It’s STILL All About CREDIT!

June 1, 2009

By Brian Short, CMC, CRMS, GMA

Six months after we were told that giving the auto industries $30 BILLION would save them (in spite of the SCREAMING from nobodies like this author and others! See: https://promortgagematters.com/2008/12/05/are-they-still-clueless-a-time-for-real-ideas-to-move-forward/) GM (now affectionately referred to as “Government” Motors!) has taken our money with them – down the drain!GM

However, that’s not all!  This NEW PLAN to “restructure” GM involves another $50 BILLION from the US Government to this company which is now owned, in part, by the very thugs and shysters (the UAW) who helped bring them to their knees rather than give concessions to keep their employer solvent.  Now GM is owned by the US Government and being run by this Administration (headed by the “Community Organizer in Chief”)  the Unions put in office with the help of  the Black Panther club-toting “poll monitors” and ACORN.

GM stock is now trading at $.70 and has been taken off the Dow 30 but the UAW retirement plan is getting the backing of the US Federal Government.  What about all of those other retirement funds which had played by the rules and bought GM stock when it was selling for $90 at it peak?  Who is backing and guaranteeing those retirees? 

Why does this administration feel the obligation to artificially prop up the union retirees at the expense of the non-union retirees?  Would it have anything about securing future votes or rewarding them for past votes?  Is this really good for our free market economy?  Does this plan to pour another $50-$100 BILLION into GM before the end of 2009 really do anything for 100 MILLION non-union workers who are still fighting every week to make their house payments and keep their jobs?

frozen_credit_marketJust as a reminder, this economic crisis was brought about because of the loss of credit – first in the housing industry, then for business owners, college students, auto dealers, big-box retail chains, etc.  We have now all felt the crash of the loss of credit and free-flowing funds on the secondary banking markets. 

To continue to throw BILLIONS of dollars at each of these failing industries without fixing the PRIME ROOT of this disaster is like trying to use a “Sham-Wow!” to fix a broken dam.  There may be water all over the road but that is not hardly the problem.  Some major concrete reconstruction at the source of the cracks is what is required to keep the water from running over the road.

The issue at stake is shoring up the banking credit markets so the other industries dependent on free flowing credit (i.e. housing, autos, retail, college loans, etc.) can begin to normalize.  Propping up other industries before the banking and credit markets are stabilized is still “throwing good money after bad.” (My dad always said this.  I’m not real sure what it means.  However, I think you get my point!)

During Bill Clinton’s successful run for President against an originally economy%20stupidassumed unbeatable George H. W. Bush, who had become nearly an overnight national hero for a seemingly bloodless war to remove Saddam Hussein from his occupation of Kuwait, was given its momentum from a phrase coined by campaign adviser James Carville in 1992 when he chimed “It’s the Economy, Stupid.”  He turned the debate from Bush’s noble handling of foreign affairs to the faltering economy (which Bush had attempted to fix by caving in on his pledge  – “Read My Lips” – for no new taxes during his administration to pacify an uncooperative Democratically controlled Congress).

The Clinton campaign continued to hammer out it focus on the economy -“It’s the Economy, Stupid!”  – and they changed public opinion away from the foreign affairs hero in favor of a small-town southern Governor who had never lived or worked in Washington, DC.

Once again, the attention of the public must be turned – “It’s the Credit Market, Stupid!” – to get this currently distracted administration away from simply returning campaign favors and shoring up organized gangsterism and thugery shrouded in “labor protection” movements and “community organizations.”  The American public must see through this type of “Chicago Style” politics and demand that our elected representatives quit passing out money they don’t have in order to make promises they can’t keep at the expense of generations they won’t ever meet!

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Are They Still Clueless? – A time for Real Ideas to Move Forward.

December 5, 2008

By Brian Short, CMC, CRMS, GMA

 

Once again, as our elected officials are reviewing the automakers’ plans for $34 Billion of bail-out loans they have found themselves consumed with only the symptoms of the the real issue at the core of our current economic disaster – the FREEZING OF THE CREDIT FOR THE  HOUSING INDUSTRY!
clueless-excuseOur current recession, having officially begun in the last quarter of 2007, is NOT because the auto industry is not selling enough cars to keep their bills paid.  The reason for the worst downturn in the US economy in over 40 years is NOT because the retail sector (except for WalMart) is still not seeing any “black” even after “Black Friday”.    The reason retailers are still seeing “RED” , even after “Black Friday” is simple – – the FREEZING OF THE CREDIT FOR THE  HOUSING INDUSTRY!

The explanation for the unprecedented downturn in manufacturing, the highest jump in unemployment in 40 years and the seeming irreversible plunge in consumer confidence is the FREEZING OF THE CREDIT FOR THE HOUSING INDUSTRY!

For our politicians and bureaucrats to continue spending time working on clueless1symptoms of the REAL PROBLEM will only accentuate the depth of this crisis and delay the turn around.  What needs the attention of the Treasury Secretary, Federal Reserve Chairman, Senate Banking Committee and the House Financial Services Committee is what will stimulate the housing industry – plain and simple!

The $700 Billion promised by the Treasury Secretary to be used for troubled assets and unsellable mortgage backed securities must be used for its original purposes and not to prop-up other sectors of the economy whose recent record breaking losses are only a symptom of FROZEN CREDIT FOR THE HOUSING INDUSTRY!  The housing industry has been in a free-fall for nearly 2 years!  Before any recovery plan will be successful, Congress must require that the Treasury and Federal Reserve not divert that money to other needs until the credit for the housing industry is freed up and thawed out.

