Category Archives: Investing

Don't buy a house that you like

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One of the most important questions people are asking themselves these days when buying a house is, “Will I lose money if I have to sell it?”  Fair question for sure.  The most likely answer is yes, if you are going to need to sell it in the not too distant future.  Stay in it for a decade, is more the order of the day these days.

Of course some people will still be buying houses, regardless.  For those people who are buying a house, I say “Don’t buy a house that YOU like!”  I know that seems like an odd statement, but it is very important that you buy a house that MOST people will like. 

1) Spend hours in a house before you buy it; not minutes.

Don’t you think it’s odd that some people spend less time in a house before they buy it, than I spend picking out a pair of earrings or stockings at Nordstrom’s Rack?

2) Write down what you like and what you don’t like.

If there is nothing on the list that you don’t like, you probably aren’t looking hard enough.  There is no such thing as a house without pros and cons.  Bring some people with you, including your buyer’s agent.  Have everyone quietly write down the pros and cons.  Don’t discuss with each other until everyone is finished.  If your buyer’s agent has no cons on their list, fire them.  Now compare everyone’s lists while still inside the house.  One at a time, each can explain why they do or don’t like various aspects of the house.  It is more likely that you won’t miss something if you take the time to do this.

3) Ask your buyer’s agent what things they might ask you to do to this house, if you called them back to sell it.

Make a list, before you make an offer, of all of the cons and note which can be corrected and which can not.  Traffic noise is not something you can correct when the windows are open in summer.  Seeing cars go by, might be something you can correct with landscaping.  Bright gold switchplates changed out is simple, cheap and takes little time.  Take the time to go through all of the cons to determine if there are any that cannot be corrected. Then try to like something without things that cannot be corrected.

4) Be careful of homes that are just over a price break point 

Everyone knows that an asking price of $599,950 is better than one priced at $609,950.  In these times when people view property on the internet they put in a “cap price” such as $600,000. Consequently, you have a better chance of “breaking even” if you have to sell the house, if you buy it at $580,000 than if you pay $610,000.  Just is.  Don’t argue that point.  Just is.

5) Let the majority rule

Don’t buy a house if you are the only one who likes it.  If it is a vacant house, it’s easier to get a lot of people to come over and spend a bit of time in it.  If 2 people like it, including you, and 10 people hate it…keep looking.  The more you overlook what other people think about the house…the harder it will be to sell it if and when you have to sell it.

Agents often say Price will fix any Problem…but that is NOT true!  In a market in which only 3 of every 10 homes readily sell, you don’t want to be one of the 3 that no one wants at any price.  10 houses for sale = 3 sell because everyone likes them…4 sell because they are a good value…3 get passed over repeatedly.  You don’t want to own one of those last 3 houses. 

Test what you like against what MOST people like.  Better to pay a few dollars more for a house that is generally appealing, then to get a great buy on the house with the most negatives.

Is Excise Tax Payable on Short Sale Debt Forgiveness?

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The Washington State Department of Revenue (DOR) seems to think so.  Background: At an Escrow Association of Washington (EAW) meeting on Nov 13, 2008, Mel Kirpes and Steve Bren from  WA DOR spoke at a regional dinner meeting where it was announced that when there is a short sale, the DOR considers the debt forgiven as additional consideration above the contracted sales price between the parties and that the DOR will be pursuing the home seller for payment of the excise tax. (Reference is a EAW letter dated Nov 25, 2008 from EAW Director Cindi L. Holstrom)
Naturally this had a chilling effect amongst escrow officers.  The DOR responded on Dec 12, 2008 in a letter from Gilbert Brewer, Assnt Director of the DOR:

RCW 82.45 imposes an excise tax on the sale of real estate unless specifically exempt from statute. “The measure of the tax is based on the total selling price of the property conveyed. The incidence of the tax is usually on the seller.  However, if the tax is not paid in full, the tax (together with any interest and penalties) becomes a lien on the real property. This is mandated by RCW 82.45.030 …which defines “selling price” as the “true and fair value of the property conveyed.” If a property has been conveyed in an arm’s length transaction between unrelated persons for a valuable consideration, a rebuttable presumption exists that the selling price is equal to the total consideration paid or contracted to be paid to the transferor, or to another for the transferor’s benefit….”total consideration paid or contracted” to be paid as including “money or anything of value, paid or delivered or contracted to be paid or delivered in return for the sale, and shall include the amount of any lien, mortgage, contrat, indebtedness, or other incumbrance, either given to secure the purchase price, or any part thereof, or remaining unpaid on such property at the time of the sale.”

