Oxymoron - Don't Believe Everything You Hear

"All that glitters is not gold"

Oh really?!  But gold actually does glitter, so there is an erroneous premise here.  

To be a true and correct idiom or expression it should be coined as, "NOT all the glitters is gold" (gold glitters, but it is not all that does; such as glass, diamonds, metals, etc)  

The moral of this post?  Don't believe or just take for granted everything that you hear...

Bank of America (BoA) - "Brazen, Unauthorized & Impermissible"

Bank of America is NOT one of my respected or trusted financial institution by any means.  I feel sorry for their stockholders who got completely HOSED.

Article as reported in Fortune Magazine:

A Fistful of Someone Else's Dollars

Troubled homeowners aren't the only ones having their issues with Bank of America.

A federal bankruptcy judge ruled Tuesday that BofA (BAC) must return $500 million in collateral it seized without cause from Lehman Brothers two years ago, just after the investment bank collapsed in the biggest-ever U.S. bankruptcy.

Bank of America's actions were "brazen…unauthorized and impermissible," U.S. bankruptcy judge James Peck wrote in a ruling Tuesday, the Wall Street Journal reports.

BofA forced Lehman to post the collateral in August 2008 as questions started to mount about the investment bank's health. There's nothing unusual there, as rivals such as Citi (C) and JPMorgan Chase (JPM) did the same.  The problem lies with what BofA did in November 2008, when it took the cash from the collateral account to offset debts it was owed by Lehman. The bank did so without the court's permission, the Journal reports.

Peck ruled this week that BofA's moves violated rules protecting companies from having their assets seized, and made clear he wasn't overjoyed with the bank.

In his order, Judge Peck said it was "astonishing that [Bank of America] would make the premeditated tactical decision to deliberately seize the collateral" without first seeking court permission. The judge said Bank of America acted with "apparent disregard for the consequences" and ordered the bank to repay Lehman's bankruptcy estate the $500 million plus interest.

Tuesday's ruling came on the same day a top executive at BofA's home loans divisions said the bank regrets its missteps in the foreclosure fiasco. But the bank has no regrets in this case, a spokeswoman indicates.

We are disappointed with the court's decision, and we continue to believe that our actions were fully supported by well-established New York law and the unambiguous language of the Bankruptcy Code.  We are considering our appellate options.

Home Valuation Code of Conduct (HVCC) Appraisals - New Rules

Just when I thought I had beat Freddie Mac and Fannie Mae's Home Valuation Code of Conduct (HVCC) appraisal guidelines into the ground, here we go again.....  (see all my previous blog entries on this topic)

  

The Federal Reserve proposed far reaching new rules October 18, 2010 that could affect residential real estate appraisals.  The interim rules which are to take effect December 2010, and be finalized in the Spring of 2011, prohibit outside influence in appraisers' valuations and require lenders to report evidence of appraiser misconduct to regulatory authorities.  Isn't that what HVCC was designed to do in the first place?!  So why are they "re-inventing the wheel" here on this issue?

The new rules will supersede or replace HVCC.  All of this is as a result of Congress passing the "Dodd-Frank Wall Street Reform and Consumer Protection Act" in July 2010 and being signed into law by President Obama. The original sponsors of the bill were Barney Frank (D-MA) and Chris Dodd (D-CT) in the Senate Banking Committee as a result of lobbyists pressure to change or reform the appraisal rules or guidelines under HVCC which resulted in a whole host of problems and complaints with inaccurate appraisals produced by appraisers who were were working for low fees through appraisal management companies (AMC's), short turn around time, and unfamiliarity with the local market.

Appraisers were one of the principle parties that got us into this whole real estate market meltdown in the first place, then after rules and regulations were imposed on them to prevent collusion in appraisals, they have to go and screw things up even further for the consumer!  

As a result of this whole real estate market meltdown or bubble-burst, it is quite interesting and makes a very poignant statement to note that there were no "punitive" rules imposed on Realtors.  As buyer agents we assisted people who were able to obtain financing, which was contingent upon a satisfactory appraisal.  We had no part or undue influence in either the buyer obtaining financing or in the appraisal.  As long as they had a lender's approval letter, we assisted them in buying a home and assumed that lenders (and appraisers) were practicing prudent and rational guidelines in their lending practices.  As listing agents we had to work within the constraints of "fair market value", unrealistic seller expectations and perceptions of value; and work within the constraints or confines of the real estate appraisal - in other words, if the property didn't appraise for what a buyer was willing to offer for it, they weren't going to get the financing, and the deal was not going to go through.

Realtors cannot be blamed in this whole debacle; the finger points DIRECTLY back to lenders and appraisers who were in "cahoots" or collusion with each other in driving the price of housing literally through the roof.  Wall Street of course is also to blame since they provided the funding and means for this all to take place in the first place and knew damn well that this was going to happen.

