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I read a lot of economics blogs and columns, in part because I am a masochist but I also really like to see what economists are saying or not saying about housing. At Marginal Revolution today there is a discussion about theories behind the involvement of Fannie and Freddie in the mortgage market. The post states that the old consensus was that the GSE's were in place to make housing more affordable. EPIC FAIL ALERT. The notion that Fannie Mae, Freddie Mac, and the Federal Reserve have ever made housing more affordable is ludicrous and comical. If you define affordable as low interest rates then you can definitely argue that they succeeded but you are ignoring the most important factor in whether housing is affordable: your income.
We used to consider housing affordable if you spent roughly 25 percent of your gross monthly income on housing. During the peak of the housing boom, Fannie Mae was routinely backing loans at 65 percent of people's gross monthly incomes. If you expand your definition of affordable to mean, "at the cusp of bankrupting you" then well done, Fannie. You made housing more dangerously affordable than ever.
What we have in many parts of this country is a mismatch in the supply of housing with what consumers can actually afford, you know, given their crappy job prospects. The government inflated housing bubble changed what we view as affordable and made a 3 bedroom house in the suburbs with granite countertops seem like a public good. It's not. We have a vast amount of homes that are affordable to a small amount of people. This cannot be fixed by government intervention, it will require rising incomes and economic growth which will increase demand for what is currently, unaffordable housing.
HUD projections show that in my region, housing demand will be for homes in the $125,000 to $200,000 price range. This is affordable given our median income levels and these are the homes that are actually selling right now. What we have is a plethora of homes priced from $250,000 to $350,000 that even if you have 20 percent to put down (a modern miracle), once you factor in taxes and insurance you would need income in excess of $72,000 a year to afford. This is assuming that you don't have any other debt. If you have a car payment, student loan, and an average credit card balance this ups your income requirement to $100,000 a year to afford the payment. Better get on the The Ladders website.
On the other end of affordability we have many families that are working class, what is quickly becoming a class of the working poor. They may have combined incomes of $45,000 per year and they have consumer debt and spend virtually all of their incomes monthly. For this family, an affordable house carries a mortgage payment of $1125 including taxes and insurance. For this family, a home that costs $150,000 is affordable. Unfortunately, many of these families are living in $250,000 houses because they qualified for twice what they could actually afford with the help of Fannie, Freddie, and the Federal Reserve.
We have a number of housing problems which are exacerbated by our poor economy. People underwater on their mortgages are trapped unless they say screw it and walk away and why wouldn't they; what incentive do they have to stay? Do you really think people struggling to stay afloat are going to put the virtue of their word over a rational economic decision? Didn't think so.
A bigger problem exists for unemployed homeowners. Because economies tend to have local and regional agglomeration characteristics in particular industries, you end up with a lot of unemployed people in one area with similar skill sets. If these unemployed people were mobile, as in able to sell their house and not take a complete financial schlacking, they could move to where their skills might be employable. Unfortunately, we have a labor force that is very immobile right now which makes unemployment even worse. Being a renter right now has tremendous advantages, particularly if you can move to take advantage of opportunity.
Perhaps, the Banks should become landlords and turn short sales and foreclosures into rentals. This would slow down the decline in housing values because the properties wouldn't go to market and then drag down appraisals for the next two years for other homes in the area. Bankers would make great Slumlords, they wouldn't even require training.
Tuesday, August 24, 2010
Housing Will Save Us!!! Oh Wait, Nevermind.
The Geniuses of the Federal Reserve (wouldn't that make a totally un-sexy calendar) have declared that a double dip recession is becoming more likely following a weak housing report and high unemployment. Can you remember the last time that economic news didn't include the phrases "weak housing" and "high unemployment"? Why is it then that every news release about the economy seems to be written with an underlying tone of surprise like economists and media types are really saying, "I can't believe that housing is still weak and people are still unemployed, the economy seems so robust."
The coverage of Charles Evans, Chicago Federal Reserve Bank President, can be found here. Here is a quote from the article:
"Many economists worry that, without housing as an engine of growth, the economy could take much longer than usual to recover."
I have to call Bullshit on this statement. Housing as measured by fixed residential investment has contributed on average 4.1 percent to GDP since 1929. It is actually a very small part of our economy when compared to consumer spending, government spending, and private investment. It is not an engine of economic growth, it is a symptom of economic growth. Economists should know better. When consumers feel good about their job security and have rising wages, they invest in housing. Therefore, housing sector growth lags economic growth not the other way around. When did we quit recognizing this and start treating housing as a bigger component of our economy than it actually is?
If you don't want to take my word for it because I blog under the name Turdy and swear like a sailor, take a look at this graph I created tracking the private sectors housing investment over time as a percentage of GDP.
What should jump out at you from this graph is that housing rebounds after the trough of the recession historically. The fact that intelligent economists at the Federal Reserve and serving as Obama's Economic Advisors are arguing that housing can and should lead us out of the recession are bullshitting you. It is distracting you from what is really wrong with our economy; businesses have so little faith in our economy and face so much uncertainty about government policy that they are paralyzed. As long as this is the case, there will not be economic growth.
It must make you wonder how a sector that directly contributes such a small share of GDP could facilitate the destruction of the larger economy. The answer is that the housing bubble fueled indirect contributions to GDP through lax lending standards and consumers use of their homes as ATMs. Housing didn't gain that much in share of GDP during the bubble, it reached a peak of 6.1 percent in 2005 which was a 50 year high but still only 2 percent over its long term average. During this same period however, consumer spending on goods and services grew because people felt wealthier which led to increases in goods manufacturing and spilled over to other sectors of the economy. When the bust occurred, the reversal of the positive spillovers was catastrophic for manufacturing, retail, and other major sectors of the economy.
Economic recovery will rely on the consumer in this recession as it has in EVERY RECESSION IN OUR HISTORY. Before people buy houses, they need to be able to pay for necessities like transportation, food, and child care. When they feel secure in their jobs and have wage growth, they will start investing in more long term investments like housing but we are nowhere near that point. It is a colossal waste of time for everyone to worry about propping up the housing market and suggesting that it will grow our economy. We have already paid the price for the fallacy of this argument, why must we continue on the same path?
The coverage of Charles Evans, Chicago Federal Reserve Bank President, can be found here. Here is a quote from the article:
"Many economists worry that, without housing as an engine of growth, the economy could take much longer than usual to recover."
I have to call Bullshit on this statement. Housing as measured by fixed residential investment has contributed on average 4.1 percent to GDP since 1929. It is actually a very small part of our economy when compared to consumer spending, government spending, and private investment. It is not an engine of economic growth, it is a symptom of economic growth. Economists should know better. When consumers feel good about their job security and have rising wages, they invest in housing. Therefore, housing sector growth lags economic growth not the other way around. When did we quit recognizing this and start treating housing as a bigger component of our economy than it actually is?
If you don't want to take my word for it because I blog under the name Turdy and swear like a sailor, take a look at this graph I created tracking the private sectors housing investment over time as a percentage of GDP.
 |
| Data from Bureau of Economic Analysis, Graph and Data Analysis by Turdy, Design based on Calculated Risk Blog |
It must make you wonder how a sector that directly contributes such a small share of GDP could facilitate the destruction of the larger economy. The answer is that the housing bubble fueled indirect contributions to GDP through lax lending standards and consumers use of their homes as ATMs. Housing didn't gain that much in share of GDP during the bubble, it reached a peak of 6.1 percent in 2005 which was a 50 year high but still only 2 percent over its long term average. During this same period however, consumer spending on goods and services grew because people felt wealthier which led to increases in goods manufacturing and spilled over to other sectors of the economy. When the bust occurred, the reversal of the positive spillovers was catastrophic for manufacturing, retail, and other major sectors of the economy.
Economic recovery will rely on the consumer in this recession as it has in EVERY RECESSION IN OUR HISTORY. Before people buy houses, they need to be able to pay for necessities like transportation, food, and child care. When they feel secure in their jobs and have wage growth, they will start investing in more long term investments like housing but we are nowhere near that point. It is a colossal waste of time for everyone to worry about propping up the housing market and suggesting that it will grow our economy. We have already paid the price for the fallacy of this argument, why must we continue on the same path?
Tuesday, August 17, 2010
Just when you thought it couldn't get worse....
This article in the WSJ is today's reason that I am fast tracking my plans to become a pirate. Here is the opening sentence:
"The U.S. government will likely continue to play a role in guaranteeing mortgages, but policy makers must figure out how to design a system that doesn't lead to a rerun of the collapse of mortgage-finance giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner told attendees at a housing summit convened on Tuesday."
Arggh. My immediate irritation is with the word "design". The government couldn't design an exit strategy from a wet paper sack yet they can design a system to prevent financial ruin? No, they cant and the fallacy that you can design a system to control a spontaneous order like our market economy is mortifying and dangerous. I was even more disturbed to find out that two economists I greatly respect seem to be throwing support to Geithner on their blog.
The argument pervasive at the moment is that without government backing there will be no private capital in the mortgage markets and this will lead to a further decline in housing prices, more underwater homeowners, and more stress to the economy. Currently, the government is involved in backing 90 percent of mortgages whether implicitly or explicitly. As far as I can tell the idea is to wean the government out of its involvement in the business of housing by temporarily increasing its role, an idea that is so profoundly crazy I cannot believe it is being taken seriously by smart people.
I agree with the ultimate goal that the government (read taxpayers) will not be intimately involved in every loan made for housing. The problem lies in the fact that once the government is involved, it changes the expectations of the private players and becomes the new rule of the game. The incentives will not be there for the private sector to take a role because the expectation will be that the government will continue to prop up the market. Private capital will flow into areas other than mortgages and the taxpayer will end up with the flaming crap bag on their steps. Temporary government intervention typically turns into permanent government intervention because it distorts market signals and diverts investment to alternative sectors.
I don't know about you but if I hear the phrase, "Mortgage Rates are at historic lows," one more time I am going to exercise my second amendment rights and blow up my television. Mortgage rates have been too low for too long, another part of the problem. The Treasury officials are arguing that without a government guarantee on mortgages, mortgage rates will soar. Fantastic! Let them soar, they have been distorting the real cost of lending and altering borrowers decision making calculus for too long. Interest rates are prices and as such, they should reflect the risk associated with lending and the cost of doing business. Let interest rates rise and more private investors will enter the mortgage markets. Keep interest rates below the actual market rate and the government will be the only entity dumb enough to jump in.
I am so tired of government stimulus that I think I need a Valium to cope with my over-stimulation.
"The U.S. government will likely continue to play a role in guaranteeing mortgages, but policy makers must figure out how to design a system that doesn't lead to a rerun of the collapse of mortgage-finance giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner told attendees at a housing summit convened on Tuesday."
Arggh. My immediate irritation is with the word "design". The government couldn't design an exit strategy from a wet paper sack yet they can design a system to prevent financial ruin? No, they cant and the fallacy that you can design a system to control a spontaneous order like our market economy is mortifying and dangerous. I was even more disturbed to find out that two economists I greatly respect seem to be throwing support to Geithner on their blog.
The argument pervasive at the moment is that without government backing there will be no private capital in the mortgage markets and this will lead to a further decline in housing prices, more underwater homeowners, and more stress to the economy. Currently, the government is involved in backing 90 percent of mortgages whether implicitly or explicitly. As far as I can tell the idea is to wean the government out of its involvement in the business of housing by temporarily increasing its role, an idea that is so profoundly crazy I cannot believe it is being taken seriously by smart people.
I agree with the ultimate goal that the government (read taxpayers) will not be intimately involved in every loan made for housing. The problem lies in the fact that once the government is involved, it changes the expectations of the private players and becomes the new rule of the game. The incentives will not be there for the private sector to take a role because the expectation will be that the government will continue to prop up the market. Private capital will flow into areas other than mortgages and the taxpayer will end up with the flaming crap bag on their steps. Temporary government intervention typically turns into permanent government intervention because it distorts market signals and diverts investment to alternative sectors.
I don't know about you but if I hear the phrase, "Mortgage Rates are at historic lows," one more time I am going to exercise my second amendment rights and blow up my television. Mortgage rates have been too low for too long, another part of the problem. The Treasury officials are arguing that without a government guarantee on mortgages, mortgage rates will soar. Fantastic! Let them soar, they have been distorting the real cost of lending and altering borrowers decision making calculus for too long. Interest rates are prices and as such, they should reflect the risk associated with lending and the cost of doing business. Let interest rates rise and more private investors will enter the mortgage markets. Keep interest rates below the actual market rate and the government will be the only entity dumb enough to jump in.
I am so tired of government stimulus that I think I need a Valium to cope with my over-stimulation.
Tuesday, August 10, 2010
Welcome to the Scam
It has taken me a few days to process the op-ed written by Treasury Secretary, Timothy Geithner. The title of his piece, "Welcome to the Recovery", is so ironic it took me two days to quit laughing. If you haven't read this epic work of bullshit, you can find it here.
This is economic recovery? Surely, you jest. If you aren't disappointed by this "recovery" than you have incredibly low standards and should immediately stop reading this blog. You would be just as happy reading Brittany Spears blogging about the housing crisis.
The disappointment that this is what smart people call economic recovery is akin to finding out that heaven is just a really huge Department of Transportation office and that you will spend eternity waiting in line to renew your heaven license, only to find out you didn't fill out the paperwork correctly and must take a new number. When did we decide to accept such low standards for economic recovery?
I no longer want to be an economist because it is mortifying that myriad intelligent economists are spewing the propaganda and bullshit to convince the American public that things are getting better. The worst part is that these economists know better and if they don't, they should. Every piece of economic data that is released is discarded if it is negative and explained away. If there is the slightest bit of implied positiveness in a number, it is heralded as a sure sign of recovery. The problem with this is that most of the data is suspect, and the analysis of the data is even worse.
I recommend that you immediately take everything Bernanke and Geithner say and infer the opposite for at least the next 18 months or so. If they say the auto industry is booming, I want you to hear, "The auto industry isn't declining at the frightening speed it was thanks to the infusion of your future into this dinosaur industry." If they tell you the private sector is investing, you should hear, "The private sector is investing in things that don't really create jobs and the increase looks great because it is a positive number, but investment plummeted so much that it had nowhere to go but up." When Geithner says businesses have repaired their balance sheets, you should hear, "Businesses have made use of many loosey goosey accounting standards and in addition, by laying off a huge part of their labor force they can direct the money they were paying in wages to paying off debt that has been called due by struggling banks." This is just a brief sampling of how to take bullshit and turn it into truth, I am working on a patent for a portable economic bullshit translator that resembles a Kindle. Stay tuned for that.
The hard core truth is that the financial crisis is both a symptom of a false economy created with government incentives and the cause of our new economy. Without the government infused housing bubble, perhaps we might have recognized back in 2003 that the strength of our economy was an illusion. Instead, we rode the false economic growth like a reckless drunk on a mechanical bull.
A gentleman asked me the other day if the current economy was Keynesian. I was baffled but wrote his comment off to someone trying to impress me with their vast economic knowledge earned by listening to Rush Limbaugh. Maybe I wrote him off to soon, perhaps, he was implying that the cause of the crisis was Keynesian economics and that is highly likely. Regardless, modern economics cannot describe what our economy is and therefore it cannot purport to know how to fix it. Keynesian policies will only make the economy worse because the underlying assumptions are not valid. We have undergone structural changes in our economy that have altered the framework of neo-classical economics, so much so that if I were teaching economics right now I would have my students tear up their textbooks. The government intervention in the economy and the perverse policies of the Federal Reserve have irrevocably altered our economy and now our economy has new DNA. The basic tenets of economics are the only economic principles that are applicable now and my mantra, "Incentives Matter", is the key to understanding the crisis and eventually recovering.
I have blogged before that I think there are only two possibilities about economics right now:
I would bet that if Geithner and Bernanke went to happy hour and were drunk enough to be very honest about the economy they would say, "We are royally fucked."
This is economic recovery? Surely, you jest. If you aren't disappointed by this "recovery" than you have incredibly low standards and should immediately stop reading this blog. You would be just as happy reading Brittany Spears blogging about the housing crisis.
The disappointment that this is what smart people call economic recovery is akin to finding out that heaven is just a really huge Department of Transportation office and that you will spend eternity waiting in line to renew your heaven license, only to find out you didn't fill out the paperwork correctly and must take a new number. When did we decide to accept such low standards for economic recovery?
I no longer want to be an economist because it is mortifying that myriad intelligent economists are spewing the propaganda and bullshit to convince the American public that things are getting better. The worst part is that these economists know better and if they don't, they should. Every piece of economic data that is released is discarded if it is negative and explained away. If there is the slightest bit of implied positiveness in a number, it is heralded as a sure sign of recovery. The problem with this is that most of the data is suspect, and the analysis of the data is even worse.
I recommend that you immediately take everything Bernanke and Geithner say and infer the opposite for at least the next 18 months or so. If they say the auto industry is booming, I want you to hear, "The auto industry isn't declining at the frightening speed it was thanks to the infusion of your future into this dinosaur industry." If they tell you the private sector is investing, you should hear, "The private sector is investing in things that don't really create jobs and the increase looks great because it is a positive number, but investment plummeted so much that it had nowhere to go but up." When Geithner says businesses have repaired their balance sheets, you should hear, "Businesses have made use of many loosey goosey accounting standards and in addition, by laying off a huge part of their labor force they can direct the money they were paying in wages to paying off debt that has been called due by struggling banks." This is just a brief sampling of how to take bullshit and turn it into truth, I am working on a patent for a portable economic bullshit translator that resembles a Kindle. Stay tuned for that.
