Tuesday, October 26, 2010

Not Long Before the End

The fact that we only have one more week before the election makes we want to shout "hurray!" I think we should all have a celebration on Election Day. No, not because we get to see the awesome power of democracy in action, as we and our fellow citizens get to exercise our basic right to choose our political leaders.

The celebration is because after the election, they'll finally stop running campaign ads on television. Thank God for small favors.

Here's an attack ad:
"This politician supports amnesty for illegal aliens and increasing the income tax. He wants to export jobs to China. Do we really want a leader who thinks it's okay to give our jobs to illegals?"

That's an ad attacking a Republican!

Then there are the ads put out by the candidates themselves:
"I'm a gun-totin', truck drivin', Bible reading conservative."

That's from a Democrat!

Then there are the robocalls:
"We have a quick two question survey. 1. Do you support the rise of the anti-Christ, like our opponent? 2. Do you support having good jobs, like our candidate?"

Yes, I'm looking forward to the day after Election Day. Nothing like a little piece and quiet.

Sunday, October 17, 2010

Foreclosure Moratoriums

You can look at the mess in the mortgage banking industry, and the current foreclosure moratorium, from two different directions. Looked at from one side, it a mess of terrible complexity and ambiguity. Uncertainty clouds the outlook. Looked at from the other side, there are no issues, and everything is as clear as a summer’s day.

The current moratorium is being imposed by the banks that process mortgage payments. In almost every case, these banks do not actually own the mortgage in question. The bank may not even have been the original lending institution for the mortgage. In today’s housing market, most mortgages are resold shortly after the real estate closing. Thousands of mortgages are pooled together into securities, which are then sold and resold. What the bank is doing is servicing the mortgage on behalf of the investors who actually own it. So in a foreclosure, the bank has to submit paperwork to prove that it has standing to foreclose on an individual. That is complication number one.

The systems for processing mortgage payments are highly automated, which keeps the cost down. Because almost all of the work is done by computer, it only takes a few people to handle thousands of mortgages. But the legal system is not automated at all. In a foreclosure proceeding, paper documents have to be submitted for every case, covering every aspect of the procedure. That is complication number two.

In the past, only a few mortgages were in foreclosure at any one time, compared to the number of mortgages outstanding. After all, is the borrower couldn’t make the payments, they were encouraged to sell the house to get out from under the mortgage. As long as home prices were rising, this worked. With the collapse of the housing bubble, millions of homeowners are underwater, owing more on their house than it can be sold for. Combined with high levels of unemployment, that means the number of houses being foreclosed upon has grown by leaps and bounds. There are vastly more houses in foreclosure than just a couple of years ago. That is complication number three.

In a foreclosure proceeding, the bank has to submit paperwork to back up their position. In the absence of the original loan documents, bank employees sign affidavits attesting that they have reviewed all of the documents connected with a case. It turns out that, faced with a crushing backlog, some of the document signers were filing up to 400 packages a day. They could not possibly have been reading all of the documents to ensure accuracy.

Now that this has come to light, some attorneys who represent homeowners facing foreclosure are arguing that not only are current foreclosure proceedings invalid, but that many past foreclosures are also questionable. That’s the background for the current moratorium. Lots of heat, not much light and clarity.

But as I mentioned before, there are two sides to the story. The other way to look is at the homeowners. These are people who borrowed the money to buy houses, and aren’t paying it back. I think even the attorneys representing them will admit that these guys have stopped paying the mortgage, sometimes years ago.

To me, this seems pretty simple. You stop making payments, you get your butt thrown out onto the street.

Right now, the squatters keep possession of the house until the bank can prove it has right of ownership. All of the delays are on the bank side of the equation. But it strikes me as unjust, that some people can get away with not paying back a loan without consequences. My solution: throw the deadbeats out, but don’t allow the bank to resell the property until they can catch up on the appropriate paperwork. In the meantime, the bank has to pay to maintain the properties, which they have to do anyway, until they can find a buyer.

This way, the squatters don’t get to make chumps out of the majority of homeowners who continue to pay their mortgage every month. At the same time, the banks have a powerful incentive to get their paperwork straightened up. Case closed.

