Constituent Communication

A little over a year ago I signed up for a Facebook account after receiving an invitation from now 1st District Councilman Robert Garcia. At the time Robert was one of the publisher's of the Long Beach Post and I was a contributor to the site; I wrote about the Facebook invitation and the technological gap between my generation (47) and Robert's (31) in a post titled "Tech Savy, Culturally Naive." Since that post in June 2008 we have seen a Presidential candidate leverage the available technology to promote his campaign to deliver messages and collect cash, and we have seen Garcia photocopy Barack Obama's campaign playbook and win a crowded contest for his seat on the Long Beach City Council. Using the exponential math of degrees of separation social media sites like Facebook and MySpace, and to some degree the more business oriented site LinkedIn, connect friends of friends of friends to new friends.

As an experiment and an excuse to gather friends together, in March I used my Facebook page to create and launch a barbecue at our home. "Stuftivus" was a great time with fourteen people who did not know each other but knew me or Leslie or both--but had communicated through comments made on my Facebook page. As the party got started and people showed up it was if they were walking into a high school reunion, I vaguely remember you, let's catch up. And it was a great time, friends of my mine became friends with friends of a friend. Degrees of separation were lifted. Now many of these people now communicate directly and their circles have gotten a bit bigger and the world a bit smaller.

Last week the Facebook home pages of thousands of people across the country and across the globe had several postings from friends, or friends of friends, announcing Councilman Garcia's placing on the Long Beach City Council's agenda an Equal Benefits Ordinance. The Equal Benefits Ordinance, or EBO, would require contractors bidding on city contracts who offer benefits to their employees and their spouses to also offer those same benefits to employees who are in domestic partnerships (more information available on Garcia's website). While I am opposed to our cash strapped and broke city adding any more costs to doing business in a city that is already notoriously unfriendly to businesses, I am not using this space to debate the merits of the proposal and the merits of opposition. My positions on gay rights are on public display so any who take my position on the issue as anti-gay is ignorant of my stance, my position is from that of a business owner, a citizen of a city that has been mismanaged for years and the over-extension of government.

That all said, the issue I want to address is how Garcia is changing government in our city with his presentation of this issue to the public, using his Facebook, MySpace and Twitter accounts, and those of his staffers, to announce the EBO at tomorrow's city council meeting. With a drip of announcements on all their pages, and encouraging their friends and contacts to show up at the city council meeting, to write letters to the offices of other council members and the mayor, the message and the news spreads quickly through the on-line communities.

Garcia's use of the social media to distribute his policies and news from his office is very cost effective and efficient. Facebook and other similar sites have no charge to users, revenue is generated from advertising. With a few moments of staff time and a few clicks Garcia's staff is able to saturate multiple websites and communicate with several thousand people--directing all of them to Garcia's website, not paid for or controlled by the city. Using the technology that his generation is dependent upon to communicate with friends, get news, express themselves and their opinions, allows Garcia to target his supporters and their circles of friends and acquaintances. By by-passing the traditional media, or putting it in second or third position for getting news, Garcia is going directly to voters and supporters without the filters of reporters and editors.

Garcia is the youngest person on the Long Beach City Council and he is showing his elder peers on the council how to communicate with their younger constituents. Constituents who do not have home telephones, do not typically subscribe to the local daily papers and who spend more time surfing their social media sites to see what their friends and acquaintances are posting and reading than seeking out news stories on their own. Garcia's messages and notices are an active part of the social media exchanges within the Long Beach area, and the results were seen first in his election in April and will most likely be seen tomorrow night at the city council meeting where the seats will be filled because of his agenda item for an Equal Benefits Ordinance.

Since my self-deprecating post last June I have become much more in tune with using Facebook and Twitter (my Twitter here), though I have struggled with separation of my personal and business uses--Twitter is almost solely business postings of rates and economic news through the day, while Facebook is much more of a personal and social site for me. Using the social media I have seen how effective it can be in engaging others in discussion or for supporting an event or cause. The communication to multitudes through a quick sentence and posting a link is very effective and at times empowering.

