We are buying a house in Northern Virginia

I have not been so active here because we have been busy looking for a house to buy since getting back from Christmas vacation in Finland.

Our goal was to find a house within our budget not too far away from my work. That was a little tricky given that I currently live less than five miles from the office, so every house we looked at was going to result in a longer commute than I have now.

One thing that we learned pretty quickly is that despite all the news on how bad the housing market is, all real estate is local and the local market in Northern Virginia is pretty competitive, especially in the more affordable range. Just how competitive:

• Many of the houses that we were interested in were on and then off the market within a day. A couple of times we would see a house come on the market and immediately send the details to our agent only for him to come back that there were multiple offers on the property already, sight-unseen.
• House flippers are still working the market. However, this is not necessarily a bad thing as they are taking a $200,000 - $300,000 dump and turning it into a $350,000 - $450,000 renovated home.
• Renovated homes don't spend much time on the market.
• There are many short sale homes on the market. This is a problem given that you have to wait for the bank to accept any offer acceptable to the seller. We tried to avoid short sales and would limit that to only short sales where there was only one lender. This was after considering looking at one home but found out that there were three lenders against the property and it took six months for the first lender to approve the sale.
• Houses priced over $400,000 are in a different market than those under $400,000. I think this has lots to do with people not being able to borrow whatever the house costs instead of now only being able to borrow what they can afford.
  

We made two offers on homes, both inside the Capital Beltway. For the first house we offered the asking price and asked for nothing in return. No payment of costs, no fixing anything. There ended up being three offers on the property with the two others offering more than we did. Apparently that house went for around $20,000 over the asking price.

For the second house we took the same strategy of offering the asking price and asking for nothing in return. Again there were multiple offers on the house. However, this time our offer was selected.

Now we are in the middle of going through the motions of buying the house. Our home inspection resulted in a second inspection by a structural engineer. We came up with two issues that will cost about $10,000 - $12,000 to repair. As far as the seller is concerned, they are not interested in doing anything or compensating for anything flat out saying that they would simply go with another offer, because they can.

So, despite all the wheeling and dealing you see on 'Property Virgins' and the other real estate shows, don't think that you are going to experience the same in your search. In the end, we have decided to bite the bullet and purchase this house. Looking at the market here, this house is still a good deal. As a bonus, since making the offer on this place we have yet to see another house come on the market within our price range.

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Congressman Edolphus Towns (NY-CountryWide) Stupid or a Lier?

News comes out that another Democrat has possibly received a VIP loan from Countrywide.

The loans were made to Rep. Edolphus Towns of New York, who heads the House Oversight and Government Reform committee. The panel's ranking Republican, California Rep. Darrell Issa, has been pushing to have the committee subpoena mortgage records showing who received loans through Countrywide's VIP program -- operated under former Chief Executive Angelo Mozilo and known within the company as "Friends of Angelo." - WSJ

It is disturbing enough that this very Congressman is preventing a proper investigation of the Countrywide VIP loan program with the thought that he was protecting other Democrats. It sounds to me like a criminal act to block a proper investigation of Countrywide because his own name might come up. However, that is not what drove me to write this post.

This was:

The spokeswoman for Mr. Towns, a 26-year congressional veteran, said his decision not to subpoena the VIP records "has nothing to do with his mortgages." If the mortgages came through the VIP program, "it was without his knowledge," and he doesn't believe he received any special benefits from Countrywide, she said. "As far as he knew, he was just getting a loan as a regular person." The congressman, who wasn't a committee chairman when he received the Countrywide loans, first heard of the VIP program last year from press reports, she said. - WSJ

He found out last year about the VIP program and still does not know if he got VIP loans or not? Are we really supposed to believe that? I can understand that he might have gotten special treatment and not known about it at the time, even though Countrywide claims that everyone who did benefit did know that. But he should have checked immediately if he did or not and probably should have issued some sort of statement given the clear potential of a conflict of interest. Hell, now that he has been confronted, he can't say that he didn't get preferential treatment which probably means that he did. After all, wouldn't you want to know if you got a special deal after hearing that others have? I know I would.

