Paying the piper

About 30 months ago, mid 2005, if you qualified you could get a 30 year fixed interest rate loan of say, $200,000 at about $1200/month. Throw in taxes and insurance of about $600 a month and you have a payment of $1800/month.

Now once upon a time the rule of thumb was that the monthly payment for a family should not exceed 25% of family monthly income. So that $200,000 loan should be supported by income of $7500 per month or $90,000 per year.

To qualify for the loan you needed 20% cash down, or in this case, $50,000. If you didn't have it, but had say $25,000 and excellent credit they would loan you the $225,000 but would charge you mortgage insurance until you could show that the payments and appreciation had now established your equity value of 80% of the loan value. At that point they would remove the PMI, but would also stress that you should leave the payment alone. To build equity. The truth being, of course, that they aren't concerned for the borrower, but since they wanted to bundle the mortgage and resell it, the more equity, the better the deal.

Now over the years the monthly income to loan payment percentage has became smaller and smaller, the price of housing became higher and higher and credit for ALL purchases became easier and easier and guess what... the number of qualified fixed "best" rate borrowers became less and less..... Enter the subprime.

Subprime Loan
A loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans.

Notes:
Subprime loans tend to have a rate that is 0.1% to 0.6% higher than the prime rate. Although the additional percentage may seem small, for mortgages and other large loans, this translates to thousands of dollars worth of additional interest payments.

And while I am not a genius, it seems obvious to me that if you can't qualify for a conventional loan of say, 5%, how can you qualify for a loan of 5.6%??

Subprime lending (also known as B-paper, near-prime, or second chance lending) is the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history. The phrase also refers to banknotes taken on property that cannot be sold on the primary market, including loans on certain types of investment properties and certain types of self-employed individuals.

wiki

Now while the emphasis has been on poor credit, the real culprit was average credit. The bills had been paid pretty much on time, the individuals had a good employment record… Comes the stretch. Only instead of stretching, we now have a Adjustable Rate Mortgage – ARM available for say, 3%. Sounds great. The payment is now in the $1200 range…. Principle, interest and taxes. But life is a beach and then you die….. That ARM is adjusted up 2% and the payment is back at $1600… in the meantime other debt has increased due to the spending on goodies for the new home, etc…. so now it has become a real stretch…. Toss in a 30% increase in energy costs, higher property taxes, higher insurance and the stretch has become a gasp. Then the ARM is bumped another 2% and the monthly is now around $1800… and the gasp becomes a scream. Toss in some loss of income…. No overtime say…. And the patient is terminal…

Now I’m not a forgiving type. These folks who over spent and exercised no restraint should pay for their mistakes. The problem is, the poison they’re taking is working its way up the food chain and getting to me. My portfolio has taken a 10% hit and I can’t really see the bottom. Especially since the market dropped another 60 or so points after hearing W’s plan. It is obviously not enough.

Why? Because those bad loans were bundled by the original bank and sold to another financial firm as an investment…. Let’s say that a bundle was sold for a million bucks… as the default rate goes up, more houses are foreclosed and put on the market… but the new price is less than owed, so the bundle is essentially of no value….or greatly reduced value…

Stay tuned folks. The aircraft has departed, but I don’t think anyone knows where it will land.

Notes on religion

During these serious times, people of all faiths should remember these four religious truths:

1. Muslims do not recognize Jews as God's chosen people.

2. Jews do not recognize Jesus as the Messiah.

3. Protestants do not recognize the Pope as the leader of the Christian world.

4. Baptists do not recognize each other at Hooters.

A hat tip to my old bud Jimmy who, from time to time, sends me a good'un.

TGIF

It's been a bleary week, confounded by conflicting pools of info in polls that, as NH proved, make little sense. John McCain, who is a personal hero of mine but not my choice as Pres, is supposedly in a tie with another ex-Baptist preacher from Arkansas while I hear no mention of Fred who, at least, makes me feel as if common sense has not completely left the planet.

The high point in humor for the week was hearing Hillary and Hussein pledge undying love for each other while blaming their love children, aka "Staffers" for all the mean things said about each other.

A close second was, and is, watching the nutso Left blogosphere attack Hussein because he admitted that Reagan changed the direction of the country and claiming that he was ready to change it back on course himself. They seem to think he is plotting a tax cut of epic proportions and will drill for oil in the Senate cloakroom. Reagan did, Hussein won't and we will destroy our economy before we dare admit that energy for people is more important that Habitat For Animals.

Speaking of Habitats, I have thankfully heard nothing from Jimmy C about Israel giving up and just dying quietly for quite a while. But no matter. Condi R has taken up the peace at all costs flag and was last seen waving it while W ponders what he has to do to kiss and make up with the thugs in Middle East..

Uh, W... You were on the right track.

And to think that I once thought she would make a good Madame Pres... Oh well, I once thought the Cowboys were back, the market would shoot past 14,000 and professional basketball actually had a meaningful pre-playoff season. (Ignore that foul called when the players were three feet apart...)

And to close on a low point we still have another day for the market to dive. I haven't read the overnights but everyone I have talked to is as nervous as the Bride of Frankenstein in an electrical storm after seeing the complete result of the good Doctor's work.

