Monday, March 26, 2007

What's The Deal With This Sub-Prime Mortgage Thingy?

New York Newsday
Schumer urges more regulation of subprime mortgage rates
March 25, 2007, 12:19 PM EDT

NEW YORK (AP) _ Sen. Charles Schumer warned Sunday that 91,000 New York families are at risk of losing their homes when the rates of their sub prime mortgages increase, and said more federal oversight is needed in the sub prime lending market.

"The subprime market is the wild west of mortgage loans, and it's time we bring a sheriff into town," Schumer said. "The first step is making sure that borrowers are protected from these usurious lenders.
A lot of bloggers have been bringing this issue up, especially Atrios over at Eschaton. What has been lacking is, a reasonable explanation of what the heck the issue is. Soooooo.... a primer.

What is a mortgage?
A mortgage is a lien that constitutes a loan on Real Property.
In English: The mortgage contract, like most contracts, involves an exchange of considerations, things that have value. In the case of a mortgage the borrower is voluntarily allowing the lender to place a lien on the property. That is the mortgage, it is not the loan. This is why the borrower is referred to as the mortgagor, while the lender is the mortgagee. The borrower gives the lien and then lender accepts it. The loan is represented by the promissory note which amongst other things gives the bank the power to foreclose should the borrower default.

What are all these interest rates?
Interest Rate: a fee charged by a lender on the note of a loan.
Discount rate: The rate banks are charged on short term loans from the Federal Reserve.
Prime Rate: Rate charged by lenders to their best customers. i.e. least risky
Sub-prime: Rate charged by lenders for loans to high risk borrowers.

Okay now that we have that settled here is the story. SUBPRIME loans are mad to people who either have bad credit due to a bankruptcy, poor payment history, etc. Most SUBPRIME loans, eventually involve an adjustable rate that is higher than prime due to the increased risk. This rate "resets" periodically based on the US. Dollar, London InterBank Offering Rate (LIBOR) index.

The most popular type of sub prime lending is the 2/28 A.R.M.. The first two years of the loan are at a fixed rate but the NEXT 28 years are adjustable and can have severe consequences for the borrower. The primary reason to take a loan like this is to REBUILD your credit over the two years fixed and then refinance into a fixed rate, i.e. DO NOT LET THE ARM kick in. In short the 2 year fixed rate is a "teaser" sometimes below the rate for a 30-year fixed, then when the arm kicks in the interest AND the payment can go up dramatically.

The trouble for most people is they get suckered in because they are extremely vulnerable and the lender is a predator.
Ms. Needmoney goes to Chetum loans. Mr. Shifty the loan officer/banker/broker offers Ms. N a zero down 2/28 sub prime mortgage. The rate is 1.5% lower than the fixed rate of 6%.
Even here the story can go horribly wrong. Is the lender a sub-prime lender only? What if Ms. Needmoney COULD qualify for a prime rate mortgage, BUT since her chosen lender only makes sub-prime loans? He might "forget" to tell her that she could qualify for a prime and then refer MS. N to a prime lender. Back to the story.....
WOW! Thinks Ms. Needmoney, this is great! I can get a home for my family and the payments are so low! For two years, Ms. N makes her payments and then she applies to roll into a fixed; but finds that she still cannot qualify. The ARM rate resets that year for 2% higher , a full point higher than the fixed rate, and her payment goes up to adjust for the rise in interest. Ms. N now has a payment she cannot make and her credit rating plummets as she tries to make payments, pay bills, and raise a family.

End of story: Ms. Needmoney's dream has become a nightmare and foreclosure is sneaking around the bend.

(Click for larger picture)

Why? If we look at the example chart. Ms. Needmoney loan of 400,000 starts at 5.5% with a payment of $2271.18 however with the reset of adjusting .5% every year after the two year fixed she could pay up to 3,488.68 per month, based on an interest rate cap/ceiling of 15%. her monthly budget will have to adjust to eventually absorb a $1200 difference in mortgage payment.

Hope this helped and I will be back with more on this topic.

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Wednesday, March 21, 2007

Reasons To Be Cheerful, Part 1

Okay, I know the attempted hijacking of American democracy is serious business.

