Wade Rathke: Chief Organizer Blog » Citizen Wealth

Bring Back 1st Time Tax Credit

dine — Mon, 30 Aug 2010 14:01:21 +0000

New Orleans Shaun Donovan at HUD is clearly having problems getting his arms around the fact that America is not New York, the evidence starting with the horrible failure of the mortgage modification program or rather the lack of a mortgage modification program. Now throwing more words at the housing crises this weekend in pronouncements he reheated the money transfer scheme to the states for unemployed borrowers, postponing rather than solving problems, and talked about something with the Federal Housing Authority (FHA) about refinancing, details unknown.

I’m going to sign up for bringing back support for the 1^st time home buyers program that ended in April even though it is a tax credit of $8000 rather than direct support at the point of sale, which would really get the sales charts soaring in the dead-in-the-water real estate market. So far other than bailout and boost up banks, the Administration hasn’t had much success with anything else in the housing field and fall is usually not the hot season for sales in that industry with winter’s bite not far away in many markets.

Driving down Franklin Avenue returning from visiting the Mom yesterday afternoon, I was surprised by the number of for sale signs on this street where a ridge and houses built higher off the avenue had allowed recovery more quickly in the midst of the Gentilly deluge. A betting man would believe that the prices are still based more on wishes than reality, but I’m not sure who would take the plunge even on Franklin where an ex-Mayor of New Orleans is one of the neighbors without a little bit of love from the federales. Milne Boys’ Home, where Louis Armstrong was partially raised during its time as an orphanage, continues to sit in sullen scandal with blue tarps flying frayed as the flags on Franklin, but there’s good news even there as several million was announced recently to finally rebuild.

Something has to move the inventory here and elsewhere, and at least the 1^st time homeowners program is something even HUD knows how to handle.

Soft Case for Home Ownership: Forced Savings/Low Interest Rates

dine — Sat, 28 Aug 2010 14:59:06 +0000

New Orleans Dueling columns in the Times smashed the drunken or doped spin of the Realtors Association trying to claim that the housing market was “back” and in the “Your Money” section made a soft and shrugging case for home ownership:
“Indeed, many people who are buying at the moment are locking in mortgage rates of about 4.5 percent. A year ago, they might have paid 5.25 percent on a $300,000 loan for a monthly payment of about $1,657. Today, you could lock in a lower monthly payment of around $1,520 on a mortgage that size, or you might not need to borrow that much, given that prices have fallen in many areas.

FORCED SAVINGS You may make nothing at all beyond inflation over time on a home, but the part of your mortgage payment that goes toward principal is a form of forced savings.
Sure, you might do better by renting and investing the difference between the rent and the total costs of ownership. But at least three things need to go right.
First, you need to actually save the money. Americans have trouble with that sort of plan. Then, you need an after-tax return that’s better than whatever a home would deliver. That’s a task that might not have gone so well over the last 10 or 12 years, and it involves its own future risk, given how little safer investments are returning now. Finally, you must not raid the savings along the way.”
Of course it goes without saying that the “forced savings” part of this equation only works out at the point of sale, and even the “nothing at all beyond inflation” somehow has to take in the cost of property taxes, insurance, and maintenance (which can easily be another $5-10000 per year). Additionally, a family would have to factor in the computations the fact that after cashing out the house, you would either need to buy another house to escape capital gains consequences on the first sale, or make sure that you included those taxes in your figuring as well. Taking all of those things into account, the house might have to appreciate more than $100,000 every 10 years to breakeven.
None of that says that owning a home is still not an asset providing more citizen wealth than renting, but all of this has to be part of the cold shower that boosterism must be forced to confront before continuing, unrealistically, to argue that home ownership is a guaranteed method of reducing poverty in the US and elsewhere.

Homes as Assets and Wealth

dine — Tue, 24 Aug 2010 14:11:58 +0000

New Orleans The New York Times ran the article on the front page announcing that the “era” is over when a family in the United States could reliably expect their personal residences to appreciate and create citizen wealth. Housing Fades as a Means to Build Wealth, Analysts Say was headline on the email version. This headline has been in the making for several years since the subprime crash and the advent of the Great Recession, but it is really more complicated than the headline or the story reveals.

