Tuesday, September 25, 2007
Monday, September 24, 2007
The Housing Scam
So the gamblers have lost their stakes due to lack of performance and they are crying to the Feds for subsidies. So bad for them to take a loss during gambling with investors' money. It does not look good and is terrible for social relationships!
The need or desire for more money and the material goods it supplies leads people to invest money by gambling on a higher risk paying off. The rub is that did the original rubes realize the shaky trail their money would pioneer? Or would you prefer: Were lies told and who told them? Let’s jump in and find out and I do not care who contributed to what campaign. Let’s look at the whole story.
The story begins with the development of the west and the cheap land available to speculators and developers, the settlement occurring with much individual initiative and little government support except for law and order.
Arizona was ripe for the pickings after World War II and the real estate market boomed with some ups and down until the 1990s when lending practices loosened up and allowed for loans to people with poor credit. I seem to remember a pundit declaring that some people just needed a chance to prove themselves and that is probably true in some cases.
The loan business escalated to the point that the lenders would guarantee just about anybody for a loan, while arranging for themselves and their business partners to get paid cash in full. Profits flowed nicely in the direction of the loan artists, speculators and developers. The loan companies then ‘bundled’ these dubious loans and sold them to their investors for more cash. These investors had gathered the cash from smallholders.
These loans were then to be milked for interest in order for the smallholders to get paid and when the default rate went up, the investors went under and the smallholders lost their value. Lenders holding these smelly bundles cannot sell them and are scrambling to pay the defaulted payments or they just go under and run. Remember the huge profits the loan artists, speculators and developers reaped? That is where the money really went, into the hands of the sharpshooters.
They say the local economy was stimulated and thus good was wrought. Let’s examine that. Construction jobs were plentiful and foreign nationals were more than glad to take that opportunity. The hue and cry about illegal immigration began and political fortunes are staked on the outcome of this debate. The area schools are overcrowded. Police and firefighters are spread too thin. The roads are congested and the state budget is swollen with transportation spending. Foreclosures are rampant and homes remain unsold. Vast tracts of pristine desert have been bulldozed and the water table is dropping despite infusions of Central Arizona Project water.
The icing on this grim cake is enough to choke the taxpayers who are widespread victims of this growth. Our taxes have doubled in five years because the speculators ran up the prices on properties because they could get loans with no credit. The flippers cleaned up on this one when they could buy on hock and resell at a higher price. One third of the foreclosures are ‘investors’ who were not required to qualify for loans, but could collect the profits nicely, while running up prices for normal homebuyers.
It works like this: Sure, I’ll arrange a loan for you at $200,000 and you sell this property for $235,000 in two months and I’ll take my $200,000 and build another $90,000 house I’ll sell to you for $210,000 etc. In the meantime, the poor schmuck who owns a home in the vicinity suddenly is sitting on hot property that of course should generate more tax for the government, who will use it to pay for infrastructure to benefit the developers who ran up the housing valuations during their profit taking spree funded by cheap credit. The taxpayer is now paying taxes on a house they never paid that much for but now they are told it is ‘worth’ more. The intrinsic value of the home is the same or even less due to the overcrowding and fumes.
Our politicians have catered to this scam because they then got control of huge infusions of tax money they could play with. The pull back in housing sales has resulted in a state budget shortfall and a mounting deficit. Who will own these houses under foreclosure? Who is paying taxes on those properties?
This subprime mortgage scandal has damaged our landscape, raised our property taxes and created huge public debt for the infrastructure required to cope with the growth. Our water supplies are strained and rationing looms as the Colorado River is slowly drained into oblivion. Cheap labor and loose credit created huge profits for a few but left the taxpayers looking for a way to control the government.
We can vote. We will prevail over those who would oust people from their homes in order to collect more taxes for the same government services. A crooked lender loaned big bucks on homes near mine, so now I pay more taxes. This is horse patooties.
The need or desire for more money and the material goods it supplies leads people to invest money by gambling on a higher risk paying off. The rub is that did the original rubes realize the shaky trail their money would pioneer? Or would you prefer: Were lies told and who told them? Let’s jump in and find out and I do not care who contributed to what campaign. Let’s look at the whole story.
The story begins with the development of the west and the cheap land available to speculators and developers, the settlement occurring with much individual initiative and little government support except for law and order.
Arizona was ripe for the pickings after World War II and the real estate market boomed with some ups and down until the 1990s when lending practices loosened up and allowed for loans to people with poor credit. I seem to remember a pundit declaring that some people just needed a chance to prove themselves and that is probably true in some cases.
The loan business escalated to the point that the lenders would guarantee just about anybody for a loan, while arranging for themselves and their business partners to get paid cash in full. Profits flowed nicely in the direction of the loan artists, speculators and developers. The loan companies then ‘bundled’ these dubious loans and sold them to their investors for more cash. These investors had gathered the cash from smallholders.
These loans were then to be milked for interest in order for the smallholders to get paid and when the default rate went up, the investors went under and the smallholders lost their value. Lenders holding these smelly bundles cannot sell them and are scrambling to pay the defaulted payments or they just go under and run. Remember the huge profits the loan artists, speculators and developers reaped? That is where the money really went, into the hands of the sharpshooters.
They say the local economy was stimulated and thus good was wrought. Let’s examine that. Construction jobs were plentiful and foreign nationals were more than glad to take that opportunity. The hue and cry about illegal immigration began and political fortunes are staked on the outcome of this debate. The area schools are overcrowded. Police and firefighters are spread too thin. The roads are congested and the state budget is swollen with transportation spending. Foreclosures are rampant and homes remain unsold. Vast tracts of pristine desert have been bulldozed and the water table is dropping despite infusions of Central Arizona Project water.
The icing on this grim cake is enough to choke the taxpayers who are widespread victims of this growth. Our taxes have doubled in five years because the speculators ran up the prices on properties because they could get loans with no credit. The flippers cleaned up on this one when they could buy on hock and resell at a higher price. One third of the foreclosures are ‘investors’ who were not required to qualify for loans, but could collect the profits nicely, while running up prices for normal homebuyers.
It works like this: Sure, I’ll arrange a loan for you at $200,000 and you sell this property for $235,000 in two months and I’ll take my $200,000 and build another $90,000 house I’ll sell to you for $210,000 etc. In the meantime, the poor schmuck who owns a home in the vicinity suddenly is sitting on hot property that of course should generate more tax for the government, who will use it to pay for infrastructure to benefit the developers who ran up the housing valuations during their profit taking spree funded by cheap credit. The taxpayer is now paying taxes on a house they never paid that much for but now they are told it is ‘worth’ more. The intrinsic value of the home is the same or even less due to the overcrowding and fumes.
Our politicians have catered to this scam because they then got control of huge infusions of tax money they could play with. The pull back in housing sales has resulted in a state budget shortfall and a mounting deficit. Who will own these houses under foreclosure? Who is paying taxes on those properties?
This subprime mortgage scandal has damaged our landscape, raised our property taxes and created huge public debt for the infrastructure required to cope with the growth. Our water supplies are strained and rationing looms as the Colorado River is slowly drained into oblivion. Cheap labor and loose credit created huge profits for a few but left the taxpayers looking for a way to control the government.
We can vote. We will prevail over those who would oust people from their homes in order to collect more taxes for the same government services. A crooked lender loaned big bucks on homes near mine, so now I pay more taxes. This is horse patooties.
Friday, September 21, 2007
Thursday, September 13, 2007
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