The hard core truth is that the financial crisis is both a symptom of a false economy created with government incentives and the cause of our new economy. Without the government infused housing bubble, perhaps we might have recognized back in 2003 that the strength of our economy was an illusion. Instead, we rode the false economic growth like a reckless drunk on a mechanical bull.
A gentleman asked me the other day if the current economy was Keynesian. I was baffled but wrote his comment off to someone trying to impress me with their vast economic knowledge earned by listening to Rush Limbaugh. Maybe I wrote him off to soon, perhaps, he was implying that the cause of the crisis was Keynesian economics and that is highly likely. Regardless, modern economics cannot describe what our economy is and therefore it cannot purport to know how to fix it. Keynesian policies will only make the economy worse because the underlying assumptions are not valid. We have undergone structural changes in our economy that have altered the framework of neo-classical economics, so much so that if I were teaching economics right now I would have my students tear up their textbooks. The government intervention in the economy and the perverse policies of the Federal Reserve have irrevocably altered our economy and now our economy has new DNA. The basic tenets of economics are the only economic principles that are applicable now and my mantra, "Incentives Matter", is the key to understanding the crisis and eventually recovering.
I have blogged before that I think there are only two possibilities about economics right now:
- Our models were always wrong and we just got lucky because the spontaneous order of the economy was strong enough to counteract our stupidity. In this theory, the economy used to have a very strong immunity to the falsehoods of economists.
- Our models were once applicable, but we have so screwed up the natural economic order that we have to start over or at least go back to Adam Smith.
I would bet that if Geithner and Bernanke went to happy hour and were drunk enough to be very honest about the economy they would say, "We are royally fucked."
Wednesday, July 14, 2010
Why Financial Reform Won't Work: Part 1
I have been ranting about financial reform legislation and how it won't work and will probably have horrible unintended consequences but before today, I didn't spell out why I feel that way. Today, I decided to spell it out after I received a email from Barack Obama's people telling me to call Senator Grassley and convince him to vote for the combined bill. The email came in with the subject of Urgent and claimed the legislation is the "boldest overhaul of the financial system since the Great Depression." I like the use of the word boldest in this sentence because bold does not equate to intelligent, well designed, or effective. Once, my co-blogger after drinking for twelve hours, stole a golf cart at a NASCAR race and proceeded to drive in small circles turning left and screaming, "Guess who I am? I'm a NASCAR driver." This was a bold move, one of his boldest. It does not qualify as one of his most intelligent or positive moments and it could have landed him in jail. Sometimes bold moves, while funny as hell, are not good ideas.
What I hate most about the legislation is the creation of a Consumer Financial Protection Bureau. You might wonder why I could hate something that sounds so innocuous and the answer lies with where it will be housed: The Federal Reserve. We are supposed to be comforted by the fact that it is an autonomous bureau with a single director. Look, there is no independent agency or bureau in all of Washington D.C., I don't care what they are intended to be. Furthermore, how autonomous were you when you lived under your parents roof?
The Federal Reserve is one of the 5 major players that created the crisis we find ourselves in and they have no business being anywhere near a bureau intended to protect consumers. They fueled the crisis, failed to recognize it, and then sold consumers down the river in the bailout mess. Putting a Consumer Protection Bureau there is like assigning lions to be security detail for gazelles.
Another key element of the package is regulatory control and accountability for the ratings agencies. The problem with this is that the regulators have to understand what the agencies are doing and what the products are they are actually rating. Half the instruments Wall Street are trading are so convoluted that people within the firms trading them don't know what they are. How could a regulator possibly know what the ratings agencies are doing or what they are rating? Someone smart enough to get it isn't going to work as a regulator, nope, they will go to work on Wall Street inventing new instruments of debt and new ways to sell it. Don't even get me started on the corruption inherent in regulation anyway.
It's very simple; Consumers need to protect themselves. If we have gotten so collectively stupid that we think the government can protect us than we are totally screwed as a nation. The government couldn't protect us from September 11th, then the government created the conditions for the housing crisis, and I'm not sure if you noticed; the government can't fix the economy either. The best the government can do to help the consumer is encourage financial education in the schools and mandate more economics courses for our students. Even that won't solve the problem. When people want to do stupid things (think NASCAR story above), they will find a way to do them.
The email from Barack's people claimed that the bill would end the exploitation of the consumer by ending hidden fees and pages of small print. The pages of small print you get with a loan application are there because of regulations, trust me when I say we would have preferred to not send you fifty pages of documents to get your loan approved. If you think there is small print now, just wait.
The truth is, when I was a loan officer, my customers didn't read the disclosures I sent them. They looked at two things: their monthly payment and their closing costs. They signed fifty pages of disclosures without reading them. Most of my customers would get their loan package and call me and ask for the Cliff Notes, which I was more than happy to provide them. If you really ever read a loan package and understood everything in it, you probably would not want to get a loan. There is a clause in most loan documents that if you make any material changes to your home without notifying your mortgage company they can call the note due and demand full payoff. How many people know that? How many people know that and tell their mortgage company that they turned a bedroom into a stripper lounge?
I don't have the answers on how this gets better but I think it starts with us getting smarter, which is not too promising and quite frankly, makes me fear for the future.
What I hate most about the legislation is the creation of a Consumer Financial Protection Bureau. You might wonder why I could hate something that sounds so innocuous and the answer lies with where it will be housed: The Federal Reserve. We are supposed to be comforted by the fact that it is an autonomous bureau with a single director. Look, there is no independent agency or bureau in all of Washington D.C., I don't care what they are intended to be. Furthermore, how autonomous were you when you lived under your parents roof?
The Federal Reserve is one of the 5 major players that created the crisis we find ourselves in and they have no business being anywhere near a bureau intended to protect consumers. They fueled the crisis, failed to recognize it, and then sold consumers down the river in the bailout mess. Putting a Consumer Protection Bureau there is like assigning lions to be security detail for gazelles.
Another key element of the package is regulatory control and accountability for the ratings agencies. The problem with this is that the regulators have to understand what the agencies are doing and what the products are they are actually rating. Half the instruments Wall Street are trading are so convoluted that people within the firms trading them don't know what they are. How could a regulator possibly know what the ratings agencies are doing or what they are rating? Someone smart enough to get it isn't going to work as a regulator, nope, they will go to work on Wall Street inventing new instruments of debt and new ways to sell it. Don't even get me started on the corruption inherent in regulation anyway.
It's very simple; Consumers need to protect themselves. If we have gotten so collectively stupid that we think the government can protect us than we are totally screwed as a nation. The government couldn't protect us from September 11th, then the government created the conditions for the housing crisis, and I'm not sure if you noticed; the government can't fix the economy either. The best the government can do to help the consumer is encourage financial education in the schools and mandate more economics courses for our students. Even that won't solve the problem. When people want to do stupid things (think NASCAR story above), they will find a way to do them.
The email from Barack's people claimed that the bill would end the exploitation of the consumer by ending hidden fees and pages of small print. The pages of small print you get with a loan application are there because of regulations, trust me when I say we would have preferred to not send you fifty pages of documents to get your loan approved. If you think there is small print now, just wait.
The truth is, when I was a loan officer, my customers didn't read the disclosures I sent them. They looked at two things: their monthly payment and their closing costs. They signed fifty pages of disclosures without reading them. Most of my customers would get their loan package and call me and ask for the Cliff Notes, which I was more than happy to provide them. If you really ever read a loan package and understood everything in it, you probably would not want to get a loan. There is a clause in most loan documents that if you make any material changes to your home without notifying your mortgage company they can call the note due and demand full payoff. How many people know that? How many people know that and tell their mortgage company that they turned a bedroom into a stripper lounge?
I don't have the answers on how this gets better but I think it starts with us getting smarter, which is not too promising and quite frankly, makes me fear for the future.
Tuesday, July 13, 2010
But Wait...There is more....
This my follow up to Turd’s last entry…and I agree this blog is a complete clusterfuck. But clusterfuck’s make the world more interesting. What is the fun in everything running smoothly? The world would be a boring place and I don’t do well with boring.
The Barbie Doll's return basically annoyed me. Yes, there was fear and uncertainty about my future….but what really bothered me was that she was going to plop her Happy Ass down in my sanctuary….the Beach Office. This office had been my escape from the torture of sitting on Gilligan’s Island and being surrounded by the Mortgage Devil and his Minions. After spending that late fall, winter, and Spring in the Beach Office I had grown fond of The Edsel…he was like the Grandpa I didn’t have anymore. I was starting to warm to Turd (her passion for football was admirable) and life was a little more tolerable at the Beach Office.
Then…the Barbie came back. I knew she was going to take over this office and staff it with “her people” and I was going to be pushed out of there. I was certain that I was going to be left spending my days on the Island. This fear certainly wasn’t unfounded…I vividly remember being pushed to the back office at the Beach when The Barbie returned. A few days after she was re-hired, I slipped in the back door and went right to my office. Basically, no one knew I was there. I was unpacking my shit and getting myself set up for the day when I overheard the following conversation between the Barbie’s Husband aka The Controller and “her staff”:
“Her Staff” – I need my old office space back.
The Controller – We will get you whatever office you want.
“Her Staff” – But Turdy and A-Hole already have the office space we want.
The Controller – Doesn’t matter…they can go sit on the fucking balcony for all I care. This is our office now. Not theirs.
“Her Staff” - *school girl giggling*
So, yeah that was confirmation of what I already knew…I was heading back to Gilligan’s Island. I sat and stewed for about five minutes and then I stepped out the office and made a point to say “Hello” to everyone on “her staff” and The Controller. They all grew quiet and I left them wondering exactly how long I had been in the office. The Controller eventually asked how long I had been in the office…with my best poker face I gave a vague response of “ a little while”. I wanted him to wonder if I heard exactly the extent of an asshole he really could be.
Before the infamous meeting, I had more conversations with the Mortgage Devil than I had in…ohhhh, the past six months combined. It was a constant theme of “she will take business from us…we need to stay united against her and make her look bad…you need to keep me posted on everything you see or hear that she is doing for the sake of “our team”…" peppered in between that agenda were some personal remarks about her betraying him when she left the Bank of Hell the previous year. That part of the dialogue bordered on sounding like a scorned lover more than a competitive business concern…but I will leave that speculation for another day. The Mortgage Devil had done a good job of convincing me that my office space concern was trivial compared to the ramifications of her return on my future.
The day of the “Meeting” had arrived. I had steered clear of both offices that day and rolled into the Bank of Hell around noon to do some paperwork before this meeting. I got bored quickly and headed out for some lunch. When I came back I saw the Mortgage Devil was in his smaller office with his door closed. I couldn’t see who was with him, so I assumed it was the Douchebag from Josey Wales. Then I saw that the Douchebag was in the Enabler’s office…not the Mortgage Devil’s. So, I am thinking it must be a customer. I am on my phone and then I am summed in to the Mortgage Devil’s Big Office for the Big Meeting. As I hang up the phone, I see the door to the Little Office open and outcomes the Mortgage Devil and…THE BARBIE!! Son of a Bitch!!! They were having a meeting before our Big Meeting? My head was spinning….what the hell is going on? I walk into the meeting and we were blindsided as Turd mentioned earlier. I started to understand what Joe Theismann felt when Lawrence Taylor hit him blindside and snapped his leg. Well…not nearly as painful…but similar in the shock and surprise. Now I understood what the meeting between the Mortgage Devil and Barbie BEFORE our meeting was about...he was setting us up. FUCK!!!
Turd had no clue they had a meeting before our Big Meeting. She was already in the office where the meeting was to take place. Obviously, I had no chance to tell her about this little fact. The whole thing unraveled in about a 10 second span.
Well, Turd summed up the rest of the Big Meeting well in the previous entry so I don’t want to be redundant. But I will say that I…like Turd...was so pissed off by being mutually screwed that it drove us together and made us allies and friends forever.
Ohhh...and Turd...I was never invited to your Baby Shower. Apparently, the Mortgage Devil and his Minions lost my invitation before they had a chance to mail it to me. I never knew about it until after we left the Bank of Hell and you told me about it. So, you weren't snubbed...well at least not by me.
The Barbie Doll's return basically annoyed me. Yes, there was fear and uncertainty about my future….but what really bothered me was that she was going to plop her Happy Ass down in my sanctuary….the Beach Office. This office had been my escape from the torture of sitting on Gilligan’s Island and being surrounded by the Mortgage Devil and his Minions. After spending that late fall, winter, and Spring in the Beach Office I had grown fond of The Edsel…he was like the Grandpa I didn’t have anymore. I was starting to warm to Turd (her passion for football was admirable) and life was a little more tolerable at the Beach Office.
Then…the Barbie came back. I knew she was going to take over this office and staff it with “her people” and I was going to be pushed out of there. I was certain that I was going to be left spending my days on the Island. This fear certainly wasn’t unfounded…I vividly remember being pushed to the back office at the Beach when The Barbie returned. A few days after she was re-hired, I slipped in the back door and went right to my office. Basically, no one knew I was there. I was unpacking my shit and getting myself set up for the day when I overheard the following conversation between the Barbie’s Husband aka The Controller and “her staff”:
“Her Staff” – I need my old office space back.
The Controller – We will get you whatever office you want.
“Her Staff” – But Turdy and A-Hole already have the office space we want.
The Controller – Doesn’t matter…they can go sit on the fucking balcony for all I care. This is our office now. Not theirs.
“Her Staff” - *school girl giggling*
So, yeah that was confirmation of what I already knew…I was heading back to Gilligan’s Island. I sat and stewed for about five minutes and then I stepped out the office and made a point to say “Hello” to everyone on “her staff” and The Controller. They all grew quiet and I left them wondering exactly how long I had been in the office. The Controller eventually asked how long I had been in the office…with my best poker face I gave a vague response of “ a little while”. I wanted him to wonder if I heard exactly the extent of an asshole he really could be.
Before the infamous meeting, I had more conversations with the Mortgage Devil than I had in…ohhhh, the past six months combined. It was a constant theme of “she will take business from us…we need to stay united against her and make her look bad…you need to keep me posted on everything you see or hear that she is doing for the sake of “our team”…" peppered in between that agenda were some personal remarks about her betraying him when she left the Bank of Hell the previous year. That part of the dialogue bordered on sounding like a scorned lover more than a competitive business concern…but I will leave that speculation for another day. The Mortgage Devil had done a good job of convincing me that my office space concern was trivial compared to the ramifications of her return on my future.
The day of the “Meeting” had arrived. I had steered clear of both offices that day and rolled into the Bank of Hell around noon to do some paperwork before this meeting. I got bored quickly and headed out for some lunch. When I came back I saw the Mortgage Devil was in his smaller office with his door closed. I couldn’t see who was with him, so I assumed it was the Douchebag from Josey Wales. Then I saw that the Douchebag was in the Enabler’s office…not the Mortgage Devil’s. So, I am thinking it must be a customer. I am on my phone and then I am summed in to the Mortgage Devil’s Big Office for the Big Meeting. As I hang up the phone, I see the door to the Little Office open and outcomes the Mortgage Devil and…THE BARBIE!! Son of a Bitch!!! They were having a meeting before our Big Meeting? My head was spinning….what the hell is going on? I walk into the meeting and we were blindsided as Turd mentioned earlier. I started to understand what Joe Theismann felt when Lawrence Taylor hit him blindside and snapped his leg. Well…not nearly as painful…but similar in the shock and surprise. Now I understood what the meeting between the Mortgage Devil and Barbie BEFORE our meeting was about...he was setting us up. FUCK!!!
Turd had no clue they had a meeting before our Big Meeting. She was already in the office where the meeting was to take place. Obviously, I had no chance to tell her about this little fact. The whole thing unraveled in about a 10 second span.
Well, Turd summed up the rest of the Big Meeting well in the previous entry so I don’t want to be redundant. But I will say that I…like Turd...was so pissed off by being mutually screwed that it drove us together and made us allies and friends forever.
Ohhh...and Turd...I was never invited to your Baby Shower. Apparently, the Mortgage Devil and his Minions lost my invitation before they had a chance to mail it to me. I never knew about it until after we left the Bank of Hell and you told me about it. So, you weren't snubbed...well at least not by me.
Me and A. Hole
This blog is a complete clusterfuck. I swore it would be chronological but then I have used it as a platform to bitch about the consolidation of banking and the government's role in the housing crisis. I have determined the format to be FUBAR and thus, I have decided today I will blog about what I feel like. After all, this is my blog.
It is common knowledge that A.Hole and I were not friends at first sight. The Barbie Doll's return prompted us to be friends because fear and uncertainty are powerful motivators. I promised a month ago to blog about the infamous "Sitdown" that entrenched us as allies, but I didn't. Check out The Bitch is Back if you don't know the back story. I guess my check back tomorrow really meant, "Wander back in a month or so, I might or might not actually tell you what happened."
The Mortgage Devil called a meeting with his boss, a guy so salesman slick that every single time I saw him I was reminded of the scene in The Outlaw Josey Wales with the dude on the ferry who changed his tune depending on which side was on the raft. The meeting is going to be with me, A. Hole, the Douchebag from Josey Wales, Barbie, and the Mortgage Devil. For weeks the Mortgage Devil had been prepping us on all we should be upset about and vent to our superiors and he told us all the concerns he would raise at the meeting. Let me be clear, when the Mortgage Devil called a meeting, I usually didn't attend. On the rare occasions I did, I would stroll in late and look annoyed and spend the majority of the meeting fantasizing about being a pirate or being drunk at Happy Hour. This meeting however, was important for my career. Or at least that was the bullshit story I was fed.
