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Archive for the ‘government’ Category

I don’t know what the full story is, and we’ll perhaps never know, but Caroline Kennedy has withdrawn from consideration to replace Hillary Clinton as a New York Senator.  My money is on the idea that once Ms. Kennedy found out that she wasn’t Gov. Paterson’s choice for NY Senator, she took her ball and went home. Regardless, this ends a media circus that taxed my faith in my fellow New Yorkers who thought she’d be a great choice.

Appointing Caroline Kennedy as Senator would be extremely demoralizing to most New Yorkers. She would not have earned it save for her accident of birth, and it would be contrary to the spirit of upward mobility that the current administration seeks to champion. Simply put, nepotism sucks. Yes You Can unless there is a Kennedy who wants it. Sorry.

Enormous deficit aside, my faith in Albany was on the upswing before this spectacle. The Empire State Hypocrite was out of office in disgrace, replaced by a man who appears to be down to earth, honest, and pragmatic. He is visually impaired and a minority. Yes He Can.

But my favorite thing about Governor Paterson is that he signed the Commission Escrow Act, something George Pataki vetoed in spite of the huge legislative (and popular) support of the bill. This was a long time coming, and I am hoping that it is the first of many things that are positive coming out of Albany instead of the partisan gridlock we all put up with.

Frankly, I am disappointed that Ms. Kennedy wasn’t dismissed earlier. From my vantage point this was ego driven, and she got a rush from all the attention, at least while it was positive. If her name were Caroline Faranda she’s have gotten as much ink as a possible Senator as my dog. Her appointment would have rendered the Commission Escrow Act more of an anomaly than a trend.

Here’s to a trend of progress, and not slipping back into politics as usual. I wish Caroline Kennedy well and appreciate her philanthropy, but the delusion that she was qualified to be a Senator would have undermined us all. I hope the new Senator is the best choice for New York and the country and not the best political choice. I also hope that it continues what appears to be a movement to restore New York as the Empire State and not the Red Tape State.

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More and more people are buying foreclosures and short sales, and many agents are recommending they do so. Many of these homes are assessed at a far higher value than their last purchase price. If you bought a home for $500,000 and it is assessed for $625,000, then you are overpaying your taxes.

Of course, municipalities aren’t bending over backwards to make the process terribly easy. Most places have a certain day devoted to property tax appeals, and if you don’t make it in that day you are out of luck for another year. These are the same people who raised taxes with impunity in the hot market period. They should make appealing taxes available on a rolling basis- January, April, October, whenever. But my local government has one day in June, period. So call your assessor, get that day put on your calender, and show up with all of your closing papers.

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The Housing Bill has passed in the Senate with some Republicans grousing that it is an unfair bailout at the taxpayer’s expense.

Some highlights:

Increase the Federal Housing Administration’s role.

Establish a stronger regulator for the GSEs.

Permanently increase “conforming loan” limits.

Create home-buyer credit.

Bar down-payment assistance for FHA loans.

Create an affordable housing trust fund. Give grants to states to buy foreclosed properties.

Bolster Fannie and Freddie
All of these moves are good moves. We need a stronger and more vital FHA; the FHA rotting on the shelf is precisely what created the vacuum filled by the sub prime niche. The aid to Fannie Mae and Freddie Mac are controversial, but I support them. I am a free market guy, but the government has to act in some cases, and this is one of them. Unlike the S & L scandals and subsequent bailouts in the late 80’s, aid to F & F is not rewarding bad lending. As a matter of fact, if more people went conventional, the magnitude of the problem would be diminished. Fannie and Freddie sustained collateral damage from sub prime; they were not part of it. We all should remember that.

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Uncle Sam is stepping in to aid Fannie Mae and Freddie Mac. One might question the wisdom of government bailing out mortgage companies. In this case, I don’t. Fannie and Freddie are part of the solution, not part of the problem. By definition, they were not sub prime lenders. They just bore the brunt of problems borne of the sub prime meltdown.

Should the government help irresponsible banks that fueled the economic crisis by making reckless loans? Never. Should they take steps to shore up the institutions that are the standard bearer of responsible lending? You bet they should. It is the system working. The Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association, as Freddie and Fannie are less commonly known, are implicitly backed by the Fed. Now the Fed must act.