Here is our plan to get the housing industry off of “dead center” and get the entire US economy flowing with cash.

home-repairs1. Open FHA Loans to investors and 2nd home buyers.  Use  the FHA 203 (K) loan (See Dec 1, 2008 article on this site.) to rehabilitate distressed and foreclosed properties and open up the use of the traditional FHA 203(B) Loan for those who can afford and need to buy a second home.  We must move the current homes on the market to those who could quickly buy up the inventory and possibly make some money on speculating on the front end of a housing recovery.

This move alone, will bring millions of buyers back into the housing market.  Distressed properties do not qualify for Fannie or Freddie loans if they have damage to walls, floors, windows or doors.  Speculators and investors will breathe new life into those houses which need repair before they can be sold in today’s market.  These investors and speculators  have the cash, experience and knowledge to buy up (and repair if necessary) the current glut of houses and make them rental houses, second homes and ideal marketable properties.

Empty pockets2. Revive the seller-assisted Down Payment Assistance Programs for home buyers who have no down payment money to put toward a home purchase.  This will put first-time home buyers back into the market even if they have no cash for down payment purposes.  Prior to the October 1, 2008 shut down of these programs by HUD, many in our industry were using the Down Payment Assistance Programs (DPA’s) for as many as 80% of their closed purchase loans.

Those who want to move but still have homes to sell will not be able to be added to the mix of potential home buyers until we can help them find buyers for their properties.  The re-introduction of the DPA’s will bring those first-time home buyers (or those who sold their houses and made nothing on the sale of their home because of depreciating home values) back into the market who have been sidelined since October1.

BUS300203. Provide tax incentives for  those who buy houses.  We must urge Congress to consider giving a tax credit for any down payment or closing cost money used in the purchase of a house.  Homeowners already receive their credit for mortgage interest paid during a year, but that must be expanded to include any monthly payment paid toward principle or mortgage insurance and down payment, closing costs, and repairs made to a distressed or outdated property bought and repaired or updated to be resold or made into a rental.

How can those who are willing to be part of the solution be rewarded for stepping up to the plate and taking some big swings in order to help get the housing industry flowing with buyers, sellers and builders again?  Give them as many tax incentives as possible to bring them and keep them in the housing market buying and selling and repairing.

Real troubled times require real ideas to deal with the real problem – REAL QUICK!


Bailing out the Auto Industry? I hear Starbucks is having trouble!

November 11, 2008

bucketThere seems to be a rush to bail out, yet, another industry.  Banks, Insurance companies, Fannie and Freddie and now, the “Big Three” auto makers.  How can this be “good” for our country and economy?

The mortgage industry applauded the bailout of the GSE’s (government sponsored enterprises) Fannie Mae and Freddie Mac.  They were already quasi-government agencies with directors and CEOs appointed by Congress (for better or worse!).  Unlike the insurance industry, no other company – government run or private – does what they do.  Unlike the auto industry, no other company – domestic or foreign – keeps our banks fluid and the housing market flowing.  Without Fannie and Freddie the wholesale banks, which buy the mortgages originated by mortgage brokers, would have no more money to fund the new loans.  Fannie and Freddie were put in place by the federal government to keep the market fluid. 

The Federal Government determined, over fifty years ago, that fluidity in the housing market was the key to keeping Americans buying their homes.  This strategy has worked for our country for the past several decades and has given this generation unprecedented opportunity to own a house (or two) when our grandparents seldom owned property and certainly did not buy without a 25%-30% down-payment. 

Fannie and Freddie (whether there should still be two of them is a topic for another day!) have played a key role in the “ownership society” announced by President Bush nearly 8 years ago prior to this recent unprecedented growth in home ownership among all Americans – including minorities, women and young people.  No one else has done or could do for our economy what Fannie and Freddie have done in giving Americans ownership, equity, property and a vested interested in a community.

circuit-city2So, many are now saying, “let’s take all hurting industries to the Feds and let them bail them out, too!”  Insurance companies (AIG is back for a SECOND round?!?), Wall Street Banks, the Auto Industry…. Why stop there?  Circuit City just announced the closing of 155 stores and that they will ask for Chapter 11 protection from their creditors as they reorganize and attempt to restructure their debt.  We’re losing our Circuit City (only 4 months old!) in the city where I live. 

Other retail chains are hurting, as well.  Starbucks was in the news earlier this week for posting a worse than expected earnings report.  Starbucks recently forced the closing of a Saxby’s coffee shop in our starbucks-cup-21humble city when they built theirs one block away from the newly finished Saxby’s.  Is the over-priced coffee industry hurting and should the Feds step in a bail out the Grande’s, Latte’s and Espresso’s of the world because many teen-aged multi-pierced, messy-haired servers and “Espresso-Masters” will be displaced?  I tend to believe that, as John McCain took a beating for saying, the fundamentals of the US economy will work themselves out – in the insurance industry, the banking industry, the auto industry and, need I say,  the gourmet coffee industry.  We must let the free market do its work and not let the Feds try to convince us that they know how to run a business and to micro manage these selected industries and our economy.

Is the mortgage industry really that different?  YES.  When it comes to competition and product availability, the secondary market of the mortgage industry is very different.  Fannie and Freddie play a role that no other private or foreign company or agency play and that is why it is not inconsistent to support the limited propping up of Fannie and Freddie (already quasi-government agencies) and be opposed to the Federal government picking and choosing which private company or industry to bail out.  Unions have made the US auto industry what they are today – unresponsive to market changes, overpriced, less efficient, dependent on foreign fuel, and not environmentally friendly.  The US auto industry must change at their core or they deserve to fade into the history books along with their union-thug bed-fellows.