With all the foreclosures going on in this country, can they all be from sub-prime or predatory lending? Contrary to popular opinion, they are not. There are many people who can afford to pay for their homes, but yet still walk away. Why would anyone do that? Many of the millions of Americans who bought homes during the real estate “boom” now have homes that are valued much less than what their mortgages are. Guess what? Walking away -- even if you can afford the mortgage -- is perfectly legal!
Case in point: A Detroit City Councilman, Kwame Kenyatta, left his home for that very reason and admitted it. This man, a government official, plans to run for mayor of Detroit. His home was purchased for $225,000 and it is now worth $100,000. His monthly payment is $2,600 a month and supposedly was scheduled to go up by another $1,000 “soon.” Councilman Kenyatta wasn't even behind on his payments at all when he decided to just walk away.
Through the Michigan property tax estimator, I estimated his taxes at an astonishing $9,000 dollars per year. Most of us will admit that is a ridiculous amount of taxes to pay on a home worth $225,000, much less on a home worth $100,000. Still, these outrageous property taxes were known at the time of purchase. In Michigan, the taxable value can never go down while you own the property, no matter what happens to property values. That is something the Michigan legislature might want to rethink in light of these types of foreclosures.
Basically, a house payment with principal and interest of the full $225,000 at 7% is only $1,500. With approximately $700 added on for property taxes, that leaves over $400 a month for homeowners insurance and PMI. Private mortgage insurance (PMI) is an insurance policy which protects the lender in case of default by a buyer who puts down less than 20%, which it appears is the case here (making it easier to walk away).
That sounds like the lender in all these deals of less than 20% down are protected, in which case, the PMI companies would be the ones in trouble. However, in many cases, the same lender loaned the balance, at closing, from the down payment to make up the 20% in a second mortgage on the home. This eliminated the need for PMI insurance. In these cases, the lender was left unprotected. Even if another lender was involved, the main, or first, mortgage company has to approve the deal before it can close. It is a distinct possibility that Kenyatta then had a first and second mortgage on his home instead of PMI. Which one is worse? Deliberately burning a private mortgage insurance company or a bank?
Since his current payment of $2,600 a month covers a full purchase price mortgage, where can the additional $1,000 a month future payment be coming from? Since that is one of his excuses for walking away, that is a question that should be asked of-- and answered by -- Councilman Kenyatta.
Don't let the large mortgage payment fool anyone into sympathizing with the councilman. His reported $81,000 salary is 288% higher than the current median household income in Detroit of $28,097, according to the U.S. Census Bureau. After he pays his mortgage, he has another $4,150 in his pocket. That doesn't even include any possible income from his wife.
While it is a terrible hit to Kenyatta and millions of people all around this country, it is a chance you take when you make an investment in real property. When you buy a car for $20,000 and drive it off the lot, it might only be worth $12,000. Are you then allowed to just walk away from it just because it isn't worth what you paid for it? Of course not!
Why does this matter to us? Voluntary foreclosure contributes to neighborhood blight, drives property values down even further due to more inventory, affects local and state governments in the form of lost property tax revenue and adds additional strain on our nation's banks. If real estate had continued to boom, these same people would have taken advantage of the new equity that results from booming prices.
I can understand Americans who, for various reasons like unemployment or other changes in finances, can’t pay their mortgages and have to walk away. However, the many people who can afford these payments, yet choose to walk away are undermining our country, not only financially, but also morally. In other words, they are committing legal bank robbery.
Why haven’t our legislators stepped up to the plate on this issue? Is it because some of them are doing the same thing? Surely it has come to their attention by now. The IRS addresses losses on investments, but there is no current law on primary home loss of value. If we had a law in place giving incentives to stay, it might help eliminate some of this legal bank robbery that we are seeing.
Why isn't there a law preventing people who can afford their mortgages from walking away from them? At the very least, there should be some repercussions, other than the same mark on their credit history as the unfortunate unemployed or victims of predatory lenders. Where is a legislator when you need one?
What is the incentive, other than moral character, for homeowners to stay put when they can go down the street and buy a similar house for thousands (and thousands) less than they currently owe? Many lenders are ultimately going to have to take the current foreclosures -- and poor credit history due to it -- into account when offering new loans. Otherwise, millions of people are not ever going to be able to purchase a home again. We are going to be a nation of renters where the super wealthy owns all the property. That is not what America stands for, folks. Let us insist that our legislators do something about it -- and pronto.
