June 6, 2010

The next generation of home buyers has too much college debt to buy a house

Last week, The New York Times ran a particularly depressing article about how college students are taking on too much debt to ever pay back.  Lenders were encouraged to do this, because not only were the loans government-backed, but the new bankruptcy laws don’t discharge educational loans.

The Times showcased a recent NYU graduate, Cortney Munna, who ended up owing over $100,000 in student loans and had to enroll in night school to avoid the unaffordable monthly payments that would start once the classes stopped.

While many viewed this article as yet another example of the Brazilification of the United States, thank goodness Danville Realtor Greg Fielding has put this story into the proper perspective.  Who’s Greg Fielding?  He founded the group blog housingstorm, and also runs Bay Area Real Estate Trends.

Greg Fielding believes that high college debt is a problem because indebted graduates can’t take on further debt to become homeloaners!

From a real estate perspective, this could impact the starter-home markets for the a decade or more as the next generation of first-time homebuyers is already burdened with too much debt.

And if they have so much debt they have to stay in night school forever, so much for saving up a down payment on that cute little 800 sf condo.  Just as the lenders threw money at anyone who could fog a mirror and wanted a house in 2006, it’s happening with college loans now.

All of these actions were taken in the name of helping students, but few ever stopped to consider that loaning an 18-year-old kid $40,000 a year might not be “helping” him. In fact, just like housing, the beneficiaries weren’t the borrowers, but the lenders, brokers, and sellers. It is their collective, repugnant greed to blame.

A Real Estate agent speaking against the excesses in the mortgage market (by way of criticizing the college loan market) is quite refreshing!  So, how bad is this problem?

60% of student loans are either in forbearance or default (with interest piling up). A full 60% of these predatory loans are NOT being paid back. This is a staggering number. A full 60% of recent grads are watching their loan balances grow with less and less hope of ever paying them back.

Wait, wait, wait.  Math class is hard, but can we agree that if 60% of the loans are not being paid back, that this does not mean 60% of recent grads are affected?  The example in the Times, which Fielding himself quotes from, has one student with four different loans.   Is it possible that the same people are defaulting on multiple debts, leading to a lower percentage of college grads at risk?

Okay, that’s a digression.  20% or 60%, this is a problem.  There is $730 billion in student loan debt, and only 40% of it is being repaid. The rest is either in deferment (no payments, no additional interest), forbearance (no payments but interest accrues), or default.  And this is a problem, because:

This generation will have a harder time qualifying for home loans, and will certainly qualify for smaller loans, until these debts are paid off. But we are making NO progress. In fact, the situation is only getting worse.

They will have a harder time qualifying for home loans.  Priorities!  And speaking of home loans, here’s an example from the Wall Street Journal article showing the difference between home loans and student loans:

Heather Ehmke of Oakland, California, renegotiated the terms of her subprime mortgage after her home was foreclosed. But even after filing for bankruptcy, she says she couldn’t get Sallie Mae, one of her lenders, to adjust the terms on her student loan. After 14 years with patches of deferment and forbearance, the loan has increased from $28,000 to more than $90,000. Her monthly payments jumped from $230 to $816. Last month, her petition for undue hardship on the loans was dismissed.

Fielding doesn’t just see this as preventing future home sales.  He questions whether all these people should be buying in the first place, or whether they should borrow for college.

But “more people in college” is not the answer any more than “more people in homes”.

Fielding wants these debts addressed in bankruptcy proceedings, but he thinks government is beholden to colleges and banks.  Then government will help colleges and banks instead of debtors.  More loans, not fewer.  More “debt slavery” rather than less.  This Greg Fielding makes too much sense.  He almost sounds like a Socialist.

It’s an interesting way to sell houses.

Comments (132) -- Posted by: madhaus @ 5:01 am

132 Responses to “The next generation of home buyers has too much college debt to buy a house”

  1. maryjane Says:

    Some colleges think they’re like PA and should double in price every 10 years. I’m amazed at how the price goes up every year – economy be damned – and kids and their parents just add on the debt to pay up. Not going to college just isn’t an option for parents who want their kids to have a middle class lifestyle. It’s the rare child who can do well with just a high school diploma.

  2. zanon Says:

    Cortney Munna got degree in women study.

    Not RBA material

  3. maryjane Says:

    Colleges love to offer majors like women’s studies. It ensures you need to get at least a masters degree before anyone will hire you. It keeps those seats filled.

  4. SEA Says:

    “…and had to enroll in night school to avoid the unaffordable monthly payments that would start once the classes stopped.”

    Oh, yes, if she preserves her grace period, then she can take classes at the local community college. Just last night I spoke to a guy who suggested he would have $60k in debt. What did he study? Art. I didn’t get the details, but he suggested that he was going to graduate soon. I suggested he’d better get down to the local community college and spend $500 on tuition to avoid $4,500 in payments. The classes last 3-4 months (depending on quarters or semesters), and then he gets the grace period after that (which means he can take a quarter or semester off).

    The government will pay the interest on any subsidized debt, and sure the interest on unsubsidized debt accrues, but I am discussing cash flow.

    madhaus, that math was probably a result of the fine education that the author purchased. We know that all lending was predatory, so that 60% is really computed based on all loans, and that includes recent grads, so then we just make the claim, “A full 60% of recent grads are watching their loan balances grow with less and less hope of ever paying them back.”

    External factors, such as future inflation, clearly are no hope. Also if the loans are in repayment, then after 25 years (or 20?, Obama suggested he wanted to reduce it further, if I remember right) the debt is forgiven (read: report it as income on your income tax). Also if you die before the 25 years, the debt is forgiven.

    The bottom line to all of this, however, is not the level of debt, but rather the quality of the education, which directly relates to earning ability. Many doctors have far more student loan debt, but most doctors pay the debt back.

  5. maryjane Says:

    The attitude towards educational debt has undergone a huge change in the past few years. I know many people who were able to finance their UC educations totally on their own by working during the summer. It was expected that parents would help in small ways, like not charging you rent while you lived at home during the time you were in college but for the most part college was the child’s responsibility. I don’t know of any 18 year old who could pay UC tuition with a summer job these days. Now I know people who borrowed against their home equity to send their children to a private high school. The house had become an ATM and any debt would be tiny next to the equity they were building. So their children owe over $100,000 and have no clue that it’s going to be very hard to earn that much money with a music degree. People got stuck in the mindset that education was always a good deal, no matter how much it cost or what you were getting for your dollar and that housing prices always went up.

  6. SEA Says:

    “People got stuck in the mindset that education was always a good deal, no matter how much it cost or what you were getting for your dollar and that housing prices always went up.”

    Reminds me of Kimberly:

    “I thought it would funny to poke fun at San Jose for having a low priced house.”

    You know that a manufactured place priced below $100k is a good deal, because it’s a “low priced house.” It’s so funny! hahaha

    And we know that it’s not possible to over-price a Palo Alto home–it’s also “a good deal no matter how much it costs or what you are getting for your dollar.” Just ask Real Estater.