Garcia is considered on the cutting edge with many in the "old guard" of politics and government, but rather than cutting edge he is very much mainstream for his generation and the way they interact and communicate with each other. Using their available technology, provided for free, they are able to share themselves, their ideas and their causes quickly and pervasively through friends of friends of friends of friends of.....

If you, like many of my acquaintances, have been pooh-poohing Facebook and Twitter as for younger generations and not a serious means of communication, I suggest you look at the occupant of the White House and the 1st District Council seat in Long Beach as evidence of the effectiveness of properly harnessing the sites and the power they bring to your message.

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Just Some Questions

Below are questions I have asked myself throughout the past week. Instead of writing what my answers to them would be I am interested in any answers you may have, or additional questions you have asked yourself.

For the week starting Monday July 6, 2009:

Would you stay in a job where your rival(s) has initiated over a dozen investigations into your behavior, you being cleared each time, at a cost to your employer of several millions dollars?

Is it selfish to stay and be subject to more fallacious activity at more cost and distractions to you and your employers?

What is the website you visit the most?

Is it the site where you spend the most time?

Did you watch or listen to any of the MJ memorial service on Tuesday?

After the Cap and Trade passed in the House and the G8 discussions in Italy, why would a corporation spending tens, hundreds of millions of dollars to open a new manufacturing plant do so in the United States?

When will the elected and appointed leaders in California understand that losing over 400,000 manufacturing jobs over the past ten years while seeing the number of government jobs increase over 130,000 is bad?

Coke or Pepsi?

Why do so many people drive so damn fast on residential streets? Aren’t they concerned that some idiot driving like they do may hit their kids or their pet?

Have you ever worn an oversize football jersey and a baseball hat sideways when on a date at a nice restaurant with your spouse or significant other?

How much are you willing to be taxed to pay for someone else’s health care? Put another way, how much less of the income you earn are you willing to have confiscated to pay for the bad decisions of others who are in poor health?

Is it the duty of the city, county, state or federal government to legislate social policies and values? Or the duty of none of them?

What is the worst legal transgression you have made? Did you “get away” with it?

If someone you knew was married with kids and cheating on his wife with probably more than one person, could you consider him a “hero?”

Are you comfortable being alone? How about being with someone but in total silence for a very prolonged period of time? What do you most often think about during these times?

Why do birds suddenly appear every time you are near?

Can you name two or three vocalists with better voices than Karen Carpenter?

My birthday was last Sunday, Leslie asked me “What was the biggest accomplishment for you in the past year?” Your answer would be what?

How much can you assert yourself in a true and equal partnership?

Knowing all the hazards of compact fluorescent light bulbs, why is there still support for banning incandescent bulbs and mandating these biohazards in every home?

When did “global warming” become “climate change?” When the fraud of the global warming movement became more exposed in the mainstream consciousness?

When will politicians quit reacting off the fringe PC of everything “green” and “sustainable” and focus on good jobs?

Do you find it easier to eat healthy and be environmentally conscious when you have more money?

When is it too early to endorse a political candidate? When is it too late?

Is Obama our President and our Secretary of State now?

Cookies or Pie?

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Curing The Foreclosure Market

We have seen the ads and we have become inured to them, a sporty car speeding through winding curves in the hills, a shiny truck bouncy across a creek, a mature man holding open the door for his equally stately spouse (we presume) in front of the club. Then the deep baritone voice of the announcer "Payments as low as x-hundred dollars with zero down."

Ah, zero down. Sometime ago the auto makers sat down with their finance and marketing wizards to answer the perpetual question, "how can we sell more cars?" And the answer to moving more cars out of the dealerships was not to sell them, but rather to lease them. Create financing that allowed Americans to drive off in a brand new car with no money down and an attractive payment. Nothing more than a long term rental contract on a depreciating asset, lease transactions create a sense of ownership and also because of the way they are structured are more often than not converted into another lease on another new car at the end of three or five years. Leases create a constant market for the auto makers.

