Your home is shelter, not a retirement nest egg or a bank or a tax shelter

"Since the housing market began to turn in 2007, Washington has tried to keep prices from falling with every policy gimmick known to politics: Foreclosure mitigation, more guarantees from the FHA, higher guarantee thresholds from Fannie Mae and Freddie Mac, Fed purchase of mortgage assets, and the $8,000 home buyer's tax credit promoted by the White House and Georgia Republican Senator Johnny Isakson.

Their main result, other than subsidizing some Americans at the expense of others, has been to sustain the housing recession over a longer period of time. The price decline would have been sharper without them, but the recovery would have happened sooner." Review & Outlook, WSJ, June 2, 2011

The story of Jack and John

Jack Booket knows a get-rich scheme when he sees one, and he holds no grudge against John Paulson, the hedge-fund manager who made bets on his ability to pay his mortgage. Jack lost; John won. The story is in today's Wall Street Journal. Paulson did nothing to affect Booket's choices. Booket chose to refinance his mortgage in 2006 and a few months later was hit by a car on his motorcycle returning home from a "late-night party." It wasn't his first accident. The writers discreetly don't say alcohol was involved, but it usually is in the a.m. hours of vehicle accidents regardless of who is at fault. Two years later he stopped making payments on his $300,000+ refinanced mortgage. Jack Booket gambled and lost.

John Paulson also gambled, but with a little help. Those mortgages he bet on weren't drawn from a hat. They were matched with court records, foreclosure listings, title records and loan servicing reports. In other words, there was a pretty good chance even before his 2006 motorcycle accident that Jack was overstepping his reach. Paulson gambled that Jack would continue his prior behavior, and he won.

Let's move off the "evil" hedge fund manager who gambled and won, and instead look at the gamble our own government is making on housing, despite knowing what happened in 2007 with non-credit worthy home buyers, and speculators ready to pounce. Through the USDA rural home loans you can still get 100% financing, have a poor credit rating, pay no mortgage insurance, and get tax credits to help you pay the mortgage. I'm not sure you even need to be green, but you could probably qualify for more credits if you replaced a few appliances or windows. And it isn't just for single family homes--you could work up something really sweet with old uncle Sam, walk away if it doesn't work, and leave me with the bill! The only requirement I saw was that you have at least Internet Explorer 5 to fill out the application.

How ACORN hurts the poor

and scams the middle class. ACORN isn't the only non-profit accepting government money to put people in "affordable homes." They and others, including some well-meaning church groups, contributed to the sub-prime housing failure, which has its roots in the myth that "everyone deserves to own their own home," and the even bigger myth that homeownership is the key to wealth, and therefore banks need to look the other way if minorities or single parents or speculators apply. I've been a homeowner since 1962. We bought a duplex in Champaign, IL with my father's help (his grandmother helped him, and we've helped our children), and although it was a hassle being a landlord, it allowed us to afford something better and make a car payment a few years later. Even so, without his help, we would have done it eventually. But always with 20% down and no more than 1/3 of our income (a wife's income didn't count in the formula in the 1960s) in housing costs. Real income.

That's not how ACORN does it. There are very few foreclosures among people and banks who used the old rules. See the data on negative equity. Foreclosures are very high for no interest loans and accepting government benefits as income. Here's ACORN's website:

With AHC you get:

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

They are still using that failed formula, but now they are accepting government money to run foreclosure workshops to "help" the people they "helped" the first time around, even though it has been shown that most of those people will fail the second time around too. They really couldn't afford the home ACORN got for them, or didn't want the sacrifices necessary to own a home. But President Obama owes ACORN big time--and no one in his administration will stop this double and triple scamming.

There are many ways to make up that 3 months of mortgage payment in the bank to qualify for a decent bank mortgage--and believe me, you'll need that discipline if you want to be a homeowner--

give up smoking
stop eating out
give up manicures and hair weaves
give up the cell phones
drop your cable subsciption or go to basic-basic
go to the library for your movies
don't lease your furniture or car
learn a few fix-up skills and do your own work
put your family on a cash only budget

and I'm guessing this is not taught to wannabe home owners by ACORN because then the people wouldn't need the hand holding and would become strong and resilient.

What really caused the mortgage meltdown?

Zero money down, not subprime loans, led to the mortgage meltdown says Stan Liebowitz in today's WSJ. "The evidence from a huge national database containing millions of individual loans strongly suggests that the single most important factor is whether the homeowner has negative equity in a house -- that is, the balance of the mortgage is greater than the value of the house. This means that most government policies being discussed to remedy woes in the housing market are misdirected." Take a look at the "do you qualify" page at The Obama administration's "Making Homes Affordable" plan, and you'll see the government throwing more money after bad at homeowners with negative equity. The government is leading the way to a deeper recession with its higher taxes and poor policies.

Foreclosure counseling

Yesterday I was listening to 700 am in Cincinnati and heard an ad for Hope Now Alliance which was all warm and fuzzy about helping people facing foreclosure. "Betcha they put them there," was my response to the radio. So today I looked them up. Yessiree, same old gang that put people into homes with "gift" downpayments, and balooning mortgages and probably did no credit checks or background sifting are part of this group, thrown together to get more government money for foreclosure counseling when they were about to loose their sorry as- jobs in the mortgage industry.

So how does a floundering GSE with ties to Congress and in the tank lobbyists for Obama (if no party is mentioned, assume Democrat, because Republicans are usually noted) put on a Santa Claus face?

"Freddie Mac** has instructed its national network of mortgage servicers and foreclosure attorneys to stop all planned foreclosure sales and evictions involving Freddie Mac-owned mortgages during the holiday season.

The move is designed to give more homeowners facing foreclosure or eviction additional time to take advantage of the newly announced streamlined mortgage modification program, says Freddie Mac CEO David M. Moffett.

This should allow homeowners to work out agreements with mortgage services to avoid foreclosure. All foreclosure sales slated from Nov. 26, 2008, to Jan. 9, 2009, will be temporarily stopped. The program applies to single-family and 2-4 unit properties.

Not all these apples are bad, but I wouldn't want to be in the same basket with ACORN and La Raza, one a communist agitation group spoiling many elections with illegal voters, the other wants the SW to return to Mexico.

Members:

ACORN Housing Corporation
Catholic Charities USA
Citizens’ Housing and Planning Association, Inc.
Consumer Credit Counseling Service of Atlanta
HomeFree- USA
Homeownership Preservation Foundation
Housing Partnership Network
Mission of Peace
Mississippi Homebuyer Education Center- Initiative
Mon Valley Initiative
Money Management International, Inc.
National Association of Real Estate Brokers- Investment Division, Inc.
National Community Reinvestment Coalition
National Council of La Raza
National Credit Union Foundation
National Foundation for Credit Counseling, Inc.
National Urban League
NeighborWorks America
Neighborhood Assistance Corporation of America
Rural Community Assistance Co.
Structured Employment Economic Development Co.
West Tennessee Legal Services, Inc.

**Who is Fred? The Federal Home Loan Mortgage Corporation (FHLMC) (NYSE: FRE), commonly known as Freddie Mac, is an insolvent government sponsored enterprise (GSE) of the United States federal government.

The FHLMC was created in 1970 to expand the secondary market for mortgages in the US. Along with other GSEs, Freddie Mac buys mortgages on the secondary market, pools them, and sells them as mortgage-backed securities to investors on the open market. The U.S. government seized control of the mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), called GSEs, in September 2008, placing the liabilities of more than $5 trillion of mortgages onto the backs of the U.S. taxpayer.