Help for homeowners

Yesterday, President Obama unveiled a "new" plan to help home-owners who may be able to benefit from re-financing (see article here). From what I have read, I think the program is good, but I'm not sure how successful it may be.

The program is designed as an aid to homeowners who want to refinance and take advantage of today's lower rates. Nothing that I have read says it will reduce the amount of the loan, only the interest rate. Let's say someone took out a loan on a $300,000 home in 2004 with a rate of 5.5%. If they had chosen a fixed rate, that's a payment of about $1700. If they can refinance to a 4% loan today, that's a payment of about $1430 and leaves $270 in their pocket.

So who loses the $270? Well, the new program is for people whose loans are owned by Fannie Mae and Freddie Mach, so they are obvious losers in the deal. Also, banks may lose as older loans are paid off earlier. However, banks will get some refinance $$ in their pocket as well as a better loan. If the old loan defaulted, banks were sure to lose.

So what is the down-side to the program? Well, refinancing costs money and some of that burden will be paid by the tax payer. I don't think that's a lot of money (compared to loan defaults), so I think this is a good program overall.

Trouble is, it doesn't address the amount owed. In my example above, I assumed the entire $300,000 would be refinanced. In reality, if they were current, they would only owe $262,000 at this point. But the problem comes in that the value of the house may have dropped. The house may only be worth $200,000 now and in that case, they wouldn't be able to refinance. under today's rules, but would be able to under the new rules.

The program looks like it helps out some people in certain circumstances and therefore I have no objection to it. I'm not overly excited, because it doesn't seem like it will affect many people. Maybe the president is trying to tackle the economic issues in small bites rather than a sweeping program that no one can pass.

Fist Time Home Buyer's Tax Credit - Payback Time

If you're one of the people who bought a home in 2008 and received the $7,500 tax credit it's payback time. (For those who purchased in 2009 or 2010 and received the $8,000 credit, this does not apply, as long as you still own the home). The original First Time Home Buyer's Tax credit was actually a loan. The $7,500 has to be paid back over 15 years, starting this year.

The loan is interest fee, so you only have to pay back $500 each year. Form 5405 contains instructions for the payback. You also have to pay back the credit (either $7,500 or $8,000) if you keep the house less than three years. In this case, the amount is due back in the tax year that you sold the house. The amount of repayment is limited to any gain you might have on the sale of the home. Some other exclusions apply, but read the form and instructions for full details.

It may seem unfair to the 2008 home buyer that he only received $7,500 and has to pay it back while the 2009 or 2010 home buyer received $8,000 and he gets to keep it. Fair or not, that's the tax law. It's possible that congress would change to law to forgive the $7,500 loan, but my guess is, it won't. The current congress is more interested in reducing the debt than helping one small group of taxpayers. The realtors who fought so hard for the credit have now moved on to new buyers and aren't likely to fight for a tax break for the buyer from three years ago.

One bit of good news is that the $7,500 was real money. If you had taken that money and invested in a small CD making 2% interest (I know that's hard to find now, but let's assume), you would end up with over $2,000 at the end of the payback time. Of course, the intent of the tax credit was to stimulate the economy, so it's better if you actually spent that money instead of bankrolling it.

No one should go broke....

I've been planning this post for a while, and then I just heard a comment on the radio from President Obama. He said that "no one should go broke, because they happen to get sick in this country." This is based on his pitch for health care. I thought, that the same thing applies in this situation.

My post focuses on a young couple, the Holts,  who were following the American dream. They bought a house and were raising their family. Unfortunately, their dream became a nightmare. Their children developed breathing problems to the point that their middle child was forced to take the heaviest dose of steroids a toddler could take. Mom developed migraines, dad - kidney problems. Almost five years after they bought the home, they found the source of the problems - methamphetamine. The previous occupant of the home had been dragged out of the attic by police and busted for making meth.

Meth fumes can permeate the drywall, carpet, insulation and air ducts and in this case, caused the Holts' illnesses. Cleanup of their home will cost about $30,000. The article where I found all of this information (here) detailed two other situations that were similar. Two other families' lives wrecked. To paraphrase the president - "No one should go broke in pursuit of the American dream."

Now the Holts clearly are not at fault in their situation (based on the story anyway), but who is at fault and who will pay for the cleanup? Clearly the previous occupant is at fault, but he's in jail and can't pay for the cleanup. It's not clear if they had a home inspection that should have shown the problem, but after five years, you would begin to wonder about limits of liability and statutes of limitations. They probably have a mortgage, they could walk away and leave the bank holding the meth house. But then why should the bank lose their investment? Home owner's insurance doesn't cover meth lab clean-up.

It's clear to me this is a problem and no one should go broke. The Holts have reached out to their community and the community is helping some, but new hospital visits and sporadic donations have limited their financial recovery. So, where do they go from here?

I'm afraid I don't have an answer, but I do know something that isn't the answer. I know this isn't a federal problem. The state has a mandate (through Medicaid) to provide medical assistance to the needy. The bank who holds the mortgage took some risk when they loaned the Holts money for the house, they should step up to some of the responsibility. But the majority of the burden will (and should) fall on the Holts, who through no fault of their own, made a very bad choice in homes.