Funny too how these Congressmen all managed to find the same lender and somehow had their loans processed through the same VIP program and all without their knowledge. How did that happen? Is there some billboard in the halls of Congress where people can tack up bargains, furniture for sale and discount mortgages? Sure looks like it.

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Why Not 'Cram-Down' Chrysler's Government Debt?

The acting President of Chrysler Motors, President Obama, announced Thursday that Chrysler would be filing for Chapter 11 bankruptcy.

Apparently, the Government is claiming that some of Chrysler's lenders were not interested in writing off enough of their loans and stake in the company that the President's men demanded. The lenders of course think that they were getting screwed in the deal, especially compared to how others were going to make out.

Chrysler’s dissident lenders have on their side the “absolute priority” bankruptcy rule, which holds that value must be distributed according to the legal priorities of the stakeholders. What riled the group that put out the statement today was the fact that junior creditors, consisting of a workers healthcare trust, would get equity in a new Chrysler entity while they would not.

In the deal Chrysler was trying to conclude out of court, Fiat would have become a 20 percent owner of Chrysler, and a union retiree health-care trust fund would hold 55 percent, with the rest of the company staying in the government’s hands initially, according to people familiar with the matter. The government intends to replicate this, using bankruptcy to set up a new company, people familiar with the plan said.

Junior Creditors

“Junior creditors are ordinarily not entitled to anything until senior secured creditors like our investors are repaid in full,” the dissidents said in the statement.

In bankruptcy court, the absolute priority rule is regularly modified, lawyers said. Two-thirds of the lenders can force the holdouts to go along with them in a procedure called a cramdown. - Bloomberg

As shocking as the Government's strong-arming private lenders is the Democrat politicians opinion of those who currently own Chrysler's loans:

The objections from the group of lenders also drew criticism from Michigan lawmakers, including Democratic Representatives John Dingell and Sander Levin.

“The rogue hedge funds that refused to agree to a fair offer to exchange debt for cash from the U.S. Treasury -- firms I label as the ‘vultures’ -- will now be dealt with accordingly in court,” Dingell said. - Bloomberg

And the President can't figure out why banks don't want to lend money any more. You see, it is the Democrats in charge who get to decide what is fair. What a load of bull. Chrysler borrowed the money. They should be accountable to the lenders, not the lender accountable to the Government. After all, the lenders mistake was only in agreeing to lend money to Chrysler or to take over loans made to Chrysler. But it was Chrysler that flushed the money down the toilet.

To keep Chrysler from filing bankruptcy, the Government loaned Billions of dollars and in the end they plan to be the second largest shareholder in the company when it emerges from bankruptcy court. But, I wonder if the last-minute Government loans in the billions tipped the scale against these holdout lenders who were not interested in playing the game the Government wanted to play, giving the Government along with the union that important 2/3rds majority going into bankruptcy. No I didn't do the math, but I know that if the Government didn't loan the money, they would not have a seat at the table, other than as an observer.

Also, I wonder why isn't the President pushing for the Government loan principal to be 'Crammed-down' which is what he is pushing for bankruptcy judges to have the right to do.