I rolled in early and eight months pregnant, wearing a strapless dress as a skirt. I was wearing a shirt, I swear. The Barbie introduces herself and asks, "Wow, do you always look this great pregnant?" I respond, "It is hard to say, this is only my second time." She doesn't seem to be the dragon slayer I was expecting; in fact, she seems awfully nice and wanting to impress. I find it hard to hate her during our small talk and now, I am confused.
Before the meeting the Mortgage Devil goes over the things he is concerned for us for and encourages A. Hole and I to tell the slick seersucker suit wearing asshole from Josey Wales everything he has said. We walk into the most awkward meeting of all time. The Barbie and The Devil haven't been in the same room for months. There are rumors all around that the demise of their partnership was a sordid affair which led to her rapid departure and this fact is not lost on me or A.Hole as we sit down to face our future.
The meeting starts and the Mortgage Devil tells seersucker suit guy that his best loan officers have concerns. A. Hole and I elucidate the concerns we have been fed by the Mortgage Devil and then wait for him to back us up, and we wait. He gives his boss, Seersucker Carpetbagger, a glance that looks to be saying, "Look at these whiny bitches, you deal with it." Here is where it goes awry. Seersucker Carpet Bagger tells us in not so polite terms that we are in fact, whiny bitches, and we need to get on board. He regales us with stories of loan officers who prosper in competitive markets and wonders why we suffer from such low self esteem that we would be threatened by Barbie's return. The Barbie Doll seems hurt and defensive and reassures us that she wants life to be good for us and has no idea why would be worried about her hurting our business or happiness. A. Hole and I are so floored we say nothing, which is an absolute oddity and a freaking miracle. We endure a twenty minute lecture where our boss, the Mortgage Devil, nods his head at every critical thing the Seersucker Carpet Bagger tells us. We have been thrown under the bus. The Mortgage Devil set us up to look like whiny bitches and get shit off his chest and then turned coat on us and played Polly fucking Anna. Surprising? Nope. Disappointing? Hell Yes.
I get in my Volvo, the official car of libertarian loan officers, and immediately call A.Hole on his cell phone. We are both furious and ranting and raving. A. Hole and I both realized we were completely set up and our higher ups now were laboring under the impression that we were scared little fear mongers with no competitive spirit. The Mortgage Devil had slipped one by us and nothing is more painful than that.
I was so upset by the tongue lashing of the Seersucker Carpetbagger that I called my Operations Manager, the Enabler, and threatened to quit. She reassured me that everything would be fine and that the Mortgage Devil was just trying to make things right by me and A. Hole. Extremely pregnant, I realize I won't be fighting this battle at the moment and so I stew. I spend the last month of my pregnancy marketing and closing loans and on a Friday, send out a bunch of cold call letters to realtors touting my awesome abilities to get loans done at the Bank of Hell.
That Sunday, I give birth to my daughter. But not before my operations manager holds a baby shower for me at the Bank of Hell where everyone hates me, or at least does a shitty job of pretending to be my friend. A. Hole is not invited or he doesn't show up. Wait a minute, why didn't you show up Fucker? I digress....at said baby shower, the Mortgage Devil entertains us with stories of how he has missed almost all of his kid's firsts and great moments due to his commitment to the mortgage industry. He goes on to tell stories of when he has mortified his kids in public because he is such an asshole. I was miserable at my baby shower because the Mortgage Devil used it as a platform to talk all about him, as usual.
A.Hole and I became friends because of the Barbie and the extreme foulness of the Mortgage Devil, but when I returned from so called, "Maternity Leave", they put us in the cave together. Big mistake, morons. Big Mistake. That is when the shit hit the fan. Stay tuned, I may get around to that story tomorrow....or not.
It is common knowledge that A.Hole and I were not friends at first sight. The Barbie Doll's return prompted us to be friends because fear and uncertainty are powerful motivators. I promised a month ago to blog about the infamous "Sitdown" that entrenched us as allies, but I didn't. Check out The Bitch is Back if you don't know the back story. I guess my check back tomorrow really meant, "Wander back in a month or so, I might or might not actually tell you what happened."
The Mortgage Devil called a meeting with his boss, a guy so salesman slick that every single time I saw him I was reminded of the scene in The Outlaw Josey Wales with the dude on the ferry who changed his tune depending on which side was on the raft. The meeting is going to be with me, A. Hole, the Douchebag from Josey Wales, Barbie, and the Mortgage Devil. For weeks the Mortgage Devil had been prepping us on all we should be upset about and vent to our superiors and he told us all the concerns he would raise at the meeting. Let me be clear, when the Mortgage Devil called a meeting, I usually didn't attend. On the rare occasions I did, I would stroll in late and look annoyed and spend the majority of the meeting fantasizing about being a pirate or being drunk at Happy Hour. This meeting however, was important for my career. Or at least that was the bullshit story I was fed.
I rolled in early and eight months pregnant, wearing a strapless dress as a skirt. I was wearing a shirt, I swear. The Barbie introduces herself and asks, "Wow, do you always look this great pregnant?" I respond, "It is hard to say, this is only my second time." She doesn't seem to be the dragon slayer I was expecting; in fact, she seems awfully nice and wanting to impress. I find it hard to hate her during our small talk and now, I am confused.
Before the meeting the Mortgage Devil goes over the things he is concerned for us for and encourages A. Hole and I to tell the slick seersucker suit wearing asshole from Josey Wales everything he has said. We walk into the most awkward meeting of all time. The Barbie and The Devil haven't been in the same room for months. There are rumors all around that the demise of their partnership was a sordid affair which led to her rapid departure and this fact is not lost on me or A.Hole as we sit down to face our future.
The meeting starts and the Mortgage Devil tells seersucker suit guy that his best loan officers have concerns. A. Hole and I elucidate the concerns we have been fed by the Mortgage Devil and then wait for him to back us up, and we wait. He gives his boss, Seersucker Carpetbagger, a glance that looks to be saying, "Look at these whiny bitches, you deal with it." Here is where it goes awry. Seersucker Carpet Bagger tells us in not so polite terms that we are in fact, whiny bitches, and we need to get on board. He regales us with stories of loan officers who prosper in competitive markets and wonders why we suffer from such low self esteem that we would be threatened by Barbie's return. The Barbie Doll seems hurt and defensive and reassures us that she wants life to be good for us and has no idea why would be worried about her hurting our business or happiness. A. Hole and I are so floored we say nothing, which is an absolute oddity and a freaking miracle. We endure a twenty minute lecture where our boss, the Mortgage Devil, nods his head at every critical thing the Seersucker Carpet Bagger tells us. We have been thrown under the bus. The Mortgage Devil set us up to look like whiny bitches and get shit off his chest and then turned coat on us and played Polly fucking Anna. Surprising? Nope. Disappointing? Hell Yes.
I get in my Volvo, the official car of libertarian loan officers, and immediately call A.Hole on his cell phone. We are both furious and ranting and raving. A. Hole and I both realized we were completely set up and our higher ups now were laboring under the impression that we were scared little fear mongers with no competitive spirit. The Mortgage Devil had slipped one by us and nothing is more painful than that.
I was so upset by the tongue lashing of the Seersucker Carpetbagger that I called my Operations Manager, the Enabler, and threatened to quit. She reassured me that everything would be fine and that the Mortgage Devil was just trying to make things right by me and A. Hole. Extremely pregnant, I realize I won't be fighting this battle at the moment and so I stew. I spend the last month of my pregnancy marketing and closing loans and on a Friday, send out a bunch of cold call letters to realtors touting my awesome abilities to get loans done at the Bank of Hell.
That Sunday, I give birth to my daughter. But not before my operations manager holds a baby shower for me at the Bank of Hell where everyone hates me, or at least does a shitty job of pretending to be my friend. A. Hole is not invited or he doesn't show up. Wait a minute, why didn't you show up Fucker? I digress....at said baby shower, the Mortgage Devil entertains us with stories of how he has missed almost all of his kid's firsts and great moments due to his commitment to the mortgage industry. He goes on to tell stories of when he has mortified his kids in public because he is such an asshole. I was miserable at my baby shower because the Mortgage Devil used it as a platform to talk all about him, as usual.
A.Hole and I became friends because of the Barbie and the extreme foulness of the Mortgage Devil, but when I returned from so called, "Maternity Leave", they put us in the cave together. Big mistake, morons. Big Mistake. That is when the shit hit the fan. Stay tuned, I may get around to that story tomorrow....or not.
Monday, July 12, 2010
I Hate Banks (But Not All Bankers)
While I wasn't alive during the Great Depression, my grandparents were and my father was born a few months before all hell broke loose in 1929. My grandparents didn't trust banks much and mostly dealt in cash, rare was the occasion where you would get a check in the mail from them. The institutional distrust of banking was strong in that generation and they told me things like, "Save your pennies." My parents, slightly less influenced by the Great Depression, used banks as the times dictated and as their business required. They didn't necessarily trust banks, they trusted their banker. My parents would say things like, "Save your quarters." They had a relationship with the bank through a real person whom they could go to when they needed to borrow money, open a savings account, or get advice on business matters. A relationship with your banker is a relic like plastic covers on flowered davenports and doilies on all your tables.
I went to a bank on purpose today, I mean actually INSIDE the bank. I never do this. I loathe banks so much that I am a drive through girl all the way and if I don't want to even see the drive through person, I use the ATM for most transactions. Unfortunately, today I had to open a new account which cannot be done in the drive through.
As I am waiting in the lobby, I am experiencing symptoms of a panic attack. I feel out of breath and my hands are shaking, meanwhile a wave of nausea passes over me. So hideous was my time at the Bank of Hell that I cannot even sit in a bank and function like a normal human being. I imagine that this is what an Ex-Con would feel like if they went back to visit a friend and were on the free side of the glass. After a small wait, the Branch Manager comes out to help me. I am going into (deep breath) a banker's office.
She is incredibly pleasant and is only helping me because her business bankers are working with other clients. She keeps apologizing for the time it is taking her which is making me paranoid that federal agents are lurking outside and she is stalling. I'm hoping my disdain for banks is not readily apparent and that she won't be alarmed by shiftiness and fidgeting or infer that it means I'm about to try and rob her vault. When she discovers that I am an economist and former loan officer she wants to chat about all the nuances of the industry. The worst thing she cites about her time as a loan officer are some adjustable rate mortgages she did and how customers would sometimes call her on the weekend. I bite my tongue because the stuff I could tell her would shock the shit out of her. I did tons of ARMS, pay options, liar's loans, and my customers called me virtually 24 hours a day. While she mentions she didn't like the competitiveness of the mortgage side I refrain from having complete diarrhea of the mouth and unloading stories of the Mortgage Devil on her.
She was so pleasant and nice that I felt it necessary to point out here that I don't hate all bankers, even though I will throw a bank under the boss in virtually every blog. I now have a neighbor who is a banker who appears normal and a number of friends who work in the banking and mortgage industry that seem like the kind of people to perform a random act of kindness. What I don't like though are what happens in the collective of a bank and how the industry has evolved to the point where we don't have relationships with our banks and are increasingly dependent on a small number of banks for an ever increasing number of services. Consolidation of power in that degree scares the crap out of me.
When I worked in the industry my arch rival (outside of my own boss) was Wells Fargo and its loan officers. I detested Wells Fargo because it was our biggest competition and their refugee loan officers who became my colleagues described unfavorable working conditions. Ironically, I now live 20 minutes from their headquarters and know a lot of their employees and I still refuse to bank there.
I have never understood Wells Fargo's apparent resiliency to this crisis and therefore, I have never bought it. In fact, for years now I have been waiting for their controversy and their day in the Horrors of Banking Annals. My theory is that they are the Enron of the industry now that Countrywide is defunct and by that I mean that I think their accounting practices must be similar to those of Enron. I read articles where Wells Fargo's lack of exposure in the crisis is because of their conservative nature. I don't recall this. In fact, they had 125% equity lines, loan products for people without credit scores, and they underwrote a ton of Alt-A. They were a major player in a lot of urban markets where predatory lending, fraud, and discrimination were rampant. They were a major player west of the Mississippi where a ton of homeowners are underwater. They were one of the biggest players in all of the loan products we have been told destroyed our economy. How can they come out relatively unscathed?
Last week, a former Wells Fargo loan officer who got me into the business received a letter from the Department of Justice requesting her insight as they investigated the lending practices of Wells Fargo. The next day, Wells Fargo announced that it was taking the ax to Wells Fargo Financial and cutting 3,800 jobs and closing down those branches. They cited overlap ensuing from their forced merger with Wachovia. I'm not buying it. Wells Fargo Financial did personal loans, 9 months same as cash financing, and subprime loans. How has his not impacted their larger financial picture before now?
Another "non-risky" lending practice affiliated with Wells Fargo is the lending of money to payday loan firms. Wells Fargo is one of the largest players in this industry associated with predatory lending, discrimination, and oh yeah, risk.
I have to wonder if we are going to find out that the Cinderella of the mortgage industry is really the ugly stepsister of Countrywide. While I hope its not true for friends who work for the company, it is baffling to me that my biggest competitor while I was at two different huge companies has not had its equal share of distress. TARP money they claimed they didn't need was given to them for a reason...
So, I do hate most Banks, especially the big ones, even though I recognize the purpose they serve and I have to admit, not all bankers are bad. The runaway growth in bank size and services is dangerous for the economy and for the consumer. The new regulations do nothing to solve this problem and like any government regulation, will create unintended consequences that make us vulnerable for another crisis.
Perhaps, my Grandparents had it right. Save your money in a jar and don't buy anything you can't pay cash for. Only sign up for an account because you really are blown away by the free toaster.
I went to a bank on purpose today, I mean actually INSIDE the bank. I never do this. I loathe banks so much that I am a drive through girl all the way and if I don't want to even see the drive through person, I use the ATM for most transactions. Unfortunately, today I had to open a new account which cannot be done in the drive through.
As I am waiting in the lobby, I am experiencing symptoms of a panic attack. I feel out of breath and my hands are shaking, meanwhile a wave of nausea passes over me. So hideous was my time at the Bank of Hell that I cannot even sit in a bank and function like a normal human being. I imagine that this is what an Ex-Con would feel like if they went back to visit a friend and were on the free side of the glass. After a small wait, the Branch Manager comes out to help me. I am going into (deep breath) a banker's office.
She is incredibly pleasant and is only helping me because her business bankers are working with other clients. She keeps apologizing for the time it is taking her which is making me paranoid that federal agents are lurking outside and she is stalling. I'm hoping my disdain for banks is not readily apparent and that she won't be alarmed by shiftiness and fidgeting or infer that it means I'm about to try and rob her vault. When she discovers that I am an economist and former loan officer she wants to chat about all the nuances of the industry. The worst thing she cites about her time as a loan officer are some adjustable rate mortgages she did and how customers would sometimes call her on the weekend. I bite my tongue because the stuff I could tell her would shock the shit out of her. I did tons of ARMS, pay options, liar's loans, and my customers called me virtually 24 hours a day. While she mentions she didn't like the competitiveness of the mortgage side I refrain from having complete diarrhea of the mouth and unloading stories of the Mortgage Devil on her.
She was so pleasant and nice that I felt it necessary to point out here that I don't hate all bankers, even though I will throw a bank under the boss in virtually every blog. I now have a neighbor who is a banker who appears normal and a number of friends who work in the banking and mortgage industry that seem like the kind of people to perform a random act of kindness. What I don't like though are what happens in the collective of a bank and how the industry has evolved to the point where we don't have relationships with our banks and are increasingly dependent on a small number of banks for an ever increasing number of services. Consolidation of power in that degree scares the crap out of me.
When I worked in the industry my arch rival (outside of my own boss) was Wells Fargo and its loan officers. I detested Wells Fargo because it was our biggest competition and their refugee loan officers who became my colleagues described unfavorable working conditions. Ironically, I now live 20 minutes from their headquarters and know a lot of their employees and I still refuse to bank there.
I have never understood Wells Fargo's apparent resiliency to this crisis and therefore, I have never bought it. In fact, for years now I have been waiting for their controversy and their day in the Horrors of Banking Annals. My theory is that they are the Enron of the industry now that Countrywide is defunct and by that I mean that I think their accounting practices must be similar to those of Enron. I read articles where Wells Fargo's lack of exposure in the crisis is because of their conservative nature. I don't recall this. In fact, they had 125% equity lines, loan products for people without credit scores, and they underwrote a ton of Alt-A. They were a major player in a lot of urban markets where predatory lending, fraud, and discrimination were rampant. They were a major player west of the Mississippi where a ton of homeowners are underwater. They were one of the biggest players in all of the loan products we have been told destroyed our economy. How can they come out relatively unscathed?
Last week, a former Wells Fargo loan officer who got me into the business received a letter from the Department of Justice requesting her insight as they investigated the lending practices of Wells Fargo. The next day, Wells Fargo announced that it was taking the ax to Wells Fargo Financial and cutting 3,800 jobs and closing down those branches. They cited overlap ensuing from their forced merger with Wachovia. I'm not buying it. Wells Fargo Financial did personal loans, 9 months same as cash financing, and subprime loans. How has his not impacted their larger financial picture before now?
Another "non-risky" lending practice affiliated with Wells Fargo is the lending of money to payday loan firms. Wells Fargo is one of the largest players in this industry associated with predatory lending, discrimination, and oh yeah, risk.
I have to wonder if we are going to find out that the Cinderella of the mortgage industry is really the ugly stepsister of Countrywide. While I hope its not true for friends who work for the company, it is baffling to me that my biggest competitor while I was at two different huge companies has not had its equal share of distress. TARP money they claimed they didn't need was given to them for a reason...