When it comes to cars Americans are happy to continue making payments on an asset that is worth less in value than the balance of the obligation--most of the newer cars you see on the street are what is termed "upside down". To many Americans their vehicle is tied to their identity and the marketing departments feed on this. You spend a lot of time in your car, your neighbors see your car, your co-workers, your friends--your car says if you are rugged or sporty, if you are successful, it conveys your image. This is the marketing that too many buy into and as a result they auto leasing industry has done a great job of keeping these individuals in new cars every few years.

Evidently when it comes to our homes, where we raise our children, hold family holidays, establish roots in our community, we are much more concerned about when the asset depreciates. While as a nation we are more than happy to pay, or lease, for a $30,000 vehicle at the dealer only to have it worth $24,000 by the time we pull it into the garage, we seem to be extremely adverse to keeping a home purchased for $350,000 if it is now worth $280,000--even if the 20% loss is not out of our own pocket. After all only a fool would pay for an asset that has dropped in value---unless it says I have an urban-mountain chicness about me.

Most Americans aversion to paying for a house losing value is evidenced in the foreclosures happening across the country. While the early press and political statements where pointing fingers at my industry, to some extent justified, and to Wall Street greed, to some extent justified, no fingers were being pointed at others in the transaction: Fannie Mae and Freddie Mac, Congress which regulates Fannie and Freddie, and the borrowers who flooded the real estate markets from 2002 through 2007. Finding scapegoats is the primary focus of the media and politicians. Swarmy mortgage brokers had to be the cause of the housing crisis, forcing innocent Americans into "liar" loans, and loans that had adjustable rate bombs that were hidden in the documents they signed. Slick, greedy Wall Street financiers found exotic derivative investments to look like the risk would be spread thin across the globe to investors all the while piling billions of dollars from innocent American homeowners into their mansions and jets.

Very compelling stories, stories with legs and enough truth to find individual examples that could be splashed on the front page or before the first commercial break. But hardly truthful in telling the major cause for the pending and continuing decline in real estate prices that would affect the global economy.

In "New Evidence On The Foreclosure Crisis" (Wall Street Journal, 7/3/09, subscription may be required), Stan Liebowitz breaks down the numbers on over 800,000 foreclosures across 30 million loans for the second half of 2008. He categorized the foreclosure causation into five categories: negative equity, down payment of less than 3%, mortgage rate reset higher, subprime FICO score (less than 620) and unemployment increase in 2008. Far and away the largest foreclosure group, at 35% is the group with negative equity, combined with borrowers who put less than 3% down and the low to no equity group rises to over 51% of the total foreclosures in the second half of 2008. FICO score, stated income (or "liar") loans, adjustable rates and even unemployment as the cause of the foreclosure combined do not equal the number of foreclosures of those with no equity.

A huge factor in Liebowitz' data is what is not included: home equity lines of credit. His study was just on the foreclosures through the first trust deeds for primary mortgages. As I mentioned on Monday in "Congress Caps and Trades Homeownership" Fannie Mae and Freddie Mac lending guidelines allowed for, I would say encouraged, second trust deeds and mortgages covering 20% of the purchase price to allow for 100% financing--none of these transactions are accounted for in Liebowitz' analysis, so his numbers are very conservative as to the extent that no down payment at time of purchase is a primary cause of the foreclosures on the market. Because of the foreclosure process almost none of the foreclosures in the market were foreclosures made by the holder of the 2nd or equity line--they are at a total loss to the process.

Also not accounted for in Liebowitz' data is the loss to lenders and the markets due to short-sales where lenders take steep discounts in their loan payoffs to facilitate a sale, from my rather limited analysis of transactions at our company the vast majority of these transactions were low to no down and/or had 2nd trust deeds as part of the financing.

Why is this data important? Because as Liebowitz discusses, to this point the focus of policy from the White House, HUD, and Congress has been to prevent foreclosures by throwing various loan programs and modification policies into the market that do not address the fact that most foreclosures are the result of negative equity. Not interest adjustments. Not that income was inflated on loan applications. Not that the borrowers had subprime credit. No, most foreclosures to this point are happening because of the fall in real estate prices combined with the zero equity the borrowers had in their homes when they purchased them.