    This logic is too common. It’s like it’s not possible to lose.

    How about using Net Present Value (risk adjusted, as always) to determine how much that education is worth? Borrowing to make poor purchase decisions just makes the purchase worse, not better.

  7. maryjane Says:

    What do you think is going to happen to housing prices when all the people who bought back in the 70′s and 80′s downsize to move into the old assisted care facility. What I see coming is more high end properties available and no one in the pipeline who can afford them at half the price. Student loan debt will keep them from saving anything. So many people don’t have a clue how hard it is to actually save $200,000 to buy a $1,000,000 home and, believe it or not, there are only so many people out there who will be able to figure it out – even in the RBA. Iowa may become a real alternative once they do the math.

  8. maryjane Says:

    Heather Ehmke of Oakland, California, renegotiated the terms of her subprime mortgage after her home was foreclosed. But even after filing for bankruptcy, she says she couldn’t get Sallie Mae, one of her lenders, to adjust the terms on her student loan. After 14 years with patches of deferment and forbearance, the loan has increased from $28,000 to more than $90,000. Her monthly payments jumped from $230 to $816. Last month, her petition for undue hardship on the loans was dismissed.

    1. Subprime mortgage
    2. Foreclosure
    3. Bankruptcy
    4. $90,000 in student debt

    I’m sorry, but I don’t understand why I should care. How hard was it for any of the parties involved in this to see it coming? Maybe we need more college courses on the Depression. Read a book, take a history class – or a math class. Try not to be an idiot. Really!

  9. SEA Says:

    maryjane- “Try not to be an idiot.”

    …or get a better attorney.

    That “undue hardship” takes a real professional, not an average bankruptcy attorney that are so commonly selected. There is nothing wrong with a average bankruptcy attorney for most cases, but selecting an attorney who can properly presenting a student loan case is something that should be checked into.

    The same goes for short sales. Hire a professional that can get the job done–a short sale is not something that the “average” REALTOR is equipped to handle.

    Unfortunately, the problem is just like most other situations: Those who need a true professional don’t know it.

    Too often I have heard of the situation like this:

    Too much debt is piled up, and this is indeed true–in other words, there is no doubt that the person is bankrupt by just about any measure. So since the person has no financial means, they look for the cheapest possible solution. By cheapest, I am suggesting the lowest initial cost.

    While that may be a fine way to go, I’d suggest that anyone considering bankruptcy go in for an initial consultation at least a year before filing. This will give the person the opportunity to position themselves much better–stuffing retirement accounts as much as possible, for example. One might be able to stuff those retirement accounts with three years of contributions (late one year, next year, early the third year), and then after the bankruptcy is done, pay the penalty to withdraw the cash. I am not an attorney. Check all strategies over with a true professional. Follow your professional’s advice, and so on and so forth.

  10. madhaus Says:

    Take a look at the Wall Street Journal article linked to in today’s article. There’s a doctor who got hit with a huge collection fee on her medical school loans, and they’ve climbed to over half a million. It specifically says she can’t buy a house and has deferred marriage because of her debts.

    Yes, most doctors pay it back, but either this one didn’t do the math, or didn’t take the loans as seriously as she should. It’s hard to tell. But do we really want our next generation of professionals to graduate owing $250,000? The article suggested this was quite common and that because of it, few could afford to go into non-specialty careers.

    I gotta tell you, this situation really sticks in my craw. We’ve been saving for our kids’ college funds since they were born, but not everyone has the forethought or the ability. My comment on Brazilification was not a throwaway line. I think our future as a country is peonage for the majority.

  11. maryjane Says:

    SEA – I get the impression that long range planning isn’t the strong suit of people who get into this situation. I’m afraid that money isn’t something tangible to them. You don’t put it in the bank and watch it grow. You borrow it and it seems someone is always there to give it to you. You’re right though – when you have to write a check from your own account it hurts.

    I’ve seen the student loan problem coming for a long time. From what my kids tell me it’s the rare friend who doesn’t have some sizable debt. Very few were questioning banks when they would put a value on a piece of real estate and then loan money to the buyer. The bank was at least making an attempt to assess the value and they had an asset they could repossess that would be worth something. Look where that got us. With an education no one is saying that a degree in religion is worth less than one in engineering and yet everyone knows that it’s the truth. Once the diploma is awarded it’s owned by the person who earned it. There’s nothing to repossess. And yet banks are doing even less work evaluating the product they’re paying for. You can’t do a short sale on an education.

  12. madhaus Says:

    I wonder why my avatar went into hiding last post. Maybe it took up residence in that mobile home park with an undisclosed address.

    maryjane, glad to see you posting on this topic, and your thoughts on this topic are very much appreciated. Unlike our friend Worried Mom, we didn’t trade up to somewhere overpriced and our house is almost paid off.

    I went to college during the inflation of the late 70s and early 80s. Tuition more than doubled. How did it keep moving at this rate?

    Take a look at Fielding’s article, he links to some other very interesting ones. In particular, the three links from Mish deserve some discussion.

    SEA, you are correct, Fielding completely blew his math, both in failure to see there were multiple loans per student, and in several other assumptions. All recent grads do not have student loans. All recent grads are not failing to pay their loans. All loans are not predatory. And all loans are not made to recent grads.

    He also misquoted the WSJ article in ignoring the difference between deferment and forbearance.

  13. Real Estater Says:

    What makes college expensive is not just the tuition, but the living expenses. If you buy a house near your kid’s college, let your child use one room, and rent out the rest of the rooms, you can mitigate some of these expenses, especially if you have multiple kids going to the same school.

  14. SEA Says:

    madhaus- Before reading the article, let me break out the math, as you know I do often, probably too often for some people’s personal comfort.

    Using NPV (assume zero risk to make the computations easy; also assume that the opportunity cost of the student’s time is zero. Finally, just to simplify this even further, assume the only financial cost of the education is tuition, there is a break-even point (sure books, transportation and so on might be included, but that gets a bit more complicated).

    It’s a bad move to pay for the eduction to become a doctor if the NPV is negative. This is true even if you pay with cash.

    “We’ve been saving for our kids’ college funds since they were born, but not everyone has the forethought or the ability.”

    Depending on the cost-benefit analysis, maybe a trust fund is a better bet than education.

    Note too how Real Estater basically claims that the best educational value is Stanford, no matter the cost, as the NPV & ROI is always more positive than any other school (I don’t even need to consider negative NPV & ROI, as Real Estater has made it clear that with Stanford these are always positive, no matter the cost).

    An over-simplification, basic test, is to ask if the added economic value (i.e. added earning potential) is justified given the cost of the education.

    One of the highest cost-benefits that I have found is in truck driving. Truck driving school is relatively inexpensive, yet the added income potential is relatively high for many low-skilled workers. I am not suggesting that truck drivers make big money, but rather I am suggesting that with a minimal education the return on investment is good, and it’s always better to have a positive return on a small investment rather than a negative return on a large investment.

