Dickens Couldn't Make This Stuff Up
Over the next two and a half weeks I'll be traveling. I'll try to post but all will depend on time and the strength of the WiFi connections I'm dealing with.
The New York Times of August 21, 2012 carries a front-page story on the “Carpet Capital of the World,” a stretch of Interstate 75 between Atlanta and Chattanooga that used to be densely populated with carpet mills and floor covering outlets. From June 2011 to June 2012, the carpet and flooring businesses there have “lost 4,600 jobs, or 6.9 percent.” The key reason? The failure of the housing market means that demand for carpets and other types of flooring have plummeted. And, naturally, the spiraling unemployment rate will add its downward force to the problem.
Congress approved TARP and the President signed it while the country screeched about fat cat criminals being rewarded while homeowners moved into tents. Our political representatives told us the economy made this painful "bailout" unavoidable. And as jobs evaporated, our representatives told us lower taxes on the rich lead to job creation. About TARP, they insisted the economy would crumble if these “too big to fail” banks collapsed. Here's a concise look at the success of the “job creation” move:
Meanwhile, their parents keep losing their homes. Predictions were that help from the Homeowner Affordable Modification Plan (HAMP) to those facing homelessness would aid between 3 and 4 million financially distressed Americans. Through December 2011 only 933,327 had actually received help. Smart Money As of October 2011, the Obama Administration had spent only $2.4 billion of the $50 billion allocated for HAMP. Think Progress
HAMP had been available only to those whose homes were 25% underwater, i.e., the value had eroded one quarter of what was owed. Also, those applying had to be current in their mortgage payments. In June 2012 the Obama Administration attempted to restructure HAMP to increase its success rate. Here are the revised qualification criteria:
Most individuals not in crisis and applying to refinance a home—having seen the horrors attendant on ARMs—seek fixed rate loans. Those receiving a modification under the new agreement would be obliged by banks opting to do so to take an ARM at a higher interest rate to begin with, a rate that in five years could exceed the original rate being modified. Along with Holden Lewis, the source for these revelations about the February agreement, I ask, “Please let me know if you have ever heard of a bank choosing the less lucrative option.” BankrateCheck it out for more disheartening information.
But, sad to say, modification doesn't usually solve the problem. Too often, homeowners find themselves back in trouble:
Even so, four of the largest banks have an astronomical failure rate while smaller banks and credit unions see far few defaults on modified loans. Click Ritholtzfor a chart that shows smaller services have failure rates as low as 13 percent while big bank failure rates go up as high as 61.9 percent. No doubt those ubiquitous tacked-on fees treasured by bankers have something to do with the disparity.
Remember the 60s and the War on Poverty? Fast forward to 2012 and the War on Terror that breaks down into a War on People of Color, a War on Women, a War on the Poor, and a War on the Middle Class. When no one but those whose incomes range in the multimillion dollar bracket can get an education, when few can find employment and few can afford to homes, we will see the arrival of the New Great Society, one in which being poor is a criminal act.
The New York Times of August 21, 2012 carries a front-page story on the “Carpet Capital of the World,” a stretch of Interstate 75 between Atlanta and Chattanooga that used to be densely populated with carpet mills and floor covering outlets. From June 2011 to June 2012, the carpet and flooring businesses there have “lost 4,600 jobs, or 6.9 percent.” The key reason? The failure of the housing market means that demand for carpets and other types of flooring have plummeted. And, naturally, the spiraling unemployment rate will add its downward force to the problem.
Congress approved TARP and the President signed it while the country screeched about fat cat criminals being rewarded while homeowners moved into tents. Our political representatives told us the economy made this painful "bailout" unavoidable. And as jobs evaporated, our representatives told us lower taxes on the rich lead to job creation. About TARP, they insisted the economy would crumble if these “too big to fail” banks collapsed. Here's a concise look at the success of the “job creation” move:
“Over the 12 months ending in June 2012, hires totaled 51.3 million and separations totaled 49.6 million, yielding a net employment gain of 1.8 million.” College RecruiterThis might look acceptable if you assume those nearly 2 million jobs are remunerative sufficiently to support a family. Unfortunately, that’s not the case.
According to Bureau of Labor Statistics data, as Barack Obama took the oath of office there were about 2.2 million workers receiving the minimum wage or being paid even less than that. There are actually a number of exemptions to the minimum wage law and 1.9 million workers were making less than $6.55 an hour in January 2009.
The minimum wage has gone up since then, and so has the number of the lowest paid workers. At the end of 2011, there were 3.8 million Americans working for $7.25 an hour or less. The number of minimum wage workers grew 466 percent in the last three years. Those being paid less than the minimum wage grew by 18 percent. The total number of jobs in the country during this time fell by about 2 percent. Money NewsDalton, Georgia, in the carpet capital, used to be home to generations of people working in the carpet mills. Now that automation and the housing collapse have ousted nearly 5,000 of those workers, Dalton may well decline into less than genteel poverty. Their only hope for their children lies in education that will equip them to work with the computers that now hold their parents’ jobs. But . . .