In California we have seen moratoriums on foreclosures for 90 day periods, all these moratoriums have done is hold off when the homes will be foreclosed on and then put back on the market. I have yet to hear of one home that was saved because of the moratorium--sure a few may have had time to go through a short sale process, but in the end is that not pretty much the same thing? The borrower is left without a home and the lender is left with a less than full balance pay off of their mortgage.

Left to its own devices with the financing currently available, as I addressed on Monday, first time buyers are flocking to market due to low prices and low interest rates. The mortgages our industry has been funding the past eighteen to twenty-four months are the strongest borrowers our industry has seen in decades. Tighter lending policies, down payment requirements and the absence of profit seekers purchasing homes for profit instead of for homeownership, have created a solid foundation for a recovering housing market. And as this continues we will see the credit driven foreclosures in America decline.

Instead of fiddling around with forcing cram downs for meeting arbitrary income to debt guidelines, increasing loan to value limits for refinancing mortgages to 125% of property values, forcing lenders to take losses on rates of return, Congress and President Obama would serve the nation's real estate markets best by letting the markets take care of the foreclosures through natural supply and demand. With the low prices and affordable rates Americans are buying homes, and they will continue to do so as long as they can afford to buy them.

What will impact future foreclosures and housing prices are two major factors: interest rates and unemployment. As job losses pile up many Americans will be forced to choose between paying their mortgages and feeding their kids. As Washington continues it spending of trillions of dollars at a time and the accompanying borrowing inflation in our economy is just a matter of time, and that will mean significantly higher interest rates that will reduce home affordability.

If Congress is truly concerned about homeownership and the foreclosure markets across America my advice is to a) leave it alone, let the markets cure the problem b) cut taxes for employers and investors to stimulate investment and capitalization of new endeavors, or if cuts are unpalatable then don't raise any taxes on any group c) quit spending money, no more stimulus bills, no health care reform, no new programs until the current economy rights itself and a solid foundation for future growth is established. Basically I am asking Congress to not pass any legislation that is supposed to "fix" the housing or mortgage markets, nor to redistribute any more tax payer dollars by taking it from those who create businesses to fund new programs that just add to government's size.

Too bad the housing industry has not done as good of a job promoting the chicness, the sportiness, the rugged manliness of homeownership as well as the auto industry, if it had perhaps more Americans would be willing to stay in their homes and make their payments as they raise their families in their own homes. Had more done so our foreclosure crisis would be significantly smaller than it has been.

Oh, and as always when the finger pointing starts take a look at the role of the one pointing the fingers--usually there is a good reason he is trying to show someone else to be at fault.

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What A Difference A Dog Makes

Not too long after we brought Harrison, who was five months old at the time, home in mid-February Leslie said, "Having a puppy is like having a toddler in the house....except you can't put him in a bouncy chair or spinner toy to keep him occupied and out of your stuff." In the ensuing five months we have gone through one remote control, several writing instruments, a couple of plants, some malibu light cords, a few hairbands, and at least one school project (thankfully after it had been turned in so he ate the homework after it was back home). Having spent the previous thirteen and a half years with Cooper, we became used to not having to watch what he ate; well in terms of toys, rugs, electronic devices, books, etc.

With Cooper we most definitely had to watch what he ate when it came to food--he would eat whatever he could when he could. A bag of cookies, a container of sushi from Trader Joes, several hot dogs, half a pizza, a yogurt container. If it had people food it was targeted by Cooper. The older he got the more bold he became, sort of challenging us with a "what are you going to do put me down over a half a chicken?" attitude. Cooper could hear the sound of a potato chip bag from the other side of the house with the gardner's leafblower on full and a C-17 taking off over the house. If it sounded like, smelled like, looked like food Cooper was there and waiting for a piece of the pie--literally. For a long time after he died right after Thanksgiving we could feel him trotting into the kitchen when we went for a couple of cookies to munch on while watching "Survivor" or filling some bowls with Pirate Booty for the kids' snack.