    Now from that WSJ article, “Among the charges: a single $53,870 fee for when her loan was turned over to a collection agency.”

    WTF! We all know that $500k is not a lot of money, and $500k + $50k is still not a lot of money, but $53,870 fee because she ignored her medical student loans?

    “She recently entered a rehabilitation agreement on her defaulted federal loans, which now carry an additional $31,942 collection cost. She makes monthly payments on those loans—now $209,399—for $990 a month, with only $100 of it going toward her original balance. The entire balance of her federal loans will be paid off in 351 months. Dr. Bisutti will be 70 years old.”

    FCKD.

    Initially it was so easy to ignore, and if you ignore it, it will go away, like a bad friend.

    …and the beat goes on…

  15. SEA Says:

    Real Estater- “What makes college expensive is not just the tuition, but the living expenses. If you buy a house near your kid’s college, let your child use one room, and rent out the rest of the rooms, you can mitigate some of these expenses, especially if you have multiple kids going to the same school.”

    No, no, no. The good parents send their children to Stanford, and buy a home in the RBA. Thus the kids are guaranteed big bucks and the parents pay for the education when they sell the home. And renting out rooms? There is no income tax on that, right?

  16. SEA Says:

    maryjane- “Once the diploma is awarded it’s owned by the person who earned it. There’s nothing to repossess.”

    You forgot the most critical part:

    There’s nothing to repossess OR sell by the owner.

    It’s ok that there’s nothing to repossess if the owner can sell it. Too often the value of the owner does not go up, and yet there is lingering debt.

    In the case of the doctor, her value initially went up, and she probably could have paid the debt off, but by ignoring the situation, it was costly. In other words, the debt load was probably initially ok, if she would have handled it better. As a doctor, at least she has something to sell. Too many women’s studies students are not, as zanon put it, RBA material (see #2).

  17. maryjane Says:

    OK, I read about the doctor and my first thought was sheer terror that someday I might find myself under her care. How much research did she do before she signed those papers? I get the feeling she’s read too much about doctors and their affluent lifestyles but didn’t think through the fact that college (4 yrs) + med school (4 yrs) + internship (1yr) + residency (2 yrs) = 11 years where the money is only flowing out. That’s before you even think about doing a fellowship which is probably another 3 yrs where you only earn what a basic college graduate would earn. Then, if you’re lucky, you can find a job where you have to work horrible hours and moonlight in an emergency room to make ends meet.

    Would you want this deep thinker to have to figure out what was wrong with you in a life or death situation? I don’t have any patience with people who can’t do the most basic math and expect me to pick up after them. The sad fact is that not everyone can afford to buy whatever they want. If you can’t afford it, and no one is willing to recognize your brilliance and give you a full scholarship, then maybe you should work for a few years to earn some money. College is one thing but in this instance med school seems like an indulgence. How much did she think she was going to make? Did she talk to an actual doctor? Does she know about managed care and HMO’s? Does she have a connection to the internet? My biggest fear is that my child marries someone like this and is in debt forever.

  18. maryjane Says:

    Real Estater- you go ahead and buy your house and rent it out to college kids. I’m sure they’ll do their best to keep the property up. I have a picture of college boys cleaning up after a party by using a garden hose in the living room. LOL!

  19. SEA Says:

    “My biggest fear is that my child marries someone like this and is in debt forever.”

    I know a doctor that consolidated his student loan debt at a fixed rate of 2.X% (or something low–I don’t remember the exact percent). I suggested that he not pay one dollar back early. Basically never pay low interest rate debt back early. Prepay high interest rate debt, if there isn’t a significant penalty (watch out for rule-of-78 loans for example).

    The debt is not a problem if there is plenty of equity. (E=A-L)

  20. anon Says:

    “What makes college expensive is not just the tuition, but the living expenses. If you buy a house near your kid’s college, let your child use one room, and rent out the rest of the rooms, you can mitigate some of these expenses, especially if you have multiple kids going to the same school.”

    Ahh, it wouldn’t be a burbed thread without a stupid comment by real estater.

    Let’s see….

    Average monthly rent in PA in 2006: $2162 for a 2br/2bath. Two students living there would pay $1,176 each (which is pretty high for a student). For the 9 months of school, this is $10,584

    Full time tuition for Stanford in ’06: ~$36,000.

    Which is the bigger number? I know real estater can’t figure it out but maybe someone else can help him…

    Did you even go to college, RE?

  21. Real Estater Says:

    >>Note too how Real Estater basically claims that the best educational value is Stanford

    Is there actually a link to this claim, or is this just a another claim?

  22. SEA Says:

    I’m not Pralay…

  23. Real Estater Says:

    anon says,
    >>Average monthly rent in PA in 2006: $2162 for a 2br/2bath. Two students living there would pay $1,176 each (which is pretty high for a student). For the 9 months of school, this is $10,584

    Full time tuition for Stanford in ‘06: ~$36,000.

    Which is the bigger number?

    Which part of the word mitigate did you not understand?

    In any case, if we you use your PA example, that would be quite an ideal scenario. My kids can just live at home. The only expense would be tuition. By the time they graduate, the appreciation on the house would likely exceed their tuition.

  24. Alex Says:

    If you fools would only become a cleaner like me… You’d be poor and have to drive a Subaru. But you’d also lead a more carefree life and have more time to go cruising the streets of Palo Alto for redheaded MILFs.

  25. maryjane Says:

    This all comes back to the primary public schools which are getting less money every day. They obviously aren’t teaching arithmetic or reading very well. Skills in either of those would go a long way toward keeping people from getting themselves into situations like these. But what about the parents. Isn’t anyone sitting their kids down and asking how they plan to pay for their education? All you need is paper and pencil. The math/science people can even graph the result for fun.

    Amount parent is willing to contribute + amount child can contribute + modest loan = amount that can be spent. Expected salary increase over say 10 years should probably equal total loan amount. There are plenty of options. UC will give you a substantial break on your tuition if you are a TA in a course. You’d have to work during the summer, not travel to Spain as ‘part of your college experience’. You can work for a year if you have to. Almost every child I know in college has some kind of scholarship as part of the package. It’s perfectly doable if it’s your priority. In the house my son lived in the temperature got down into the 30′s inside because when they prioritized, utilities were something they felt they could skimp on. They all had winter jackets and the libraries were heated. So you put duct tape around the windows to keep the fresh air out. It helps. If you take a full course load you can graduate in 3 1/2 years and save on a whole semester. People who think they deserve the experience of NYU film school and a nice apartment in NY also deserve to not whine about it when the bill comes due. Part of the learning experience of college is to test the limits of what you really need vs. what you just think you need. Welcome to adulthood.

  26. Real Estater Says:

    maryjane says,
    >>This all comes back to the primary public schools which are getting less money every day.

    Didn’t you say it’s all about parents watching their kids?

  27. Alex Says:

    maryjane,

    you’re such a party-pooper. when i was in college, all I could think about was the next party and the next co-ed. Parties, beer bongs, tailgates. I enjoyed it so much, I had to do college twice.