Since there is an exemption from real estate excise tax in the event of foreclosure or a deed in lieu of foreclosure (see WAC 458-61A-208) this DOR opinion may unfortunately motivate homeowners to consider foreclosure a more viable option. Perhaps the home seller’s Realtor can negotiate with the lender to pay for the additional excise tax lien as well.  However, then that extra amount paid by the lender may also be subject to excise tax.
The Seattle King Co Assoc of Realtors and Washington Realtors believes DOR’s position is incorrect and problematic.  On Jan 8, 2009, The Northwest Multiple Listing Association posted a notice to their real estate agent members as follows:

“RCW 18.86 requires agents to advise their clients to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise.  This duty exists in every transaction but is particularly important in short sale transactions where unique legal and tax issues exist.”

We’ve been saying the same on RCG for many years now. Short sales are way more complex for real estate agents than the average transaction and homeowners are best served when they have retained their own legal counsel to help them understand the lender paperwork as well as this current DOR trainwreck. You may be thinking, “homeowners in financial distress can’t afford an attorney.” However, some attorneys offer low cost options for homeowners facing foreclosure.

UPDATE
January 13, 2009
Department of Revenue: “After receiving extensive input from interested stakeholders and industry representatives about the nature of these transactions, we have carefully reconsidered how real estate excise tax statutes apply to these unique transactions [short sales]….we now see that these short sales are distinguishable from other transactions involving the forgiveness of debt because the seller negotiates separately with the lender for any debt reduction/forgiveness, apart from the actual purchase and sale of the property.  As a result, the loan forgiveness is not “paid or delivered in return for the sale” of the property, as required by RCW 82.45.030.”   Margaret J. Partlow, Senior Policy Counsel, Dept of Revenue. 

(Hat tip Rhonda Porter and Kary Krismer.)

Translation: We are not going to require sellers to pay excise tax on the debt forgiveness  with a short sale.

40 representatives from escrow, title, real estate, attorney, and short sale faciliator companies showed up in Olympia to help educate the Dept of Revenue. Thank you, Escrow Association of Washington, for bringing this to our attention and taking on the state head to head.

Mother Nature Happens…

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…and she doesn’t ask us if it’s convenient or if we’re in the middle of a mortgage transaction, for a natural disaster to strike, such as the current flooding in Western Washington.  When significant natural events occur, it may impact your mortgage transaction.   

Most commonly, the lender will require the appraiser to do a re-inspection (442) of the property for any transactions that are not funded prior to the event.  Even if your home uphill a mile from a flooded river, if you’re in a region (such as a zip code) that’s flooded, where an earthquake, wild fire or other has happened, be prepared for your transaction to be delayed.   The appraiser is typically required to verify:

  • The property is free from damage.
  • The disaster had no impact on the value or marketability of the property. 
  • Include an updated photo of the home.

If the appraiser determines that the property has suffered from the disaster, repairs will be required with a follow up inspection (442) from the appraiser.   All re-inspections from the appraisal are submitted to the underwriter for (hopefully) approval.  It is possible that the underwriter may add additional conditions after the review.   I have found 442’s to cost around $150 (per inspection). 

If the appraisal has not yet been completed during a transaction, the appraiser will most likely need to address the disaster and whether or not it has impacted the value of the home. 

It’s up to the lender (and can vary from lender to lender) on whether or not they will call for reinspections when a natural disaster happens.