"House of Cards" from CNBC is a great video piece of investigative journalism which documents how this all happened.

Push/Pull Door Design

This is a great concept...  but where does the lock set go ?

 


Obviously this application is for interior building structures, and not the main outdoor ingress/egress, but it's a cool design....  But I guarantee that folks would still try to pull the button out, and push the handle in !

 

Say What You Mean, and Mean What You Say (Part II)

This is a follow up to my previous blog entry, part 1.

Here's another one!  Do I have grey or gray hair ??

 

Why the contemplation or trepidation over which one to use or which one is "PC" (politically correct).  Or should I just say that my hair is an "achromatic color somewhere between black and white?!"  Maybe I should just color my hair to avoid the confusion!  LOL

National Association of Realtors - Washington, DC

The National Association of Realtors (NAR) building (on right side) in Washington, DC. The U.S. Capitol Building (Congress - House of Representatives and Senate) is visible in the background.  If they want to go lobby Congress, the only thing they have to do is just walk up the street a few blocks !  Talk about, "Location, Location, Location"  LOL  : )~

Say What You Mean, and Mean What You Say

Two of the most ambiguous words in the English language prohibit us from doing just that; the words subsequent and next. 

"Take the next exit"  -  this one ?  "No, the next"

  

"Let's meet next Thursday" - next week ?  "No, this week" (then it should be let's meet this Thursday; or not this Thursday, but the next [week].

  

"That's next to impossible!" -  does that mean it is almost impossible, or one degree below (or possibly even higher than) impossible?!

 

The word "next" can cause a great deal of confusion and can be quite vague actually! 

As a Paralegal, I have also encountered the word "subsequent" in statutes, regs, administrative law or other legal codes.  "Subsequent" can mean either before... or after; e.g. "subsequent to judgment" (also note that judgment has no e) when referring to civil procedure.  Does that mean before judgment is entered or after judgment is rendered?!   "Subsequent to receiving your travel Visa documents, you must also ..."  Does this mean before my travel Visa document is issued or after it is issued, I must do X? 

Why the ambiguity ?  Why can't we simply say before or after for the word "subsequent"; and clearly define "next" ?!

Rent vs Own (another point of view)

(See video clip below after my commentary or analysis)

This guy makes some very interesting points about the down sides of home ownership; but I think he's still whacked ...  Even though as he points out that your down payment which will be "parked" into your home forever, or used when you trade up to another home, and will not be accessible to re-invest in other ways; and that real estate taxes which you'll pay over the life of your mortgage loan (15 or 30 years) and which are "hidden" in your PITI as part of your total mortgage payment can certainly add up to a large aggregate over the life of that mortgage or ownership interest in the property, along with other maintenance costs -- in the end or final analysis you ARE building equity over time and real estate property ownership is something that can be passed on to an heir; whereas what can you pass-on with rent or a lease?  Nothing !  If you added up ALL the expenses of home ownership (mortgage interest, real estate taxes, repairs, etc) in the end you should still be far better off than with renting and at a minimum break even or have a large gain in equity/appreciation if you ever want or need to sell some time down the road.  The exception to this assumption or case in point about "short sales" is where someone bought at the top of the roller coaster apex of the market, put little to nothing down, had an ARM loan, re-financed or pulled equity out on a HELOC or home improvement project, then the market crashed or receded a bit like the tide; then they could find themselves, as many home owners did in this recession, being upside-down in their loan.  However, like the stock market, if you're in it for the long term and can weather through little dips or fluctuations in the market; in the end you'll come out a hell of alot better (not bitter LOL) than if you were just renting and flushing your money down the toilet each month.

One can also get a life insurance policy to pay off the mortgage in the event of an untimely passing; then any children or heirs, or surviving spouse, can own the home free and clear.   Assuming the average person does not have bundles of cash saved up to invest in other ways or "diversify their financial portfolio", renting affords absolutely no return on investment whatsoever whereas real property ownership does by way of building equity in the property and appreciation. They're not "making any more land" by the way and with MASS immigration and natural population growth an abundance or surplus of real estate parcels for the taking at give away prices or for the "stealing" or homesteading is not going to happen.

Real estate ownership is a long terms investment strategy; whereas what this guy proposes by not owning and renting and using your extra bundles of cash (assuming you have such a nest egg) would be a short term investment strategy. 