    Didn’t go to class much but it was loads of fun. Don’t have much to show for it now but it made dealing with my current job almost worth it.

  28. maryjane Says:

    It’s a partnership and each side has to do their job plus some. I expected the school to teach my children to read but that didn’t mean I never helped them get better at it. I didn’t just take their essays and look at the grade. I read them and we talked about things that we would fix in the next one. If the child isn’t doing well it’s not someone’s fault. It’s a problem that needs solving and the team needs to get working on it. You know about being part of a team, don’t you RE?

  29. Real Estater Says:

    >>You know about being part of a team, don’t you RE?

    You’re preaching to the choir.

  30. maryjane Says:

    Alex – party on but if I’m paying I want A’s.

  31. maryjane Says:

    RE – I’m glad we’re on the same page, team leader.

  32. SEA Says:

    He’s no ordinary team leader, he’s part of the PMO team organizing mega mega-projects.

  33. maryjane Says:

    SEA – then he should have a great time with school. Can you fit 5th grade on an excel spread sheet?

  34. SEA Says:

    Fifth grade? I’m still waiting for him to graduate from second grade!

  35. maryjane Says:

    I can see a problem with geography already. RBA vs PA? Austin?? San Jose??? Aarrrghh!

  36. SEA Says:

    What do the flyover states look like?

  37. maryjane Says:

    Dirt.

    What currency do they use in New Mexico and do I need a visa?

  38. bob Says:

    My personal take on this is that there has been a shift from how college is paid for. It used to be pretty common that if a child wanted to go to college, they usually paid for it themselves. This was the case with my Grandfather, Aunt, Mom, Dad, and for the most part my brother and I. But these days it seems that parents now feel that they must pay for it. This has in turn enabled colleges to justify raising tuition as more and more students get bankrolled by their parents. If everyone had to pay for college with jobs flipping burgers, there could only be a certain amount colleges could charge. When you can dig into parent’s pockets instead, this changes the ball game.

  39. Real Estater Says:

    With skyrocketing college costs, it makes total sense to go for the top schools in order to reap the ROI. If your kid is not cut out for higher education, JC might be a better place to let him/her learn a trade. I wouldn’t waste my money sending a kid to go partying at school.

  40. maryjane Says:

    Back in the olden days my college had one bus into the big city at 10 am on Saturday. It came back at 6 pm. Now there are trips on an hourly basis throughout the day all week long. The gym has been rebuilt, departments added, dorms built but the best is the vegan dining hall. Is it worth 17 times what I paid? I can’t for the life of me figure out how but their seats are full. I do know that there’s no way my father would have considered sending me there now.

  41. SEA Says:

    That’s right–the higher the initial cost, the higher the ROI.

    Ever considered buying a manufactured home and becoming a comic artist?

  42. SEA Says:

    “I can’t for the life of me figure out how but their seats are full.”

    Student loan debt, maybe?

  43. Alex Says:

    In New Mexico, they only take pesos. And they don’t take American Express.

    Better learn to say “Yo quiero Taco Bell.”

  44. Alex Says:

    Faux Estater said, “I wouldn’t waste my money sending a kid to go partying at school.”

    Why you diss me like that, yo?! That’s how I met your wife. She and I, we go back long way. We tight.

  45. maryjane Says:

    Maybe mobile homes will be a good investment. Or cars. Or refrigerator boxes. I agree with madhaus – we’re headed the way of Brazil.

  46. SEA Says:

    Funny thing, I know where you can buy a manufactured home for “only $99k.”

    I’m sure Kimberly researched this…

  47. Petsmart groomer Says:

    I went to an open house in 94301 this week-end (787 Melville). Not a bad house in itself, but the lot is odd and it’s on the wrong side of Middlefield. RE, what’s the traffic like on Melville?

  48. madhaus Says:

    PG, why are you wasting your time in 94301? I was looking at open houses today, too, but a little more upscale.

    Glad to see a lively discussion on this topic. Does anyone have any answers for the current mess we have? The links from Fielding’s article (Mish’s posts) suggest the Federal guarantees on the loans, plus the Pell grants cause the high tuition.

    That isn’t even the beginning of it. A huge amount of the Pell grants are going to for-profit education.

    Parents, do not pay for your kids to go to these programs. They’re in it for the money, and they admit it. They’ve got people working boiler rooms trying to pull more bodies in the door; once a student finishes ONE class, the loans are keepers. The for-profit trade schools are particularly egregious.

    And yes, University of Phoenix, this means you.

  49. Real Estater Says:

    Petsmart groomer Says: >>Not a bad house in itself, but the lot is odd and it’s on the wrong side of Middlefield. RE, what’s the traffic like on Melville?

    It has a little more traffic than houses on the interior of the neighborhood, but not enough to pose an issue. Just curious, why are you looking in 94301?

  50. SEA Says:

    “And yes, University of Phoenix, this means you.”

    University of Phoenix is the lowest you can get on the benefit:cost ratio.

    The benefit is about as close to zero as you can get, and the cost is about as high as you can get.

    “A huge amount of the Pell grants are going to for-profit education.”

    There are some good for-profit schools, and it’s not a bad thing if a student goes to a good for-profit school. That said, the student should treat a Pell grant as cash, but I’m guessing that’s not the way it’s treated.

    There is an even bigger problem with community college. Too many single moms go and borrow $40k-$50k and never earn an associate’s degree. It’s really sad.

    Some of these medical programs, such as Medical Assisting, can take a minimum wage earner that is unemployed to employment at $12-$20 per hour in less than a year.

    Take 9 month program at a for-profit school that costs about ~$14k in tuition, and subtract the Pell grant, and for ~$10k someone who was unemployed is suddenly employed. (The actual cost might be a little more or less, but these numbers are fairly reasonable.)

    Is the $10k in debt worth it? For most it’s a great deal, but for a few others it just makes matters worse, as they have spent the Pell grant and have $10k in debt.

    Also for-profit school must adhere to a 90/10 rule. No more than 90% of a for-profit school’s revenue can come from financial aid.

  51. SEA Says:

    I should add that’s my personal opinion about University of Phoenix based on my own personal experience with various degree holders, “graduates.” No, I have not random sampled, and there probably are some students who actually get an education from UoP, but I am yet to find one.

  52. Real Estater Says:

    By the way, Petsmart groomer, the only “wrong side of Middlefield” is being on Middlefield.

  53. nomadic Says:

    Maryjane said: People who think they deserve the experience of NYU film school and a nice apartment in NY also deserve to not whine about it when the bill comes due. Part of the learning experience of college is to test the limits of what you really need vs. what you just think you need. Welcome to adulthood.

    BRAVO!

    bob: It used to be pretty common that if a child wanted to go to college, they usually paid for it themselves. This was the case with my Grandfather, Aunt, Mom, Dad, and for the most part my brother and I.

    Yep, my dad did it that way too. GI Bill. I wouldn’t recommend it these days. Fortunately my brother and I got full scholarships so my folks could help the other two slackers a little.