For many lower income and working families, the evidence I amassed in Citizen Wealth would still be correct in establishing that a house is an asset which can act to separate a family decidedly, if not irrevocably, from the ranks of poverty, and provides an intergenerational asset that can continue to create income security, which is how I defined citizen wealth in the first place. It is

also undeniably true that despite the fact that a house may be an asset, it is definitely not a piggybank or a get-rich-quick scheme which some wheeler dealers were promoting on the infomericals and real estate hype of the time.

With millions of homes “underwater” families may need to walk away today in order to have a chance at building assets in the future. Values may in fact not recover in the generation of their lives. The housing crises has been disproportionately devastating to African-American and Latino families and the non-existence of any kind of effective home mortgage modification program has been equally disastrous. Public policy has been at the banker’s heels in this crisis to the peril of the entire nation.

Tax policy and federal expenditure have not caught up to the housing crises. Our single largest “safety net” expenditure on citizen wealth is the wholesale mortgage interest rate deduction to facilitate home ownership. The early and mid-20^th Century view that home ownership was a guaranteed winning ticket to poverty reduction is simply not finding evidence in the 21^st Century to support the level of the expenditure, which has now been laid bare as more about subsidizing development, construction, and investments rather than poverty reduction.

The challenge now will be whether or not we can put some sacred cows out to pasture and run with some new programs and plans that remember that housing in its various forms can be assets, but we need a lot more in terms of affordable options for housing and realistic income maintenance and asset building strategies to actually build and sustain citizen wealth. It’s hard to be optimistic, but that’s the work order today.

Silver Lining on Home Equity Loans

jstuart — Thu, 19 Aug 2010 17:25:51 +0000

New Orleans In some ways we all eventually come to grips with the fact that we are a “product of our raising,” as the expression down here goes and in the case of personal real estate and personal debts, I was my father’s son: conservative! When he retired after 38 years with an oil company, the first thing he did was pay off his mortgage. When I left a job I had held for 38 years, I paid off my mortgage. Land is an asset. Pay the notes and hold the land as long as you can. Save, don’t spend, was another part of the standard operating procedure. I know a lot of people who took out home equity loans to pay for this, that, and the other, especially children’s educations. I saved for it, and am still paying off the last $10,000 on the last of my children’s student loans. What did I know? I was the chicken, and it now sounds like my friends, and a lot of big whoops, may have been the foxes!

A front page article in the Times while I was off the grid in talking about home equity loans says it plainly: “…one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.”

The banks are writing off these home equity loans at record levels and the default rate on such loans, given the collapse of housing prices in many markets, is busting the charts compared to other default rates. In 2009 lenders wrote off $19.9 billion in home equity loans and in the first quarter of 2010 wrote off $7.88 billion in such loans. It goes without saying that big bank balance sheets are probably carrying untold billions of dollars in bad loans that they are sequencing for write-offs in the future that are probably uncollectible but still on the books. When any collection is made, it seems little more than 10 cents on the dollar is being collected. The article quoted a Utah collection outfit plainly stating that anything more than $10-15,000 was simply uncollectable.

Damn!

The plain math for this weird mix of tragedy and opportunity is that if someone pulled out $100,000 or so in Arizona, California, Florida or wherever when the market value of their homes was soaring, then they might end up losing their home because they are underwater (though as I have counseled previously, in many cases their economic self-interest is already better from walking away rather than paying forever to never achieve equity), but they would have pocketed $90,000 free and clear. Bigger whoops with million dollar places might end up walking away with two, three, five times that amount.

Before the crying towel gets pulled out for the banks, remember that the default rate is still less than 5% and falling slightly, so it’s not like there aren’t a lot of chickens like me and fewer foxes out there, but don’t talk about “moral hazard,” because in this bubble the banks and the borrowers were co-dependents all the way up, and now, all the way down

Wrong Reasons, Right Move

jstuart — Thu, 12 Aug 2010 17:55:41 +0000

Helena Coming back on the grid for a day, you go through your email, answer the urgent calls, see what’s tweeting, hit the Facebook, and scan through the headlines in the New York Times and other papers to see what’s up. The last is the least rewarding task sometimes.