Mr. Kenyatta has shown his true colors before entering the mayor’s office, unlike many candidates. Let us not reward a man of low character with an even higher office than he currently holds. The good people of Detroit should be shouting for impeachment of his councilman position. Let us hope that the voters of Detroit show their moral outrage and keep this bank robber out of the mayor's office.
Showing posts with label legislation. Show all posts
Showing posts with label legislation. Show all posts
Tuesday, April 21, 2009
Monday, April 13, 2009
It Doesn't Take A Village, It Takes A Nation
Face it, our country is in trouble. We are in a major recession. We are having near record unemployment. Global warming? I am not a scientist. Therefore, since like me, most of us have to rely on others for our information, I will just ask: Can we afford not to believe it, just in case? I have 3 grandchildren. Since we've already messed up their finances, until we have a definitive answer, I will err on the side of caution. So many of these areas need our attention. Still, as ordinary Americans with limited resources and no political connections, we feel powerless to do any thing about it.
America, we have been challenged. In President Obama’s inaugural speech, he told us all that the fate of America rests as much in our hands as it does in the government’s. No matter what your party affiliation, you have to know that is right. It does not take a village, it takes a nation -- it takes the people.
There is legislation which has come about because one person, for whatever reason, decided to take a stand. That person challenged the status quo. That person said “I don’t want this to happen any more.”
For some, the route has been multi-million dollar lawsuits or class action suits. There are other ways that ordinary citizens have set out to make change. These include citizen petitions that lead to legislation or constitutional amendments, public awareness, and establishment of associations and foundations, to name just a few.
I am pursuing my issues in the public arena, in what I like to call the court of public opinion. If enough people hear you, many times so do your elected officials. I am hoping that is the case with the state of higher education. We need awareness of the issues that matter to us all and learn what we can do, as one person, to change our world for the better.
My long term issues of note include outrageous executive compensation in public corporations and injustice in the judicial and legislative system. Currently my focus is on the policies and regulations of higher education. I want to educate students and parents about the pitfalls while attaining that higher education. However, my real goal is to help raise awareness and affect change in areas of policies and procedures of private for-profit schools, federal student lending programs and the corporations who really profit from it.
Many of my personal issues concern us all. Take for instance, my stance on executive compensation: Albert Lord, past chairman and current CEO of the Sallie Mae Corporation has made almost a quarter of a billion dollars during his years at the helm -- and he is not finished yet. Still, if we don’t own stock in the Sallie Mae Corporation, or any corporation for that matter (which I do not), why does it matter to us?
Obviously we can not pay our government executives the kind of money that Albert Lord is getting. I remember the debate by the city council of Largo, Florida, around 1997 or so, to raise the salary of our city manager, Steve Stanton to more closely match that of the raised salary of the city manager in Clearwater, Florida. The council was also concerned about being able to retain a man of his talent and experience in light of competition from the increasingly large executive salaries in the private sector.
The result of debate is that in the next 10 years, his salary went up by 55% to over $140,000 while the median family income of the rest of the county rose by just over 12.5% to approximately $44,000. Never mind that the 2007 council forgot all about his talent and expertise in running the city --which I thought was highly debatable in 1997-- when he decided to go from being Steve to Cindy by way of a sex change operation. Cindy, you’re fired!
Money insulates the wealthy against the problems that ordinary people face. Can the wealthy really know what is best for us? Those tax dollars belong to us. Do they feel the same pinch when those tax dollars are not enough and ask us for more? Those dollars are for such trivial items as infrastructure, government services such as police and fire protection, and upkeep of our resources, among others.
Hopefully, now you can see why Albert Lord’s multi-million dollar paychecks matter to us all. Just in case, I will raise one more point: His paychecks are primarily funded by same source that Steve Stanton’s were. Sallie Mae makes most of its dollars from originating and servicing federal student loans, courtesy of our tax dollars.
We need to raise our voices loud enough to be heard. We need to let our legislature know that we are not going to stand by and watch our tax dollars spent frivolously any longer. I know there is a lot of controversy on the bail-outs. I believe that the bankruptcy of large financial institutions might possibly bankrupt us all. We also have to admit that both administrations have now have used it as a solution, thereby taking the partisanship out of it.