    -
    There’s been a lot of good discussion here today. My 2 cents on the loan situation – the programs should have a little counseling on the front end regarding the ROI of the chosen degree and require progress against earning a degree to continue to receive funding. I’m not saying kids can’t choose their major, but it should be made crystal clear how long they should expect to be paying for it.

  54. SEA Says:

    nomadic-

    “require progress against earning a degree to continue to receive funding.”

    There are extensive rules regarding this. Both rate of progress as well as grade point average.

    Search: Title IV SAP

  55. nomadic Says:

    Thanks, SEA. How does this happen then – you wrote, “Too many single moms go and borrow $40k-$50k and never earn an associate’s degree. It’s really sad.”

    Personal loans?

    -
    One other thing you all might find interesting (especially Mr. Math aka SEA) ;-) :
    http://money.cnn.com/2010/06/03/real_estate/rent_vs_buy/index.htm

    Trulia has a new Rent vs. Buy index, but it’s calculator I found kind of interesting. It isn’t as cool as the NYT version we post on occasion. It seems to be leaving something out too, but it’s been a long day and I can’t put my finger on it yet.

  56. SEA Says:

    nomadic- one more thing.

    “Yep, my dad did it that way too. GI Bill. I wouldn’t recommend it these days.”

    In the 1940s the GI Bill was sufficient to pay for a Harvard education. Today? Doesn’t pay that much.

    (I wish I could quickly find a source. I looked it up once, but I don’t have the source right here. The GI Bill enabled many to go to Harvard in the 1940s, even if it didn’t technically cover 100% of the tuition.)

  57. nomadic Says:

    argh. it’s for its

  58. nomadic Says:

    GI Bill worked pretty good in the 1950s too – after the Korean War.

  59. SEA Says:

    “Thanks, SEA. How does this happen then – you wrote, “Too many single moms go and borrow $40k-$50k and never earn an associate’s degree. It’s really sad.”

    Personal loans?”

    1/2 time load, less than 100 level classes (such as math 0XX–low level math is common), plus financing living expenses.

    So what happens is the single mom takes a minimum load and maximum debt. This results in a very slow completion, in time. Those SAP requirements are GPA/rate of progress, which is based on credits attempted. The SAP isn’t concerned with time so much as attempted credit hours. If you keep passing classes, then the number of credits you can take is quite high.

    Let’s say you can go in debt by $3,000 – $4,500 per quarter. This is not exactly easy, as it depends on financial need, estimated cost of attendance, etc. But start with a student that needs some sub-100 level classes, and go for 10 quarters at 6 credits, and we are up to $30k-40k.

    It’s about this time, or a bit sooner, that a new school is needed, which basically resets the SAP, but there are lifetime maximums on the debt. Even if they attempt to transfer some credits, maybe some don’t transfer…

    Another thing that happens, but is not that common, is a student will have a bunch of credits from many different schools, with debt attached to each, but not enough credits for residency at any one school.

    I do not recommend these actions, but I am pointing out that these things can and do happen.

    Look up the total cost of attendance for a year at your favorite CC and assume that the single mom will qualify for nearly 100% student loan financing. Keep in mind that the cost of attendance is almost as much for a 1/2 load as it is for a full-time load. At this rate it takes 4 years, plus the sub-100 classes, plus repeating a couple classes, etc.

    Does this give you a better picture?

  60. nomadic Says:

    Yes, and it’s appalling. It’s also very different from what I would call “progress.” Reminds me of people who are like professional students. That should not be allowed with loans. The point is to actually get a degree. There should be more incentive (read imperative) to finish as quickly as possible. That’s how the loans get paid back.

    Would it be too hard-ass to also say that sub-100 level courses shouldn’t qualify for loans? ‘Cause to me, the need for those would indicate someone who should be going for vocational training instead…

  61. nomadic Says:

    Oh, and I’ll just toss in one last comment: guess who gets to pay for all of these bad loans when they default? YAY, more useless crap for taxpayers to subsidize along with the bad housing loans.

  62. Petsmart groomer Says:

    > Just curious, why are you looking in 94301?

    Some friends are trading down and asked me to look at this house for them. Not that this is any of your business :-)

  63. DreamT Says:

    PG – It’s a nice enough area, but the houses are way too crowded against each other IMO. And last I drove by (a few months ago admittedly) I noticed all the utility poles and electric+cable+phone wiring across the streets, really defeating the point of the street trees – wasn’t Palo Alto going to bury all that wiring?

  64. SEA Says:

    “2009-10 COST OF ATTENDANCE BUDGETS AT CAÑADA COLLEGE:”

    $17,712 (less a bit for the 1/2 time load)

    http://www.canadacollege.edu/financialaid/faq.shtml
    (about 1/2 down the page)

    DeAnza: $17,451 (once again, less some for the 1/2 time load)

    http://www.deanza.edu/financialaid/coa.html

    “There should be more incentive (read imperative) to finish as quickly as possible.”

    Remember the doctor near the top? She could have been taking classes to avoid paying that debt back; just like the guy I wrote about in message #4. Sure they might have to pay cash, as they have exhausted the total financial aid available (lifetime maximums, for example), but they still don’t have to start paying the student loan debt back until after the grace period expires…

    Mind you, this gets to the difference between accrued interest and cash flow. Many single moms don’t care about the future (read: high discount rate), so cash today is a great deal, even if interest accrues.

    The financial aid system, much like the bankruptcy system, can be used for good, but there are those who work the system.

    Remember also that after 25 years (or less, as Obama was tinkering with lowing the time), the unpaid student loan debt is forgiven.

  65. Real Estater Says:

    >>Some friends are trading down and asked me to look at this house for them. Not that this is any of your business

    Why so sensitive? It’s only an open house, dude.

  66. Real Estater Says:

    >>wasn’t Palo Alto going to bury all that wiring

    They did in one neighborhood (Leyland Manor).

  67. Real Estater Says:

    madhaus says,
    >>PG, why are you wasting your time in 94301?

    It’s none of your business, got that?

  68. nomadic Says:

    They did in one neighborhood (Leyland Manor).

    Did the city run out of money after that, or is that the neighborhood with political clout?

  69. maryjane Says:

    Petsmart -

    Can I ask why your friends are trading down? Are they downsizing or do they need something more affordable? I know people who are moving into smaller places now that most of the kids are gone and I wonder if this is a trend that’s taking off in a bigger way. Ten years ago people seemed to be less willing to give up their big places even if they were living there with four cats and a goldfish. They considered it an appreciating asset but now more and more people seem to be cashing out.

  70. madhaus Says:

    >>Some friends are trading down and asked me to look at this house for them. Not that this is any of your business

    Why so sensitive? It’s only an open house, dude.

    It’s none of your business, got that?

