All you need to know about the "housing crisis" in one press release from nine years ago

SEATTLE, Washington - Via Cafe Hayek, a press release from Wells Fargo in August 2000 (text not bolded in original):

A new home financing program, designed to spur homeownership among California’s educators, may receive an “A” from teachers throughout the state. The program, announced today by Wells Fargo Home Mortgage, Inc., the California Housing Loan Insurance Fund (CaHLIF) and Freddie Mac, allows teachers working within the state to purchase a home with a downpayment of just $500.
The program also offers teachers relaxed credit guidelines – making it easier to qualify for the program – and higher qualifying ratios, which allows homebuyers to qualify for more home. Wells Fargo Home Mortgage will be the exclusive provider of these loans; CaHLIF will provide downpayment assistance and mortgage insurance; and, Freddie Mac will purchase the loans.
..
..
A starting salary for a California public school teacher is $29,000 a year, according to the California Teachers Association, while the average teacher’s salary is $44,000. Meanwhile, the median home price in California is $217,520.
..
..
While California educators will only need $500 for a downpayment, the remaining downpayment will be funded by CaHLIF in the form of a 3 percent simple interest loan with payment deferred until the end of the loan term, or when the home is sold or refinanced.

As a commenter at CH noted, a $200K loan under these circumstances would be about $1,300/mo for someone making $44K a year. I make more than triple that and I consider my mortgage of under $1,600 to be approaching the upper range of what I consider acceptable relative to my income.

The "crisis" has repeatedly been spun in the media as crazy, gambling, out of control banks making bad decisions, but in this case all the bank (Wells Fargo) is doing is writing an ill-advised loan, scraping off a bit of vigorish, and dumping the turkey loan off on the only kind of entity that would want such a thing, a government mutant like Freddie Mac.

This particular example is doubly odious, doubly indicative of the danger of having a government entity tinkering in the housing market, because not only was Freddie gobbling up absurd loans, but in this case it was a special for teachers!. Why are teachers making $44K more deserving of cushy loans than anyone else making $44k? At least it was available to both public and private school teachers... cold comfort.

More reasons not to declare a national crisis when someone misses a mortgage payment

SEATTLE, Washington - We the public continue to receive news every month about the percentage of homeowners who are behind on their mortgage payments or in foreclosure. The impression usually given is that every one of these parties just needs a helping hand - that they're scouring through the couch cushions and hitting up relatives for a few bucks, just so they can scrape a payment together. Can't we as a society help these people? Who could possibly want to miss a mortgage payment?

Turns out, a lot of people. I already discussed people intentionally getting foreclosed and making a few bucks in the process last month. Now there's more: a long Time piece on Las Vegas real estate presents another variation of such a strategy. This variation involves short selling (which is the lender agreeing to let a house be sold for less than the value of the loan and letting this amount fully satisfy the borrower's obligation) and is being promoted by Vegas agent Brooke Boemio:

Boemio specializes in short selling, in a particularly Vegas way. Basically, she finds clients who owe more on their house than the house is worth (and that's about 60% of homeowners in Las Vegas) and sells them a new house similar to the one they've been living in at half the price they paid for their old house. Then she tells them to stop paying the mortgage on their old place until the bank becomes so fed up that it's willing to let the owner sell the house at a huge loss rather than dragging everyone through foreclosure. Since that takes about nine months, many of the owners even rent out their old house in the interim, pocketing a profit.

There you go. Creative, perhaps even profitable - but is it ethical?

It's an entire city of John Dillingers, feeling guiltless for stealing from the banks. Boemio is well aware that short selling isn't ethical [emphasis mine - jmr] and is exacerbating Vegas' economic problems. People, she believes, should make their payments, accept their paper losses and ride out the crash. "Guess what, a______s of Las Vegas. That's what gambling is about. That's what investing is about," she says. "It's greedy. But we're all doing it. Because why not?" It's very hard, she says, to suffer as the one honest person in a town of successful con artists.