An irresistible headline jumps up on an editorial: “A Welfare Check and a Voting Card.” That’s a verse in my song, so I jump to that. Big mistake!

The good news is that the Obama Administration after delays dating virtually back to the passage of the National Voter Registration Action (NVRA) in 1993 is clearly issuing regulations to the states and making mandatory the so-called “motor voter” provisions that would require registration access and assistance for recipients of welfare and food stamps by government workers who work with these eligible families. That indeed is cause for celebration by all who are committed to democracy, full participation of the poor in what I have called “maximum eligible participation,” and, frankly, just plain following the law.

The Times editorialist was both wrongheaded and mean-spirited.

In the second sentence comes the first backhanded slap: “…but it could also reduce the impact of advocacy organizations whose role in registering voters caused such a furor in 2008.” WTF? Buddy, you want to reduce the impact of groups committed to full democratic participation by all Americans, then stand up with the Times for automatic registration or even better mandatory voting, don’t blame those of us committed to democracy for the fact that the government didn’t do what the law both allowed and required. Jerk-ball!

But, it gets worse. Later the editorialist offers this gem: “But it is worth remembering that the recession has brought millions of new people to food stamp and other welfare offices in the last two years, many of whom may not be traditional Democrats. In addition, government offices are much more likely to provide reliable registrations than Acorn (sic ACORN) or other advocacy groups that were widely accused of fraudulent sign-ups in the last cycle. Welfare offices generally have extensive methods of verifying identities in order to provide benefits, and it is illegal to provide false records there.

Let me try and understand the perverted logic here. Perhaps the writer would hope that you believe that the recession has had the salutary benefit in our democracy of pushing a more deserving class of the poor into government offices s/he would have us believe, and in fact it might not be a partisan group, as if the poor are somehow political and politically active. If the editorialist read their own paper they might have gotten the news that many of those pushed back were the marginally employed who had been pushed into lower wage employment by the draconian pushbacks in welfare and food stamps over the last decade and the total disinterest in government in security full participation from people eligible for any of these entitlement programs.

And, hey, correct me if I’m wrong, but where do you get off a cheap shot, low blow rehash of the Republican National Committee press briefings to simply take a cut with the “likely to prove reliable registrations than ACORN or other advocacy groups that were widely accused of fraudulent sign-ups in the last cycle.” Prove any of that anywhere, pal, or are you just drinking the partisan Kool-Aid, where a smear is as good as it gets. Luckily for this joker, Times editorialist in their anonymous bunker never have to face any accountability for their smears, innuendo, and misstatements.

Finally in a last act of total hypocrisy the writer tries for an upbeat note by using the example of Ohio and Missouri in recent years where suits by what he calls “advocacy groups” forced the law to be obeyed and hundreds of thousands came on the rolls. Please chicken hearted writer, don’t actually say that these “good” advocacy groups were included in the first order both ACORN and Project Vote, since you have just bitch slapped both of them all the way through this piffle.

At the end we agree though: “The more people who have access to the ballot, the better the country will be.” The difference is that I really believe in this – as do these constantly maligned advocacy groups – and our friend with his nose in the air was really holing his nose all the way as he typed out this piece.

I can’t tell you how nice it is to now be getting ready to head south and stop for two days at the famous (within a small circle of friends) Sleepy Time Duck Camp miles off the highway, way off the internet grid, overlooking a view of the Red Rock Lakes in the Centennial Mountains, the only north-south range in the Rockies at the border of Montana and Idaho. 12 hours up in the “real world” and I’m ready for the much more real world looking eye to eye with a bull moose or fat brown trout again before slapping leather home again.

A Hustle versus a Job

jstuart — Mon, 02 Aug 2010 21:49:51 +0000

Denver For several years Local 100 represented buggy drivers in the French Quarter of New Orleans. Any tourist in the city has seen the mule driven buggies lined up in front of Jackson Square to give tours which are a mixture of fact, fiction, and raw personality from the drivers themselves. In meeting after meeting about grievances or bargaining the drivers would break out into arguments about whether carriage driving was a “job,” meaning something with real terms, conditions, and employment expectations or a “hustle,” meaning something that worked at the margins and whose income game strictly from their own wild and inimitable contributions totally independent of the employer and whatever they might, or as was usually the case might not, provide. I learned a lot from those conversations which has given me a window for looking at livelihoods ever sense, especially in the vast and growing informal sector.