  71. WillowGlenner Says:

    I traded down, from Los Gatos to Willow GLen. My reasons were,
    - kids were gone we needed a house under 2K sq ft
    - wanted an “urban lifestyle” where house was much more close in
    - wanted a medium sized yard, not the huge forest we used to have since kids took the big dog
    - wanted to be close to the Shark tank
    - finally, since I am always thinking about investment, wanted a midprice house to appreciate.

  72. maryjane Says:

    What I see is more people thinking about is what’s going to happen if they lose their ability to drive. I know several people (80+) who are locked into their houses (and mindset). There’s no grocery store within walking distance, all the neighbors are working all day, they don’t want to do the upkeep and the place is starting to fall down around them but they would never consider selling even though they’re totally dependent on others to keep their lifestyle going. The planners are doing exactly what WillowGlenner mentions. Personally, I’d love a one bedroom in NYC on Sutton Place with 10 ft high ceilings and a doorman. Oh yeah!

  73. Petsmart groomer Says:

    > Are they downsizing or do they need something more affordable?

    Downsizing.

  74. madhaus Says:

    Use the Bay Area Spirit term, PG. Rightsizing.

    Or better yet, Deadwood Pruning.

  75. Insecure Techie Says:

    My kids can just live at home. The only expense would be tuition.
    —-

    The Real Question for Real Estater is that if his kid wants to live at home with a dad constantly bragging about his zip code. After all, Real Estater needs respect from his coworkers kid’s new GF/BF.

  76. nomadic Says:

    I thought making a kid commute to college was equivalent to child abuse in this day and age. What would the neighbors think?!

  77. Real Estater Says:

    >>I thought making a kid commute to college was equivalent to child abuse in this day and age. What would the neighbors think?!

    My neighbor is very proud to tell others on the block that his son goes to Stanford.

  78. DreamT Says:

    They’d think that the kid is so well-rounded, he does not need to fend by himself to prove that he is :)

  79. Real Estater Says:

    >>The Real Question for Real Estater is that if his kid wants to live at home with a dad constantly bragging about his zip code.

    Brag to whom? Others in the same zip code?

  80. DreamT Says:

    #79 – Insecure Tacky probably meant your co-workers up North

  81. madhaus Says:

    I think it would be really funny if one of RE’s kids got accepted at Harvard or similar prestigious East Coast school, but was hosed from Stanford. Can you imagine what the neighbors would get to hear?

    “No son/daughter of mine is going to pay $15,000 a year for room and board! You’re going to Foothill and you’ll like it and you’re transferring to Cal in 2 years! This house will be quadruple value by 2023! Don’t you remember what zip code you live in?”

    Or even worse, Yale. Great school, really awful town. Not worth buying there, that’s for sure.

  82. Alex Says:

    I don’t think Faux Estater’s kids would have the genes and intelligence to make it to Haaaarvard or Yale.

    Don’t get his hopes up.

  83. nomadic Says:

    My neighbor is very proud to tell others on the block that his son goes to Stanford.

    Do you feel sorry for him since he can’t afford to let his kid live on campus? Or are enough PA parents practical in regard to not paying to move the kid a few blocks away, making it “acceptable” to keep them at home?

  84. madhaus Says:

    Actually RE didn’t say if the neighbor kid lives at home or not, just where the kid “goes” to college.

    And it’s entirely possible that the kid “goes” to Stanford to buy a box of Sprinkles Cupcakes, then continues on up Sand Hill to 280 and parks at Foothill Junior College, where s/he’s actually matriculated.

    Alex, of course I’m funning him. It’s like when I let him pretend his Boxster has the Police Emergency number on the side. Wonder what kind of SUV the trophy wife is driving, an Elantra ?

    Insert your favorite Leland Stanford Junior University joke here.

  85. SEA Says:

    “Wonder what kind of SUV the trophy wife is driving, an Elantra ?”

    My guess: Kia Sorento

  86. nomadic Says:

    Kia Sportage. Cheaper.

  87. SEA Says:

    But the Sorento is promoted by a phallic symbol with an STD.

    http://www.youtube.com/watch?v=NBh3r2mVFR8

  88. madhaus Says:

    But the Sorento is promoted by a phallic symbol with an STD.

    No way. Those are pleasure dots.

  89. SEA Says:

    “Those are pleasure dots.”

    And would his trophy wife expect anything more?

  90. nomadic Says:

    But the Sorento is built in the US. Something built anywhere else (even Korea) is more well-rounded and therefore better.

  91. SEA Says:

    Maybe a NUMMI built Toyota? What could compete with a Bay Area built product?

    My new suggestion:

    Toyota Matrix.

    We know that he really got excited over the $50M investment in Tesla. I’d hate to see her driving a Geo Prizm. But built in the Bay Area, you know it must be of the highest quality.

  92. Is Education in a Housing like Bubble? - Politics and Other Controversies -Democrats, Republicans, Libertarians, Conservatives, Liberals, Third Parties, Left-Wing, Right-Wing, Congress, President - Page 3 - City-Data Forum Says:

    [...] definitely , and the dumbasses that inflated it didn't think through the obvious consequences… The next generation of home buyers has too much college debt to buy a house | Burbed.com So much for any 'recovery' in home [...]

  93. Alex Says:

    And it’s entirely possible that the kid “goes” to Stanford to buy a box of Sprinkles Cupcakes, then continues on up Sand Hill to 280 and parks at Foothill Junior College, where s/he’s actually matriculated.

    Madhouse, don’t insult Foothill College like that. If only Faux Estater’s kid(s) know what college is…

  94. Insecure Techie Says:

    making it “acceptable” to keep them at home?
    —–

    I guess it is quite “acceptable” for Real Estater and his kids. That’s how slow Real Estater is. It probably runs into family. When his kid is 19, he will say:
    “Dad, thanks for the reminder. With the holiday season here, I’m probably going to postpone moving out til the next Spring season.”

    And when his kid turns 23 he will say something like this:
    “I’m ready to move out. Actually, my plan is to move out within the next couple of years.”

  95. Greg Fielding Says:

    madhaus,

    Glad you thought the post was interesting! And, nice catch about the fact that 60% of the loans not being paid back is different than 60% of the borrowers not paying. Either way, it’s still bad.

    One disclosure I forgot to add: I’ve got 3 young kids so I’m rooting for anything that will bring the cost of college down to Earth!

    Great discussion here.
    -Greg

  96. madhaus Says:

    Greg, thanks so much for stopping by. I hope you understood that when I called you a socialist, that was a compliment. :)

    Don’t know what you make of this place, but a smart real estate agent could learn a lot by seeing what the regulars here think of their talented cohorts.

    It seems the idea of education loans as the new subprime has really caught on. I’ve got 2 kids getting ready for college, too.

    My parents had saved for money for my brother and I, then were hit by the galloping inflation of the 1970s; what they thought was more than enough was nowhere near what they needed. Looks like this is happening again, only this time only the college costs are running full out while wages are still stuck in the ditch.

    Do you see any answers other than rewinding the bankruptcy laws (the ones rewritten for the credit card firms and hospitals)?