So, I do hate most Banks, especially the big ones, even though I recognize the purpose they serve and I have to admit, not all bankers are bad. The runaway growth in bank size and services is dangerous for the economy and for the consumer. The new regulations do nothing to solve this problem and like any government regulation, will create unintended consequences that make us vulnerable for another crisis.
Perhaps, my Grandparents had it right. Save your money in a jar and don't buy anything you can't pay cash for. Only sign up for an account because you really are blown away by the free toaster.
Sunday, July 4, 2010
Independence from the Myth of Homeownership
It is Independence Day and I have been contemplating whether it is time for us to collectively say we don't buy the myth of homeownership anymore and declare our independence from the fallacy. Will we do this? Of course not.
The government likes homeowners and for good reason. Homeownership provides stability, a tax base, and makes people far less mobile than they otherwise might be. All of this allows for easier governance and more far reaching impacts. This isn't just a goal at the Federal level, municipal governments enjoy these benefits as well and are incredibly reliant upon homeowners as a means of survival. This is why the government promotes homeownership and creates the propaganda we know as the "American Dream."
In 2001, I was invited to dinner at a small business owner's home. The evening was pleasant at first, but when I made what I thought was an innocuous and indisputable observation, they turned on me. The hideousness that came out of my mouth was, "Housing isn't always a good investment, the stock market outperforms housing over time. People would be better off renting and investing their money in the market." What had been a pleasant evening with food and wine turned into an absolute shitfest. The couple, twice my age, looked at me like I had just declared that I was going to eat them with fava beans and chug a nice Chianti. Actually, it was worse than that. In heated voices, they provided me anecdotal evidence of how if they didn't own homes they never could have started their business. I cried Bullshit. At one point, the wife rolled her eyes at me and called me a naive child. Then when I provided economic evidence for my argument, they called me Un-American. Apparently providing statistical data supporting the fact the return on investment of the stock market is greater than that for housing is unpatriotic, who knew? I lack the ability to back down from an argument and because I was so convinced I was right, I didn't shut my yapper and was never invited back to their home. Their final argument as they shoved me out the door was that the dot-com bust proved me wrong. Is there nowhere that I can hide from foreshadowing and irony?
So how did I go from arguing against homeownership to becoming a homeowner and then profiting from shoving other people into the same situation? The answer is complicated but I think it was the combination of the propaganda post September 11th along with the recognition that the market was about to boom. I bought my first house with the expectation that I would make a lot of money on the investment plus, I needed somewhere to live. I never thought I would become a salesperson for the American Dream and there was no way I could have anticipated how good I would be at it. I guess I'm saying that I sold out.
When you stop and think about what happened after September 11th it is hard to not realize how fragile our economy is. I don't think we ever recovered from the 2001 recession, certainly not in terms of incomes and real wealth. We had a fake recovery, fueled by an illusion. The housing boom made people feel wealthier, and on paper they actually were. That is why we had the rapid increase in household wealth and the record consumer spending expansion. The price we paid was the ensuing decline in household wealth, the single greatest decline in modern history and nearly tenfold what we experienced during the OPEC crisis in the 1970's. Without the government fueled housing boom we would still be in the recession of 2001. Reread that statement because I don't think it gets enough play in the media.
It seems ironic that people get up in arms about government spending to get out of this recession when they didn't bat an eye while government incentives "got us out" of the last one. The sad and scary fact is that this recession is really the double dip of the last one and since we aren't recovering, we might get a triple serving of economic smackdown.
Perhaps, I'm wrong, but I don't think so. Here is a basic fact about our housing boom recovery that supports what I am arguing: We really didn't have inflation during the recovery according to government measures. Inflation is not always a bad thing, in fact, in a true period of economic growth we should have inflation due to rising wages which increases demand and puts upward pressure on prices. We actually had stagnant wages during this time and by some measures, we experienced wage erosion. That is the opposite of economic growth, that is economic decline.
The booming economic years of 2003-2007 were a myth, just like homeownership. The government stimulated us into recovery through less transparent measures than it is using now. Incentivizing homeownership through legislation, expansion of the GSEs and arbitrarily low interest rates was our stimulus and ultimately has proven more costly than we can even comprehend.
Am I saying the housing crisis is the fault of the government? Hell yes. I recognize that greedy bastards on Wall Street and Main Street played a role, but, they were merely responding like rational economic actors to the incentives the government was providing. I almost feel sorry for the poor bastards on Wall Street who are being demonized by indignant politicians for causing the crisis. Hi Pot, have you met Kettle?
So, Happy Independence Day. Enjoy your potato salad and beer, it is as American as dogs in bandannas. In the spirit of the holiday, I offer this from the Declaration of Independence:
."..that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness."
Notice that homeownership isn't a fundamental right. Let's remember that the next time we hear about the American Dream. Don't even get me started on the liberty part....
The government likes homeowners and for good reason. Homeownership provides stability, a tax base, and makes people far less mobile than they otherwise might be. All of this allows for easier governance and more far reaching impacts. This isn't just a goal at the Federal level, municipal governments enjoy these benefits as well and are incredibly reliant upon homeowners as a means of survival. This is why the government promotes homeownership and creates the propaganda we know as the "American Dream."
In 2001, I was invited to dinner at a small business owner's home. The evening was pleasant at first, but when I made what I thought was an innocuous and indisputable observation, they turned on me. The hideousness that came out of my mouth was, "Housing isn't always a good investment, the stock market outperforms housing over time. People would be better off renting and investing their money in the market." What had been a pleasant evening with food and wine turned into an absolute shitfest. The couple, twice my age, looked at me like I had just declared that I was going to eat them with fava beans and chug a nice Chianti. Actually, it was worse than that. In heated voices, they provided me anecdotal evidence of how if they didn't own homes they never could have started their business. I cried Bullshit. At one point, the wife rolled her eyes at me and called me a naive child. Then when I provided economic evidence for my argument, they called me Un-American. Apparently providing statistical data supporting the fact the return on investment of the stock market is greater than that for housing is unpatriotic, who knew? I lack the ability to back down from an argument and because I was so convinced I was right, I didn't shut my yapper and was never invited back to their home. Their final argument as they shoved me out the door was that the dot-com bust proved me wrong. Is there nowhere that I can hide from foreshadowing and irony?
So how did I go from arguing against homeownership to becoming a homeowner and then profiting from shoving other people into the same situation? The answer is complicated but I think it was the combination of the propaganda post September 11th along with the recognition that the market was about to boom. I bought my first house with the expectation that I would make a lot of money on the investment plus, I needed somewhere to live. I never thought I would become a salesperson for the American Dream and there was no way I could have anticipated how good I would be at it. I guess I'm saying that I sold out.
When you stop and think about what happened after September 11th it is hard to not realize how fragile our economy is. I don't think we ever recovered from the 2001 recession, certainly not in terms of incomes and real wealth. We had a fake recovery, fueled by an illusion. The housing boom made people feel wealthier, and on paper they actually were. That is why we had the rapid increase in household wealth and the record consumer spending expansion. The price we paid was the ensuing decline in household wealth, the single greatest decline in modern history and nearly tenfold what we experienced during the OPEC crisis in the 1970's. Without the government fueled housing boom we would still be in the recession of 2001. Reread that statement because I don't think it gets enough play in the media.
It seems ironic that people get up in arms about government spending to get out of this recession when they didn't bat an eye while government incentives "got us out" of the last one. The sad and scary fact is that this recession is really the double dip of the last one and since we aren't recovering, we might get a triple serving of economic smackdown.
Perhaps, I'm wrong, but I don't think so. Here is a basic fact about our housing boom recovery that supports what I am arguing: We really didn't have inflation during the recovery according to government measures. Inflation is not always a bad thing, in fact, in a true period of economic growth we should have inflation due to rising wages which increases demand and puts upward pressure on prices. We actually had stagnant wages during this time and by some measures, we experienced wage erosion. That is the opposite of economic growth, that is economic decline.
The booming economic years of 2003-2007 were a myth, just like homeownership. The government stimulated us into recovery through less transparent measures than it is using now. Incentivizing homeownership through legislation, expansion of the GSEs and arbitrarily low interest rates was our stimulus and ultimately has proven more costly than we can even comprehend.
Am I saying the housing crisis is the fault of the government? Hell yes. I recognize that greedy bastards on Wall Street and Main Street played a role, but, they were merely responding like rational economic actors to the incentives the government was providing. I almost feel sorry for the poor bastards on Wall Street who are being demonized by indignant politicians for causing the crisis. Hi Pot, have you met Kettle?
So, Happy Independence Day. Enjoy your potato salad and beer, it is as American as dogs in bandannas. In the spirit of the holiday, I offer this from the Declaration of Independence:
."..that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness."
Notice that homeownership isn't a fundamental right. Let's remember that the next time we hear about the American Dream. Don't even get me started on the liberty part....
Saturday, July 3, 2010
Saturday Night's All Right for Stealin'
One of the hobbies of the Mortgage Devil was working on Saturday. While most of us might enjoy playing golf, going to the beach, watching a college football game, drinking themselves stupid or a combination of these items on a Saturday… the Mortgage Devil worked….EVERY Saturday. In order to continue to be the Dark Overlord of the Beach Market he needed to work on Saturday…it was kinda’ like his own Holy Day.
His Saturday would start with a stop in the Bank of Hell to check voice mail and write down the name of numbers of the people that he hadn’t called back from that Friday or possibly six Friday’s ago. He always said “if the worst thing that I do is never call people back…then I am doing alright”. Well he did way worse than not calling people back…and I will get into one example of that in a minute.
Now that the voice mails are checked, he grabs a stack of flyer's and his cell phone and start driving like a maniac all over the Beach to stop by all of the Real Estate offices. He picked Saturday’s because he can’t get past the receptionist (gate keeper) during the week. He had free reign on Saturday’s to terrorize the Real Estate Agents with his flyer's…aka propaganda…proclaiming how great he was and how awesome the Bank of Hell was compared to the rest of the world. In between stops he would be on his cell phone calling his customers and patting himself on the back for how dedicated he was to be returning their phone call on a Saturday. He was in his glory. You would think by the time he returned all of their phone calls and passed out all of his propaganda…he would call it a day. Not this asshole. Nope.
He would then head back to the Bank of Hell for the second half of his Saturday hobby. Since none of the Devil’s Minion’s or support staff were in on a Saturday…he would start grabbing and looking at EVERY loan file they had in their filling cabinets that were “in process”. Which basically meant that everyone who had applied for a loan but had not gone to closing was having the Devil look through their mortgage file. But don’t worry, he wasn’t stealing customer’s personal information. He was trying to find an angle to steal the loan application from the other loan officers in the office (such as Turdy and myself). He would look at the name of the Loan Officer on the file then rip into the file like a madman trying to find out the customer’s name, who was the selling real estate agent, who was the listing agent, who was the builder, the title company, the sellers, if the children’s name were on a tax return he might write their names down too. Why did he do this? Because he is fucking crazy? Yes. Greedy? Yes.
He honestly believed that everyone that applied for a mortgage at the Bank of Hell, were there because of him. There was no way any other loan officers could have brought that customer to the Bank of Hell…on their own. Yes, he is that narcissistic and crazy.
Then the Mortgage Devil would put a yellow “sticky” note on the front cover of the file and plop it into the offending loan officer’s chair. There were several Monday mornings I would stumble into the Bank of Hell after a Sunday of tailgating and drinking to find a stack of my files in the seat of my chair. The first time that this occurred it was after a particular rough Monday morning following a long day of tailgating. I see the stack of files, rub my eyes because I thought I was seeing shit at this point, and realize…yeah, files are really in my chair. My first thought was that my processor at the time (who was the Devil’s most loyal Minion) had worked on the file over the weekend and needed me to look at it for a reason. Silly me. She would NEVER work on a Saturday unless large sums of unmarked cash were placed in a non-descript white envelope then pressed into her greedy mitt. I grab the file on top and notice the “sticky” note. It read: “See Me! – Mortgage Devil”. Ok…so I head off in search of the Dark One.
I find him in his usual position…behind a large desk with files stacked up to his eyes, head set on, spouting his scripted bull shit to some unsuspecting customer, while pounding away on a manual calculator. I give him my best “What the Fuck?” look. He gives me his index finger extended…his universal sign of “wait a minute (or an hour as explained previously). I know that he saw me, so I head back to my desk (Gilligan’s Island) to look at the rest of the sticky notes…I then grow disgusted and push them aside for now. Eventually, the Mortgage Devil comes around the corner. His words “Grab those files and meet me in the Break Room”. Though I don’t feel like being obedient, I decide that I am curious to see what he wants from me. I quickly find out what he wants…those files. Literally. The conversation goes something like this:
Mortgage Devil: “I was looking through your files this weekend and noticed that a few of those files should be mine”.
Me: “You did WHAT this weekend to my files?”
Mortgage Devil: “I was looking through your files this weekend”.
Me: “Why do you think it is OK to look through MY files?”
Mortgage Devil: “I noticed that several of your loans are actually my loans. The stack of loans you are holding are my customers.”
Me (trying not to punch him in the face): “I honestly don’t know why you would think they were your customers?!”
Mortgage Devil: “Well take the one on top for example. The builder is a friend of mine. We had lunch before.”
Me: “Oh really? If he is your friend then why did he refer his customer to me?”
Mortgage Devil: “That is what I am trying to figure out. You obviously took that customer from me somehow.”
Me: “I took the customer because he was referred to ME! By your “friend”…which I wonder how close you two are because he has been referring clients to me for the past two years on a regular basis and we had lunch three weeks ago. So, when exactly did you have lunch with your “friend”?
Mortgage Devil: “Look…you need to check with me when you get something from that builder. I am going to let it slide this one time.”
Me: “Why don’t we have a conference call with the Builder and ask him who he was referring the loan to?”
Mortgage Devil: “Look, you just need to run this by me next time.”
Me (walking away): “I don’t see that happening”.
Mortgage Devil: “Hey come back here…we need to talk about the rest of the files!”.
I walked down the back steps with my files out the back door into the parking lot…got into my car and drove straight to the beach to go cool off. Unfortunately, Turdy and I weren’t very close then…or I would have demanded she attend Happy Hour with me immediately…the drinks would have definitely been on me. So, I had to find one of my unemployed drunk friends to vent to…which isn’t very hard to find at the Beach. Sure it was around 11:00 a.m. on a Monday morning but I didn’t see me going back to the office that day.
After I am properly cooled off from many drinks at Happy Hour, I decide I need to start holding onto my files until the last minute. Basically, I would start the file and keep it away from the Processor’s and more importantly the Mortgage Devil’s Saturday Night Stealin’ expeditions until the file was almost ready to close. Sadly, it was necessary to do business that way at the Bank of Hell.
The Mortgage Devil as mentioned before was making $1-2 million a year in commissions and yet was so paranoid and narcissistic he would spend Saturday’s trying to steal files so he can make MORE money and more importantly produce MORE loans so he can remain the #1 Producer for the Bank of Hell. A prize more coveted to him than spending time with his family or even his own sanity.
His Saturday would start with a stop in the Bank of Hell to check voice mail and write down the name of numbers of the people that he hadn’t called back from that Friday or possibly six Friday’s ago. He always said “if the worst thing that I do is never call people back…then I am doing alright”. Well he did way worse than not calling people back…and I will get into one example of that in a minute.
Now that the voice mails are checked, he grabs a stack of flyer's and his cell phone and start driving like a maniac all over the Beach to stop by all of the Real Estate offices. He picked Saturday’s because he can’t get past the receptionist (gate keeper) during the week. He had free reign on Saturday’s to terrorize the Real Estate Agents with his flyer's…aka propaganda…proclaiming how great he was and how awesome the Bank of Hell was compared to the rest of the world. In between stops he would be on his cell phone calling his customers and patting himself on the back for how dedicated he was to be returning their phone call on a Saturday. He was in his glory. You would think by the time he returned all of their phone calls and passed out all of his propaganda…he would call it a day. Not this asshole. Nope.
He would then head back to the Bank of Hell for the second half of his Saturday hobby. Since none of the Devil’s Minion’s or support staff were in on a Saturday…he would start grabbing and looking at EVERY loan file they had in their filling cabinets that were “in process”. Which basically meant that everyone who had applied for a loan but had not gone to closing was having the Devil look through their mortgage file. But don’t worry, he wasn’t stealing customer’s personal information. He was trying to find an angle to steal the loan application from the other loan officers in the office (such as Turdy and myself). He would look at the name of the Loan Officer on the file then rip into the file like a madman trying to find out the customer’s name, who was the selling real estate agent, who was the listing agent, who was the builder, the title company, the sellers, if the children’s name were on a tax return he might write their names down too. Why did he do this? Because he is fucking crazy? Yes. Greedy? Yes.
He honestly believed that everyone that applied for a mortgage at the Bank of Hell, were there because of him. There was no way any other loan officers could have brought that customer to the Bank of Hell…on their own. Yes, he is that narcissistic and crazy.
Then the Mortgage Devil would put a yellow “sticky” note on the front cover of the file and plop it into the offending loan officer’s chair. There were several Monday mornings I would stumble into the Bank of Hell after a Sunday of tailgating and drinking to find a stack of my files in the seat of my chair. The first time that this occurred it was after a particular rough Monday morning following a long day of tailgating. I see the stack of files, rub my eyes because I thought I was seeing shit at this point, and realize…yeah, files are really in my chair. My first thought was that my processor at the time (who was the Devil’s most loyal Minion) had worked on the file over the weekend and needed me to look at it for a reason. Silly me. She would NEVER work on a Saturday unless large sums of unmarked cash were placed in a non-descript white envelope then pressed into her greedy mitt. I grab the file on top and notice the “sticky” note. It read: “See Me! – Mortgage Devil”. Ok…so I head off in search of the Dark One.