Cramdown -- a court-ordered reduction of the secured balance due on a home mortgage loan, granted to a homeowner who has filed for personal bankruptcy. In a cramdown, the bankruptcy court splits the outstanding mortgage balance into two parts. The amount of debt equal to the current appraised value of the home is treated as a secured claim, which the borrower must continue to pay. The amount of debt in excess of the current property's value becomes an unsecured claim, which is usually not repaid in full. In areas where home prices have depreciated, cramdowns can result in significant mortgage reductions. In some cases, the judge may order the remaining secured debt amortized over the remaining life of the loan term, thus lowering monthly payments. In other cases, monthly payments remain the same as before the cramdown, and the secured mortgage is simply paid off faster. - TeachMeFinance

Is it because in personal bankruptcy the money at stake is owed to the banks (which are evil) and in this case the money is owed to the voters (which are only evil if they don't vote Democrat)? The holdout lenders were looking at a 67% 'haircut' from the face value of the loans they held. To be fair, the other groups, including the unions should be facing a cut of equal proportions but they are not. Not exactly fair is it? It seems, but is not said, that the Democrats are taking the position that since many of these lenders did not pay the face value of the loans that the base of reference is the money that they actually paid, not the amount originally borrowed. This is Bull. Because if the government is going to take that position, they they very well might do so with other things. Take gold. The price is currently hovering in the $900's. Now imagine the Government dictating how much profit you can make when selling your gold and declaring that those who bought gold when it was under $500 and are not trying to sell for over $900 are vultures. It is just plain stupid. Maybe they should try regulating the losers for a change.

Now imagine the public outrage if all that money provided by the Government gets written of during bankruptcy proceedings. That is probably what should happen if the goal is for the company to emerge from court as a viable business. But that outcome would leave lots of Democrats twisting in the breeze.

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Banks Learn - Refuse to Negotiate With Obama Administration

I was wondering when this was going to happen, given that corporate discussions with the Government have not turned out too well for corporate executives. And you can bet that banks were going to get royally screwed if they decided to 'play ball' with the Government concerning 'cram-down' legislation for mortgages.

Democrats had negotiated with JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. on a compromise. Durbin said the lenders objected after months of talks, and “will not even participate in a negotiation,” although the banks are “surviving today because of taxpayers’ dollars.” The three banks Durbin identified received $95 billion in U.S. aid.

“It’s clear that part of the mortgage industry was never interested in meeting us half-way, as negotiations went forward, they moved the goal post back and back,” Senator Charles Schumer, a New York Democrat said. - Bloomberg

Not surprising is that the only bank to agree to the Government 'Cram-Down' legislation is CitiBank, which just so happens to be partly owned by the Government. Also nice how Senator Durbin took advantage of whacking the Industry over the head with TARP funds. Funds the Government is refusing to let banks repay.

Good for the banks for holding the line on this idiotic idea of rewarding mortgage deadbeats. Not for anything, but letting some people off on their mortgages because they bought too much house is not fair and will probably invite many more people to file for bankruptcy just to take advantage of this. Of course the banks will have to raise rates on the rest of us to pay for these bad loans.

If people can't pay their mortgage, it should be up to the bank whether to foreclose or not as well as whether or not to change the terms on the mortgage.

If the Government wants to bail out underwater homeowners, then how about offering up these houses to us at greatly reduced prices. This way, those who acted responsibly get a chance to buy a house at a good price, the underwater homeowners get rid of their houses, and the banks don't get stuck with more properties.

Just saying.

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Mortgage Deadbeats Protest For More Money!

My sister-in-law and her husband were off in Manhattan last Friday and ran across this protest across the street from the New York Stock Exchange on Wall Street.

These people were protesting that banks were getting a bailout and they were not.

(Poor President Washington!)

To put this whole protest into proper perspective, here is a simple explanation of one reason why there is a credit crisis:

• People borrowed money from banks to buy houses
• People borrowed more money from banks to buy:
--- Home furnishings for their mini-mansion
--- Home electronics including an entertainment system
--- New Cars

• People then borrowed more money to reward all this hard work with vacations
• People then failed to repay the money they borrowed

So the banks had all this money that they have lent out to a bunch of deadbeats. The deadbeats stiff the banks. The banks then ask the Government for a bailout, which one can think of as having the Government pay the deadbeats bills off. What is the response? The deadbeats are pissed off that nobody is interested in giving them more money. You would think that they were asked to repay their loans by how mad their were...