In its most recent survey of college pricing, the College Board reports that a "moderate" college budget for an in-state public college for the 2011–2012 academic year averaged $21,447. College DataThat totals almost $86,000 for four years of education. The federal government, in order to finance its handouts to the top 1% of Americans, has turned to debt collectors to squeeze dollars from former students and their families, a process made urgent by Obama’s plan to forgive college debt after twenty years.
The debt collector on the other end of the phone gave Oswaldo Campos an ultimatum:
Pay $219 a month toward his more than $20,000 in defaulted student loans, or Pioneer Credit Recovery, a contractor with the U.S. Education Department, would confiscate his pay. Campos, disabled from liver disease, makes about $20,000 a year.
“We’re not playing here,” Campos recalled the collector telling him in December. “You’re dealing with the federal government. You have no other options.”
Campos agreed to have the money deducted each month from his bank account, even though federal student-loan rules would let him pay less and become eligible for a plan -- approved by Congress and touted by President Barack Obama -- requiring him to lay out about $50 a month. To satisfy Pioneer, Campos borrowed from friends, cut meat from his diet and stopped buying gas to drive his 82-year-old mother to doctor’s visits for her Parkinson’s Disease.
With $67 billion of student loans in default, the Education Department is turning to an army of private debt-collection companies to put the squeeze on borrowers. Working on commissions that totaled about $1 billion last year, these government contractors face growing complaints that they are violating federal laws by insisting on stiff payments, even when borrowers’ incomes make them eligible for leniency. BloombergCongress has just passed a one-year extension of the lower rate on the student loan interest rate they have doubled, from 3.4 to 6.8 percent. The climate isn’t ideal for more gouging of those struggling to pay their debts, not in an election year. But a year from now, education is likely to become even less affordable for all but the wealthiest Americans when that $86,000 incurs a penalty rate of nearly 7 percent. Current estimates have former students paying off their education debt around the time they turn 50.
Meanwhile, their parents keep losing their homes. Predictions were that help from the Homeowner Affordable Modification Plan (HAMP) to those facing homelessness would aid between 3 and 4 million financially distressed Americans. Through December 2011 only 933,327 had actually received help. Smart Money As of October 2011, the Obama Administration had spent only $2.4 billion of the $50 billion allocated for HAMP. Think Progress
HAMP had been available only to those whose homes were 25% underwater, i.e., the value had eroded one quarter of what was owed. Also, those applying had to be current in their mortgage payments. In June 2012 the Obama Administration attempted to restructure HAMP to increase its success rate. Here are the revised qualification criteria:
You may be eligible for HAMP if you meet all of the following criteria:You obtained your mortgage on or before January 1, 2009.You owe up to $729,750 on your primary residence or single unit rental propertyYou owe up to $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental propertyThe property has not been condemnedYou have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify).You have sufficient, documented income to support a modified payment.You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.In February, the Administration forged a deal with the five largest banks over their crimes in the housing market, ranging from inflating a borrower’s income to foreclosing on property to which they couldn’t show title. The agreement putatively goosed the loan modification rate, but actually gave more power to the banks. The new deal added a sweetener for the banks: the right to force a homeowner to accept an adjustable rate mortgage.
Most individuals not in crisis and applying to refinance a home—having seen the horrors attendant on ARMs—seek fixed rate loans. Those receiving a modification under the new agreement would be obliged by banks opting to do so to take an ARM at a higher interest rate to begin with, a rate that in five years could exceed the original rate being modified. Along with Holden Lewis, the source for these revelations about the February agreement, I ask, “Please let me know if you have ever heard of a bank choosing the less lucrative option.” BankrateCheck it out for more disheartening information.
But, sad to say, modification doesn't usually solve the problem. Too often, homeowners find themselves back in trouble:
. . . according to Comptroller of the Currency John Dugan, a top bank regulator, more than half of the mortgages that were modified in the first three months of 2008 went delinquent again within six months. "After three months, nearly 36% of the borrowers had re-defaulted by being more than 30 days past due. After six months, the rate was nearly 53%, and after eight months, 58%," Dugan said in an early December speech. Real Estate at MSNEven with a loan modification the amount owed doesn't decrease. In fact, the bank stands to gain handsomely if a borrower does not default. Sacramento Real Estate
Even so, four of the largest banks have an astronomical failure rate while smaller banks and credit unions see far few defaults on modified loans. Click Ritholtzfor a chart that shows smaller services have failure rates as low as 13 percent while big bank failure rates go up as high as 61.9 percent. No doubt those ubiquitous tacked-on fees treasured by bankers have something to do with the disparity.
Remember the 60s and the War on Poverty? Fast forward to 2012 and the War on Terror that breaks down into a War on People of Color, a War on Women, a War on the Poor, and a War on the Middle Class. When no one but those whose incomes range in the multimillion dollar bracket can get an education, when few can find employment and few can afford to homes, we will see the arrival of the New Great Society, one in which being poor is a criminal act.
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