I find him in his usual position…behind a large desk with files stacked up to his eyes, head set on, spouting his scripted bull shit to some unsuspecting customer, while pounding away on a manual calculator. I give him my best “What the Fuck?” look. He gives me his index finger extended…his universal sign of “wait a minute (or an hour as explained previously). I know that he saw me, so I head back to my desk (Gilligan’s Island) to look at the rest of the sticky notes…I then grow disgusted and push them aside for now. Eventually, the Mortgage Devil comes around the corner. His words “Grab those files and meet me in the Break Room”. Though I don’t feel like being obedient, I decide that I am curious to see what he wants from me. I quickly find out what he wants…those files. Literally. The conversation goes something like this:
Mortgage Devil: “I was looking through your files this weekend and noticed that a few of those files should be mine”.
Me: “You did WHAT this weekend to my files?”
Mortgage Devil: “I was looking through your files this weekend”.
Me: “Why do you think it is OK to look through MY files?”
Mortgage Devil: “I noticed that several of your loans are actually my loans. The stack of loans you are holding are my customers.”
Me (trying not to punch him in the face): “I honestly don’t know why you would think they were your customers?!”
Mortgage Devil: “Well take the one on top for example. The builder is a friend of mine. We had lunch before.”
Me: “Oh really? If he is your friend then why did he refer his customer to me?”
Mortgage Devil: “That is what I am trying to figure out. You obviously took that customer from me somehow.”
Me: “I took the customer because he was referred to ME! By your “friend”…which I wonder how close you two are because he has been referring clients to me for the past two years on a regular basis and we had lunch three weeks ago. So, when exactly did you have lunch with your “friend”?
Mortgage Devil: “Look…you need to check with me when you get something from that builder. I am going to let it slide this one time.”
Me: “Why don’t we have a conference call with the Builder and ask him who he was referring the loan to?”
Mortgage Devil: “Look, you just need to run this by me next time.”
Me (walking away): “I don’t see that happening”.
Mortgage Devil: “Hey come back here…we need to talk about the rest of the files!”.
I walked down the back steps with my files out the back door into the parking lot…got into my car and drove straight to the beach to go cool off. Unfortunately, Turdy and I weren’t very close then…or I would have demanded she attend Happy Hour with me immediately…the drinks would have definitely been on me. So, I had to find one of my unemployed drunk friends to vent to…which isn’t very hard to find at the Beach. Sure it was around 11:00 a.m. on a Monday morning but I didn’t see me going back to the office that day.
After I am properly cooled off from many drinks at Happy Hour, I decide I need to start holding onto my files until the last minute. Basically, I would start the file and keep it away from the Processor’s and more importantly the Mortgage Devil’s Saturday Night Stealin’ expeditions until the file was almost ready to close. Sadly, it was necessary to do business that way at the Bank of Hell.
The Mortgage Devil as mentioned before was making $1-2 million a year in commissions and yet was so paranoid and narcissistic he would spend Saturday’s trying to steal files so he can make MORE money and more importantly produce MORE loans so he can remain the #1 Producer for the Bank of Hell. A prize more coveted to him than spending time with his family or even his own sanity.
Friday, July 2, 2010
Return to the Scene of the Crime
I haven't blogged in awhile, not because I am uninspired but rather, I have been busy turning parts of this blog into a book. Well that and I took a vacation back to the land where all the debauchery described here occurred.
Returning to the place where I worked as a loan officer for three years and lived for twice that time brought mixed emotions. My hope was to avoid running into any of my previous costumers or real estate contacts, unless of course by choice. That mission was accomplished. I didn't want to see old customers because I was in fear of getting physically or verbally assaulted because of the loans I had done for them. and frankly, I feel sorry for a lot of people who are trapped in the sandbox where I made a ton of money for awhile and then fled.
I was struck immediately by the impacts of the housing crisis on the entire region and while it should have come as no surprise, I still was shocked to see predictions I had made long before coming to pass. My friend and co-blogger, A.Hole, and I met my friend and real estate agent, Judy Moody, for happy hour. Of course, we drank a lot and as to be expected, talked about real estate and gossiped about former colleagues we still didn't like. I heard stories of homes purchased for $800,000 in 2006 selling at short sale for $350,000. One of these homes was purchased by a gentleman that only earned $50,000 a year. Obviously, he was the beneficiary of a liar's loan but he was just one of thousands who purchased a home he couldn't afford in a highly speculative market.
Economics 101 as it applies to housing is that housing demand is driven by employment. In theory, people need income to buy a home. The housing boom took this fundamental tenet of economics and spit on it. In the area where I lent money, we had very little employment and most of it was tied to tourism. A great number of people in the sandbox are reliant upon unemployment in the winter as their jobs are seasonal but, the vast majority of people were self employed or directly employed by industries associated with housing. This includes a plethora of self employed individuals, real estate agents, and construction contractors. Our housing boom was driven by people on the other side of the bridge purchasing second homes and investment properties and our local speculators, who behaved like they were players in the gold rush. People who had no business owning one home found themselves temporarily exercising domain over small, crappy housing empires. It couldn't last.
A number of things conspired to cause the decimation of the housing market in the sandbox. Fannie Mae, the Federal Reserve, and government policies were the catalyst but, the local developers and real estate players pushed the market over the edge.
Much like the Tragedy of the Commons, where everyone acting in their self interest brings about a negative outcome for themselves and the greater good, real estate developers went nuts. With no consideration to the sustainable supply of certain types of housing in the region, condo developers saturated the market with units that demand could not possibly keep up with. Planned urban developments went up everywhere, even where they shouldn't. Development in a protected wetland was possible if you knew the right people; no one thought about whether they should do it, they just doled out favors and protected the fat cats of the region. The spoils of the boom went to the early developers and investors who amassed wealth at an unprecedented rate. Seeing the gains to these early entrepreneurs, every Tom, Dick, and Harry wanted in on the splendor. The last to get in are suffering the most as profits were driven out and then the market collapsed completely, much like the species crash of an unsustainable animal population. The housing market is very Darwinian, but the fittest in this case were those who got in first and then had the good sense to the get the hell out while the gettin was good and those who had political ties to avoid silly things like zoning laws and environmental regulations that the unconnected were subject to.
At a particularly drunken happy hour at a bar by the Bank of Hell ruled by the Mortgage Devil, I got in an argument with people who had invested in a condo development on what they call a river. Growing up on the Mississippi, I felt the need to point out that their so called river looked like a polluted ditch and bore no resemblance to a real river. They argued with me and then realizing I wouldn't change my stance that not all waterfront property is created equal, they changed their tactic to arguing that the new condo development would appeal to young professionals. I responded, "To attract young professionals you must have jobs and this town doesn't so I think there is a pretty major flaw in your understanding of the demand for these units." No amount of Ketel One keeps me from making sound economic sense but these people were having none of it. They told me I didn't understand real estate and they would prove me wrong. Yeah, right. I went by the project and one whole building is sitting sheathed without Tyvek, unfinished and blighted. The other condo building they actually finished has a vacancy rate that appears to be 90%. As I predicted, young professionals go where the jobs are and are not swayed to deviate from their economic self interest by a creek filled with litter and surrounded by crime.
The entire region looked sad to me despite the flood of tourists from Pennsyltucky, New Jersey, Washington D.C., Baltimore, and surrounding cities. The housing market in the sandbox looks to be at least a year away from even the seeds of recovery and with the economy still struggling, financial distress for people underwater in their homes or turning their second homes into rental properties is nowhere near over. A glance at the rental listings for the area show how the flood of housing units for rent has depressed rental prices. Great for renters? Perhaps, if they could find a job.
Buying at the beach became the American Dream with the help of incentives from the Federal Government yet, our government is accepting no responsibility for its contributions to the crisis. Even those people in the sandbox who have encountered economic ruin due to their belief that the housing market was a never ending path to wealth blame the "Greedy Bastards on Wall Street." Ummm, people want to make more money, duh. That is only a problem when the government provides incentives to do so at the expense of common sense, economic sustainability, and future economic growth.
If the government gives your kids free reign in a candy store for a decade, you will get a bunch of fat kids with cavities. What happens when you give adults these same incentives but trade the candy store for the housing market, oh yeah, an incredible bust and recession.
On a positive note, if you are independently wealthy and require no employment, I can guide you to some tremendous values in a resort community. If however you want to live at the beach but need income to support the habit, I got nothing.
Returning to the place where I worked as a loan officer for three years and lived for twice that time brought mixed emotions. My hope was to avoid running into any of my previous costumers or real estate contacts, unless of course by choice. That mission was accomplished. I didn't want to see old customers because I was in fear of getting physically or verbally assaulted because of the loans I had done for them. and frankly, I feel sorry for a lot of people who are trapped in the sandbox where I made a ton of money for awhile and then fled.
I was struck immediately by the impacts of the housing crisis on the entire region and while it should have come as no surprise, I still was shocked to see predictions I had made long before coming to pass. My friend and co-blogger, A.Hole, and I met my friend and real estate agent, Judy Moody, for happy hour. Of course, we drank a lot and as to be expected, talked about real estate and gossiped about former colleagues we still didn't like. I heard stories of homes purchased for $800,000 in 2006 selling at short sale for $350,000. One of these homes was purchased by a gentleman that only earned $50,000 a year. Obviously, he was the beneficiary of a liar's loan but he was just one of thousands who purchased a home he couldn't afford in a highly speculative market.
Economics 101 as it applies to housing is that housing demand is driven by employment. In theory, people need income to buy a home. The housing boom took this fundamental tenet of economics and spit on it. In the area where I lent money, we had very little employment and most of it was tied to tourism. A great number of people in the sandbox are reliant upon unemployment in the winter as their jobs are seasonal but, the vast majority of people were self employed or directly employed by industries associated with housing. This includes a plethora of self employed individuals, real estate agents, and construction contractors. Our housing boom was driven by people on the other side of the bridge purchasing second homes and investment properties and our local speculators, who behaved like they were players in the gold rush. People who had no business owning one home found themselves temporarily exercising domain over small, crappy housing empires. It couldn't last.
A number of things conspired to cause the decimation of the housing market in the sandbox. Fannie Mae, the Federal Reserve, and government policies were the catalyst but, the local developers and real estate players pushed the market over the edge.
Much like the Tragedy of the Commons, where everyone acting in their self interest brings about a negative outcome for themselves and the greater good, real estate developers went nuts. With no consideration to the sustainable supply of certain types of housing in the region, condo developers saturated the market with units that demand could not possibly keep up with. Planned urban developments went up everywhere, even where they shouldn't. Development in a protected wetland was possible if you knew the right people; no one thought about whether they should do it, they just doled out favors and protected the fat cats of the region. The spoils of the boom went to the early developers and investors who amassed wealth at an unprecedented rate. Seeing the gains to these early entrepreneurs, every Tom, Dick, and Harry wanted in on the splendor. The last to get in are suffering the most as profits were driven out and then the market collapsed completely, much like the species crash of an unsustainable animal population. The housing market is very Darwinian, but the fittest in this case were those who got in first and then had the good sense to the get the hell out while the gettin was good and those who had political ties to avoid silly things like zoning laws and environmental regulations that the unconnected were subject to.
At a particularly drunken happy hour at a bar by the Bank of Hell ruled by the Mortgage Devil, I got in an argument with people who had invested in a condo development on what they call a river. Growing up on the Mississippi, I felt the need to point out that their so called river looked like a polluted ditch and bore no resemblance to a real river. They argued with me and then realizing I wouldn't change my stance that not all waterfront property is created equal, they changed their tactic to arguing that the new condo development would appeal to young professionals. I responded, "To attract young professionals you must have jobs and this town doesn't so I think there is a pretty major flaw in your understanding of the demand for these units." No amount of Ketel One keeps me from making sound economic sense but these people were having none of it. They told me I didn't understand real estate and they would prove me wrong. Yeah, right. I went by the project and one whole building is sitting sheathed without Tyvek, unfinished and blighted. The other condo building they actually finished has a vacancy rate that appears to be 90%. As I predicted, young professionals go where the jobs are and are not swayed to deviate from their economic self interest by a creek filled with litter and surrounded by crime.
The entire region looked sad to me despite the flood of tourists from Pennsyltucky, New Jersey, Washington D.C., Baltimore, and surrounding cities. The housing market in the sandbox looks to be at least a year away from even the seeds of recovery and with the economy still struggling, financial distress for people underwater in their homes or turning their second homes into rental properties is nowhere near over. A glance at the rental listings for the area show how the flood of housing units for rent has depressed rental prices. Great for renters? Perhaps, if they could find a job.
Buying at the beach became the American Dream with the help of incentives from the Federal Government yet, our government is accepting no responsibility for its contributions to the crisis. Even those people in the sandbox who have encountered economic ruin due to their belief that the housing market was a never ending path to wealth blame the "Greedy Bastards on Wall Street." Ummm, people want to make more money, duh. That is only a problem when the government provides incentives to do so at the expense of common sense, economic sustainability, and future economic growth.
If the government gives your kids free reign in a candy store for a decade, you will get a bunch of fat kids with cavities. What happens when you give adults these same incentives but trade the candy store for the housing market, oh yeah, an incredible bust and recession.
On a positive note, if you are independently wealthy and require no employment, I can guide you to some tremendous values in a resort community. If however you want to live at the beach but need income to support the habit, I got nothing.
Monday, June 7, 2010
The Bitch is Back
My initial hatred of A. Hole began to dissipate. Having moved into his subdivision we became neighbors, and seeing him as a human being helped to soften my stance but, what finally made us allies was a crazy turn of events we never saw coming. The Mortgage Devil’s old partner, the Barbie Doll, was returning to the Bank of Hell and this news caused chaos.
For months, A. Hole and I had been coexisting in the beach branch of the Bank of Hell. We tolerated each other, made obligatory small talk, and were content to not know much about each other. In the beginning, as I previously blogged, I was wildly turned off by his eating habits and his fandom of the Washington Redskins well that, and the fact that he was a loan officer and worked at the Bank of Hell. It was the like the super trifecta of things I abhor.
So, the crack head receptionist left one day and never came back but the Bank of Hell replaced her with another temp, we will call him The Edsell. He was a gentle retired librarian, newspaper man, and historian who reminded me a little of the grandfather in the Werther’s commercials. He was also, amusingly and sadly, in the twilight of his memory and ability to function in a professional environment. He was pleasant to both A. Hole and me, but since he and A. Hole were both Redskins fans, I endured countless discussions about the Skins chances to make the playoffs that year. The Bears were already a lock and I was wildly over confident in my team and figured there was no way the Skins were going to make it. As they chatted in the lobby about the prospects I fought the urge to yell out, “The pope will have to get laid for your team to get in. Shut Up!”
Turns out the Skins made the playoffs without any copulation on the part of The Pope and since I am rarely wrong, this prompted me to talk to A. Hole about it. Slowly, our relationship turned a corner. It was encouraged by The Edsell, who was so kind and grandfatherly that it was like having your conscience sitting ten feet from you; it brought out the best in us.
The charming thing about The Edsell was that he was the worst receptionist in the history of mankind, sweet and completely incompetent. A. Hole and I would get phone messages with 5 digit phone numbers and names of people that were inaccurate or unintelligible. Here is a typical exchange:
Turdy: “Hey The Edsell, I see you took a message from someone named Douchey Bagsley who called about a loan. I don’t know a Douchey Bagsley but I did talk to someone named Darcy Bailey about a loan, does that sound familiar?”
The Edsell: “Yeah, yeah, that sounds right.”
Turdy: “One other question, after her name you have the numbers 55534, is that supposed to represent something?”
The Edsell: “Yeah, that is the phone number she left. You are supposed to call her as soon as possible.”
Turdy: “I would love to do that Edsell, but unfortunately, I think I need seven numbers to reach her. It would appear two are missing. Do you know what those might be?”
The Edsell pages through the message pad, opens drawers searching for the missing digits, and then pauses.
The Edsell: “Those other numbers must be around here somewhere, I’ll get back to you.”
Neither A. Hole or I had the heart to say anything to The Edsell or management about our hard of hearing, elderly, and sweet receptionist. We spent a lot of time reconstructing phone numbers and randomly plugging in digits until we reached someone on the phone who had actually called. Often, we would call people and insult them by calling them the wrong name. We once got a message that someone named Johnny Weinerberger called, it wasn’t even close to their actual name, but it was a damn funny name. The Edsell helped bring us together as colleagues but it was the Barbie Doll’s return that made us allies.
So ironically, it was The Edsell who helped to let me know that the Barbie Doll was returning. The Mortgage Devil had been blowing up my cell phone and since he never answered my calls when I needed him, I was avoiding him. I am on my office phone when Edsell yells out, “Turdy, the Mortgage Devil is on the phone and he says it’s urgent.” After telling Edsell to take a message and returning to my phone call, Edsell comes in my office and looking sheepish, tells me the Mortgage Devil insists on speaking to me immediately. I mumble, “For shits sake.” Then I tell Edsell to put the Mortgage Devil’s call through. I am wary of this call because taking a phone call from the Mortgage Devil when he is in manic mode is a surefire way to guarantee you will not be able to resume the rest of your daily activities when you get off the phone, instead, you find yourself on your way to happy hour regardless of the time of day.