P.S.

Here is what the stopforeclosuresandevictions.org group noted on the signs above has to say on their website:

The stock markets are crashing, the world economy is headed into a deep recession or even depression, and the U.S. government and its top bankers, along with their counterparts around the world, are giving what’s going to amount to trillions of dollars to bailout the richest 1 percent of the people WHILE DOING NOTHING TO RESCUE ORDINARY WORKING AND POOR PEOPLE!

We must stand up and say no to this injustice! NOW IS THE TIME TO ACT. - Link

Why should the 'poor people' get more? They already got their money, either in an initial mortgage, refinancing and 'cashing out' some equity, or otherwise taking money out of their house like it was an ATM. It is the banks and Wall street that lent them this money only for this group to stiff them in return and cry VICTIM!

Here are some more comments from someone who has been burned by these 'victims' who wrote in 'A Wall Street Trader Draws Some Subprime Lessons: Michael Lewis' some thoughts about the poor:

...1) They're masters of public relations.

I had no idea how my open-handedness could be made to look, after the fact. At the time I bought the subprime portfolio I thought: This is sort of like my way of giving something back. I didn't expect a profile in Philanthropy Today or anything like that. I mean, I bought at a discount. But I thought people would admire the Wall Street big shot who found a way to help the little guy. Sort of like a money doctor helping a sick person. Then the little guy wheels around and gives me this financial enema. And I'm the one who gets crap in the papers! Everyone feels sorry for the poor, and no one feels sorry for me. Even though it's my money! No good deed goes unpunished.

2) Poor people don't respect other people's money in the way money deserves to be respected.

Call me a romantic: I want everyone to have a shot at the American dream. Even people who haven't earned it. I did everything I could so that these schlubs could at least own their own place. The media is now making my generosity out to be some kind of scandal. Teaser rates weren't a scandal. Teaser rates were a sign of misplaced trust: I trusted these people to get their teams of lawyers to vet anything before they signed it. Turns out, if you're poor, you don't need to pay lawyers. You don't like the deal you just wave your hands in the air and moan about how poor you are. Then you default.

3) I've grown out of touch with "poor culture.''

Hard to say when this happened; it might have been when I stopped flying commercial. Or maybe it was when I gave up the bleacher seats and got the suite. But the first rule in this business is to know the people you're in business with, and I broke it. People complain about the rich getting richer and the poor being left behind. Is it any wonder? Look at them! Did it ever occur to even one of them that they might pay me back by WORKING HARDER? I don't think so. - Bloomberg

Go read the whole thing.

As for bailouts, the one group that never gets bailed out is the group that never needs bailing out as they have acted responsibly. Well how about giving them more money for them to responsibly inject more capital into the economy.

One of the more ridiculous suggestions that the Democrats have made and that these people are demanding is for Congress to stop these deadbeats from getting foreclosed on. How about giving the rest of us free money to buy these houses? We win for not getting into this mess. They get punished by losing their homes as they should, but otherwise are no longer stuck with a mortgage they cannot afford. The banks get some money back, but not all as home prices need to drop before many of us will buy, even with free money. However, they don't get stuck with a bunch of bank-owned properties or mortgages with non So they are punished for their stupidity as well, but in the end we all win/lose together.

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Obama's Plan to Tax Earnings $250,000+ Will Worsen The Housing Bubble

The driving force of the current credit crisis is the housing bubble. This brings out a big problem. Just who can afford all those houses?

Clearly, many people who purchased houses over the last couple years were not able to afford them. Now, don't accept that BS being tossed around that these people were no longer able to afford their houses only after house prices fell. What a crock. The monthly payment didn't change just because the value of their homes went down. What changed was their ability to sell the homes for a profit (Or to refinance while cashing out more equity). Once it was no longer possible to re-sell their homes for a profit, they lost interest in them and all of a sudden they became 'victims'.