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I have to echo Larry Kudlow’s question posed yesterday on Chuck Schumer’s involvement of the FDIC takeover of IndyMac Mortgage. Schumer is a senator from New York; IndyMac is based in California.

It is hard to believe, but he caused a run on the bank. Would Senator Schumer have expressed such a lack of confidence in a New York institution? The opportunity was certainly there.

IndyMac is the second-largest financial institution to close in U.S. history, said the Office of Thrift Supervision, which regulates the company.

In comments released to the media, the OTC said a June 26 letter by New York Sen. Charles Schumer expressing concern about the bank’s viability was the ‘immediate cause’ of the thrift’s closure.

Depositors withdrew more than $1.3 billion in the 11 days after Schumer’s letter was made public, the OTC said.

‘Although this institution was already in distress, I am troubled by any interference in the regulatory process,’ OTC director John Reich said in a statement.

What a shame!

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When I agree with the NY Times Editorial, it is noteworthy. But for the senate to go on vacation with no comprehensive policy on addressing the mortgage and foreclosure crisis is reprehensible.

By the time the Senate returns next Monday from its July 4 recess, some 55,000 more homes will have entered foreclosure. And that’s hardly the full picture of the growing calamity. More than three million homeowners are currently at risk of default and millions more are expected to join them in the coming year as home prices drop, the economy falters and delinquencies rise. Yet the Senate went ahead with its vacation last Friday without passing a foreclosure prevention measure.

Many of these people are the same hypocrites who decried Bush for not cutting his own vacation short when New Orleans was under water. Since the odds are that whatever they would do might not help anyway this may not be as tragic as the Times says. But for them to not even try, even for appearances sake to act like they give enough of a crap to work a little overtime, tells me what they are truly about.

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Connecticut Senator Chris Dodd is addressing criticism that he knowingly accepted favorable terms on his two home mortgages. None of the talking heads revealed the terms, but the NY Times published the following:

Mr. Dodd said that he was a longtime customer of Countrywide and refinanced the mortgages on his homes in 2003 after shopping for the best deal. Ultimately, he obtained a five-year adjustable rate loan at 4.25 percent for his house in Washington and a 10-year adjustable rate loan at 4.5 percent for his house in East Haddam, Conn.

Rates were pretty low in 2003. I used to have the software to look up Countrywide’s rate sheet archive, but I no longer do. Here is what I know. Adjustable loans have lower introductory rates than 30 year fixed. We refinanced our home in December 2003 with a 3 year adjustable at 4.25%. A 5 year adjustable would have been higher, and a 10 year higher still. There is a slew of commentary about this, but few facts on the actual details of the mortgages. 

 Mortgage News Daily has some details.

The three men were alleged to be participants in a special program for “friends” of Mozilo that awarded discounts and waived fees for those friends. Portfolio, citing internal Countrywide documents, said that the company made two loans to Dodd in 2003, shaving three-eights of a point off of a $506,000 loan to refinance a townhouse in Washington. The discount saved Dodd about $2,000 in interest payment. A second loan to refinance a house in Connecticut was written at a quarter point off the going rate, saving the Senator about $700 a year.

Since anyone can pay down their rate about a quarter of a percentage point by paying a point up front, Dodd was not charged about $7500 for the Washington Townhouse, and perhaps paid $2-3000 less for his Connecticut home. That is roughly $10,000 which would have been rolled into the closing costs. He saved roughly $200 per month on his combined payments.

Is this a horrible scandal? No. Niether Dodd nor Countrywide grafted millions from the public in this deal, nor are there millions in unmarked bills in the senator’s basement freezer. Countrywide probably just wholesaled the loans, which, in industry terms, means that Mr. Dodd got the “par” rate at no profit or loss to the company.  

How aware the Senator was of the deal he was getting is debatable. Despite the popular myth that democrats are more like us working stiffs, Dodd is the son of a US senator and has been in Washington since 1975. He probably lives in lala land about the mundane details of life. That said, Washington is  tough town and he has won the war of attrition through eight elections and over 30 years in office. A guy on the senate banking committee ought to know how to cover his tush. This isn’t a free bottle of wine at a restaurant on his anniversary.

So, for about $10,000 which could have been rolled into the loans for a total of about $40 per month, Senator Chris Dodd is very embarrassed. 

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