But maybe it’s the scent of spring in the air. Or maybe it’s the scent of Republican flop sweat in the air. But I just can’t help thinking of all the things there are to laugh about:

1. Tony Snow’s Discomfiture. C’mon, you just know ol’ Tony thought this job was gonna be a cakewalk. Spend an hour a day standing in front of a bunch of stenographers and lapdogs, lie to them, insult them to their faces, and have them thank you for it? Must have sounded like a sweet gig. And Tony’s just that kind of snotty, supercilious asshole who’d really revel in the degradation of others.

Too bad it hasn’t worked out that way, huh, Tones?

Nope, poor ol’ Tones has looked downright uncomfortable these last few days. There are… people out there… asking actual questions… and expecting him to answer them! The horror!

Well, Tony, that’s what you get for being the last crewman to sign on for the Titanic.

2. Congressional Republicans Who Don’t Know What Year It Is. So far in this session of Congress, they’ve been gaveled down by Barney Frank, Barbara Boxer, and the refrain is always the same: You’re Not In Charge Anymore. Elections Have Consequences. Sit down and Shut Up, Motherfucker. (Okay, I made the last one up.) But watching Congressional Republicans flailing like beached whales and complaining about having their rights violated because they’re being asked to follow the rules and procedures of the House and Senate – well, maybe it doesn’t take much to crack me up, but I’m loving it.

3. Chris Matthews’ Homoerotic Excitement Over Schoolyard Thuggery. Doesn’t poor Chris have one friend who’ll pull him aside and tell him, Dude, you’re embarrassing not only yourself but a whole country? Matthews must be the only person left in America who thinks Bush is “tough” and “manly”. Or at least the last one un-self-aware enough to gush on and on about it on a national television show.

That’s just the beginning -- there’s o so much more….

It Was Only A Matter Of Time

Watch as two forces of evil converge in comedic symmetry.

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Wednesday, March 14, 2007

Si Se Puede!!!

Great Americans deserve recognition, sign the petition. Nuff' said.

Full Petition Text:

Petition to President Bush and members of the U.S. Congress

I call on the U.S. Congress to establish an official federal paid holiday in honor of Cesar E. Chavez, the late president of the United Farm Workers, on his birthday, March 31. This should include a Cesar Chavez day of service-learning and community action.
Signed by:
[Your name]
[Your address]
Short, sweet and to the point. The truth never needs very long to say.

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Sunday, March 11, 2007

Dogs and Cats Living Together! Mass Hysteria!!

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Wednesday, March 07, 2007

Cognitive Dissonance or WTF?

I was having a nice day. Having been sent uptown I escaped the psychotic wonders of this pittance of a job. I mean seriously what kid of law firm forgets that they are going on trial the next day. Christ.

Upon my return to this legal wasteland I am informed of this.
Despite Recent Suicide Bombs, Violence Appears Calmer in Baghdad
U.S. Troop Surge Met With Little Resistance From Militias
That's comforting, calmer violence. It really shows progress when the violence becomes calme..... What the hell? Roll that sentence over in your mind a bit. Go ahead, don't be afraid. It took me one or two reads.

Besides the oxymoronic nature of the two clauses I am still flabbergasted by the absolute audacity to use the phrase "Violence Appears Calmer". The next paragraph, however lets everyone know that the author of the article either:

A) has a really different idea of what calm is or
B) Is Full of Shit.
BAGHDAD, Iraq, March 6, 2007 — Two suicide bombers killed at least 149 Shiite pilgrims today in the town of Hillah south of Baghdad.

The pilgrims were making their way toward the town of Karbala, 60 miles south of Baghdad, for a religious festival due to start Friday. The bombers had mingled with the crowd when it stopped at a roadside tent, where they detonated the explosive vests hidden under their clothes.
From my understanding though the car bombs went off quieter and really did feel bad about splintering the bones and charring the flesh of their victims. Its gives me hope. We can use this calmer violence. Now as to the A&B options above, if you picked B you are certainly on target.
This is in stark contrast to the last big U.S. push into Sadr City in 2004, which led to fierce street fighting with heavy casualties on both sides.

The main reason appears to be that for now the militias have melted away rather than confront the well-armed Americans. Despite recent deadly attacks outside Baghdad, many people who spoke to ABC News inside the city say they sense things have started to change since the U.S. surge began.