Whether you agreed with the bail-outs or not, you have to agree on this: as it was our taxpaying dollars used for that bailout, we have earned the right to step up to the plate with our demands. Can we agree that it is past time to have policies and systems in place so that these insolvencies become a thing of the past?
We can do that by checking executive salaries, bonuses and other forms of compensation. We can do that by not allowing these companies to grow so large and diverse. Insurance companies need to sell insurance and banks need to manage finances. Neither has any business in the other business. The Gram-Leach Bliley Act in 1999 ended a long time separation of banking and insurance activities. Again, neither needed to take on the additional services of securities, but they did. In 2004, the large national banks wanted in the real estate business of brokering and sales. Since they already are in the business with loans and title services, I should think that was enough. How much worse would our bank insolvency be if they had been in real estate too?
Part of the problem was that national banks do not have to conform to state legislation, leading to a lack of licensure for those banks if real estate sales were allowed. Let's see: Bank of America provides the loan, sells us title insurance and title services for the sale, homeowners insurance, mortgage insurance and then offers us a mutual fund to go along with it. They want to sell it too?
There was a reason why insurance and banking were separate entities. Most of our eggs ended up in one basket and it is time to review those dangerous liaisons. We did not allow all that, our government officials did. Most of us didn't even know about it until the markets started collapsing.
We can no longer afford a government that is insulated from its people. Our people have to speak out on the issues that affect us most. We have to demand accountability for our tax dollars and adherence to our basic rights as outlined in the constitution. At our voting booths, constitutional amendments should be written in easy to understand language so we know what we are voting on, as should all of our laws.
It should be illegal to put a bill up for vote in the House or the Senate that has add on items and pork that have no relationship to the bill. Pork should be handled like the ordinary citizen is expected to handle his own finances: after the bills are paid, if there is money left over, pork away. In the meantime, pork off!
It should also be illegal for Senators and Congressman to be absent from work so often. We allow them the same freedom to come and go at will as if they actually owned the government. It is no wonder some of them start to think they do. Where is the accountability?
It should be illegal for these same legislators to spend an obscene amount of “company” time and lobbyist money campaigning for the next term or higher office on our dime. It should also be illegal for them to spend such obscene amounts to do so, effectively knocking out, perhaps more qualified, candidates who do not have the same political strings to pull. It should also be illegal to work for the good of the party and not the good of the people once in office.
Out of all these things, is there even one thing that you could take a stand on? Could it be global warming, medical research, tax funded “artwork,” gay marriage or just the sorry state of education in general? Surely there is something you can do to make a difference, even if it is just writing to your representative.
America, this is your call to arms. Step up and serve your country. Please answer the call in whatever way suits you best, but answer it. The future of our country is in your hands.
America, we have been challenged. In President Obama’s inaugural speech, he told us all that the fate of America rests as much in our hands as it does in the government’s. No matter what your party affiliation, you have to know that is right. It does not take a village, it takes a nation -- it takes the people.
There is legislation which has come about because one person, for whatever reason, decided to take a stand. That person challenged the status quo. That person said “I don’t want this to happen any more.”
For some, the route has been multi-million dollar lawsuits or class action suits. There are other ways that ordinary citizens have set out to make change. These include citizen petitions that lead to legislation or constitutional amendments, public awareness, and establishment of associations and foundations, to name just a few.
I am pursuing my issues in the public arena, in what I like to call the court of public opinion. If enough people hear you, many times so do your elected officials. I am hoping that is the case with the state of higher education. We need awareness of the issues that matter to us all and learn what we can do, as one person, to change our world for the better.
My long term issues of note include outrageous executive compensation in public corporations and injustice in the judicial and legislative system. Currently my focus is on the policies and regulations of higher education. I want to educate students and parents about the pitfalls while attaining that higher education. However, my real goal is to help raise awareness and affect change in areas of policies and procedures of private for-profit schools, federal student lending programs and the corporations who really profit from it.
Many of my personal issues concern us all. Take for instance, my stance on executive compensation: Albert Lord, past chairman and current CEO of the Sallie Mae Corporation has made almost a quarter of a billion dollars during his years at the helm -- and he is not finished yet. Still, if we don’t own stock in the Sallie Mae Corporation, or any corporation for that matter (which I do not), why does it matter to us?