See you later. Keep the faith and since New York City has admitted to having a huge influx of Bed Bugs.....

Don't let the Bed Bugs bite!!

Every Repub I have ever known

likes to invoke the name of Ronald Regan. Now, as Jimmy Durante used to say,
"Everybody wants to get in the act..."

And that includes Barack Hussein Obama, who explains that, like we were in 1980, we are ready for change, and that he can make that happen.

You tube

Yes, he can by doing what he wants to do, which is surrender in Iraq and in the WOT.

I wish I could look this guy straight in the eye, if he can actually hold his eyes steady, and ask a simple question or two.

Hussein ole buddy, you are a Senator. A US Senator. And we have a war going on. Do you think you could something positive?? Like say, wearing a US Flag lapel pin?? Now I know you probably think the UN should run the country, and I know you probably cross the street before you walk by a military recruiting station... But don't you think that wearing a flag pin might just be the thing to do?? Or are you too good for the country?? Why are you ashamed to wear one??

Did you ever hear of Iowa Jima, ole chap? Pearl Harbor? Gettysburg? Cemetery Ridge? D Day??

Those battles were fought under the flag you won't even acknowledge by putting a small pin on your suit lapel.

"And you want to change??? Change to what, Hussein??

Inquiring minds want to know.

And BTW. You couldn't carry Reagan's briefcase, much less unite the country.

The war must be over

I mean I never hear about it. To think that only six months or so ago Harry and Nancy P were declaring the war lost and condemning the thought of a new strategy... well... I hardly know what to say....

Actually I do. What we have here is not a failure to communicate, but a wonderful display of media bias and the Demo's belief that politics trump everything and the objective is to win at all costs, not the war, but political office.

Try this, and it isn't original with me.... Note that almost any news article you read that is negative about the person will identify their political party in the first few lines if Repub, not at all or much later if Demo.

But back to my point. I think this says it very well.

If you wanted to see the perfect example of the ethical and moral collapse of the Mainstream Media, you could not do better than a long article in the New Yorker of May 23, 2005. The article is entitled, "The Spy Who Loved Us." Written by a teacher at the University of Albany, named Thomas Bass, it's about a man named Pham Xuan An. Now very old, An was -- among many other things -- a correspondent in Saigon during the Vietnam War for Time magazine. He was apparently considered a particularly brilliant and well-informed correspondent and very well liked by his colleagues in the Western press corps during the war.

He was also a Communist spy, working for the North Vietnamese informing them of what he knew about American military plans, troop movements, political agendas.

He even helped the Communists win large battles by directing Vietcong and North Vietnamese troops against American and South Vietnamese forces. He helped plan the Tet Offensive of 1968, including helping the man who planned the attack on the U.S. Embassy. This was the offensive where thousands of innocent civilians were massacred by the Communists.

If the New Yorker is one of the flagships of the Mainstream Media fleet, they are sailing in maddeningly disloyal, contemptuous waters and obviously have been for a while. Small wonder the media gloried in Mark Felt and Watergate last week. In those days, Americans actually trusted the Mainstream Media. The New Yorker piece by Prof. Bass makes it clear how wrong we were. He's a fine writer but a man whose piece lacks any moral compass at all. And what of the fellow journalists in Saigon cheering him on? Now we know a bit more about why the war turned out as it did.

Link to article.

This time around the MSM has tried, but they haven't quite made it. This time we have the Internet, cable news and Talk Radio.

Talk Radio, of course, is under attack by the Left, and the Demos by claiming that it is unfair, and we must have a "Fairness Doctrine" in which a station must provide equal time to opposing views. That sounds great until you realize that it would just kill the shows because the stations wouldn't want to be involved in the complaints, lawsuits, government investigations that would be sure to follow,

Think about that the next time Obama says he wants "change." Think about that the next time Hillart wants "fairness."

Think about a world where the MSM controls what you see, hear and read. Think about this:

I don't Think US should be the Leader of the World

Link to article.

Dave sends me great games

Try this one if you really think you know geography!

Every now and then I convince myself that

I don't believe in executing murders. Then I read something like this:

Authorities allege that Chandler spent the last weeks of his life locked in a closet without food or water. Defense Darren Cantor and Ann England claim he died of a previous medical condition.

If the perps are convicted, and being the inventive type, you can guess what method I would use.

Back a few years ago I seem to remember the Repubs in Florida taking it on the chin, and rightly so in my opinion, for letting "excuses" like the one below exist.

"I pushed his hair back and saw that his ear was completely black, with no flesh tone," she (teacher's aide) said while tearing up. "So I asked him how it happened.

"He said, 'My dad (which he called Phillips) clobbered me'. I asked him if he was ever punished by 'time out' or by not watching television. He said his 'mom' and 'dad' (Berry and Phillips) would put him in a hot shower and turn it up as hot as it would get," she said, crying again.

Holm Elementary officials reported the bruising but the Denver Department of Human Services later called the report "unfounded," according to state Human Services records.

It appears that the school did its job and the bureaucrats did not. The Gov is a Democrat.

Watch this story disappear as fast as Denver snow when a down slope wind follows the bad weather.

Link to Denver Post