Cram Down and the Stimulus Package; or How To Get a $500,000.00 House for $350,000.00!!

The Democratic stimulus package is chock full of…well…everything. From money for the National Endowment for the Arts to Honeybee Insurance to money to fight sexually transmitted diseases (now that’s stimulus), it certainly is far reaching, but not stimulative. I define “stimulus” as government spending that will directly result in concrete jobs. Some employer would have to hire someone to build a road or build a bridge or make steel to go into those types of things. In fact, the portion of the bill that is “stimulus” is less than 20% of the total, most of which would occur 2-4 years down the pike. The recession will be over by then.

Concurrent with the stimulus package is the pending approval of the 2nd half of the TARP program...an additional $350 billion. Hidden within both the stimulus and TARP programs is something called “cram down”. Let’s suppose that two years ago you were 30 years old and wanted everything now. So you bought a $500,000.00 with 5% down signing an adjustable rate loan recalculated annually. After the first year, your mortgage payment jumps from $1200.00/month to $1800.00/month. You can’t afford the increase. When you go to refinance, you discover that the value of your house has gone down, and is now only worth $350,000.00. You can’t make your mortgage payment, and 6 months later the foreclosure papers are in the mail. What will you do? What WILL you do?

Barack has the answer. File for bankruptcy, and have your loan modified. For those of you who have never experienced bankruptcy, renegotiation of loans is often part of the proceedings. When you sign a mortgage for a house, you sign two documents. The first is the note that says you owe the money. The second is the mortgage, which is recorded in the county records securing the note. If you file for bankruptcy, the note is eliminated, but the mortgage on the real estate remains. The bank forecloses on the real estate, and if it sells the real estate at auction for less than the note, the bank has no recourse against the owner as the underlying note has been wiped out. If the holder of the mortgage forecloses and the owner doesn’t file for bankruptcy, and the house sells for less than what is owed on the note, the owner is liable for the balance until he files for bankruptcy. Often times the holder of the mortgage and the owner will re-sign for the house after the bankruptcy proceeding is over, and the owner can stay in the house.

What Obama is proposing is that the bankruptcy courts be given broad power to force a renegotiation of the note and mortgage within the bankruptcy proceedings. The judge would have the power to force new terms on the holder of the note and mortgage. Included in this range of authority would be the power to lower interest rates, extend the term of the loan, and here is the kicker, the power to reduce the value of the note to the current value of the real estate. In the case outlined above, the bank would be forced to write-off $150,000.00. This is called “cram down.”

It shifts the threat of loss from the person who is buying the house to the entity that is lending the money. Isn't that a great way to force the banks to start lending again? The banks will protect themselves two ways: 1) increase the amount of the required down payment; and 2) undervalue the home for appraisal purposes. Most likely, it will be some combination of both. The bottom line is it will become much more difficult to buy a house.

In addition to the above, it penalizes those who have bought responsibly. If the beneficiary of the bankruptcy court’s largesse in the forced renegotiation of the mortgage and note sells the house within 5 years of the renegotiation, and the house sells for more than the renegotiated amount, the owner has to share the profits with the lender to “allow” the lender to recoup part of the forced loss. But after five years, the owner of the house gets to keep it all, even if the house goes up in value to what he originally bought it for. Take it from someone who watches real estate, eventually the value of the house will go up again, and happen rapidly. IT ALWAYS DOES.

Meanwhile, the rest of us who saved our money to buy our homes and bought what we could afford, are left to dangle in the wind. Bad behavior is rewarded once more by the nanny state. The irresponsible party stands to gain $150,000.00 at the expense of those who are trying to buy a house for the first time, those who bought responsibly the first time, and the shareholders of the banks, which generally tend to be seniors who bought the stock for dividend income.

While I understand the reasoning that everyone suffers when whole neighborhoods go into foreclosure, I think I would like for Barack to cram “cram down” where the sun don’t shine.

And It Has Been Less Than A Week!!

This past week has provided a virtual fountain of things to rant about. Just when I was ready to write about one thing, here came another. The fumbled oath of office portended the major Democratic Party gaffs that have flooded the television screen since the inauguration. So rather than just pick one, I thought I would provide you with a list of why it is great to be a Republican this week.

1) Gitmo: Liberal nirvana has been achieved and they are shaking with joy that the horrible Americans are going to give those poor terrorists some rights. Unfortunately for you and for me, these bad guys, including those who planned 9/11 some civil rights. Obama stopped the military tribunals for the enemy combatants, signed an order closing Gitmo, and is now making plans to move these poor excuses for human beings into the Federal prison system. It won’t take long to find a sympathetic federal judge who will grant these non-citizen killers the same rights as you and me, and soon they will be among us. The 9/11 families are outraged, and so am I. Of course, the rest of the world will now look kindly upon the United States. Of course, the families of whomever these bastards kill next won’t look so kindly on the Obama administration.