Sunday, October 10, 2010

A Right to Fire Protection?

Much has been made of the recent new story in Obion County, Tennessee. This was the story about the rural trailer that caught fire. When the fire department arrived on scene, they realized that the homeowner had failed to pay the annual $75 fee for fire protection. Accordingly, the firemen were ordered to back off, allowing the trailer to burn to the ground, a total loss.

The chief of the fire department has been roundly castigated for his decision. Apparently the trailer owner had paid the fee in years past, but this year he “forgot.” But I don’t see how the fire chief could have made the decision any other way. If the fire had been put out, not only would they have no guarantee that the homeowner would pay up next year, but as word spread, surely other homeowners would also choose to make the payment optional. “I just don’t have the money this month. Besides, what are they going to do, just let the place burn? They won’t do that.”

Here’s what I would like to see reported: in the week or so since this story broke, how many $75 checks have arrived at the Obion County courthouse, from other homeowners who had “forgotten” to pay for fire protection? “Holy crap, ma, they’re serious! They just let the Jones place burn to the ground! We gotta come up with the money, just in case.”

Many people, including me, had not realized that purchasing fire protection insurance was optional. It seems that this situation applies in many rural areas. When you think about it, this makes sense. In cities, and even in the suburbs, built up densities are high enough that a fire that starts in one structure can easily spread to surrounding buildings. Accordingly, fire protection becomes a common good. Everyone bears the risk, and the costs are covered through tax revenues.

In this case, the risk was isolated to the individual property owner. He could have pooled his risk with the other property owners by paying the fee, but whether on purpose or through negligence, he bore the risk alone.

He chose to roll the dice on needing the fire department. This time the dice came up snake eyes.

Wednesday, October 6, 2010

This does not bode well.

In 2009, Frito Lay started selling their Sun Chips brand in a new kind of packaging. They began using a biodegradable polymer made from corn in their plastic bags. The corn based plastic bags would break down much, much faster in a landfill than the traditional bags, which will probably still be recognizable as snack food packaging when the Sun expands to a red giant star.

A giant corporation is taking a step to protect the environment. Yay!

There was only one problem. The new bags were much noisier than the old ones. Noisier? Yup, a lot noisier. The corn based bags made a crinkling sound, kind of a cross between cellophane and tin foil being crumpled up. That is, if a jet engine was being fueled by tin foil and spitting out cellophane exhaust.

Well, the increased amount of noise was sufficiently irritating that customers began calling up and complaining. Apparently the folks stuffing their pie holes with salty snacks want the chips to be crunchy, but not the packaging. Frito Lay has listened to their customers, and has pulled the new biodegradable plastic from production on all but one flavor of Sun Chip. They’ll probably switch that line over as well in a year, once they’ve used up the corn-based plastic resin they are contractually obligated to buy.

They’ve probably already contracted for oil tankers to bring in the petroleum for next year’s plastic. No doubt from some despotic Middle Eastern country where the only other export is hatred for America. “We would spit on you decadent, chip loving Americans, but we have no water, so our bodily moisture is precious to us.”

What strikes me about this situation is that this one small step towards sustainablility is being retracted for the most miniscule of reasons. Some poor sap at Frito Lay headquarters made the gutsy decision to try out the biodegradable packaging material. Don’t you know that guy’s career is in the toilet now. It’ll be a long time before anyone else suggests changing the packaging to improve the environment.

“You’re a bright guy, Jones, and you’ve got a bright future with the company. So let me give you some advice. See that poor, shambling wreck of a man? The ruined giant pushing the broom around the offices? He was the man who championed the Sun Chips packaging change back in ’09. Don’t go pushing the ecology thing. It won’t be healthy for you.”

To deal with resource depletion, global warming, and dependence on imported oil, we will all have to make changes in our lifestyles. Here we have an example of a positive change that was rejected by the consuming public because the bags were too noisy. That gives you an indication of how far the average man in the street will go to protect the environment.

No, it doesn’t bode well at all.