I say hello to the Mortgage Devil and right away I can tell there is something different. He is talking to me like he needs me, like I am an equal, and he sounds desperate and shaken. I am trying to process what he is telling me but what registers is that the Barbie Doll is returning to the Bank of Hell and moving into my sanctuary and the Mortgage Devil is indignant and worried about me and A. Hole. He is rambling about how he doesn’t understand how the Bank of Hell could take her back after what she did to him and how he will have our backs. He also calls A. Hole and gives a similar speech.
For the next two weeks, A. Hole and I talk a lot about what the Barbie Doll’s return will mean for us. She is bringing her own staff, she is a big producer, and she will be running our branch which scared us because the Mortgage Devil basically told us she would run us off and eat our young. We knew it meant saying goodbye to Edsell and potentially losing our offices. To add to the anxiety that comes with uncertain work conditions, the Mortgage Devil was suddenly best friends with me and A. Hole and was describing all the horrible things the Barbie Doll had done and riling us up with ugly scenarios of what our jobs would be like upon her return. This was incredibly stressful for me since I was 7 months pregnant and her triumphant return would be in my last month of pregnancy. After experiencing the Mortgage Devil’s theft of my commissions, I was petrified of what the Barbie Doll would do to me and my business.
During that month, I spoke to the Mortgage Devil and A. Hole more than I had in the previous eight months cumulatively. The staff in the Mortgage Devil’s branch which I despised and tortured whenever I could, did an about face and began being nice to me and treating me like one of their own. I would still describe their behavior as shitty but it was far more cordial and less hostile than our previous encounters. The most common phrase from the Mortgage Devil’s minions during the Barbie saga was, “I can’t believe that bitch is coming back, she thinks she can get away with this after what she has done to the poor Mortgage Devil?” The situation was ironic and intriguing, the Mortgage Devil was playing victim and as far I as can discern, he is only a victim of a hideous sense of humor and his narcissism.
I was baffled by the Mortgage Devil and his Minions sudden interest in communication and cooperation. It wouldn’t take long to find out what their true motives were. Tomorrow, I will tell you about the great “Sit Down”, the all time greatest example of getting thrown under the bus.
For now, I want to sign off with a shout out to The Edsell. He was the best thing about working at the Bank of Hell because he was genuine and kind; his complete ignorance of what was going on in the offices around him was enviable. I am hoping he is still on this earth, but given his advanced age and condition, I wouldn’t be surprised if he wasn’t. Either way, his phone messages are Mortgage Whore legend.
For months, A. Hole and I had been coexisting in the beach branch of the Bank of Hell. We tolerated each other, made obligatory small talk, and were content to not know much about each other. In the beginning, as I previously blogged, I was wildly turned off by his eating habits and his fandom of the Washington Redskins well that, and the fact that he was a loan officer and worked at the Bank of Hell. It was the like the super trifecta of things I abhor.
So, the crack head receptionist left one day and never came back but the Bank of Hell replaced her with another temp, we will call him The Edsell. He was a gentle retired librarian, newspaper man, and historian who reminded me a little of the grandfather in the Werther’s commercials. He was also, amusingly and sadly, in the twilight of his memory and ability to function in a professional environment. He was pleasant to both A. Hole and me, but since he and A. Hole were both Redskins fans, I endured countless discussions about the Skins chances to make the playoffs that year. The Bears were already a lock and I was wildly over confident in my team and figured there was no way the Skins were going to make it. As they chatted in the lobby about the prospects I fought the urge to yell out, “The pope will have to get laid for your team to get in. Shut Up!”
Turns out the Skins made the playoffs without any copulation on the part of The Pope and since I am rarely wrong, this prompted me to talk to A. Hole about it. Slowly, our relationship turned a corner. It was encouraged by The Edsell, who was so kind and grandfatherly that it was like having your conscience sitting ten feet from you; it brought out the best in us.
The charming thing about The Edsell was that he was the worst receptionist in the history of mankind, sweet and completely incompetent. A. Hole and I would get phone messages with 5 digit phone numbers and names of people that were inaccurate or unintelligible. Here is a typical exchange:
Turdy: “Hey The Edsell, I see you took a message from someone named Douchey Bagsley who called about a loan. I don’t know a Douchey Bagsley but I did talk to someone named Darcy Bailey about a loan, does that sound familiar?”
The Edsell: “Yeah, yeah, that sounds right.”
Turdy: “One other question, after her name you have the numbers 55534, is that supposed to represent something?”
The Edsell: “Yeah, that is the phone number she left. You are supposed to call her as soon as possible.”
Turdy: “I would love to do that Edsell, but unfortunately, I think I need seven numbers to reach her. It would appear two are missing. Do you know what those might be?”
The Edsell pages through the message pad, opens drawers searching for the missing digits, and then pauses.
The Edsell: “Those other numbers must be around here somewhere, I’ll get back to you.”
Neither A. Hole or I had the heart to say anything to The Edsell or management about our hard of hearing, elderly, and sweet receptionist. We spent a lot of time reconstructing phone numbers and randomly plugging in digits until we reached someone on the phone who had actually called. Often, we would call people and insult them by calling them the wrong name. We once got a message that someone named Johnny Weinerberger called, it wasn’t even close to their actual name, but it was a damn funny name. The Edsell helped bring us together as colleagues but it was the Barbie Doll’s return that made us allies.
So ironically, it was The Edsell who helped to let me know that the Barbie Doll was returning. The Mortgage Devil had been blowing up my cell phone and since he never answered my calls when I needed him, I was avoiding him. I am on my office phone when Edsell yells out, “Turdy, the Mortgage Devil is on the phone and he says it’s urgent.” After telling Edsell to take a message and returning to my phone call, Edsell comes in my office and looking sheepish, tells me the Mortgage Devil insists on speaking to me immediately. I mumble, “For shits sake.” Then I tell Edsell to put the Mortgage Devil’s call through. I am wary of this call because taking a phone call from the Mortgage Devil when he is in manic mode is a surefire way to guarantee you will not be able to resume the rest of your daily activities when you get off the phone, instead, you find yourself on your way to happy hour regardless of the time of day.
I say hello to the Mortgage Devil and right away I can tell there is something different. He is talking to me like he needs me, like I am an equal, and he sounds desperate and shaken. I am trying to process what he is telling me but what registers is that the Barbie Doll is returning to the Bank of Hell and moving into my sanctuary and the Mortgage Devil is indignant and worried about me and A. Hole. He is rambling about how he doesn’t understand how the Bank of Hell could take her back after what she did to him and how he will have our backs. He also calls A. Hole and gives a similar speech.
For the next two weeks, A. Hole and I talk a lot about what the Barbie Doll’s return will mean for us. She is bringing her own staff, she is a big producer, and she will be running our branch which scared us because the Mortgage Devil basically told us she would run us off and eat our young. We knew it meant saying goodbye to Edsell and potentially losing our offices. To add to the anxiety that comes with uncertain work conditions, the Mortgage Devil was suddenly best friends with me and A. Hole and was describing all the horrible things the Barbie Doll had done and riling us up with ugly scenarios of what our jobs would be like upon her return. This was incredibly stressful for me since I was 7 months pregnant and her triumphant return would be in my last month of pregnancy. After experiencing the Mortgage Devil’s theft of my commissions, I was petrified of what the Barbie Doll would do to me and my business.
During that month, I spoke to the Mortgage Devil and A. Hole more than I had in the previous eight months cumulatively. The staff in the Mortgage Devil’s branch which I despised and tortured whenever I could, did an about face and began being nice to me and treating me like one of their own. I would still describe their behavior as shitty but it was far more cordial and less hostile than our previous encounters. The most common phrase from the Mortgage Devil’s minions during the Barbie saga was, “I can’t believe that bitch is coming back, she thinks she can get away with this after what she has done to the poor Mortgage Devil?” The situation was ironic and intriguing, the Mortgage Devil was playing victim and as far I as can discern, he is only a victim of a hideous sense of humor and his narcissism.
I was baffled by the Mortgage Devil and his Minions sudden interest in communication and cooperation. It wouldn’t take long to find out what their true motives were. Tomorrow, I will tell you about the great “Sit Down”, the all time greatest example of getting thrown under the bus.
For now, I want to sign off with a shout out to The Edsell. He was the best thing about working at the Bank of Hell because he was genuine and kind; his complete ignorance of what was going on in the offices around him was enviable. I am hoping he is still on this earth, but given his advanced age and condition, I wouldn’t be surprised if he wasn’t. Either way, his phone messages are Mortgage Whore legend.
Thursday, May 27, 2010
There is a Turd in the Punch Bowl
On occasion I have been known to watch “South Park”. I love the way they take a current event and then “cross the line” with it. It can be a beautiful thing when the creators are on their game. One episode reminded me of when I first met my co-writer.
The overall theme of the episode revolved around someone not going along with an “agenda”. When this happened the phrase “There is a Turd in the Punch Bowl” was uttered and the person was removed. It was code for we have a “free thinker” and someone who isn’t drinking the “Punch” (or kool-aid if you like). The beauty of this is that my co-writer chose the name Turd Furgeson. Ohh, the cosmic irony.
By now you should know that Turd Furgeson didn’t go along with the Mortgage Devil’s agenda at all. She hadn’t been drinking his Punch in quite awhile. It became a source of displeasure for him and his cohort…who I would like to introduce now. This woman shall be called Cruella Deville from this point forward. She is a middle aged woman who has the most fake laugh…bordering on cackle…that I have ever heard. Her husband is a successful Doctor in the area..so she doesn't need the money. Why does she work in the mortgage industry?....because she is Cruella and she needs to steal puppies to make fur coats?...or to take advantage of mortgage customers to finance her wool sweater and wool skirt habit? I am not sure. She chain smoked cigarettes all day and ran around the office between smoke breaks totally freaking out yelling “I am so SCREWED”…all…day…long. She never met a loan that wasn’t a total crisis. She created more drama than a Broadway production on a daily basis. She would run around screaming, cursing, throwing her hands up…. and then suddenly…the phone would ring. At a quick snap she would transform the rage into a sugary sweet demeanor. It was sickening to watch. It was better not to have eaten any greasy food that could easily come up when you were in her presence. The probability that I would vomit after watching this show was very high.
I recall one evening I am talking to one of the Mortgage Devil’s Minion’s…one that I actually like a little….and here comes Cruella. She is in full on freak out mode:
Cruella: “A. Hole…darling…have you heard that Turd Furgeson is down at the Beach office stealing loans from all of us”.
Me: “uhhh…what?”
Cruella: “Oh yeah, she is down there picking up all of the phones call that could be for any of us…and she is taking the loan applications all for herself”.
Me: “hmmm…Really?”
Cruella: “Yes, the Mortgage Devil is pissed. He said that he explained to her she had to find out who the Loan Officer was that handled the loan and then pass it to them. But she isn’t doing that. He said that wasn’t the deal.”
Me: “Well, I planned to make some stops at the Beach at the end of the week and stop in that office. I guess I will get to meet her.”
Cruella: “Well you need to sit and there and listen to what she is doing and tell the Mortgage Devil. He needs proof. Better yet, tell me and I will tell the Mortgage Devil”.
Me: “Why would I do that? I am not her boss.”
Cruella: “Jesus Christ, don’t you see that she is ripping all us off??!!”
Me: “ I will give you a full report. Happy?”
Apparently, Turd wasn’t going along with the Mortgage Devil’s and Cruella Deville’s plan. So, there was a Turd in the Punch Bowl and I was supposed to help flush it? Not my style. I had no intention of being a spy or tattle-tailing. I just needed a break from Gilligan’s Island and Cruella Deville’s stupid daily shit. I knew none of my clients were being stolen by Turd because I didn’t give out the number to that office to ANYONE. I don’t think I even knew the number for that office. I didn’t even want people calling ANY office for fear the call would be directed elsewhere by the Ever-clear Pickled Bitchy Receptionist. Everyone had my cell phone number and that is how everyone reached me.
I was there for some peace and quiet and to relax a little without the constant stream of people “buzzing” my Island like Crop Dusters. I pull into the parking lot and see what I believe is the Turd’s mode of transportation. A Volvo Station Wagon. That is odd? The Mortgage Devil had a Volvo Station Wagon (and 10 other cars) too. I guess I didn’t get the Corporate Memo about Loan Officers driving Volvo Station Wagons. Oh, well. Boring Car…hopefully she is not as boring as her mode of transportation. When I walk past it I notice a Chicago Bears magnet attached to it. I figured it must be her husbands and he must be from the Mid-West. I roll in and the greeting was less than warm. Great, who pissed in her Cheerios? No worries, I have some chicken and it is quiet…except she talks very loud on the phone. Hopefully, she can stop talking for a few seconds while I check out some Washington Redskins news and plan for my next tailgate. I am at this office for some rest and relaxation not hear her blabber all day with lunatic customers. So, I notice this little window between the offices. Weird? What the hell is that for…passing joints…passing a flask of whiskey back in forth? Who knew?
So, I am doing my usual method of getting to know someone...it involves me sitting and observing…not saying much. What have I observed? She talks loud and is constantly on the phone…and she doesn’t like me. Ok, this is going to be challenge to figure out who she really is…so, I make it my personal mission.
The next several times I stop by the office…she started an annoying habit of running out the back door to talk on her cell phone as soon as I walked through the door. But due to the volume she speaks on the phone…and the thin walls in this office…I could figure out she was inviting her friends to the office. So, her friends would stop by…one that talked as much as her and the other seemed drunk or high or both all the time. After this scenario unfolded the same way several times…I figured this was intentional because she needed a buffer between us. She hated me. Why? Because she thought I was one of Devil’s Minion. She had no idea I was smiling and nodding to the Mortgage Devil while I was planning on how I could take him down. We had the same goal but were stuck in an ultra-competitive environment (created and encouraged by the Mortgage Devil), so we didn’t realize that we should be allies not foes.
I don’t recall the exact conversation, but I think we were talking about our children and she suddenly started not hating me so much. Then we got to know each other a little better and we realized we both had a deep hatred for the Mortgage Devil in common. Then things got really interesting…stay tuned folks.
The overall theme of the episode revolved around someone not going along with an “agenda”. When this happened the phrase “There is a Turd in the Punch Bowl” was uttered and the person was removed. It was code for we have a “free thinker” and someone who isn’t drinking the “Punch” (or kool-aid if you like). The beauty of this is that my co-writer chose the name Turd Furgeson. Ohh, the cosmic irony.
By now you should know that Turd Furgeson didn’t go along with the Mortgage Devil’s agenda at all. She hadn’t been drinking his Punch in quite awhile. It became a source of displeasure for him and his cohort…who I would like to introduce now. This woman shall be called Cruella Deville from this point forward. She is a middle aged woman who has the most fake laugh…bordering on cackle…that I have ever heard. Her husband is a successful Doctor in the area..so she doesn't need the money. Why does she work in the mortgage industry?....because she is Cruella and she needs to steal puppies to make fur coats?...or to take advantage of mortgage customers to finance her wool sweater and wool skirt habit? I am not sure. She chain smoked cigarettes all day and ran around the office between smoke breaks totally freaking out yelling “I am so SCREWED”…all…day…long. She never met a loan that wasn’t a total crisis. She created more drama than a Broadway production on a daily basis. She would run around screaming, cursing, throwing her hands up…. and then suddenly…the phone would ring. At a quick snap she would transform the rage into a sugary sweet demeanor. It was sickening to watch. It was better not to have eaten any greasy food that could easily come up when you were in her presence. The probability that I would vomit after watching this show was very high.
I recall one evening I am talking to one of the Mortgage Devil’s Minion’s…one that I actually like a little….and here comes Cruella. She is in full on freak out mode:
Cruella: “A. Hole…darling…have you heard that Turd Furgeson is down at the Beach office stealing loans from all of us”.
Me: “uhhh…what?”
Cruella: “Oh yeah, she is down there picking up all of the phones call that could be for any of us…and she is taking the loan applications all for herself”.
Me: “hmmm…Really?”
Cruella: “Yes, the Mortgage Devil is pissed. He said that he explained to her she had to find out who the Loan Officer was that handled the loan and then pass it to them. But she isn’t doing that. He said that wasn’t the deal.”
Me: “Well, I planned to make some stops at the Beach at the end of the week and stop in that office. I guess I will get to meet her.”
Cruella: “Well you need to sit and there and listen to what she is doing and tell the Mortgage Devil. He needs proof. Better yet, tell me and I will tell the Mortgage Devil”.
Me: “Why would I do that? I am not her boss.”
Cruella: “Jesus Christ, don’t you see that she is ripping all us off??!!”
Me: “ I will give you a full report. Happy?”
Apparently, Turd wasn’t going along with the Mortgage Devil’s and Cruella Deville’s plan. So, there was a Turd in the Punch Bowl and I was supposed to help flush it? Not my style. I had no intention of being a spy or tattle-tailing. I just needed a break from Gilligan’s Island and Cruella Deville’s stupid daily shit. I knew none of my clients were being stolen by Turd because I didn’t give out the number to that office to ANYONE. I don’t think I even knew the number for that office. I didn’t even want people calling ANY office for fear the call would be directed elsewhere by the Ever-clear Pickled Bitchy Receptionist. Everyone had my cell phone number and that is how everyone reached me.