2) Treasury Secretary: Obama promised honesty and transparency. What we got is Timothy Geithner as nominee for Secretary of the Treasury and head of the IRS. In case you didn't know, he forgot to pay his taxes for four years, even after being reimbursed by the IMF for his social security and medicare taxes. He cheated both the IMF and the IRS. People go to jail for that. Instead, we are supposed to believe that a man who is so smart that only he can lead us out of the country’s financial malaise just got sloppy. This is a disgrace. Obama should be ashamed of himself.

3) Caroline Kennedy: Need I say more. The left wing of the Democratic is howling as another hypocrite bites the dust. People like the Kennedy’s are always so anxious to tell us what to do, and this dame has so many issues she is hiding she had to withdraw her name from consideration in the middle of the night. New York’s Governor Paterson has appointed a blue dog (conservative) Democrat to the seat…and the libs are not happy.

4) Energy: Obama has instructed the Department of the Interior to cease and desist any more leases for oil and gas exploration of either our coasts. It doesn't matter now. When the economy turns around, it will.

5) Phony Music: Any musician with any sense wondered how the inauguration quartet was able to play that “interesting” piece of music outside in such cold weather. They didn’t. It was a tape. They could have put them inside the Capitol Building…or built a shelter…but instead we got a liberal Millie Vinillie. I don’t care that they did it…it was cold!!!! But they should have said so outright. So much for transparency. Or is this change you can believe in?

6) Joe Biden: Did you watch Obama back off of Joe Biden when the new VP made the crack about Justice Roberts memory?? His wife isn’t much better. She dissed the Clinton’s by spilling the beans that Jumpin’ Joe was given a choice between Secretary of State and VP. We are lucky he chose VP. Hillary got the leftovers. I pray every night for Obama's safety and good health.

7) Press Discontent: Apparently information and access to President Obama is going to be curbed. At a press conference, Robert Gibbs, Obama’s Press Secretary, couldn’t answer a question as to how they would interrogate Osama bin Laden if he were to be captured now that Obama has made it clear that tea and crumpets must be served at any questionings. He also refused to disclose the names of “senior administration officials” who are making these decisions and/or advising the President. When visiting the press, Obama refused to answer any questions saying he just wanted to shake hands. So I guess we still can't ask him any questions.

8) Robert Reich: One of Obama's top economic advisers, he testified in front of Congress he wants to make sure the money from the proposed stimulus package doesn't go to "WHITE, MALE CONSTRUCTION WORKERS." How racist can you get? Did any of you white, male construction workers vote for Obama? There you are.

And he has only been President less than a week!!!!!

Got Good News?

Believe it or not, I spend a lot of time thinking about what to write each week. Usually there are some obvious things happening that just beg for my expertise. But this winter is turning out to be my winter of discontent. There is so much happening so fast, I can’t keep up. And most of the news is bad. Couple that with the most dismal and cold winter we have had in years, I am looking to buy Prozac by the gross. Does anyone have any good news?????

Start with the banks. I own Citigroup stock, and it has gone down the tubes along with several billions of dollars of your taxpayer money. Gross Domestic Product is tanking. Unemployment is rising. Retail sales are non-existent. Ohio has run out of unemployment money.

Obama gets inaugurated next week. In this time of financial turmoil, his inauguration is setting new spending records. So much so, in fact, President Bush has had to declare a state of emergency so the Feds can help Washington pay for the festivities. In the meantime, home foreclosures are rising at unprecedented rates. Is that the best use for the money…perhaps a small swearing in ceremony at the White House followed by cake and punch? They could borrow my tea service.

Obama’s cabinet is an interesting bunch. The guy nominated for Secretary of the Treasury conveniently forgot to pay his taxes for 4 years. It was an oversight. The head of the EPA is, was, also head of a world-wide socialist group espousing a world government to force the United States to give up sovereignty and set limits on our economy….seriously. Governor Richardson withdrew his name from nomination for Secretary of Commerce for funny campaign financing. The nominee for Attorney General was selling pardons on behalf of Bill Clinton, as well as letting people out jail, just because. And Hillary Clinton…enough said. I guess this is change we can believe in.

Driving this winter has been interesting. For years they put this ice melting goo on the road that took several times through the car wash to get off of my car. This year we appear to be salt-challenged. There is no salt on the roads as we slip slide away.

Kent State Trumbull Campus has decided to give free tuition for anyone laid off from work. Great for those guys, but how about the poor schmucks who aren’t working but struggling to pay outrageous fees and the even more outrageous book costs while being student loaned to the hilt. Who decides who gets the freebies? I sure would like to be on the receiving side.