All of this is another window for looking at the increasing claims for micro-business and micro-finance, even in the United States. An article in recent weeks touted the increasing number of loans that direct micro-lenders like Kiva make in-country ranging up to as high as $10000 along with other emerging micro-lenders. Articles in The American Prospect reprinted in The Utne Review had a catchy headline about “Turning Hustlers into Entrepreneurs.” All of which I think goes to the point, which is not an unimportant contribution, but is beside the point of poverty reduction.

It is indisputable that there is a huge market for small loans in the United States because we do not have community banks anymore that care about the small lending needs of businesses and individuals. It is widely understood that banks have virtually deserted lending in less than $100000 chunks leaving the market open for predatory rates from finance companies, pay day lenders, pawn operations, and other bottom feeders. None of this creates much, if any, citizen wealth, but is part of day-to-day survival mechanisms for the poor.

Micro-lending claims and practices might feel some of this gap though these are gazillion, billion dollar gaps and micro-lenders in the US are small potatoes in this food chain. The stories of their successes also seem to focus on what my buggy drivers would have understood clearly are the value of the hustle rather than the worth of the job. A job brings real entitlements. A hustle depends on the day to day race to survive in the jungle benefiting speed and wits, the hare not the turtle.

The claims of small business advocates that we can deal with citizen wealth by enabling entrepreneurs is more of the same fairy tale, and it is fine as far as the story goes. Yes, there are people with ideas, energy, and innovations and they desperately need support, so give it to them, and where there is now a banking desert, let someone come in regardless of the name.

But, just as we all know what a real job is, let’s not mistake any of this as being a real strategy for poverty reduction. Fairy tales are wonderful, but we have to focus on reality to create real change.

Home Care Labor Crisis in USA & Korea

jstuart — Tue, 27 Jul 2010 14:43:47 +0000

New Orleans Meeting with three visitors and friends from Korea, Yungik Jeong, Young Mi Choi, and Hwang Inhul, who work with PSAU, an organization of the unemployed and irregular workers, as informal and unprotected workers are now known there, the conversation quickly came to plight of home health care workers or domestic workers as they are sometimes called in Korea. Similar to the US, this has become a fast growing occupation which they estimated already involves 400,000 workers, yet these workers are not allowed the usual protections and social security of other Korean workers and from what they indicated are actually banned from membership in labor unions.

It was painful for me to report that in the US after many years of employment increases and rising protections brought by unionization in many states, these same critical, yet low status health care workers, are facing a crisis in state after state. Announcement curtailments of workers has already expanded waiting lists in many states, and California where there may be close to as a many workers as exist in Korea faces drastic budget proposals by the governor. If all the proposals being discussed were realized my guess is that 200,000 home health care workers could see their jobs disappear with cutbacks in state subsidies. The loss of 200,000 union dues payers would also be critical for SEIU, AFSCME, and other unions representing home health workers.

The IMF crisis a little more than a decade ago in Korea finds its lingering wake in the severe cutback of labor protections. The Great Recession in the US may end up leaving a similar tsunami for many public – and private – employees as well.

Bob Hebert in the New York Times woefully reminded today that many are averaging a 25% cutback in income in the recession and that it may take 6 to 10 years to make up the ground to move back from income insecurity to any semblance of citizen wealth.

Discussions with my Korean friends was a painful reminder of the long tail of economic crises with no end in sight.

Modifications Lost in Incompetence

jstuart — Mon, 26 Jul 2010 17:18:52 +0000

New Orleans Tomorrow in Phoenix Advocates & Actions will release a report called “Modification Mysteries: Playing Foreclosure Roulette with the Banks.” The report will not only document the huge ineptness of the Treasury Department and the banks in handling foreclosure modifications (as I discussed last week less than $250 million has been spent of the $50 billion TARP money set aside to prevent foreclosures according to testimony by the TARP inspector general to Congress!), but also the total indifference, program misunderstanding, and frankly incompetence of the way the banks have handled homeowners desperate for relief to prevent foreclosures.