I was there for some peace and quiet and to relax a little without the constant stream of people “buzzing” my Island like Crop Dusters. I pull into the parking lot and see what I believe is the Turd’s mode of transportation. A Volvo Station Wagon. That is odd? The Mortgage Devil had a Volvo Station Wagon (and 10 other cars) too. I guess I didn’t get the Corporate Memo about Loan Officers driving Volvo Station Wagons. Oh, well. Boring Car…hopefully she is not as boring as her mode of transportation. When I walk past it I notice a Chicago Bears magnet attached to it. I figured it must be her husbands and he must be from the Mid-West. I roll in and the greeting was less than warm. Great, who pissed in her Cheerios? No worries, I have some chicken and it is quiet…except she talks very loud on the phone. Hopefully, she can stop talking for a few seconds while I check out some Washington Redskins news and plan for my next tailgate. I am at this office for some rest and relaxation not hear her blabber all day with lunatic customers. So, I notice this little window between the offices. Weird? What the hell is that for…passing joints…passing a flask of whiskey back in forth? Who knew?
So, I am doing my usual method of getting to know someone...it involves me sitting and observing…not saying much. What have I observed? She talks loud and is constantly on the phone…and she doesn’t like me. Ok, this is going to be challenge to figure out who she really is…so, I make it my personal mission.
The next several times I stop by the office…she started an annoying habit of running out the back door to talk on her cell phone as soon as I walked through the door. But due to the volume she speaks on the phone…and the thin walls in this office…I could figure out she was inviting her friends to the office. So, her friends would stop by…one that talked as much as her and the other seemed drunk or high or both all the time. After this scenario unfolded the same way several times…I figured this was intentional because she needed a buffer between us. She hated me. Why? Because she thought I was one of Devil’s Minion. She had no idea I was smiling and nodding to the Mortgage Devil while I was planning on how I could take him down. We had the same goal but were stuck in an ultra-competitive environment (created and encouraged by the Mortgage Devil), so we didn’t realize that we should be allies not foes.
I don’t recall the exact conversation, but I think we were talking about our children and she suddenly started not hating me so much. Then we got to know each other a little better and we realized we both had a deep hatred for the Mortgage Devil in common. Then things got really interesting…stay tuned folks.
The Mortgage Devil Does A Loan For Me, Sorta
A few months into my tenure at the Bank of Hell, I put my house on the market. It was my first home and it was a major project, ironically, I had bought it after it went to foreclosure. It was an 80 year old colonial that was in such bad shape that when I stepped foot into it for the first time it had kelly green carpet with dried up dog shit on it. I remember commenting to the realtor, "Perhaps they thought the green carpet would make the dog think it was grass." I was pretty sure they ran some kind of phone sex operation there and made meth in the carriage house but, it was love at first sight for me. The house had great bones. You had to be a visionary to see it through the dog shit, plaster falling off the walls, landscaping growing through the windows, and the hideousness that was carpet over original pine flooring. I saw it for what it was intended: a majestic home in a poor town. It was the mayor's house of Hillbilly Ville and it was perfect for me.
The home was 15 minutes from the ocean and 15 minutes from the nearest city where people actually lived and shopped. I purchased the house for $80,000 in 2002 and got my mortgage through Countrywide, with 10% down. At the time, it never crossed my mind that I would be a loan officer; I was working as a mate on an offshore fishing boat and "writing my dissertation.". When I wasn't fishing for tuna, marlin, and big tips in a leopard print bikin, I was renovating the house and learning things most women never do...and for good reason. I tore up carpet, drywalled, painted, tore up landscaping, and learned to disguise flaws in a home to the naked eye. My husband started calling me, "Contractor Jane". I went to auctions, rummaged dumpsters, and turned old barn doors into charming dining room tables to capture the essence of the home. I was in my element.
I had a few minutes of buyers remorse, not because of the constant work and money that the home needed but, instead it came when I went to the local tavern and met people that scared the crap out of me. There were people using the "N" word and not at all in an ironic fashion. There were huge Nascar fans with less teeth than an infant, no view out of their window, and to make matters worse, they looked at me like I was a city girl. Fortunately, I can adapt to most situations, but I left the bar the night we moved in a little bit drunk and pretty sure I was going to get robbed and raped. At first my friends made fun of the purchase, I had purchased a home in a town where non-residents don't even like to stop for gas. I got the last laugh.
After a few years in the home and countless trips to Home Depot, my mommy mechanism kicked in. I had a boy about to turn three and was thinking that perhaps, we should move somewhere with more people like me. I realize now that there is no neighborhood on earth with people like me, but at the time, I really held out hope that the suburbs and a culdesac would give me moms who cussed like sailors, drank wine, and were worldly when it came to politics and economics. Naive, much?
After searching for the perfect home I decided to build one in a planned urban development (PUD) full of brick homes and large lots. It was right in the middle of a culdesac and I designed it myself to be fabulous. I put our now renovated colonial on the market for $260,000 and got offers immediately. Two and a half years in the home and we got an immediate offer at more than triple what we paid. Because we did so much work on the home in what they call "sweat equity", we made out like bandits.
The new home was to be finished by Christmas, which was perfect because I had moved my parents out from the Midwest to live with us and had designed them an in-law suite attached to our new home. This was in the peak of the housing boom however, and the home was delayed. At first the builder told me it was a six week delay, then two months, and in the end it turned out to be 5 months late. I was now pregnant with my daughter, living with my elderly and often critical parents in a 3 bedroom colonial, and working as a loan officer in a pressure filled situation. I was on the verge of insanity.
The insanity and delays led me to keep upgrading things in my new home, so much so that I came in $75,000 over budget. I wanted to do my loan through the Bank of Hell and because the Mortgage Devil was all about his glory, I had to ask him to do the loan. He responds, "Of course, I do all the employee loans. But you will have to do your own application, send it through underwriting, and get all the documentation." Basically, I was to do his job for my own loan. By the way, this is totally unethical. I was under direct orders to basically be the loan officer on my own loan, of course, the Mortgage Devil didn't have time for his minions. I did as told and moved into Suburbia, earning the Devil a small commission for which he did nothing.
The craziest part of this is that after I moved into my home I started receiving his mass mailings offering to refinance me. Wonderful postcards with his picture telling me, his employee, that it was a great time to refinance. WTF? I went into his office one day and told him, "You could save some money by taking me off your marketing list, I know who you are and I don't need constant reminders." He responded with, "Well, you would be surprised how few loan officers remember to refinance their own homes." Gee, really? I watch interest rates everyday and just closed two months ago on my home and you think I need to be told its time to refinance? The only thing bigger than that man's ego is the national debt.
As though it wasn't bad enough having to deal with the asshole everyday, I now was one of his customers which entitled me to countless newsletters, magnets, and stupid bullshit reminders that he had money to sell. At one point, my now three and a half year old picked up one of the Mortgage Devil's newsletters and without missing a beat said, "Isn't this your asshole boss?" Well put, little man. Well put.
Note: I did correct my son with respect to his language, but I did take the time to compliment him on his amazing insight into people's true personalities. Now you know.
The home was 15 minutes from the ocean and 15 minutes from the nearest city where people actually lived and shopped. I purchased the house for $80,000 in 2002 and got my mortgage through Countrywide, with 10% down. At the time, it never crossed my mind that I would be a loan officer; I was working as a mate on an offshore fishing boat and "writing my dissertation.". When I wasn't fishing for tuna, marlin, and big tips in a leopard print bikin, I was renovating the house and learning things most women never do...and for good reason. I tore up carpet, drywalled, painted, tore up landscaping, and learned to disguise flaws in a home to the naked eye. My husband started calling me, "Contractor Jane". I went to auctions, rummaged dumpsters, and turned old barn doors into charming dining room tables to capture the essence of the home. I was in my element.
I had a few minutes of buyers remorse, not because of the constant work and money that the home needed but, instead it came when I went to the local tavern and met people that scared the crap out of me. There were people using the "N" word and not at all in an ironic fashion. There were huge Nascar fans with less teeth than an infant, no view out of their window, and to make matters worse, they looked at me like I was a city girl. Fortunately, I can adapt to most situations, but I left the bar the night we moved in a little bit drunk and pretty sure I was going to get robbed and raped. At first my friends made fun of the purchase, I had purchased a home in a town where non-residents don't even like to stop for gas. I got the last laugh.
After a few years in the home and countless trips to Home Depot, my mommy mechanism kicked in. I had a boy about to turn three and was thinking that perhaps, we should move somewhere with more people like me. I realize now that there is no neighborhood on earth with people like me, but at the time, I really held out hope that the suburbs and a culdesac would give me moms who cussed like sailors, drank wine, and were worldly when it came to politics and economics. Naive, much?
After searching for the perfect home I decided to build one in a planned urban development (PUD) full of brick homes and large lots. It was right in the middle of a culdesac and I designed it myself to be fabulous. I put our now renovated colonial on the market for $260,000 and got offers immediately. Two and a half years in the home and we got an immediate offer at more than triple what we paid. Because we did so much work on the home in what they call "sweat equity", we made out like bandits.
The new home was to be finished by Christmas, which was perfect because I had moved my parents out from the Midwest to live with us and had designed them an in-law suite attached to our new home. This was in the peak of the housing boom however, and the home was delayed. At first the builder told me it was a six week delay, then two months, and in the end it turned out to be 5 months late. I was now pregnant with my daughter, living with my elderly and often critical parents in a 3 bedroom colonial, and working as a loan officer in a pressure filled situation. I was on the verge of insanity.
The insanity and delays led me to keep upgrading things in my new home, so much so that I came in $75,000 over budget. I wanted to do my loan through the Bank of Hell and because the Mortgage Devil was all about his glory, I had to ask him to do the loan. He responds, "Of course, I do all the employee loans. But you will have to do your own application, send it through underwriting, and get all the documentation." Basically, I was to do his job for my own loan. By the way, this is totally unethical. I was under direct orders to basically be the loan officer on my own loan, of course, the Mortgage Devil didn't have time for his minions. I did as told and moved into Suburbia, earning the Devil a small commission for which he did nothing.
The craziest part of this is that after I moved into my home I started receiving his mass mailings offering to refinance me. Wonderful postcards with his picture telling me, his employee, that it was a great time to refinance. WTF? I went into his office one day and told him, "You could save some money by taking me off your marketing list, I know who you are and I don't need constant reminders." He responded with, "Well, you would be surprised how few loan officers remember to refinance their own homes." Gee, really? I watch interest rates everyday and just closed two months ago on my home and you think I need to be told its time to refinance? The only thing bigger than that man's ego is the national debt.
As though it wasn't bad enough having to deal with the asshole everyday, I now was one of his customers which entitled me to countless newsletters, magnets, and stupid bullshit reminders that he had money to sell. At one point, my now three and a half year old picked up one of the Mortgage Devil's newsletters and without missing a beat said, "Isn't this your asshole boss?" Well put, little man. Well put.
Note: I did correct my son with respect to his language, but I did take the time to compliment him on his amazing insight into people's true personalities. Now you know.
Tuesday, May 25, 2010
Burn it Like Beckham
My thoughts range from jello salad to lawns in need of care and perhaps, I have lost my mind. I realized today that the global economy is similar to a home in foreclosure with a seriously shitty yard. You have seen those, right? The yards so full of weeds and crap that the best options are to set fire to the whole thing or tear it up; that is our economy. The scary thing is that it isn't just our economy anymore, it belongs to everyone across the globe.
I always found debt fascinating as a student of economics and as a mortgage originator. Debt can do wonders for people, corporations, and as Ross Johnson once said, the sphincter. I have no intrinsic problem with debt, if you have read this blog then you know that I have at times encouraged people to acquire debt to degrees formerly considered stupid. But, what scares me now is how many countries are in debt and printing money. It is all fine and good when we you just have Hitler or Bernanke printing money in solitude, at different points in history....but when all the major players are printing money at the same time with no economic backing, we should be very afraid for the future. There is no economic growth to base money supply expansion on and this should scare the crap out of people. For those of you who hate economics, let me make it very simple. Inflation is inevitable. It has to be.
In a break with tradition, I have a solution or two. Here they are, in no particular order of importance:
1. Burn the whole fucking disaster down. Get rid of the Fed, Federal regulatory agencies, the FDIC, Fannie Mae, Freddie Mac, and anyone else who has an incentive to make the government bigger and hose the taxpayer.
2. Replace government regulators with private sector regulators and MAKE THEM BID FOR CONTRACTS ANNUALLY, and maybe make private firms decide who gets the contracts. As an example, in the oil business you would have smaller companies regulate the larger ones. Recognizing that this is a collusive industry, you would want to bring in new potential competitors to regulate the long standing firms. It cannot be BP regulating Exxon. That would be like fraternity boys policing themselves in a date rape, not cool.
2a. For all the hits capitalism is taking, it is the best system for improving human welfare, if you don't think so than I have to infer you have not read much about history and I am sad for you. We need to quit confusing capitalism with cronyism and we need to recognize what it needs to work better. We need to look at our legal system and government institutions that ruin what is a competitive environment that actually helps consumers.
2b. In the banking industry, I could see this as a way to save small banks. Let smaller banks audit the big banks and serve as an enforcement mechanism for regulations in place. Give the private banks an incentive not to take bribes or get ahead other than the fact that they could grow and prosper, unlike government regulators, who have no incentive to do right. The truth is that more regulations solve nothing unless they are enforced and no one is enforcing them. The banking and financial industry is very much like OPEC, a very close knit oligopoly that can allow oil to go from $14 to $56 a barrel quicker than you could get Jessica Simpson to say something stupid. This is not capitalism or competitive economics. Do not be confused. This is consolidation of economic power that results in a strange form of economic totalitarianism.
I am just beginning to mull this around. I want to avoid the inherent problems in government regulations and the crazy game theory dilemmas that these arrangements create. I want a system where potential competitors police behavior because it reduces barriers to entry and levels the playing field for everyone and at the end of the day, that is good for the consumer.
If the effing Beckhams can float freely between continents without anyone regulating the transmission of stupidity, surely, we can figure out how to regulate behavior without the government? Right?
Your thoughts are welcome....unless, you think Congress can fix it. If that is your suggestion, then please feel free to hang out with Posh Spice in another delusional land. I am setting fire to this one.
I always found debt fascinating as a student of economics and as a mortgage originator. Debt can do wonders for people, corporations, and as Ross Johnson once said, the sphincter. I have no intrinsic problem with debt, if you have read this blog then you know that I have at times encouraged people to acquire debt to degrees formerly considered stupid. But, what scares me now is how many countries are in debt and printing money. It is all fine and good when we you just have Hitler or Bernanke printing money in solitude, at different points in history....but when all the major players are printing money at the same time with no economic backing, we should be very afraid for the future. There is no economic growth to base money supply expansion on and this should scare the crap out of people. For those of you who hate economics, let me make it very simple. Inflation is inevitable. It has to be.
In a break with tradition, I have a solution or two. Here they are, in no particular order of importance:
1. Burn the whole fucking disaster down. Get rid of the Fed, Federal regulatory agencies, the FDIC, Fannie Mae, Freddie Mac, and anyone else who has an incentive to make the government bigger and hose the taxpayer.
2. Replace government regulators with private sector regulators and MAKE THEM BID FOR CONTRACTS ANNUALLY, and maybe make private firms decide who gets the contracts. As an example, in the oil business you would have smaller companies regulate the larger ones. Recognizing that this is a collusive industry, you would want to bring in new potential competitors to regulate the long standing firms. It cannot be BP regulating Exxon. That would be like fraternity boys policing themselves in a date rape, not cool.
2a. For all the hits capitalism is taking, it is the best system for improving human welfare, if you don't think so than I have to infer you have not read much about history and I am sad for you. We need to quit confusing capitalism with cronyism and we need to recognize what it needs to work better. We need to look at our legal system and government institutions that ruin what is a competitive environment that actually helps consumers.
2b. In the banking industry, I could see this as a way to save small banks. Let smaller banks audit the big banks and serve as an enforcement mechanism for regulations in place. Give the private banks an incentive not to take bribes or get ahead other than the fact that they could grow and prosper, unlike government regulators, who have no incentive to do right. The truth is that more regulations solve nothing unless they are enforced and no one is enforcing them. The banking and financial industry is very much like OPEC, a very close knit oligopoly that can allow oil to go from $14 to $56 a barrel quicker than you could get Jessica Simpson to say something stupid. This is not capitalism or competitive economics. Do not be confused. This is consolidation of economic power that results in a strange form of economic totalitarianism.
I am just beginning to mull this around. I want to avoid the inherent problems in government regulations and the crazy game theory dilemmas that these arrangements create. I want a system where potential competitors police behavior because it reduces barriers to entry and levels the playing field for everyone and at the end of the day, that is good for the consumer.
If the effing Beckhams can float freely between continents without anyone regulating the transmission of stupidity, surely, we can figure out how to regulate behavior without the government? Right?
Your thoughts are welcome....unless, you think Congress can fix it. If that is your suggestion, then please feel free to hang out with Posh Spice in another delusional land. I am setting fire to this one.
Monday, May 24, 2010
Too Small to Succeed: The Plight of Jello Salad and Small Banks
I spent a good chunk of my weekend contemplating the future extinction of Jello salad. It started at a friend’s birthday party for her daughter when her grandmother made a pineapple Jello salad and the kids couldn’t get enough of it. I don’t make Jello salad, in fact, I don’t even make Jello, unless it is for shooters but I’m even getting too old for that. So this party had me thinking that as grandparents die off so will Jello salad, because it is only loved by the very old and the very young and very few in my generation make the stuff. I find this kind of sad, although the truth is that I don’t even like Jello salad, probably because my mom shoved it in my yapper at every kind of celebration when I was a child. If I fell off my bike I was told, “Here have some Jello salad, you will feel better. It will fix you right up!” You are probably wondering what this has to do with the mortgage and banking industry. Well at first glance, absolutely nothing but, it made me realize that Jello salad is like small banks, neither one will be probably exist in twenty years.