In the meantime, Wall Street types are ripping off charities and putting Palm Beach gentry out onto the street, totally broke. Then there is this guy who tried to fake his own death by jumping out of an airplane. He only ripped off a couple of million from some nice Indiana folks.

The Mideast is self destructing. Bin Laden is making new jihad tapes. They are burning pictures of Obama on the streets of Tehran, Iran.

GET THE BIG KNIFE!! I could use some serious sunshine, some serious jokes, some serious levity, and a three day bender. To quote that immortal movie Animal House...drink heavily. Unless, of course, you have some good news!!!!

PS: THERE WAS GOOD NEWS TODAY!!!! Only a miracle could allow that pilot to land that plane in the Hudson River. It was great to see some happy news!!!!

The Youngstown Playhouse: Time to Wake Up and Smell the Coffee

The Youngstown Playhouse has been a mainstay in the Youngstown community for 50 years. It is billed as the oldest community theater in the United States. But times change, and notwithstanding valiant efforts to keep the Playhouse going, grey is the color of patrons hair, and its finances are just, plain dismal. Just 10 years ago, a million dollar grant from the government allowed the Playhouse to expand and upgrade its physical plant. It is a marvelous facility. Unfortunately, it is in a bad part of town, and maintenance costs are excessive for the huge theater. The Playhouse board of directors could not afford to the heat the facility, and cancelled the winter season. It owes a lot of money to a lot of people. The icing on the cake was the roof and water damage that occurred after the shut down destroying many Playhouse artifacts, costumes, and seating.

10 years ago, when the million dollars was approved, the debate was whether to keep the Playhouse where it is currently located, or move it downtown to create a local theater district in conjunction with improvements in the Symphony Center and the Oakland Theater. In usual Youngstown fashion, the Playhouse folks got territorial rather than practical. The result: ten years later a million dollars is now flushed down the toilet.

I could not believe my eyes when I read in the Vindicator yesterday there is talk of repairing that Glenwood Avenue white elephant. If the Youngstown Playhouse wants to survive, it should sell that turkey…raise money for a new facility…move downtown and coordinate efforts with the other theater venues in the area so 3 different productions of Beauty and the Beast aren’t running in the area within 2 months of each other.

At long last it is time for the formation of a FUNCTIONING area arts council to coordinate efforts of all the activities and organizations this area has to offer. It is time for the hard headed, territorial boards that run these organizations to come together and operate in a manner to benefit the entire community.

The Playhouse people should come to their senses and look for a smaller facility and a way in which to share costs with the other area venues. If this doesn’t happen, all stand to fail.

The New Energy Tax

This Friday morning’s rant is being written on Sunday morning. I saw on television last night that several states are considering how to manage their transportation taxes. (California, Oregon, Utah, Rhode Island to name a few.) Heretofore, there has been a tax on a gallon of gasoline…we all know how that works. Unfortunately, the formerly high oil prices have finally begun to cure America’s appetite for gasoline, and we are driving less.

Isn’t that what we are supposed to be doing? Apparently not!!! What’s good for global warming is bad for state budgets, and now they are in a quandary. State revenue has been decreasing, and they claim they can’t fix the pot holes. What to do, what to do!!!

Here’s a solution. Let’s eliminate the gasoline tax and tax you on much you drive!! These states are actually considering taxing each ¼ mile you drive. In order to do this, they intend to put a global positioning device in all cars which will report to the government how much and where you drive. Of course, where you drive will remain safely with the government. After all, there are privacy issues. And if you believe that, let me talk to you about a bridge I want to sell you in Brooklyn.

It would be funny if it weren’t so sad, and dangerous. These folks are dead serious. In the meantime, those big, bad oil companies who were gauging you at the pump are now losing beaucoup bucks as oil prices slide. Oil has to be at about $60.00/barrel to break even on new drilling. Whatever happened to the excess profit tax? All the while, OPEC is cutting back crude production…and you can expect the price of gasoline to go up again next year as the economies of the world recover. But don’t expect any additional taxes placed on gasoline, or miles traveled, to go away…they never do. Miss America’s come and Miss America’s go, but Bob Barker and government taxes are here forever.

Speaking of taxes, don’t forget about the “sugar” tax New York State is contemplating. They want to tax anything with sugar because it is good for you…right!!!!! That is the subject of another rant.

I have written several times about the unholy alliance between big oil, big government, big business, and the big environmental lobby. No matter how you slice and dice it, you and I lose. It’s time for America to wake up and smell the coffee, sans sugar. At the end of the day, the lifeblood of our economies is energy, energy, energy. We need to start paying attention to what these jack asses who are running our governments are doing.