Herein lies the sad tale of limited power projection. Sun Tzu writes about striking where your enemy is weakest, so we can expect to see a rise in violence in all the usual place Baquba etal. Why because if we flood troops into Baghdad they MUST come from other parts of Iraq. We simply do not have the manpower or logistics to project our power into multiple regions. So "surge" into Baghdad and you will see a corresponding rise in violence outside of Iraq.

Limited Power Projection also leads to our second lesson from Sun-Tzu, goad your enemy into concentrating his forces by feigning weakness. The last time we entered Sadr City a blood bath ensued. The insurgents took it firmly on the chin. One key fact remains, much like the shatteres remains of Al-Quada after the attack on Afghanistan, no matter how far they may have bent, they did not break. Recent history has borne out this assertion.

If, as even the author of the article concedes that, the insurgents have
"melted away rather than confront the well-armed Americans." We still have a zero sum gain on the ground. If we relax our presence, shorten patrols because Baghdad APPEARS calm then we may feel compelled to move troops into areas where the insurgency is highly active. Leaving a smaller and more vulnerable force within the capital, and, guess what? The insurgents, that melted away, will reappear; rested, rearmed, and reinforced.

Unless we are prepared to inflict and sustain massive casualties this will just be a circular system leading to a drawn out failure. This also calls into question what is our purpose in Iraq, what is this vague platitude that is cast about willy-nilly by the President and his crew. If we are occupiers extending an American Empire then sustained massive application of force is needed to, I hate using this term, pacify iraq. If we are there to create a stable Iraq then game over. Our ability and time to do so, by military force, has long since past.

We have no reason or purpose to try the first, and we blew our chance at the latter.


Cassini's new views of Saturn

One of my long term interest has been astronomy. I blame Carl Sagan and the Cosmos series on PBS for the additional expenses I have incurred in telescopes and time freezing my butt off trying to get a good look at the Orion Nebula.

Enough about me and my freezing posterior. The Cassini-Huygens mission has been returning some amazing and unusual views of the ringed planet. The one below is a close up view revealing cloud structure and in the upper center of the photo is the moon Dionne. The black encircling Saturn's clouds are shadows from the rings. More spectacular views are available at the CICLOPS and from NASA/ JPL's Saturn mission websites.

Cassini Imaging Central Laboratory For Operations
Magnificent blue and gold Saturn floats obliquely as one of its gravity-bound companions, Dione, hangs in the distance. The darkened rings seem to nearly touch their shadowy reverse images on the planet below.
Found Originally at Slashdot

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Tuesday, March 06, 2007

Merry Fitzmas!!!

Four of Five Counts.

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Thursday, March 01, 2007


Everyone’s favorite closeted hypocrite, Ken Mehlman, was back in the new today.

The following quote appeared in today’s Wall Street Journal (I suck at links so look it up for yourself if you don’t trust me):

"How do we get back to the time when you argued during the day and had a beer after work?" Mr. Mehlman says.

It doesn’t matter if you’re working for’em or not, spinning on behalf of the radical right-wing extremists’ grand experiment in the destruction of American democracy must become a habit.

In the last six years (longer, really, but let’s stick with the recent past) opponents of Republican warmongering and fascism have been called (surprise!) fascists, communists, appeasers, traitors, terrorists, terrorist sympathizers, anti-God, anti-Christian, anti-American, anti-life, crazy, stupid, naïve, and of course – my personal favorite – dirty fucking hippies.

But that’s all in a day’s work, according to Mr. Mehlman, and afterwards we should all just belly up to the bar with our spittle-flecked accusers.

I’m assuming by the time they get to the bar, they’ll have left behind the mallets and wooden stakes, the tar and feathers, and those angry veins throbbing in their foreheads will have subsided.

Really, Ken, as was said so many years ago, when all’s said and done, have you no shame? As one of the chief poisoners of our well of public discourse, how dare you?

You can’t spend years creating an atmosphere of hatred and partisanship that trumps everything, including honor, integrity and country, and then wring your hands over the mess you’ve left behind.

Reminds me of the old saw about the kid who killed his parents, then asked the court for mercy because he was an orphan.

Sorry, Ken, the “reasonable” shtick won’t fly. It’s way too late for that crap.

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