It's Official: New Conventional Guidelines for Ordering Appraisals

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Fannie and Freddie have finally announced (I’m sure to no one’s surprise) the acceptance of OFHEO’s Home Valuation Code of Conduct which bans communication between a loan originator/mortgage broker and the appraiser for conventional 1-4 single-unit family homes.   Appraisals must be ordered through a third party clearing-house of sorts.   I picture this being similar to ordering a VA appraisal, which is not a pleasant process.  

Here’s an example from the Home Valuation Code of Conduct of what will no longer be allowed:

  • requesting that an appraiser provide an estimated…valuation in an appraisal report prior to the completion of the appraisal report or requesting that an appraiser provide estimated values any any time….
  • providing to an appraiser an…estimated…value for a subject property or a proposed or target amount to be loaned to the borrower, except for a copy of purchase and sale agreement.
  • ordering…a second appraisal…in connection with a mortgage financing transaction unless there is reasonable basis to believe the initial appraisal was flawed….

Lack of competition is generally bad for the consumer.  And I see this slowing the process down and possible increasing costs…where is the incentive to be effecient or competitive?  Who will pay the third party clearing house?

This is technincally effective on May 1, 2009; however, lenders are all ready implementing the new code.   This is still very new and we’ll have to see in the weeks ahead how this all works out.

Government Intervention in Foreclosure

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This is Part Four of a series of articles on foreclosures.
This article does not constitute legal advice.
Foreclosure laws vary from state to state.
Homeowners in financial distress should always hire legal counsel. Call your local state bar association for a referral.  Reduced or free legal aid may be available in some states. Ask for a referral from your state Bar Association or through a LOCAL HUD-Approved Housing Counseling Agency.

In this article we will address current government intervention as well as discuss possible future intervention programs. For other preventative measures, check out the other parts of this series:

Part one: Foreclosure; Losing the American Dream
Part two: Options for Homeowners Facing Foreclosure
Part three: Loan Modifications
Part four: Government Intervention in Foreclosure
Part five: Foreclosure; Letting Go and Rebuilding

Current government intervention in the foreclosure process has taken many forms. Some states such as California, Florida, New York, New Jersey, Massachusetts, Philadelphia, and Illinois have discussed, proposed, or passed legislation in favor of a foreclosure moratorium.  In order to avoid state mandates, some companies placed a temporary halt on foreclosures over the holidays. These companies include Indymac, Countrywide, WAMU, and loans held in the Fannie/Freddie portfolios.  Recall that during the real estate bubble run-up, government backed loans fell out of favor. Many subprime loans are held by lender/servicers in pools of mortgage backed securities. The foreclosure moratorium didn’t reach those homeowners.

State moratoriums give homeowners more time to possibly refinance into a Hope for Homeowners loan or complete a short sale and the moratorium also gives banks more time to get caught up on all the backlog of foreclosure paperwork. 

Financial Economics Analyst Edward Vincent Murphy, in his Sept 12, 2008 report “Economic Analysis of a Mortgage Foreclosure Moratorium,

Paradigm Shift: Changing the Human Experience

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What will be the tipping point that creates the paradigm shift that is needed in the Real Estate Industry? 

To begin, I would like to quote a small portion of “Productive Workplaces Revisited” noted in the second link above.  “He put into…context, the age old struggle between authority and dependency”…In so doing he found an audience hungry to find alternatives to bureaucracy, authoritarianism, alienation…not simple ideology…an expression of life’s purpose – affirming diginity in every person, finding meaning in valued work, achieving community through mutual support and accomplishment.”

The above is from a book titled “PRODUCTIVE WORKPLACES REVISITED” – Dignity, Meaning and Community in the 21st Century” by Marvin Weisbord in 1987.  That link provides information regarding Mr. Weisbord’s many books.  For the purpose of this blog post, I am simply borrowing the above excerpt which I have modified to fit most any Real Estate Office in the Country, and a movement that is afoot.