  97. nomadic Says:

    I’m not convinced changing bankruptcy laws should even be a part of the discussion. First, it doesn’t address the root cause of the problems, and second, rewards bad behavior. (Like WG’s suggestion on another thread of forgiving the debt of anyone with a “bad” loan. Yay, free houses for everyone who got in over their head. F.U. to the rest of the population who managed their finances better.)

  98. Greg Fielding Says:

    madhaus,

    I don’t see any other practical solution. Prices skyrocketed because demand was over-stimulated (for 20-30 years probably). Reducing loans will reduce demand. And, without reducing the availability of loans, I’m not sure any other solution will work.

    nomadic,
    I don’t know that there is any one root cause. Blaming the student ignores the pressures and brainwashing they’ve endured. Blaming their parents ignores those same issues. We can’t just blame the lenders…who wouldn’t want to lend money under those terms! We could blame the education lobby. We can blame politicians. We can blame our entire culture for putting so much emphasis on a college education. This bad plant has a lot of roots.

    In this light, I do think that a bankruptcy re-write is the most practical solution. It’s either going to be a politician, a loss-mitigator, or a bankruptcy judge deciding what’s fair.

    I’ll choose the judge.

  99. SEA Says:

    “I don’t know that there is any one root cause.”

    If I were going to guess one root cause, one word comes to mind: Greed.

    Beyond that, poor investment, based on poor financial theory. Look at some of the Real Estater theories here. Price will double in the next 10 years because they have doubled in the past 10 years.

    There are some similar theories on education: You’ll automatically make it big if you just get that degree. In fact, the government has basically said, “If you don’t make it big, don’t worry, as we have all kinds of provisions so you won’t be required to pay back that student loan debt.”

    What we need is good investment. The WPA created all kinds of lasting public assets, many have provided years of economic benefit.

    Cash for clunkers?
    Lower interest rates?
    Cash for caulkers?

    Those cars will be long gone before the debt the government took on to pay for the program is gone.

  100. maryjane Says:

    I saw this the other day. Not only are law students not able to find jobs but the schools still think it’s a great idea to keep increasing tuition. The class of 2009 rode the crest of the wave but jobs disappeared for the class of 2010. I really wonder what the schools are charging for.

    http://abovethelaw.com/2010/06/open-thread-its-time-for-another-round-of-tuition-hikes/#more-20904

  101. Real Estater Says:

    We are #1 !!!!!!!!!!!

  102. Greg Fielding Says:

    It was an interesting study. I wrote about it:

    http://bayarearealestatetrends.com/2010/05/is-san-francisco-the-smartest-city/

  103. Real Estater Says:

    Greg,

    I first saw it on ABC News tonight. Then I noticed it on SF Gate.

  104. anon Says:

    How does a study that looks at the density of people with college degrees conclude that they are smart?

    Erroneously. That’s how.

  105. anon Says:

    Real Estater, do you watch ABC news? Is that how you stay so informed? You really are number one.

    But remember, you’re not the only one who knows it’s better “with the intellectuals!”:

    http://www.youtube.com/watch?v=4UdmYInXplY&NR=1

  106. WillowGlenner Says:

    Like WG’s suggestion on another thread of forgiving the debt of anyone with a “bad” loan. Yay, free houses for everyone who got in over their head. F.U. to the rest of the population who managed their finances better.

    Hey nomadic, third party posts without context is tacky. My POINT is that the banking industry engaged in egregious practices that were far and away more damaging to the economy on the whole vs any homeowner. If somebody is going to pay for overpriced houses it should be the party most responsible. that is the point. And the people who really F.U’d you are not those homeowners, it was the banks who lent the bubble into oblivion because they thought it didnt matter with their scam “insurance”, CDSs.

  107. SEA Says:

    Moral hazard is a problem.

    When so many fall into foreclosure, is it a failure of society, or is individual failure on a mass scale?

  108. Alex Says:

    #101.

    San Francisco was the smartest city because of my massive brainpower, you numbnut. No thanks to you. Your pathetic retarded ass dragged the score down a few standard deviations. But that’s ok. I still kick ass.

    *sneer*

  109. Alex Says:

    And what’s this “We are #1 !!!!!!!!!!!” bullsh*t?

    Last I checked, the ghetto section of Palo Alto is nowhere near San Francisco. How does that make “we”?

  110. anon Says:

    “Like WG’s suggestion on another thread of forgiving the debt of anyone with a “bad” loan. Yay, free houses for everyone who got in over their head. F.U. to the rest of the population who managed their finances better.

    Hey nomadic, third party posts without context is tacky. My POINT is that the banking industry engaged in egregious practices that were far and away more damaging to the economy on the whole vs any homeowner. If somebody is going to pay for overpriced houses it should be the party most responsible. that is the point. And the people who really F.U’d you are not those homeowners, it was the banks who lent the bubble into oblivion because they thought it didnt matter with their scam “insurance”, CDSs.”

    That sure was a stupid suggestion, wasn’t it nomadic?

    Hilarious that this guy thinks the banks are the ones who should pay for the overpriced homes.

    Here’s a thought: The assholes who borrowed the money and signed a mortgage should pay for the overpriced homes.

    This is called personal responsibility and maybe American wouldn’t be so lame if we had a little more of it.

  111. Alex Says:

    Who needs personal responsibility when you have politicians ready and eager to offer bailouts to anyone in return for a few votes.

  112. madhaus Says:

    I think I’ll start another flame war by accusing all those property owning assholes in California to take some personal responsibility and pay their fair share of property taxes so we still have a fcking school system.

    But instead the jerks have voted in yet another fcking exception to property re-assessment, and they even called it Prop 13 again this time!

    You Prop 13 selfish bstards just make me sick. That law is destroying this place. But OH NO, the evil TAX MONSTERS need to be kept at bay, even if you drive the whole state into bankruptcy, ruin every gddmned school district and agency around you. The wealthiest towns can vote in their fcking parcel taxes and screw you who can’t afford to live there.

    You all make me sick.

    Okay, I feel much better now.

  113. SEA Says:

    “Every day we call the adjuster eight or 10 times. There’s no answer, no answering machine,” said Regina Shipp, who has filed $33,000 in claims for lost business at her restaurant in Alabama. “If BP doesn’t pay us within two months, we’ll be out of business. We’ve got two kids.”

    These slackers obviously don’t have enough saved…

  114. madhaus Says:

    I bet she even supported PROP 13!!! lol

  115. SEA Says:

    Where’s your Bay Area Spirit?

  116. Insecure Techie Says:

    Last I checked, the ghetto section of Palo Alto is nowhere near San Francisco.
    —–

    If Real Estater did not live in Palo Alto, Palo Alto would have been #1 smartest city.

  117. Real Estater Says:

    >>San Francisco was the smartest city because of my massive brainpower, you numbnut. No thanks to you. Your pathetic retarded ass dragged the score down a few standard deviations. But that’s ok. I still kick ass.

    Clearly the words of a smart Asian man. Even the Indian guy has got to be impressed.