The report details a number of cases where families have allowed Advocates & Actions to use their information. A typical horror tale is found in the situation of Jorge and Maria Carillo who are trying to save their Phoenix area home from Bank of America and its ineptness.

The contemporaneous notes speak for themselves. Read and weep with them!

Case #1: Jorge and Maria Carillo


11/16/2009	Case was submitted via e-mail along with all required docs
11/25/2009	Case and docs were received by bank on Nov 19th, On August 20,2008 a modification was done, But all docs have needed are in system need to wait 30 days for review
12/19/2009	Gena- Case is still under review, follow up 12/28/09
12/28/2009	Sandy- Stated that case was under review, stated that client needed to make regular payment to stop foreclosure
1/7/2010	Jesse- Packet is complete and under review
1/14/2010	Daniel-Stated that Mod was approved but it can remain in Negotiators Dept up till two months , Neg should call client and client should received packet.
1/20/2010	Claudia- Asked about a change in financial info, advised that client should make at least some payments in order to show good faith, case is still under review at negotiators dept
1/29/2010	Esther- Stated that case continues to be under review
2/5/2010	Edgar- Case ins on the final stages of beign reviewed was put on fast track program but it can take up 2 weeks to get an answered form investor and negotiator
2/11/2010	Katie- Case was taken off foreclosure proceeding list on Jan 2, 2010
2/16/2010	Alicia- Advised that we should send a letter to Correspondence Dept to see why case is taking so long
2/22/2010	Tracy- Escalated case up Dept Manager
2/26/2010	Isabelle- Case being reviewed reason for delay is high volume, but case doesn’t have foreclosure
3/2/2010	Nicole-March 1st case is denied , was transferred to Several Depts until I came to Loan Advocacy
3/2/2010	Barbra-Advocacy Stated that her dept only handles non profit, but made an exception according to her system case was still under review was not denied, according to her there were new notes since Nov 2009. Case never had assigned neg stated that she would assign someone
3/4/2010	Christopher- Hope Dept – Stated that his Dept only educates once client receives work out packet
3/4/2010	Loreta-Home Ret- Stated Bank of America was unable to provide assistance , and that case was cancel March 1. But had no answer of why the denial Tolvina-Home Retention Supervisor-Stated that case had no specific details but believed it was for financials – Asked to resubmit financials

3/12/2010	Hector- Home Ret- Put a red flag on case to see if case can be reviewed
3/19/2010	Client was told that it would take 20 days for Bank of america to see what is going on with account
3/30/10:	Andrew-Home Res- Stated March 2 case is under review, but case was denied because on non compliance
4/12/2010	Jennifer- Stated that letter explaining account was in route by the end of the week ‘
4/27/2010	Mike-Stated that case still pulls up as being reviewed but client has received letter of denial since April the 14th , Asked to resubmit her financials.
5/5/2010	Gotham-Home Ret- Client was pre approved for the MHA program, Client should receive packet within the next weeks , provide proof of income
5/26/2010	Client brought RMA packet sent by Bank of America.

Notes: 4/27	This case was submitted to the Advocacy Dept that only handles cases from non-profit. Case was under review but there was never a negotiator assigned , once case was denied no one seem to know why or the reason or why it had taken so long for case to reviewed. Also up to this date case continues to show up in the system as being reviewed. So now bank of america is asking for financials to resubmitted to see if they can help her
Notes: 6/09	As of now bank of america doesn’t know why she was denied, so we just restarted case from the beginning. After seven months we need to restart case and be reviewed for an additional 30-90 days

Power and Farce of Credit Scores

jstuart — Sat, 24 Jul 2010 18:06:23 +0000

New Orleans Joe Nocera, the “Talking Business” columnist for the New York Times wrote a “peoples” piece today, which is worth a couple of atta-boys! The whole problem of home mortgages and the ridiculous power of credit scores (FICO scores) could be the subject of whole books for the scam involved and the damage done, but at least let’s applaud some much needed balloon busting.