I'm not a real estate guru but I've been researching and googling this and I'm not really seeing what's inherently unethical about short selling. First of all, the lender has to agree to it - it's their choice to just go ahead with a foreclosure if they so choose. From the seller's perspective, it's their choice to pursue a short sale and there is damage to their credit (albeit not as bad as a foreclosure) but as the article notes, under the Boemio strategy, "they just bought a new house, so they don't care."

There do seem to be some "ethical" concerns around short selling, in such areas as how and when to disclose to the buyer that the property is a short sale, when to list the short offer as "pending" in the MLS, and the fact that some lenders will drag their feet on approval of a short offer, hoping for a slightly better offer to materialize. I don't think any of this renders the whole concept inherently unethical.

Notice what's missing from this picture? No government "rescue" of borrowers, no posturing politicians, no snouts in the trough - just a resolution of the bloat in real estate using existing processes. The banks may take some losses and try to stick their noses in the trough, and unfortunately they'll probably succeed. Still, let's not think of every borrower behind on their payments as a helpless victim.

Found @ The Conspiracy to Keep You Poor and Stupid

Seattle voter guidance for Aug 18

SEATTLE, Washington - Looking through the voters' pamphlet, many of the candidates sound alike and some positions simply have no one on the ballot deserving of support. To simplify, I identified trouble phrases in the statements of the candidates - stuff that tells you right away, no need to read the rest of the statement and no need to color in the dot next to their name.

"living wage"
"Web 2.0"
"affordable housing"
"we can design an innovative education system"
"lifelong musician"
"create good jobs"
"community activist"
"green jobs"
"stimulus funding"
"tax incentives"
"free college education"
"Nickels"
"stimulus dollar"
"job training"
"pursuit of true public benefits"
(and scariest of all):"new era of action"

The big question facing Jets QB Mark Sanchez

SEATTLE, Washington - Mark Sanchez is in camp with the New York Jets. He has some questions swirling around him - can he handle the media pressure in New York? Will he be the opening-day starter as a rookie? Can he focus on football with all the distractions that his high profile will bring? But most importantly, will he ever be called on the carpet over the photo with the white jeans?

Sanchez did a photo shoot with GQ in May, and most of it is what we'd expect - Sanchez posing with a hot chick in a bikini, etc.

But this one shot... white jeans? White jeans? And a tight shirt that barely reaches his navel with colored horizontal stripes? He looks like a character in Querelle. This can't possibly help his standing in the locker room.

Some suggestions on "Japanese Techniques" for Starbucks

SEATTLE, Washington - Starbucks has started performing time-and-motion studies on its baristas in an attempt to increase efficiency and throughput. The WSJ article on this claims that this is an introduction of "'Lean' Japanese Techniques".

This is probably a good initiative, I'm just not sure how "Japanese" it is. The only evidence the WSJ gives of this is that a former Toyota executive is consulting their "lean team".

One of the tests the "lean team" performs on baristas is having them assemble a Mr. Potato Head doll. That certainly sounds Japanese.

But why not go all the way? There's plenty of other "Japanese Techniques" that Starbucks can try:

• They can try installing some ultra-high-tech Japanese toilets


• They can replace the baristas with modified versions of the Japanese ramen-cooking robots


• The baristas can start asking customers their blood type and customizing their order based on this information


• They can order the baristas to stop having sex

found @ Starbucks Gossip

Rolls-Royce keeping it classy in Bellevue

SEATTLE, Washington - The Rolls-Royce dealership in Overlake has a fine red-and-blue neon OPEN sign in their showroom window. What says "we sell dignified $400,000 cars" quite like a neon OPEN sign? As of this writing, they even have a picture of this travesty on their website.

The nearby Jaguar dealership has not stooped to such garishness.

Why not go all the way and drop a Ca$h for Clunkers sandwich board out front?