A glance at the FDIC bank failure list shows a number of regional and small community banks shutting their doors. I guess they are too small to succeed, while their larger national counterparts are benefitting from the notion that they are too big to fail. Our government is helping to decide who the winners and losers are and we are footing the bill.
Some of these failures are due to market forces, particularly small community banks in rural places where populations are declining and so are economic prospects. Bad investments by banks can also account for a portion of the closures, particularly those regional banks that put a considerable amount of their resources into financing home builders and commercial developers in places like Nevada, California, and Florida.
What seems odd to me is that smaller banks that didn’t take on the kind of risk that plagued the banking industry during the housing boom are failing at a much higher rate. By all accounts, they were still lending more responsibly than the rest of the industry and since many of them subjected loans to traditional underwriting by committee, they should have been more insulated than the big banks using Fannie Mae products to get nearly anyone a loan. Perhaps, a larger portion of the failures are those banks that in response to the increasing competitiveness of the banking industry and its consolidation, were encouraged to take on more risk than realistic for their asset size and local economic conditions. I still question however, that all these explanations can account for the higher failure rate. I'm sure the rest is explained by the collusion of the large banks to receive bailouts and pass on risk and exposure to the small banks.
This is on my mind because of the proposed financial regulations that will do precious little to insulate us from having another financial meltdown in the future. With the loss of small banks, we are losing tremendous information and relationships that can help foster economic growth and stability in a region. Bankers who know their customers can assess risk better than automated underwriting; tools such as credit reports, which are not always reflective of risk, cannot replace the knowledge found in a more personal banking system. The consolidation of the banking and mortgage industry which has been going on for twenty years is speeding up thanks to the housing crisis, and I’m sure the largest of the banks couldn’t be happier about it. Couple this with the melding of banking and the insurance industry and we are at more risk than ever.
So when small banks go, so does competition in the industry, leading to a cartel of banks…oh yeah, we have that already, it is called the Federal Reserve. The impact on consumers will be profound in terms of fees for everything from overdrafts, wire transfers, stop payments, and on and on. Cartels do not price competitively, they don’t have to. Will customers appreciate the convenience of large banks; of course they will. What I fear customers won’t recognize is that a less competitive banking industry can hamper our future economic growth and lead to greater risk in our financial markets.
If you haven’t read Barbarians at the Gate or Liar’s Poker I recommend you go out and get them right now. What I take from these two books is that particularly in financial markets, the consolidation of power and resources creates greater incentive for rent-seeking and collusion, leaving taxpayers more at risk to anti-competitive and harmful behavior. From junk bonds to mortgage backed securities, a very small group of players are determining behavior in financial markets and where wealth flows. Think of it this way, if you only had to answer to people just like you with the same incentives and goals you would probably behave however you wanted without fear of repercussions, there would be no reinforcement mechanism to check your asshole behavior. Ever go out drinking with a bunch of drunks? Yeah, its like that. Banks, Wall Street, the Federal Reserve, and the government agencies that are there to check them represent this giant club of assholes who have no incentive to check one another’s power.
I don’t have the answer but I know that the proposed regulations won’t work. My gut feeling is that half ass regulations will only make it worse. I want a competitive banking industry, which is impossible with the Federal Reserve and the government involved in the capacity they are working towards. This I know for sure: Clever people will always find a way around regulations and the more time goes on, the more damaging their escapes prove to be for taxpayers.
For the last twenty years, the comparative advantage of the United States has been in making debt, not creating wealth. Clever people will figure out how to make debt look like something it isn’t and it will continue to finance our economic growth much like junk bonds and mortgage backed securities have in the past. This is what we are good at as a country and the expense of it gets more burdensome every year.
Like I said, I don’t have all the solutions. Perhaps, we can save Jello salad with a few cookbooks and some help from our Grandmas, but I think small banks are on the verge of extinction. With the power of the banks and their links to Wall Street, the Federal Reserve, and the U.S. Government, there is no hope for small banks and all the Jello salad in the world won’t make it better.
A glance at the FDIC bank failure list shows a number of regional and small community banks shutting their doors. I guess they are too small to succeed, while their larger national counterparts are benefitting from the notion that they are too big to fail. Our government is helping to decide who the winners and losers are and we are footing the bill.
Some of these failures are due to market forces, particularly small community banks in rural places where populations are declining and so are economic prospects. Bad investments by banks can also account for a portion of the closures, particularly those regional banks that put a considerable amount of their resources into financing home builders and commercial developers in places like Nevada, California, and Florida.
What seems odd to me is that smaller banks that didn’t take on the kind of risk that plagued the banking industry during the housing boom are failing at a much higher rate. By all accounts, they were still lending more responsibly than the rest of the industry and since many of them subjected loans to traditional underwriting by committee, they should have been more insulated than the big banks using Fannie Mae products to get nearly anyone a loan. Perhaps, a larger portion of the failures are those banks that in response to the increasing competitiveness of the banking industry and its consolidation, were encouraged to take on more risk than realistic for their asset size and local economic conditions. I still question however, that all these explanations can account for the higher failure rate. I'm sure the rest is explained by the collusion of the large banks to receive bailouts and pass on risk and exposure to the small banks.
This is on my mind because of the proposed financial regulations that will do precious little to insulate us from having another financial meltdown in the future. With the loss of small banks, we are losing tremendous information and relationships that can help foster economic growth and stability in a region. Bankers who know their customers can assess risk better than automated underwriting; tools such as credit reports, which are not always reflective of risk, cannot replace the knowledge found in a more personal banking system. The consolidation of the banking and mortgage industry which has been going on for twenty years is speeding up thanks to the housing crisis, and I’m sure the largest of the banks couldn’t be happier about it. Couple this with the melding of banking and the insurance industry and we are at more risk than ever.
So when small banks go, so does competition in the industry, leading to a cartel of banks…oh yeah, we have that already, it is called the Federal Reserve. The impact on consumers will be profound in terms of fees for everything from overdrafts, wire transfers, stop payments, and on and on. Cartels do not price competitively, they don’t have to. Will customers appreciate the convenience of large banks; of course they will. What I fear customers won’t recognize is that a less competitive banking industry can hamper our future economic growth and lead to greater risk in our financial markets.
If you haven’t read Barbarians at the Gate or Liar’s Poker I recommend you go out and get them right now. What I take from these two books is that particularly in financial markets, the consolidation of power and resources creates greater incentive for rent-seeking and collusion, leaving taxpayers more at risk to anti-competitive and harmful behavior. From junk bonds to mortgage backed securities, a very small group of players are determining behavior in financial markets and where wealth flows. Think of it this way, if you only had to answer to people just like you with the same incentives and goals you would probably behave however you wanted without fear of repercussions, there would be no reinforcement mechanism to check your asshole behavior. Ever go out drinking with a bunch of drunks? Yeah, its like that. Banks, Wall Street, the Federal Reserve, and the government agencies that are there to check them represent this giant club of assholes who have no incentive to check one another’s power.
I don’t have the answer but I know that the proposed regulations won’t work. My gut feeling is that half ass regulations will only make it worse. I want a competitive banking industry, which is impossible with the Federal Reserve and the government involved in the capacity they are working towards. This I know for sure: Clever people will always find a way around regulations and the more time goes on, the more damaging their escapes prove to be for taxpayers.
For the last twenty years, the comparative advantage of the United States has been in making debt, not creating wealth. Clever people will figure out how to make debt look like something it isn’t and it will continue to finance our economic growth much like junk bonds and mortgage backed securities have in the past. This is what we are good at as a country and the expense of it gets more burdensome every year.
Like I said, I don’t have all the solutions. Perhaps, we can save Jello salad with a few cookbooks and some help from our Grandmas, but I think small banks are on the verge of extinction. With the power of the banks and their links to Wall Street, the Federal Reserve, and the U.S. Government, there is no hope for small banks and all the Jello salad in the world won’t make it better.
Wednesday, May 19, 2010
Mr. Slumlord, A Gift From the Devil
The Mortgage Devil was a ruthless salesman and a horrible boss. When he wasn’t stealing loans from my commission statement he was bitching about the time I was demanding of him. He was a producer, vice president, and in title only, my manager. His management style was unique. One time he had me perform my own performance evaluation saying it was a management technique, yeah right, he was the Sultan of Spin. I knew he didn’t want to waste his time managing his loan officers, he wanted to be originating loans. What a dick.
After complaining profusely about the Devil stealing my loans to anyone who would listen but primarily to my operations manager, henceforth to be known as The Enabler, the Mortgage Devil called me to tell me he was giving me a loan. He was going on and on about how generous it was of him and how the agent on the deal was one of mine, so really it was only fair that I had the loan. It was a $70,000 loan meant as a peace offering to compensate me for the $500,000 in loans he had already taken from me.
What I think happened is that he stole the loan from me before I could talk to the customer. During the phone conversation with the Devil, I was perplexed as to why he didn’t just do the loan. Once I actually spoke to the customer it all became clear. This was not a gift, no, this was the Mortgage Devil pawning off a bat shit crazy customer on me because he figured that a $500 commission wasn’t going to be worth it. The Devil, appearing to be helpful, had once again screwed me.
I mentioned this customer in an earlier post on the habitual offenders, detailing the customers who became so prevalent in your life that it felt like you were in a relationship with them. A sick, twisted, stalk you till you die kind of relationship. This customer was working on becoming a slumlord and when I say he was a total pain in the ass, I am being generous. He was a vile and hot headed guy with an ego that was completely unjustified. To make matters worse, he suffered from delusions of grandeur about the real estate empire he was building in a sad little community that only had one thing going for it; it was thirty minutes from the ocean. His properties were targeted to low income people and he was awfully proud of all the Section 8 vouchers that would be paying for his bills.
That first loan for him was a nightmare and foreshadowed the torture I would endure during the next ten loans I did for him. Actually, it might have been more but I have probably blocked it out in an attempt to protect my sanity. Every one of his loans was either a no down payment or a very tiny down payment investment property loan, which are nightmares. He and I fought on a regular basis about the documentation he had to provide during the loan process. One time he told me he wasn’t going to give me something I needed and I said, “Fine, good luck finding enough money in your couch cushions to pay cash for the house.” He called back and apologized.
I was pregnant by the time I did his third loan and because I had a history of high risk pregnancy, I was sent to a specialist, a few hours away, for a series of tests and ultrasounds. I told the slumlord the day before that I would be unavailable and would be back in touch with him in 48 hours. During my ultrasound, my phone was vibrating so intently that my purse fell off the countertop. I left my doctor’s appointment and listened to 15 increasingly disturbing voicemails from Mr. Slumlord. I was pissed. I called him and told him again that I was taking a personal day and that if he called me and left me threatening messages one more time, I would never do a loan for him again. He hung up on me.
The Bank of Hell was so proud of its J.D. Power awards for customer service that every customer received a survey after their loan closed asking them to rate their experience. As luck should have it, Mr. Slumlord filled out his surveys for the previous loans I did for him in a fit of rage. He rated me horribly and wrote nasty comments about how I wouldn’t call him back. I shit you not, I talked to that guy nearly every single day of the week for one entire year.
I didn’t find out about the survey for months. You know how I found out about the survey, you guessed it, a phone call from the Mortgage Devil telling me that I was pulling down our branches ratings and I had some explaining to do. I was summoned to the main branch of the Mortgage Devil’s territory and read the riot act by the Enabler and the Devil himself. At some point, I interrupted them with a dismissive, “This is bullshit.” I explained that Mr. Slumlord was angry when I took a personal day and took it out on me by trashing me in the survey. I was also forced to point out that I currently had four loans in process for him. This is the remainder of that conversation:
Mortgage Devil: “He said in his survey that he would never come back to the Bank of Hell again so I think you better rethink your story.”
Turdy: “Here’s my pipeline report, he closes on Friday. I guess he came back because no one else wants to deal with him, I mean that is why you gave me his first loan right, you recognized what a pain in the ass he was.”
Mortgage Devil: “Well good, I guess this is resolved. Ask him not to fill out anymore surveys, ok?”
I left the meeting and called Mr. Slumlord and told him if he wanted his loans to close he had to promise to behave and not write anymore stupid stuff; he apologized. The next four surveys from him were glowing accounts of my talents as a loan officer and included flowery praise about the personal attention I gave his loans.
I still know Mr. Slumlord’s phone number having it burned into my frontal lobe by sheer repetition. I don’t know what happened to him or his properties. The properties could be in foreclosure or perhaps, he has been attacked by one of his poverty stricken tenants for leaving harassing messages, I cheer for the latter. I do know that not having to talk to him is one of the best parts of being out of the mortgage industry.
Note: I just remembered that the Mortgage Devil made me write a letter explaining my bad survey from Mr. Slumlord. This is what I remember:
To Whom it may Concern-
My customer, Mr. Slumlord, is crazy. He still calls me for loans constantly.
Best regards,
Turdy
After complaining profusely about the Devil stealing my loans to anyone who would listen but primarily to my operations manager, henceforth to be known as The Enabler, the Mortgage Devil called me to tell me he was giving me a loan. He was going on and on about how generous it was of him and how the agent on the deal was one of mine, so really it was only fair that I had the loan. It was a $70,000 loan meant as a peace offering to compensate me for the $500,000 in loans he had already taken from me.
What I think happened is that he stole the loan from me before I could talk to the customer. During the phone conversation with the Devil, I was perplexed as to why he didn’t just do the loan. Once I actually spoke to the customer it all became clear. This was not a gift, no, this was the Mortgage Devil pawning off a bat shit crazy customer on me because he figured that a $500 commission wasn’t going to be worth it. The Devil, appearing to be helpful, had once again screwed me.
I mentioned this customer in an earlier post on the habitual offenders, detailing the customers who became so prevalent in your life that it felt like you were in a relationship with them. A sick, twisted, stalk you till you die kind of relationship. This customer was working on becoming a slumlord and when I say he was a total pain in the ass, I am being generous. He was a vile and hot headed guy with an ego that was completely unjustified. To make matters worse, he suffered from delusions of grandeur about the real estate empire he was building in a sad little community that only had one thing going for it; it was thirty minutes from the ocean. His properties were targeted to low income people and he was awfully proud of all the Section 8 vouchers that would be paying for his bills.
That first loan for him was a nightmare and foreshadowed the torture I would endure during the next ten loans I did for him. Actually, it might have been more but I have probably blocked it out in an attempt to protect my sanity. Every one of his loans was either a no down payment or a very tiny down payment investment property loan, which are nightmares. He and I fought on a regular basis about the documentation he had to provide during the loan process. One time he told me he wasn’t going to give me something I needed and I said, “Fine, good luck finding enough money in your couch cushions to pay cash for the house.” He called back and apologized.
I was pregnant by the time I did his third loan and because I had a history of high risk pregnancy, I was sent to a specialist, a few hours away, for a series of tests and ultrasounds. I told the slumlord the day before that I would be unavailable and would be back in touch with him in 48 hours. During my ultrasound, my phone was vibrating so intently that my purse fell off the countertop. I left my doctor’s appointment and listened to 15 increasingly disturbing voicemails from Mr. Slumlord. I was pissed. I called him and told him again that I was taking a personal day and that if he called me and left me threatening messages one more time, I would never do a loan for him again. He hung up on me.
The Bank of Hell was so proud of its J.D. Power awards for customer service that every customer received a survey after their loan closed asking them to rate their experience. As luck should have it, Mr. Slumlord filled out his surveys for the previous loans I did for him in a fit of rage. He rated me horribly and wrote nasty comments about how I wouldn’t call him back. I shit you not, I talked to that guy nearly every single day of the week for one entire year.
I didn’t find out about the survey for months. You know how I found out about the survey, you guessed it, a phone call from the Mortgage Devil telling me that I was pulling down our branches ratings and I had some explaining to do. I was summoned to the main branch of the Mortgage Devil’s territory and read the riot act by the Enabler and the Devil himself. At some point, I interrupted them with a dismissive, “This is bullshit.” I explained that Mr. Slumlord was angry when I took a personal day and took it out on me by trashing me in the survey. I was also forced to point out that I currently had four loans in process for him. This is the remainder of that conversation:
Mortgage Devil: “He said in his survey that he would never come back to the Bank of Hell again so I think you better rethink your story.”
Turdy: “Here’s my pipeline report, he closes on Friday. I guess he came back because no one else wants to deal with him, I mean that is why you gave me his first loan right, you recognized what a pain in the ass he was.”
Mortgage Devil: “Well good, I guess this is resolved. Ask him not to fill out anymore surveys, ok?”
I left the meeting and called Mr. Slumlord and told him if he wanted his loans to close he had to promise to behave and not write anymore stupid stuff; he apologized. The next four surveys from him were glowing accounts of my talents as a loan officer and included flowery praise about the personal attention I gave his loans.
I still know Mr. Slumlord’s phone number having it burned into my frontal lobe by sheer repetition. I don’t know what happened to him or his properties. The properties could be in foreclosure or perhaps, he has been attacked by one of his poverty stricken tenants for leaving harassing messages, I cheer for the latter. I do know that not having to talk to him is one of the best parts of being out of the mortgage industry.
Note: I just remembered that the Mortgage Devil made me write a letter explaining my bad survey from Mr. Slumlord. This is what I remember:
To Whom it may Concern-
My customer, Mr. Slumlord, is crazy. He still calls me for loans constantly.
Best regards,
Turdy
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