The Paradigm Shift is also referred to as “A Mental Revolution” elsewhere in that publication, (use the search feature and put in paradigm shift for more info on that.)

The problem as I see it, in the structure of the Real Estate Industry, may simply be the old “Too many chiefs and not enough Indians”.  What the Real Estate Industry, and every Real Estate Company in the Industry, and every Real Estate Office in every Real Estate Company, has not answered correctly is quite simply this:

WHO IS THE CUSTOMER?

In most realities, the customer of the Brokerage is the Agent.  That is something that most buyers and sellers of real estate do not get to see.  The inside of a real estate office is about the customer…the customer being the Agent.  The Agent is paying the Broker.  The Broker cannot survive unless it adequately serves its customers…the agents, not the buyers and sellers of homes.

Take a look at the photo below:

Meeting of Professionals

Meeting of Professionals

If the people gathered around that table were Doctors, you might hear talk such as: “I have a patient…I have tried this and that…has anyone had a similar… Yes, I have found X to work for many of my patients, here is a study on X I found the other day…”  The talk around that table, would be about better treatment for the patient.

If the people gathered around that table were lawyers and paralegals, you might hear talk such as “I have a case where the defendent is…I haven’t found adequate support for this client’s…. Try X vs. X, I’ll go get it for you.  Is there any other way we might tackle this in Court to show that our client…”  The talk around that table, would be about helping this client win this case.”

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Rarely, if ever, do you find a room full of real estate agents discussing ways to find a better answer for a particular buyer or seller. 

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The reality is that most times a Broker will set up meetings that help agents sell more houses.  Rarely is the discussion about the buyers and sellers of homes.  If an agent has a problem selling a home, then agents will filter ideas that ultimately do help the seller.  But when the client/customer is a buyer, the conversation all too often revolves around helping the agent “sell a house TO” that buyer.

There are many discussions with regard to “Real Estate ProfessIonals“.  Some of us equate ourselves to doctors and lawyers.  Many more view themselves as (merely) salespeople, and then complain when “real estate agent” comes up on a list next to “used car salesman” on consumer confidence and trust lists.

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The Tipping Point that will create the needed Paradigm Shift is A Mental Revolution with this Call to Arms:

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TO BROKERS:

1) TAKE DOWN ALL OF THE “SALES” BOARDS AND STOP HAVING SALES CONTESTS.

2) STOP TALKING ABOUT “MORE LEADS” AND INSTEAD ASK YOUR AGENTS IF THEY NEED ANY HELP MEETING THE NEEDS OF THEIR EXISTING CLIENTS.

3) HAVE AT LEAST ONE MEETING A WEEK WHERE THE AGENTS MEET TO DISCUSS THE NEEDS OF THEIR BUYER AND SELLER CLIENTS, AND NEVER TALK ABOUT THEIR NEED TO “CLOSE” A PERSON IN THAT MEETING.  CONSUMER-CENTRIC VS. AGENT-CENTRIC MEETING.

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TO AGENTS:

1) TRY NOT USING THE WORD “I” FOR 21 DAYS. 

2) WHEN YOU APPROACH SOMEONE FOR ASSISTANCE, MAKE SURE THAT ASSISTANCE IS FOR YOUR CLIENT AND NOT YOURSELF

3) FIGHT FOR ANYTHING YOU “NEED” TO HELP “THEM” AND NOT YOU.

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TO THE GOVERNOR OF THE STATE OF WASHINGTON (& possibly other States, as well)

RECOGNIZE THE DISCONNECT BETWEEN YOUR AGENCY LAW THAT HOLDS REAL ESTATE LICENSEES TO THE STANDARD OF “REPRESENTATION OF PEOPLE”…AND THEN GIVES THEM A “SALESPERSON” LICENSE.

There are many, many real estate agents who aspire to assist their clients well.  There are many, many real estate agents who “hung(er for) alternatives to bureaucracy, authoritarianism, alienation…not simple ideology…an expression of life’s purpose – affirming diginity in every person, finding meaning in valued work, achieving community through mutual support and accomplishment.