The first fraud of the credit world and its power he only deals with in glancing fashion, but it’s worth keeping in mind. The credit bureaus still hold the individual citizen consumer responsible for the accuracy of their garbage, rather than even performing the minimum of due diligence despite the disproportionate weight their ratings have on citizen wealth and our futures. Huge businesses that are anything but transparent (how many of us have ever reached out for our credit scores really?!?) yet take no real responsibility for anything other than “garbage in, garbage out.”

Nocera starts with a story from a mortgage broker in Connecticut of a client whose scores changed (and therefore interest rate increased!) when a credit company lowered their score when they changed to another credit card company even though their debt stayed the same. All this really indicates is that a computer program is creating the scores. Hardly news.

More telling were the pieces about the inaccuracies in Nocera’s own reports. Here is a guy in “big whoop” world taking a bunch of hits in the high air, when he examines two reports. The list of errors is a farce that would be funny if this didn’t happen to so many people who are powerless to change the reports and more frequently oblivious to their impact and existence. One said he worked for Fortune and not the Times, while another said he worked for Rite-Aid drugstore! His home address was listed as his daughter’s former address in Brooklyn. There was a claim that he had credit card accounts that in fact he had never had, while ignoring according to him one big fat one he did have. One report said that he no longer lived in a house he had only bought two months ago.

All of this is a tragic scam for working families. What does it take to get some justice here?

Breastfeeding, Grandfathering, and the World to Come in New Health Care Act

jstuart — Wed, 21 Jul 2010 15:07:01 +0000

Portland Talking shop with a couple of unions about the future and prospects for new organizing was interesting, but it was truly educational to listen to three of the labor lawyers (Gregory Hartman, Henry Kaplan, and Thomas Doyle) pulled together by the Association of Western Pulp and Paper Workers to update us about some of the impacts of coming health care act and what it will mean for workers and unions. Not surprisingly in a 2000 page bill that ended up being a compromise coat of many colors, there are a lot of patches still coming into focus, so I’m betting this is first blush gives evidence of a lot more to come.

Cadillac Plans: For all of the uproar from unions and big corporations no one is thinking or worrying about this at all. Since it doesn’t hit until 2018, this is another lifetime in politics and has no meaning now.
Breastfeeding: Oregon had stood out among other states by mandating that women who were breastfeeding would have regular, mandated paid breaks on the job for the purpose of pumping and storing. Thanks to an Oregon Senator, these provisions and guarantees of additional 15-minute breaks are part of national policy and protection for women in the new Affordable Care Act (ACA). I’m hoping we snuck some other “wins” into this thing!
Grandfathering: A huge bargaining issue for unions with collective agreements that had decent health coverage in the contract falls on provisions that allow grandfathering these plans during the life of the agreements if there are no substantial changes. Given the current uncertainty about the future plans, rating boards and panels, unions are beating back employer demanded concessions in many negotiations on the old argument of “the devil you know is better than the devil you don’t.”
Retiree Reinsurance: Most folks around the room thing that retiree insurance as part of union contracts is a dinosaur walking its last steps. It seems that a sweetener for the death match is a current provision requiring employers (those who are on top of their jobs) to apply now to a direct subsidy to reinsure self-insured retiree plans (like in auto etc) for a actual cost for retiree medical of 80% of the cost between $15 and $90K, reducing claims exposure. The dream stays alive a little longer for the last of these retirees.

It was clear a lot of this was tactical in the transition rather than long term strategic. The lawyers and reps were convinced that once the new ratings are done and the various plans on offer are shaped up that the initial impact will be better and cheaper plans when grandfathering fades away as a real concern and the rush of new workers being covered and the competition for the plan. That sounds exciting at bargaining tables everywhere. There will be a lot of 2014 re-openers as most of the ACA provisions come on line.

One point made over and over that might actually have some real weight, is that workers are going to see this maze with skepticism (as they should!), and are going to be looking for good unions and good representation to make sure that their interests and not just the cheapest price and the thinnest coverage prevail when all this comes on line. Worth doing a lot of homework now and making sure that workers understand the enormous stakes and the union advantage here.