Obviously we can not pay our government executives the kind of money that Albert Lord is getting. I remember the debate by the city council of Largo, Florida, around 1997 or so, to raise the salary of our city manager, Steve Stanton to more closely match that of the raised salary of the city manager in Clearwater, Florida. The council was also concerned about being able to retain a man of his talent and experience in light of competition from the increasingly large executive salaries in the private sector.
The result of debate is that in the next 10 years, his salary went up by 55% to over $140,000 while the median family income of the rest of the county rose by just over 12.5% to approximately $44,000. Never mind that the 2007 council forgot all about his talent and expertise in running the city --which I thought was highly debatable in 1997-- when he decided to go from being Steve to Cindy by way of a sex change operation. Cindy, you’re fired!
Money insulates the wealthy against the problems that ordinary people face. Can the wealthy really know what is best for us? Those tax dollars belong to us. Do they feel the same pinch when those tax dollars are not enough and ask us for more? Those dollars are for such trivial items as infrastructure, government services such as police and fire protection, and upkeep of our resources, among others.
Hopefully, now you can see why Albert Lord’s multi-million dollar paychecks matter to us all. Just in case, I will raise one more point: His paychecks are primarily funded by same source that Steve Stanton’s were. Sallie Mae makes most of its dollars from originating and servicing federal student loans, courtesy of our tax dollars.
We need to raise our voices loud enough to be heard. We need to let our legislature know that we are not going to stand by and watch our tax dollars spent frivolously any longer. I know there is a lot of controversy on the bail-outs. I believe that the bankruptcy of large financial institutions might possibly bankrupt us all. We also have to admit that both administrations have now have used it as a solution, thereby taking the partisanship out of it.
Whether you agreed with the bail-outs or not, you have to agree on this: as it was our taxpaying dollars used for that bailout, we have earned the right to step up to the plate with our demands. Can we agree that it is past time to have policies and systems in place so that these insolvencies become a thing of the past?
We can do that by checking executive salaries, bonuses and other forms of compensation. We can do that by not allowing these companies to grow so large and diverse. Insurance companies need to sell insurance and banks need to manage finances. Neither has any business in the other business. The Gram-Leach Bliley Act in 1999 ended a long time separation of banking and insurance activities. Again, neither needed to take on the additional services of securities, but they did. In 2004, the large national banks wanted in the real estate business of brokering and sales. Since they already are in the business with loans and title services, I should think that was enough. How much worse would our bank insolvency be if they had been in real estate too?
Part of the problem was that national banks do not have to conform to state legislation, leading to a lack of licensure for those banks if real estate sales were allowed. Let's see: Bank of America provides the loan, sells us title insurance and title services for the sale, homeowners insurance, mortgage insurance and then offers us a mutual fund to go along with it. They want to sell it too?
There was a reason why insurance and banking were separate entities. Most of our eggs ended up in one basket and it is time to review those dangerous liaisons. We did not allow all that, our government officials did. Most of us didn't even know about it until the markets started collapsing.
We can no longer afford a government that is insulated from its people. Our people have to speak out on the issues that affect us most. We have to demand accountability for our tax dollars and adherence to our basic rights as outlined in the constitution. At our voting booths, constitutional amendments should be written in easy to understand language so we know what we are voting on, as should all of our laws.
It should be illegal to put a bill up for vote in the House or the Senate that has add on items and pork that have no relationship to the bill. Pork should be handled like the ordinary citizen is expected to handle his own finances: after the bills are paid, if there is money left over, pork away. In the meantime, pork off!
It should also be illegal for Senators and Congressman to be absent from work so often. We allow them the same freedom to come and go at will as if they actually owned the government. It is no wonder some of them start to think they do. Where is the accountability?
It should be illegal for these same legislators to spend an obscene amount of “company” time and lobbyist money campaigning for the next term or higher office on our dime. It should also be illegal for them to spend such obscene amounts to do so, effectively knocking out, perhaps more qualified, candidates who do not have the same political strings to pull. It should also be illegal to work for the good of the party and not the good of the people once in office.
Out of all these things, is there even one thing that you could take a stand on? Could it be global warming, medical research, tax funded “artwork,” gay marriage or just the sorry state of education in general? Surely there is something you can do to make a difference, even if it is just writing to your representative.
America, this is your call to arms. Step up and serve your country. Please answer the call in whatever way suits you best, but answer it. The future of our country is in your hands.
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