Top 10 Reasons NOW is the time to buy

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#10 – You may lose your job.  When you don’t pay your rent, they put you on the street in 20 days.  When you don’t pay your mortgage payment, they don’t put you on the street for at least 8 months.
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#9 – It’s your Patriotic Duty to prop up the economy.
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#8 – Many a marriage has been saved…by buying a house with two staircases.

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#7 – You just read *page 114* of Harlan Coben’s “Promise Me” (see below), and you live in a “garden apartment”.

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#6 – Your girlfriend is demanding equal treatment to your wife.

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#5 – Your boyfriend is demanding equal treatment to your wife.

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#4 – Your mother-in-law just bought a 1 way ticket to your apartment

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#3 – Your bank account is bigger than your home office

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#2 – God said: Your real estate agent, banker and mortgage rep all need you to buy a house, right NOW!.  This is a direct message from God.  No kidding.

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NUMBER ONE: Your 4 year old is riding the dog, and dragging the baby around like a pull toy, because she needs a yard and swing set.

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*Page 114* “lived alone in the same crappy “garden” apartment for more than a decade…they call them “garden” though the only thing that seemed to grow was the monotonous red brick…sturdy structures with the personality of prison cells, way stations for people on their way up or down and for a few, stuck in a certain personal-life purgatory.”

Mortgage Company Merit Financial Banned from the Industry for Five Years. Scott Greenlaw: Not Banned.

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Wholesale Mortgage Company Merit Financial has the dubious reputation as being the very first company on the ML-Implode list which now sits at 312 imploded lenders.

The original Statement of Charges from 2007 focuses on violations of the state’s Mortgage Broker Practices Act such as failing to pay appraisers over and over and over again, failing to maintain a mortgage broker license, failing to attend the required continuing ed classes, failing to maintain an surety bond, failing to adequately disclose fees to consumers, and so forth.

From the Seattle Times

Merit did put loan officers through a 19-step program. “Loan Officer 101” was 15 minutes long…Saulness wasn’t impressed. She sat next to two 18-year-old loan officers. “They didn’t even know how to read a credit report,” she said.  Barry said wryly that many “had no idea what product they were selling, but they knew how much money they could make.” Merit employees proudly posted their résumés, plus photos of their luxury cars and drinking parties, on various Web sites. One loan officer had come to work fresh from being a Hooters Girl. Another solicited clients for two endeavors: writing mortgages for Merit and selling marijuana paraphernalia on the side. Indeed, several Merit loan officers boasted online that doing drugs was a favorite pastime. “Let’s get hopped up and make some bad decisions,” wrote one beside a photo of himself grinning broadly. Numerous former employees, including loan officer Sunny Hoppe, described working at Merit as a raucous — sometimes lewd — frat party. It was “young, hip, drugs and drinking,” Hoppe said, and that was at work. Former employees also said Merit regularly provided a keg of beer for some staff meetings, but Greenlaw said that, no, it was actually two kegs, and employees were free to bring in six-packs on Fridays. Asked about rumors of drug use in the office, Greenlaw said, “We just never checked.”

Washington State DFI and Merit/Greenlaw decided to settle the case and move on.  The Consent Order filed Dec 2008 says our state DFI will collect only $1500 in fines. Merit is banned from the industry for five years. Greenlaw is banned from applying for a mortgage broker/designated broker license for five years yet he is not prohibited from applying to become a loan originator.  Let’s take a look at some of the financial carnage from 2006-07:

Thousands of dollars owed to appraisers for work performed.
Thousands of dollars owed in back wages to Merit employees
Unpaid business and occupation taxes owed to the state of $351,294.
Wells Fargo was owed $244,033.
Firstam  Credco was owed $228,249.

I wonder how he’s been paying for beer and pizza these days. Let’s find out.

Is it a buyer's market? If so…where?

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I recently received an email from Christoper Hain of Terra Firma L.A., which caused me to view the chart below.  Often people try to take general median percentages and apply them in the wrong place.