Now with the credit crunch, banks are only interested in giving mortgages to people who they expect to pay the loans back and only as much as they can afford to pay back. This is as it should be. Banks are after all in the business of making money, not giving it away.

More responsible lending standards will have the effect of reducing the pool of qualified buyers. So as the supply of homes is growing the supply of home buyers is shrinking at every price level. This should result in a reduction of home prices. This appears to be happening just not to the degree that it should, yet.

Now, Senator Obama, as part of his Presidential Tax plan, wants to raise the taxes on people who earn $250,000 and up.

It seems that his supporters don't seem to have a problem with that. Too bad, because they should as it will effect them. (And not just plumbers!) For example, how much house can you buy with a yearly salary of a quarter million? As it turns out, you can get about $800 thousand dollars worth of home with a salary like that. Few people earn that much money in the US. But if Obama raises taxes on those who earn that much and more, he will further reduce this already small poll of qualified home buyers.

Is this important? Take McLean, Virginia. There are almost 500 homes for sale and over half of them have asking prices of over $1 million. That is 200 homes in one area for over a million and half of those homes are going for over $2 million.

As it stands now, a very small percentage of the population makes that much money. All the better for Senator Obama to pick on them as the voice of opposition is small. For those looking to sell their expensive homes their one main option will be to reduce their asking prices to reposition the homes to match the new reduced income levels. You might even say that this is a good thing for the poor. Unfortunately that is not incorrect. Most poor would need to increase their income to be better able to afford their own homes. Senator Obama is not promising to do that if he becomes President. What he is promising to do is to have the Government provide more services and to force employers to provide better benefits to employees.

So what do you think is going to happen to salaries if:

• - Companies have to pay more tax to the Government.
• - If your health care is company-provided through Government Regulation.
• - You have to pay no income tax (Keeping all your income)
  
• - The Government adds to your income with refundable tax credits

The result is increased compensation, but not increased income. Your immediate needs might be better met, but you have less cash to decide how to use as you please. And if the Government is taking care of you and deciding how your employer needs to take care of you, those are all sorts of responsibilities that no longer need to be taken into account which certainly does nothing to pressure employers to increase your pay. In fact, it increases the likelihood that more money goes to the Government instead of you!

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Reference: See the distribution of houses for McLean below. As you can see, the picking lower on the list are pretty slim. Also note that while housing might be overly expensive in this area, the area also has a healthly supply of well-paying jobs for those who are qualified to hold them.

31 Houses under $300,000

59 Houses under $400,000

64 Houses under $500,000

91 Houses under $600,000

117 Houses under $700,000

149 Houses under $800,000

177 Houses under $900,000

203 Houses under $1,00,000 (271 Over $1M)








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Lining Up For The Next Bailout...

No, I'm not talking about the housing bailout. Seems that my wife and I missed out on that one for foolishly thinking that houses in Northern Virginia were overpriced. Nobody told us that we wouldn't have to pay a mortgage.

So, instead of kicking ourselves that we didn't go wild and purchase a house we couldn't afford and then refinancing it to buy nice new cars, new furniture and electronics and then reward all our 'hard work' with a nice long vacation, we thought that it might be a good idea to get ourselves in line for the next Government bailout.

The big question is where will bailout mania strike next? If I had to guess, I would say a bailout of national Credit card debt.

This is the perfect place for the Government to help fix the economy. There are two ways this will work. First, it will give many Americans a 'clean slate' and remove a huge burden that is preventing them from buying more things to power the economy forward. Second, by paying off lots of credit card debt, the Government will help re-capitalize banks that are currently neck deep in accounts with maxed-out credit card limits.

Remember, you can't collect on ANY BAILOUT if you have no debt. Don't feel guilty. For sure nobody else is. I bet that the Democrats will even call carrying massive credit card debt as 'Patriotic'. So be sure to do your duty...

See, this is what bad behavior breeds. Even more bad behavior.

