number of foreclosures is down, at least temporarily, but the general election is only six weeks away. Now, if Governor Ehrlich had done this, the Democrats would be screaming that he is "politicizing the plight of poor people," or some such twaddle.

Meanwhile, since both of Baltimore's dubious daily papers lack a sense of historical perspective, it is worth remembering that Morris Goldseker was without question the most egregious slumlord in the city's history, and almost single-handedly responsible for the blockbusting of Edmondson Village in the 1950s. It was only after his death that this particcular evil-doer's millions were put to charitable use.

But Baltimore's Democrats have a pathologically short memory when it comes to the devious doings of any of our local real estate moguls, as long as they are willing to throw around some cash for a concert hall, a theatre or a charitable foundation. I put more stock in the words of Shakespeare's Marc Antony, who observed that the evil men do lives on beyond their lifetimes.

Thus, Baltimore's retail districts and working port were ground beneath the mill wheel of James Rouse's ambitions.

[Jody] Landers, executive director of the Greater Baltimore Board of Realtors, is opposed to a recommendation by the Baltimore City Task Force on Inclusionary Zoning and Housing that would require builders to designate a certain number of units in new development as affordable, and offer the units for sale to residents earning less than $60,000 for a family of four.

“There is a lot of affordable housing in Baltimore City,” Landers said.

Citing numbers from the Multiple Listing Service for the city, Landers said 1,200 homes currently on the market are offered at less than $150,000.

Landers conveniently neglects the details, which is that most of these 1,200 properties are in horrible neighborhoods, and/or uninhabitable. It's easy to talk about rehabbing houses, and quite another thing to actually do it. Especially in less-than-desirable (read: affordable) neighborhoods, where building materials and tools disappear into the hands of drug addicts the moment your back is turned. Of course, this claptrap is no surprise, coming  from someone representing an industry built on half-truths, deception and outright lying.

Blame the nearest real estate agent. It doesn't matter whether it's the one in the red blazer, the one in the puke-colored blazer, or someone with actual fashion sense. They're all of a piece. Some agents start out as genuinely decent, intelligent people, but the brokerage business is a crucible. You either adapt to the standard way of doing business, or you burn up and evaporate.

This nonsense of  24/7/365 availability got started when a few agents got the notion to plaster their home phone numbers on for-sale signs, and everyone else followed suit. The trouble is, except for agents, buyers, and the poor seller caught in the middle of this, everyone else you need to buy or sell property works nine-to-five, Monday through Friday: title abstractors, attorneys, bankers, land surveyors, termite inspectors, etcetera. So the "I'm always available" nonsense creates a lot of pressure, but really does not get things done any faster. Add to this the ubiquity of cell phones and mobile internet, and we've now reached the point where you have to leave messages for Suzy Realtor at five different places, when she's too occupied getting her nails done to talk with you.

The biggest problem with the entire notion is that it's so infantile. When I was a licensed salesperson, sellers and buyers would call at some absurd hour of the night to confide in me that they were worried about some detail of a deal. When this happens, you have to grin and bear it, even though your first notion is to tell them to bugger off.

The constant-availability myth is one  reason I don't consider real estate sales to be a "profession." You might have a fatal case of melanoma, but you are still not going to see your oncologist without an appointment, much less phone him while he's in the middle of watching Desperate Housewives.

A profession, as distinct from a trade, is an area of work where there is an entry threshold set high enough that the more mediocre aspirants are weeded out before they start. Professionals in the arts and sciences usually are required to make some original and unique contribution to their field before gaining credentials. PhD candidates, for example, spend several years researching and writing a dissertation, then must defend it in front of a group of devil's advocates. This is hardly the equivalent of passing a 100 question, multiple-guess test on real estate practices & principles, and having a credit report with no serious black marks, Any dolt can get a real estate license, and many do. Thus, as far as I am concerned, the only sense in which selling real estate might be considered a profession is in the same sense as "the oldest profession."

Next instalment, we'll consider the myths about "full time" agents and "top producers."

Until then, if you are selling your house, don't sign up with anyone without asking them some discomfiting questions. A suggested list of those is also forthcoming.

 This blog is made possible by www.RealEstateMaven.net

For sale by owner?

Not this owner.

If you’re totally comfortable giving up evenings, weekends and privacy to meet with potential buyers, by all means, sell your own home. But sooner or later, you’ll realize that you need someone who’s done this before, someone who adheres to a strict code of ethics. So, when selling your home, make sure you get an agent. And make sure that agent is a REALTOR®

What a complete crock!