The current median 12 month change in King County is down 12%.  But if you get a house for 12% less where it is down 30%, that’s not a great buy.  If you get a house for 12% less where it is only down 7%, that’s a good (not great) buy.

Chris’ article drives home the point that in one agent’s “service area”, which is not really very big, there are areas down 7% vs. 42%…HUGE SPREAD!!!

Plus he asks the question that is not discussed often enough:

“You could read either end of this chart in completely opposite ways. Perhaps, the ones that have fallen furthest are the ones you want to buy in 2009. Or perhaps, the ones that have held their value best are the ones to bet on long-term.”

I’ll be doing some neighborhood breakdowns for Seattle and Eastside today, and finding our highs and lows in my service areas.  I’ll post a graph similar to the one for L.A. below, as related to our immediate area.

Look at Beverly Hills, as example. Even in that small area (which due to the TV show most think of as 90210) there is a variance in % down for the three different Beverly Hills Zip Codes of 90210, 90211 and 90212.  Big difference between 24% down and 42% down…in one small area.

I’m going to try to do the neighborhoods accurately, vs. Zip Code.  i.e. Wallingford, Green Lake, East of Market, West of Market, etc…  I have to use a polygon search feature for that.  It’s time consuming, but given this is still “the holidays”, now would be a good time for me to expend the excess effort, and the results will be of value in tracking changes during 2009.

7% down to 42% down…it boggle’s the mind. Here’s Chris’ chart:

Housing prices down 7%? or 42?

Housing prices down 7%? or 42?

Lending Woes: A Deeper Consumer Analysis

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This may seem like an odd analogy, but I remember this story about my Mom when she was having her 7th baby.  She was in “a ward” with only curtains drawn around each bed.  She overheard some people telling the lady in the bed next to her that she should have “her tubes tied”.  They were explaining the procedure to her.  My Mom jumped out of bed, ripped open the curtain of the woman next to her and yelled  “I want one of those!!!”  The people were embarassed and said, “I’m sorry but we’re only allowed to offer these to single women on welfare having their third child.  You weren’t supposed to hear that.”

Yes…I’m suggesting that to some extent The Information Age is in part responsible for the Subprime Crisis.   Subprime loans did not come into being in late 2003.  2003 is the year more people said “I want one of those!!!”

Couple that with the fact that the World as it IS has come to the conclusion that spinning words (like Death Tax vs. Estate Tax) is a persuasion tool. We used to say, “You can’t get a good loan, but we can find you a BAD loan, if that’s what you want.”  Most people said, “No, thank you…we’ll wait.”  Loans had letters that were easy to understand.  A Paper  = most lenders.  B through D Paper was a different lender for buyers with one or a few correctable issues over the short term.  Z Paper was basically the Mob with a license to lend.

People understood the alphabet, and they knew that a C-Mortgage was not as good as an A-Mortgage.  Life was more Transparent back then.  The need for Transparency today is largely due to the fact that professionals hide truth behind more persuasive language.  Don’t get me started on Listing Agent vs. Agent for the Seller.  Everytime I hear a buyer say “The listing agent was MY agent, looking out for me (and I heard it twice in the last 4 days) I want to scream. How the heck can you believe that “the agent for the seller” is looking out for you, the buyer? Maybe because they use the words “listing agent” for that reason. But that’s a different, though related, subject.

Couple that with small businesses (who only offered Sub-Prime loans) getting gobbled up by larger “one stop shops”.  All of a sudden the lender could give you an A Paper loan or a C Paper loan without a loan denial in between. When there was a loan denial in between, the buyer had a legal out with the Finance Contingency.  When the approval came…but it was for “a bad loan”, the buyer was locked into the transaction with no legal out.

Couple that with Real Estate Agents only caring if the buyer could get a loan, period…without caring on what basis.  Couple all of THAT with the fact that many Finance Contingencies did not give a buyer “a legal out” if they could not get a conservative “A Paper” loan, but could qualify for a SubPrime loan.