With Harrison we vowed it would be different. No going upstairs, lasted until April. No sleeping on our bed, lasted until June--now working on reverse training him back to his blanket next to the bed. No people food, doing great on this one as we have not fed him scraps or tastes for treats of any of our food. We can open a bag of Fritos and spill have of them on the floor while he is laying two feet away and he won't move. We can have a rasher of bacon sizzling on the stovetop for a big Saturday brunch and he will sit in the corner chewing on his rope toy. A kid as tall as he is can walk by with a chocolate chip cookie within inches of his nose and he will be looking for his Buster stuffed animal to play with. Somewhere Cooper is mortified.

This Sunday we had a little barbecue, well little for me (two tri-tips and two whole chickens with all the sides for a half dozen adults and kids). While the kids ate inside the adults were feasting at our patio table. We have a large outdoor bar with a built in barbecue, sink etc that is of standard bar height. The bar is laden with platters of meat, beans, tortillas, homemade salsas, oh and someone snuck a salad on there, and plenty of it waiting for people to grab seconds and possibly thirds.

While were eating one of our guests said, "Harrison just jumped up and grabbed a piece of chicken." Being younger and more spry than I, Leslie jumped out of her chair and went to stop Harrison from devouring the juicy breast laying on the ground. With calls of "Leave It!" and "Drop!" Harrison just looked at her as she approached.



Now had Cooper ever been able to reach a big juicy piece of chicken the last thing he would have done would be to stay in that one spot, the second to last thing he would do would be to "Drop!" or "Leave It!". He would have had his food to go, eating as he found a place to try to hide so he could devour the meal.

Harrison is no Cooper when it comes to food.

When Leslie turned around after picking up the piece of chicken we could see it was in one piece. Leslie was laughing as she said, "He was licking it! He was just standing there licking the skin like he didn't know what to do!"

Somewhere Cooper is mortified.

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Congress Cap and Trades Homeownership

A major component of the American Dream is homeownership. Having worked for more than two decades helping families purchase their homes I know first hand how important homeownership is to many Americans. There is a strong emotional commitment to owning our own piece of dirt, our own walls and the roof that protects our children from the elements. Two amendments in our Bill of Rights protect our homes from the government. The third amendment protects us from troops quartering in our homes without our consent. The fourth amendment protects us from unreasonable searches of our homes.

The current Congress has aided President Obama in passing bills and legislation to protect homeownership, or encourage more Americans to purchase homes. Of all the legislation passed the greatest impact, by far, has been the raising of the loan limits for Fannie Mae, Freddie Mac and FHA mortgages; in particular the lifting of the FHA limits. While hindering the closing of purchase transactions with the Home Value Code of Conduct--which hopefully will be repealed or suspended soon--Congress perhaps unwittingly by passing the loan limit increases opened up real estate markets across the country to first time buyers who were waiting to enter and become homeowners.

Most first time buyers are working with a limited amount of funds for down payment and closing costs, this has been true historically which is why when President Franklin Roosevelt created the Federal Housing Administration to assist with mortgages to Americans, the program was created with long term mortgages and low down payments. FHA mortgages could be obtained wtih borrowers putting down 3% of the purchase price until about a year ago, now FHA borrowers must put at least 3.5% of the purchase price into the transaction as down payment. Every FHA borrower pays into a mortgage insurance pool to protect lenders' losses should there be foreclosure--a insurance pool that has worked well through the current crisis.

Until Fannie Mae and Freddie Mac loosened their lending guidelines and began allowing 100% financing, with very high debt to income ratios (and minimal income verification), FHA was the primary loan for most first time buyers. The guidelines allowed family members to co-sign for the borrowers, allowed parents to assist with funds to close and was a bit more lenient on credit analysis. The purpose of the program was and is to promote responsible homeownership, and it has worked. FHA loans became very scarce in California and many other parts of the country once the 21st Century began for two main reasons: 1) As mentioned the increase in loan products available through Fannie and Freddie that allowed 100% financing, combined with 2nd trust deeds borrowers could purchase a home with no down payment and no mortgage insurance 2) FHA loan limits were well below the market medians and could not keep pace with the booming home prices.

