If an ACORN falls to the ground, will an oak tree grow?

You may have heard about the problems encountered by the group ACORN. Seems they gave some bad advice to a pretend pimp and prostitute. Politicians are quick to distance themselves from the group, and the group seems to be falling apart. My guess is that it will never have the power it thought it would have.

As a conservative, you'd think I'd be glad. And in a way, I am. The actions of the group ACORN, both recently and in the past, show that they aren't to be trusted. But unfortunately, there's some good that goes out with the bad.

I started posting entries about the sub prime lending fiasco back in November 2007, almost two years ago. I posted again about it in the following May. And I posted about foreclosures in March of last year. While researching for information on ways to help the people impacted by this mess, I came across some information that said that ACORN was trying to help. Certainly their methods are, in some cases, inexcusable, but they were trying to help some underprivileged people.

So, where will the help come from now? Where can the underprivileged go for the assistance they need? Some of these people do not know how to even begin to clean up the mess in their lives. I wish I had a solution for them. Instead, I have only sadness.

If you know of an organization that helps people like this, please let me know. I've been looking for a way to step in for about two years now and can't find a way.

Roundup

I'm going to steal an idea from my blog-friend Neil and post a list of other blogs I've seen this week. Maybe I can be Neil's padawan blogger.

Don't forget my contest. You can win a big prize ($5), just for making up a story. Post it in the comments or send me an email. Today's the deadline. The judges will vote tomorrow and the winning story published.

I confess I stole the idea from the contest from (or was inspired by) the Lazy Man and Money. Lazy is one of the blogs I've been reading about practical money management. He received two copies of a book, 10,001 Ways to Live Large on a Small Budget, and is giving one away. Be sure to read the comments, some are funny, some are sad. See his post here.

Another practical money management blog I've been reading is The Simple Dollar. A recent post focused on Quantity Surcharge. You always thought that the bigger bottle of ketchup was cheaper, right?

Probably my favorite blog of late is Free by 50. It's not as much day-to-day practical information, but probes deep on some subjects. Home ownership, foreclosure, subprime lending, etc. Be sure to read several posts to get a feel for the blog.

I first heard Gerri Detweiller on the radio, she focuses on consumer alerts of all types. She's the credit advisor for credit.com. She doesn't blog every day, but her posts are good.

A Rescue Plan! (Diego style)

Ok, watching Go Diego Go with my 2 year old grandson has warped my mind. Everyone is calling the bailout plan a "rescue plan" and my mind switches to a silly video (see here). I get to singing the little song every time I hear it.

Previously, I posted on pyramid schemes (here) and multi-level marketing (here). I also talked a little about profits (here) and said they were a good thing. My goal was to get to this post and after a few interruptions I'm here.

My thought all along on this bail out plan (excuse me Rescue Plan! - Diego is very emphatic) is that it reminds me of a pyramid scheme. Everyone is saying that the problem we have is because of bad home loans. Ok, I've blogged about that too (here, here, here and here). I've been talking about this for over a year. The problem I have now is with our solution.

We've decided that the way to fix the problem is to allow more people to borrow more money. See, the problem before was that they couldn't repay all that they had borrowed, so now we're lending them more. Makes sense, right?

This is like the pyramid scheme. As long as people are buying and selling homes, we can keep the economy flying. Once people stop and look at what they really have, it all falls apart. I really don't like the alternative (lots of foreclosures, depressed home values, layoffs, general depression), but I honestly believe the longer we delay this the worse it will be. Someday, we have to pay the piper and it won't be pretty.

subprime - a dirty word

I've blogged in the past about subprime lending, but what does it really mean? Is subprime a dirty word?



First, let me answer the last question. Subprime is not a dirty word. People who borrow money are classified as either "prime" or "subprime". Prime borrowers are ones who have a good credit history, pay all their credit on time and have used credit from time-to-time. The exact definition varies based on who does the defining. Subprime borrowers are ones who have a somewhat tarnished credit history.


Of course, foreclosure, legal judgements, reposessions, bankruptcies or charge-offs do massive damage to your credit history. Also late-payments hurt. Wikipedia says "two or more loan payments paid past 30 days due in the last 12 months, or one or more loan payments paid past 90 days due the last 36 months."

So two late payments or one very late payment means you are classified as "subprime".

So, if it's not a dirty word, what's the big deal? Well, depending on HOW subprime a person is, they may get worse terms on any credit. If you don't need credit, it's no big deal. But if you need/want credit, you may see higher fees, higher interest rates. The idea is that the lender needs these higher fees and rates to offset the higher risk. And of course, they wouldn't take this risk if they didn't think they could get a higher return.

But there are a large number of people who are "subprime" who aren't much "subprime". These people have a few late payments and maybe a few other problems with their credit. They may have trouble getting a loan, but it doesn't say anything about their value as a person.




If you want to read my previous posts click on "My take on sub-prime", "Citibank" or "Foreclosure relief"