There are many factors that contributed to this mess.  Perhaps a fuller understanding of how the world changing in many and small ways led do the catostrophic consequence, will help all people who played a small part in the Country’s demise, change their small part in The Crime of the Decade.  In the end it was mostly No victims; no villains, just a lot of small tweaks and changes that snowballed into a Crisis Situation.

Let’s go back to the world as it was for a minute. 

1) Conventional Loan = 20% downpayment, 28% of gross income for housing payment, 36% of gross income for total recurring debt including the housing payment.  An 8% spread for debt payments.  If debt payments equalled 10%, then the housing portion was reduced to 26%.  There were no Credit Scores.  All credit issues were underwritten by hand and each and every negative item was explained by the buyer, in writing.  A separate letter for each negative item.

2) FHA Loan = slightly more lenient terms and dramatically reduced downpayment requirement.  The biggest reason to use FHA vs. Convential being the downpayment requirement, not the looser standards as to ratio and credit issues.  Almost no downpayment – 3% vs. 20% at the time. 

The first change was a long time ago! It started as a quiet whisper, like the people talking behind the curtain in the next bed from my Mom.  Some people were getting loans with only 5% downpayment, conventional.  When I started in real estate in 1990, most people’s perception was that they needed 20% downpayment or FHA.  Few knew that they could get a 5% down conventional.

The beginning of all of these problems goes all the way back to there.  Conventional lending guidelines made FHA less desirable.  The primary purpose of FHA was low downpayment…no longer a big spread between the two.

THEN in the early 90s, the lenders started stretching ratios from 28% to 33% of gross income on “the front end”  BUT the back end was only stretched to 38%, at first.  Stretched ratios entered the scene ONLY for people with little or no debt payments (just like tubal ligations being only for single women on welfare).  It had a stated and targeted “appropriate” audience.

When cars started costing more, lenders had to start figuring out a way for people to buy a house who already owned a car.  In many cases in the early nineties (before car leasing became popular, and probably why car leasing became popular) most young couples who each owned a car, could not buy a house.  The two car payments sucked up their whole back end ratio and subtracted from their front end ratio.  “I thought we could get a mortgage for 28% of our gross income or 33% of our gross income?”  “Well, yes…but the combined value of your two new cars is almost as much as the house you are trying to purchase!”

Everyone agreed that people needed both cars and houses…so ratios grew and grew and grew.  So, Sniglet, the changes in FHA are NOT fascinating at all. In fact FHA hasn’t changed all that much.  What’s happening is that lending standards on the Conventional side are creeping back to “The Way We Were”, putting the spotlight back on FHA, which is closer to the way IT was IF you cut out “automated” approvals.

Before you even think about buying a house, get your “other debt” issues down to no more than 10% of your gross income.  If you make $45,000 a year and your wife makes $25,000 a year, and you each have a car with a $400 monthly payment, you are spending 14% of your gross income on car payments!

Of course this Rise and Fall story would clearly fill a book.  But until everyone understands that a bailout or bandaid in ONE area only (or two) is not going to fix what ails this Country, we cannot have HOPE…and HOPE is what we need more than bailouts and fixes.

As I said in one of my previous posts: “2009 will not be a year of great change.  It will be a year of Great Hope for Change, one small step at a time, via you and me acting the best we can in each moment.”  Falsely creating hope with “Talking Points” and “Good News” articles is NOT the solution.  Expecting any one source to be the Messiah, is NOT the solution.  Every single person doing their part to improve the situation…is the only long term solution.  That means YOU!

Stop looking for someone else to come up with an answer.  Get out your teacup, and start emptying out your own little piece of the ocean.

I kissed a girl once. I was almost 50 years old and was in the middle of a divorce from a 20 year marriage.  I just wanted to make sure before I started over again, that I wasn’t starting out on a faulty premise that had been “fed” to me.  2009 is the year to test your foundations…so that when “The Rocovery” does come…it isn’t the old mess wrapped up in a bright shiny red bow.