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Note: Remember, that at the end of the day, you are ultimately responsible for your actions, at least until you die or the Government relieves you of that responsibility. This is my way of sarcastically responding what I consider to be bad Government. Want advise, talk to a lawyer or accountant!

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Credit Crisis 'Bailout' More Expensive than the Iraq War

Last night's VP debate made me wonder which Government 'crisis' was more expensive: the Iraq War or what the Government wants to spend to fix the current 'Credit Crunch'. Turns out that Iraq is less expensive, in financial terms at least.

Iraq: $585 Billion

Now there is also a cost of human life with Iraq. However, you cannot look at only the total number of US and Iraqi lives lost in Iraq, since there is nothing to say that had the US not invaded Iraq that there would not have been another 9/11 or other sort of disaster., not to mention all of the Iraqis dying as a result of Saddam's failure to comply with UN sanctions, let alone all the Iraqis he killed himself in his own purges and wars. In addition, a number of US military deaths in Iraq are due to accidents, which also occur during peacetime.

Also, the Iraq War has created jobs. The 'bailout' hopes to limit the loss of jobs.

The Credit Market Rescue/Bailout: $700 Billion + $112 Billion in Tax Breaks and Pork

In their vote on the $700 billion Wall Street bailout Wednesday night, senators packed the bill with scores of lavish goodies to please favored groups and win support from opponents in today's House vote. - NY Daily News

and:

The tax earmarks were scarcely noticed during the Senate debate over a bill that featured a $700 billion bailout package and a $112 billion tax package, including the renewal of popular tax breaks for businesses and renewable energy projects and a one-year effort to shield at least 20 million Americans from paying the alternative minimum tax. - SFgate.com

Keep in Mind that this is the cost for fighting the Iraq War since 2002. I would think that the $700 billion for fixing the credit crisis would be spent in months.

Sure, there is a chance that the Government will recoup most if not all of the $700 billion of the credit crunch bailout over the long term. In line with that, the money spent in Iraq should also result in a big peace dividend over the long run as well.

We all know who Democrats want to blame for getting into Iraq. Just who should we blame for getting us into this credit crisis mess?

Video Link

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Bailout Thought: As if Deadbeats Were Going to Pay a Government Mortgage

I can't see having the Government take over the mortgages of deadbeats being a good idea.

The Democrats will never let the Government foreclose on these people and kick them out of their (unpaid) houses. Really, in what way is having the Government be your lender going to get these people to pay when they are not paying now? If anything it would be another reason not to pay. If I did have a mortgage I certainly would want the Government to take it over so I could cry to them that I needed it slashed, and stop paying as proof of my need. Let's remember that many of the people who can't afford these mortgages any longer already took the cash out of their houses. They should be foreclosed on if they can't pay the money back!

There has to be a better way to get credit moving into the economy again. How about giving this $700 billion to those of us who acted responsible all this time and kept paying our bills. I don't own a house. How about giving me a sweetheart loan? How about giving me money to replace my old car? How about some vacation cash to reward my remaining solvent all this time? How about a little more cash for a flat screen TV and home entertainment system? How about a hundred thousand or two to increase my stock portfolio? I'm good for it!

P.S. One of the causes of this credit crisis, Casey Serin is back online. I would think that it is too late to help him with a bailout as he lost all six homes he bought. But what about all the other idiots who played the same game he did?

"Dyan Harmell bought 19 homes with 4-million dollars in mortgage debt. Pulte's in-house lender continued to sell her homes even as she showed a loss on her rental income . . . her sole income."

"'They had me close Monday, Wed, Friday on two houses each so it wouldn't show up on my credit report,' said Harmell." - Bubble Markets Inventory Tracking

People should go to jail. Good luck getting Democrats to admit that, especially with Democrat members of Congress getting sweetheart loans as payoff for not taking regulation seriously.

Video Link (Updated 30 Sept.)


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