In 2007 Congress passed a temporary increase in loan limits for FHA, Fannie Mae and Freddie Mac. FHA limits were raised to match the conforming limits and a new "high-balance" limit was created for facilitating higher transaction prices. As mortgage insurance companies pull out of California and other states, and/or severely restrict their criteria for issuing insurance on mortgages with less than 20% down payment, the FHA mortgage product has become critical to keeping our housing markets on life support, and in many areas begin a reversal of the downturn.

Since last fall the housing industry has seen a huge influx of first time buyers. With low prices and low rates, many families are finding they are able to obtain homeownership--the old fashioned way using FHA financing. Fully qualifying applicants' income, credit, and assets, FHA underwriters are approving thousands of mortgages for new homeowners. Across the state and across the country we see data where these homebuyers are stabilizing prices, or at least slowing the decline. In the past year our industry has seen the highest number of FHA mortgages funded in perhaps decades. Congress, by lifting the loan limits, contributed to this positive economic trend; if Congress went home after passing the loan limit increases they would have done all they needed to do to let the markets begin to revive.

But Congress being Congress and Obama being Obama there was more on their agenda. At the end of June by a slim margin, the bill passed due to the support of eight Republicans, the House of Representatives passed H.R. 2454, the Waxman-Markey bill, also known as Cap and Trade. I will not go into the details of the entire bill and how damaging it is to the United States economy, increases our dependence on foreign oil and the many other fallacies of the bill. What I want to highlight is one aspect of the bill that is discriminatory to many first time buyers, those who need to use FHA financing to purchase a home.

Included in the bill is an amendment that will require all home transfers that are using an FHA mortgage to have a federal "energy audit" performed on the home. An inspector will go through the property and check insulation, water flow, heaters, air conditioners, all appliances, to see if they meet new federal standards for lowering the energy efficiency of American homes. The seller will have to pay for the audit and pay for any necessary corrections before the mortgage can be approved and the transaction closed.

Imagine an elderly couple who purchased their home in 1973, have upgraded their appliances in the early 1990s and now are selling their home to move into Leisure World or somewhere else. Several local real estate professionals have told them their home value is approximately $425,000 and they should expect offers between that number and $400,000. Imagine two families wish to purchase the property: one is offering $405,000 and will be putting 20% down and getting conventional financing; the other is offering $425,000 but will be using FHA financing. Sounds easy, take the offer with $20,000 more to the seller. But wait! We must first spend several hundred dollars for an energy audit, then we must comply with the findings: install insulation, redo the windows, replumb the home, replace the appliances, and trade out the toilets.

Twenty plus years experience in the housing industry tells me that if the energy audit for home transfers is left in the Cap and Trade bill as it goes through the Senate it will put an end to most FHA financed transactions, will lead to lower home prices due to less demand and severely slow down the real estate revival that is slowly occuring around the country. "But just sell the house for more money to compensate the seller for the repairs," some will say. Sure raise the price just for FHA buyers, then tell me how it will get an appraisal at that value--especially with the Congress imposed HVCC appraisal process that has been killing sales across the country.

Cap and Trade is a bad bill, the energy audit clause makes a bad bill horrible. Sunday "Anonymous" in providing answers to several of my "Just Questions" indicated a no comment on my question as to whether members of the House knew they were voting to discriminate against first time homebuyers with the Cap and Trade vote. I hope this provides the information s/he, and you, need to see how poorly this legislation was put together and yet another example of our Congressional Representantives not reading legislation but just casting votes.

UPDATE: I believe this is my first past-posted update. The Washington Times has an excellent editorial on Congress passing unread legislation. The 300 page amendment mentioned in the editorial contained the "energy audit" language I address in this post. The Times is calling on all members of Congress to sign a pledge not to vote on a bill, particularly any health care bill, until the have personally read the bill and it has been posted for at least 72 hours to give the public time to read it. Sounds too reasonable for Congress, I wonder who will sign? As I write this at 10:00 a.m. Pacific only two Senators and two Representatives have signed. Follow it here: www.pledgetoread.com