Another thing this nut job points out is that with career changes, TDY's or relocations; renting does afford you the opportunity to pack up and leave relatively quickly. Most leases, however, call for a minimum two (2) month advance notice if the tenant wishes to terminate the lease early; but depending on what your lease contract says it does not necessarily mean that you can just up and leave at a moments notice as this guy implies.  What about KEEPING your property as an investment and renting it out while your gone ??  Have someone paying your mortgage payments for you and continue building equity in the property, while you rent elsewhere as needed.  Of course being an out of state or area landlord does have it's risks and you may need to appoint a property manager or trusted friend or associate to handle any issues that might come up in your absence, such as that call from your tenant saying there is a repair issue or something.  But with due diligence, selecting the right tenant, and having some funds set aside in an escrow account or savings account in reserves for repairs, to cover for tenant if they are late or cannot pay rent for a month or two, and other property management issues that could arise - it would be far more financially beneficial to rent your place out and keep it as an investment.  Also if you sold just because of a job change or relocation and then went from owner to renter, you could get hit with Capital Gains taxes if you remain a renter.  Funny that this guy didn't even cover these points or that the interviewer didn't ask him or make any counter arguments on rebuttal.     

He makes some very interesting and perhaps valid points about rent vs buy; but I think he's still whacked and off base.  Less stress in renting vs property ownership (as he says) perhaps; but a whole lot less return on your investment with renting too in the long run.

Ok, now watch the video and make up your own mind after hearing what he says and what I have said above....


(if video does not play correctly switch video mode to HD in embedded player)

What an Appraiser Sees

Here is a fairly good, but very basic, understanding of how an appraiser sees things.  This is overly simplified and of course there is much more that goes into a good appraisal that what is shown here; but they do make a very excellent point on making sure the appraiser is knowledgeable and familiar with your particular neighborhood.  I am surprised they did not even mention "HVCC" (Home Valuation Code of Conduct) appraisals.  I have beat this topic like a dead horse here on my blog site, so if you're interested to know all about HVCC just search through my blog archive to see the many articles and videos I have posted about it.

The appraiser here sort of touches on it, but could have brought the point home more clearly by specifically mentioning "cost vs value" in upgrades, updates that a homeowner does.  For example just because you spent $40K on the garage project doesn't necessarily mean that equates to an automatic $40K increase in your home's value.  Same as with the granite counter tops and other kitchen & baths improvements.  The appraiser in this video makes an excellent point about being relative to other properties in your neighborhood.  For example if you have granite counter tops, and everyone else does too in your neighborhood; then that update to granite counter tops you did probably isn't going to get you additional value on that appraisal....

(if video does not play correctly, switch video mode to HD in embedded player) 

How Much Down Payment is Required to Purchase a Home ?

Here's a fairly straightforward answer and video which I have copy/pasted from this source article.  I do not endorse Bank of America by the way who sponsors this "infomercial" on AOL:  (see text of article below embedded video)




The amount of down payment necessary when buying a home depends on the type of loan applying for, such as a government loan like an FHA or VA loan, or a conforming loan from a private institution. In the case of non-conforming loans, which are typically "jumbo loans", the down payment requirement can be 20 percent.

FHA loans are a great way to get your foot in the door with a low down payment as the minimum down payment requirement is only 3.5 percent of the mortgage amount you're seeking. It amounts to a 96.50 percent loan-to-value amount -- but there's a cap on the value (or purchase price) of the home, and that is set county by county. The cap exists mainly because affordability varies in a given area. Los Angeles County, for example, is currently capped at $729,750, whereas most counties around Nashville are capped at $432,500. (See where your county stands.)

Another good thing about FHA loans is that they're open to anyone, regardless of income. Because even those with a higher income might not necessarily have the savings for a sizable down payment. However, FHA does watch your credit score, as would any lender. It may even soon implement a minimum FICO score of 580.

VA loans, which are available for eligible military veterans, have a zero-down-payment option for 100 percent of the loan-to-value, provided that the loan is no more than $417,000. For higher loan values, a down payment would be required and would vary based on the appraised value or purchase price.

Conforming loans, which can have a fixed or variable interest rate -- although most borrowers choose a fixed rate -- are given out by private lenders. Lenders set their own minimum guidelines for this product, but currently Bank of America requires a minimum of a 5 percent down payment for loans up to $417,000 and 10 percent for loan amounts up to $729,750.

There are some exceptions to the minimum down payment, however. A down payment of 3 percent may be allowed if the borrower's income is below the HUD median income for the area where the home is located. And, borrowers can also use a down payment assistance program to have a third-party cover all or part of the down payment.

Given the varying options for a down payment requirement, that doesn't mean that you should go out and plunk down all of your savings on the down payment. Dangani and Melinda moved from Missouri and asked the experts how much cash they should keep in reserve.

The simple answer, says personal finance expert Lynnette Khalfani-Cox, is to not overextend yourself. Homeownership comes with a lot of hidden costs, from the property taxes to homeowners insurance and repairs. And don't forget that you're going to want to decorate. All these costs can add up to thousands of dollars more than you planned.

It's not fun to be house poor -- whether you're young, or retired and living in Florida. Make sure you consider the list price of the house, your down payment and your remaining savings carefully, so that you don't end up letting your house own you instead of you owning it. That would truly be uncomfortable.