  118. nomadic Says:

    #106 – lest I be “tacky,” here’s the post I paraphrased:
    http://www.burbed.com/2010/06/08/house-on-the-market-for-855-days-needs-your-help/#comment-60981

    Sure, banks did far more damage than any individual homeowner. There’s plenty of blame to go around. It’s like the chicken & egg – if idiots who couldn’t pay their debts weren’t allowed to borrow money, none of this would have happened; or if the banks gave loans to any dolt off the street to feed their CDOs, there wouldn’t have been a bubble. That doesn’t mean they should be given free houses.

    anon – loved #105. Classic South Park episode.

  119. madhaus Says:

    Wait, you forgot to blame Goldman and AIG and Paulson and… who did I forget?

    My god, today I had a discussion with someone who tried to pin the whole thing on Democrats giving away taxpayer money to put irresponsible people (read: minority) in houses. He’s blaming Barney Frank.

    Where is that ludicrous meme coming from and how do I cut through the crap on Fox that put these lies in their heads? You can’t point to rhetoric when the engine was fueled by greed!

  120. Hot Dog Says:

    madhouse, you are a dumbass.

  121. SEA Says:

    It was acceptable to put irresponsible people (minority) in houses so long as the market values go up. As soon as the game shifted (i.e. market values going down), it’s the fault of the Democrats.

    Basically as long as there was plenty of money, everything was just fine.

    I’ve asked the question many times–

    Let’s see, you owe $100k (round number, use a positive scalar multiple to increase or decrease as necessary). You refinance at a lower rate and instantly your payments go down (for simplicity keep the terms the same, but the duration is extended to the back to the original duration–30 year fixed refinanced back to 30 year fixed after 3 years).

    In other words the money is magically cheaper. Without getting into the technical finance details, the loan originator, mortgage broker, lender, and on and on each made some cash. The “owner” pays less cash. America is great.

    The question, however, is where did all the cash come from that paid all the mortgage industry professionals. (I use the term ‘professionals’ a little loose in some cases, but I hope you get the idea.)

    In one example, I know a guy who made $50k on a single deal. Sure it was a big loan, and sure the borrower probably could have done better, but the borrower was actually happy that his payments went down, even if he was just raped by the lending industry. My claims are based on the fact that the borrower could have obtained an even better rate elsewhere, but did not care, since it was all “free money,” so to speak.

    The technical finance deals with yield spreads and the wholesale rate sheets. Basically if a person qualifies for 5% cash, the higher interest rate you are able to sell them, the more cash you make. If the current loan is 8%, and you sell them on 7%, then you’ll make far more than if you sell them a 5% loan. It’s all based on NPV computations.

    Yes, that’s right, sell an irresponsible person a 7% loan when the going rate is 5% and life is good, until the lender finds out that the rate should have been 10%. And to think, at 10% the tax benefit would be so much better.

  122. madhaus Says:

    SEA, you know someone else who made the exact same mistake, and he’s happy about it too. His name is Hot DogReal Estater, and he’s thrilled that his loan runs another 30 years after he refinanced this spring.

  123. SEA Says:

    Remember: Never pay low-rate debt back early.

  124. Alex Says:

    Barney Frank is also responsible for bullshit policies that pushed housing onto people who couldn’t afford it through gubment-sponsored Freddie Mac and Fannie Mae. Bush should take a little bit of the hit too.

    All these freaking dolts took my tax dollars and our country is still going to hell. =(

  125. madhaus Says:

    That’s not true, Alex. Back it up.

    http://krugman.blogs.nytimes.com/2010/06/03/things-everyone-in-chicago-knows/

    It’s Foxpaganda, it’s a lie, and I’m calling you on it.

  126. Alex Says:

    You can call on me whatever you want. Barney Frank needs to be dragged out and pummeled. He was in bed in Fannie Mae, I meant his Fannie Mae executive boyfriend.

    The NY Times isn’t exactly known for being a conservative publication. So don’t try to perpetuate the Foxpaganda myth.

    http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html?sec=&spon=&&scp=3&sq=%202003%20fannie%20freddie%20labaton&st=cse

    Back in 2003, the Bush administration wanted to increase oversight of Freddie and Fannie.

    See Barney Frank’s quote on page 2: “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

    Same with Greenspan for reckless monetary policy.

  127. madhaus Says:

    Oh come on, the Bush adminstration was not exactly known for stepping up regulation on anything, unless the whole purpose of that entity was at odds with Team Bush’s business model. If someone in that administration wanted to step up oversight of Fannie and Freddie, it was probably because they were competing with financial sectors who could make the same loans at higher profit.

    Come on. That wasn’t difficult to work out, was it? The mortgage meltdown occurred when the Republicans, who are not known for being friends of the poor and unconnected, controlled both houses of Congress as well as the Executive. Blaming it on Barney Frank is like blaming overspending during the Iraq WarInvasion on Dennis Kucinich.

  128. Alex Says:

    Well, you wanted some evidence. I showed it to you. Barney Frank’s agenda was to encourage easy mortgages for the masses (so did Bush) through Fannie and Freddie. As the chairman of the Financial Services Committee, he has a very big say in what goes on in the financial industry.

    http://online.wsj.com/article/SB122290574391296381.html

    I didn’t say that Bush was clean of this mess. If you refer to my previous post, I faulted him too. But Barney Frank is dirty. If you somehow expect him to be clean when his boyfriend worked for Fannie, you’re no better than Real Estater. Your liberal bias is clouding your judgment.

  129. WillowGlenner Says:

    You know madhaus, I am totally against prop 13- I have said that before.

    But here’s the problem. These unions for state workers that pay 100% pension benefits including full medical FOR LIFE to every state prison guard, nurse, cal fire or whatever other semi professional job has bled the state dry. There is a massive amt of outrage about this and taxes are not going to get raised anywhere- for anything- until the state does something about it.

  130. madhaus Says:

    All you had to say was “prison guard.”. That group has got way too much, too soon during the prison building boom. All these prisons thrown up in small towns with no other economic future, and if they go under, so does the whole surrounding area. It’s a sickening way to keep a town “alive.”. The guards have some of the worst excesses in their contracts because of the disproportional need these areas have for the new prisons.

    I’m not going to defend bloat for the other groups you mention but the prison guard union has got to be the worst of them. Remember when Arnold had to do his first round of budget cutting and they were the one group whose money increased?

    Another reason the budget is a mess is the combination of it needing to pass by 2/3 with the gerrymandering of districts for party safety. Districts are so strongly skewed toward one party or the other that representatives dare not cross party positions when they vote.

    very few states require a 2/3 vote to pass a budget, giving the minority party the ability to derail anything they want. And they do. Look how much trouble the US Senate has getting to 60 votes; the CA budget has even more trouble getting consensus.

  131. Real Estater Says:

    Petsmart groomer,

    Did your trade-down friend buy the house? If not, he missed the opportunity. The house is sold already (after 1 week).

  132. Cashing In on Refis | Burbed.com Says:

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