As compassionate Christians, we should reach out to help people like the Holts. No one should go broke. But that doesn't mean the federal government should step in. The meth house clean-up or to health care.

In real estate - everyone's an expert

Some of you know that our house was recently on the market. "Was" is the operative word. The contract we had with the sales agent expired and we've decided to pull the listing all together. Oddly enough, we had a showing on Saturday - the last day of the contract. If that prospect shows any promise, good, otherwise we'll stay where we're at for a while.

Everyone we've talked to about the sale has reasons that things didn't go well this time. We've gotten references of 3 or 4 agents and we appreciate them. We've also heard from people who can explain what we need to do different.

It occurred to me that real estate is one area where everyone knows something. They have good ideas (and many are truly good) and aren't afraid to express them. It's been an interesting 3 months and I'm sure it will be interesting when we put the house on the market again....

Working from home

I've posted information before about my schedule before, this week is different. This week I've spent the last two days and will spend today working from home. This is typical for me, busy days away at customers, then a few days here catching up on "desk" work. But I thought I'd explain what working from home is like.

Typically, I get up before 7am and fix me some breakfast and coffee (see yesterday's comments about coffee). Then I start work by reviewing any emails that came in overnight (typically 5-10, most of which are garbage) and responding as necessary. I turn on my "radio" to the local conservative Christian talk radio show to listen to the news (I listen online). Depending on my workload, I'll occasionally turn it down if I need to call anyone or take calls.

Somewhere around 9am, I'll take a break and actually get dressed. Working in my footy jammies after 9am just isn't a good thing (it's good I don't do video conferencing).

I'll take conference calls and make calls most of the day, typically stopping for lunch around 11:30-12:30. Some days I'll have a conference call during that time. Other days, I'll eat lunch at my desk while I work. The afternoon is pretty much the same.

Around 5pm, most of the calls die down. Sometimes, the folks on the left coast schedule calls late, so I'll get on the phone again as required. And I'll do emails and desk work until I'm finished. Then I'll check email again before I head to bed.

Everyone tells me that they envy working from home. I'm here to tell you that it ain't that great. The commute is short and the requirements for attire are easy. But it's lonely and the work day typically is longer.

Now for the heart-felt part. I like working from home. It gives me a lot of flexibility. But some days I long for the times of being in a cubicle farm, being able to make comments to others and going to lunch with colleagues. It's a true mixed bag.

I made the bed

I just completed a task that I deem to be silly - making the bed. Seriously, we slept in the bed last night and it is messy, but who's going to see it? Tonight, we'll get in the bed and mess it up again, so why make it? Ben Franklin once said that a job done well need never be done again. Good Ole' Ben obviously never made the bed. Tomorrow morning it's going to need it again.

There's no one coming over and even if they did, they wouldn't come upstairs. No one would know if I skipped this menial task. No one except my wife (my son too, but he couldn't care less).

So, given the way I feel about it, why would I do this? Simple - my wife asked me to. Since I'm the last one up, I get to make the bed. If I get up before she goes downstairs to leave, she will make it, or we get to make it together, but since I slept a little late, she asked me to do it.

And I know that when she comes in this afternoon, she will notice it. She may not say anything, but if she does it will make my day complete. Regardless, she will notice it. And anything that I can do to make her just a little happier, well it makes me happy. Not that I do this for the reward, no even if she doesn't notice I'd still make the bed. Simply because she asked.

Somedays, I don't make the bed. I always have a good excuse, I forgot or I was too busy. I usually explain it to her. She doesn't get mad, occasionally she will remind me how important it is to her (I still don't understand). But I know she will forgive me and she will not hold a grudge. She's wonderful that way.

Even in all her wonder, she's not perfect. I think she's beautiful, strong and wonderful, but I know she's human and therefore must have faults, even if I don't see them (and certainly wouldn't mention them if I did).

So why write about this? Well, the last several days, I've been involved in a multi-way discussion on God's Grace and Truth. (Read about it here). While making the bed, I realized that my making the bed was somehow tied to the topic.

Sometimes I don't understand why God asks me to clean up a part of my life. It seems silly. No one will notice and it really won't make a difference. Sure I can clean something up, but it's just going to get messed up again. So why do it?

Because I love Him. I know that He will notice. And maybe, just maybe He will say somthing about it. But even if He doesn't, I'd still do it. I don't do it for the rewards, I do it because He loves me.

Unlike my wife, He is perfect. He has no faults. Some of the folks in the other discussion just don't get that, but it doesn't change the facts. So if He's perfect and my wife isn't (she's close), how much more should I do for Him?

Oh, and if I don't do what He asks? He'll forgive me. I always have a good excuse, I forgot or I was too busy. I usually explain it to Him. He doesn't get mad, occasionally He will remind me how important it is to him (I still don't understand). But I know He will forgive me and He will not hold a grudge. He's wonderful that way.

God, please forgive me when I fail you. I know it happens way too often. Please point it out to me when I do. I want to please you, even when I don't understand the reasons. Amen.

Now, I think I'll go check that bed one more time...

Home again, home again...

My two weeks of ridiculous travel is over. I'm home for a while. I do have one out-of-town trip next week, but it's only one night.

It's good to be home.