When I was in third grade at Winnetka Elementary School in New Hope, MN, we had a weekly math exercise called, "The Mad Minute." The object was to complete the most correct simple multiplication problems as possible in one minute. The weekly winner would receive a candy bar. It wasn't some "fun-size," as that size had not been invented yet.
It was a regular-sized Three Musketeers, or maybe Nestle Crunch. After one minute, Mrs. Matherne would ring a bell, and everyone would put their pencils down, and turn in their sheets.
I can remember the excitement of this very well. Some teacher's aide would enter the room, and place the worksheets on the teacher's desk. Mrs. Matherne would pass one stack out to each row, and it would be "pass to the one behind you," and, YOU'RE OFF!
The fresh smell of the dittoe machine would be distracting for some, and if you are old enough to imagine that smell, it would be distracting to you to this day.
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I bought a house in Lansing, MI about a 2 1/2 years ago, and while I was initially overwhelmed, I eventually learned all the things that first-time homebuyers learn. I learned to replace an electric outlet, care for a lawn, and catch mice. I also learned to fix a garage door-opener, bought a new microwave, and replace light fixtures. Things were good, and I was thankful that I bought a house I could, at that time, easily afford. I made it a point of making sure that I had a fixed rate, and that my rate would not go up, (any faster than my taxes, anyways). I quickly, and somewhat foolishly, began to sink extra money into the house.
I painted all the rooms, bought some things to hang on the walls, and bought some new nice furniture, all of which I paid cash for, and then lived a little light for a few months.
"Always pay for what you can," my dad always told me. "There's no reason to charge everything." I plodded along, and to this day, I haven't made a late payment yet. In fact, this year, my property taxes eventually went down!
* * *
I was ready to let my pencil fly. "6 times 3? Eighteen! Piece of cake! 8 times 7? Fifty-Six! Nice! That huge, mongo Three Muskateers will be mine before you know it!" After the minute was up, I gleefully passed my paper to the front. It took Mrs. Matherne a few minutes to grade them all, and sure enough, the only one in the class to get Sixty-out-of-sixty, was me. She invited me up to the front of the class, and made a production of awarding me the candy, but made clear to make sure I was to wait until at least recess to eat it. I threw it in my desk, and smiled. I stared at the clock, and wondered if Tommy Kramer
might throw an interception on Sunday vs. The Lions. When he didn't on Sunday, and the Vikings won, 20-17, I looked forward to the next Mad Minute.
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Your president obama and his minions are fond of reminding us of what the financial "crisis" we are in, and last week, they unvailed their "Making Home Affordable" plan. While I admire the administration for pretending to care about homeowners who are struggling, this plan is rather foolish. Please read other blog entires of mine here to see that summary. To tout this "plan," the administration says the plan "draws off the best ideas developed within the Adminstration, as well as from Congressional housing leaders and FDIC Chair Shelia Blar . . . .."
Those are the very same people who got us into this mess to begin with. They want to now spend and even more $75 Billion to help homeowners who, "are struggling to stay current on their payments."
The last time I checked, that's the best part of the American Dream, "struggling to stay current on your payments." Most people struggle. That's what we do. We look for something we want, then we work really hard to figure out how we're going to pay for it.
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The following week, that same teacher's aide brought in the Mad Minute. Only this time, it was on Yellow Paper. Some were confused by the paper, others by the same smell. Was that smell prunes? Was it Uncle's Drink? Some kids smelled it, while I waited to put my pencil down.
"Nine times Eight. Seventy-Two! Nice! Seven times three. Are you kidding me?"
I again got sixty out of sixty, and was the only one who had done so.
Mrs. Matherne again made a production of giving me this week's treasure. I liked Nestle's Crunch, and still do. This time, I made a point of smirking at my classmates, and relishing in their disappointment. I was only nine-years old, but being excellent at math problems really fast was beginning to go to my head.
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The example the administration gives in their plan describes a "family who took out a 30-year fixed-rate mortgage of $207,000 with a rate of 6.5%, on a house worth $260,000 at the time. Today, that family has $200,000 remaining on their mortgage, but the value of that home has fallen 15% to $221,000 - making them eligible for today's low interest rates that generally require the borrower to have 20% home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% - reducing their annual payments by over $2,300."
When you have more than 20% equity, it shows that you make payments, and are in a position where you are a lower risk to a bank, willing to refinance you. If you examine the numbers above, you would figure that the administration's plan would save you a whopping $192.00/month. And for what? If you cannot absorb an additional $192.00 per month, then maybe you shouldn't have purchased that house to begin with. Anyone in this position would be right back where they started from within a year. (See future blog entires)
* * *
That Week, scored two touchdowns, and Ahmad Rashad scored a game-winning Touchdown, amid a bunch of Rick Danmier Field Goals, and I was primed for this week's Mad Minute.
Only this week, Mrs. Matherne announced that, as the teacher's aide brough in this week's batch of easy candy bars, when you finish, that we were to raise our hands when we finished.
I did so, and again finished first, and was the only one to get all sixty correct. Mrs. Matherne failed to make a big deal of me this time, instead shrugging the Baby Ruth towards me. Would Joe Senser again catch a touchdown pass against the Bears the next week?
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The administration's plan focuses on people who are "underwater" or, owe more than their house is worth. Anyone who is in this position is because they did not put enough money down, yet got a loan anyways. It allows a judge to modify loans down, during bankruptcy when a borrower has "no other options." They even go so far as to say that the plan will "Support Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac."
Yup. Good luck on that ace.
It plans on reducing borrowers' interest rates down to 2%, until their payment is the goal rate of 31% of their monthly income.
If your mortgage rate is more than 31% of your income, then why did they give you that loan in the first place? (See other blog entries)
When I got my loan, my mortgage gal told me I could have a much lower adjustable rate, or a much higher fixed rate. She told me that your payment should be about 30% of your monthly income (after taxes). So if you get an adjustable rate, your income should be a lot higher.
"Are you going to flip this house?" was an honest question.
I agreed to the higher rate for the fixed rate.
"At least, that way, I won't ever get in over my head," I thought (at that time).
Of course, being that I'm white, I got the king treatment, and did not fall prey to "predatory lenders.
The administration's literature even goes so far as to say "millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income, particularly if they received subprime and exotic loans with exploding terms and hidden fees."
"Hidden fees?"
When I signed my mortgage, I actually read my entire mortgage at the signing table. Even the closing agent gave me eyes as I was reading it.
I'm sorry, but no one is putting a gun to your head when you are signing important papers in America (at least, not yet.)
I took responsibility for what I was signing, and went into the transaction with my eyes open. Looking back, it wasn't such a great deal for me, but I have no one to blame, but myself.
And, while it sucks for people who signed such deals, they should be expected to suck it up and take responsibility, like everyone else.
* * *
Tommy Kramer threw a late TD pass to Joe Senser, and the Vikings beat the Bears. I remember this game, because Vince Evans was the Bears QB. The next day, it would be Mad Minute again! I couldn't wait.
We sat in our desks, and I eagerly awaited that teacher's aide to bring in the ditto-smelling goodness that was to become my newest candy bar, and reason to mock my fellow classmates' slowness.
As Mrs. Matherne slowly passed out the Mad Minute, she made an annoucement.
"Starting this week, the person who won the candy bar the week before, cannot win this week."
"Huh?," I thought.
"This is to give everyone else a chance to win. So I'm sorry, Jack. You cannot win this week."
I was crushed. I finished first, and raised my hand, even though no one else raised their hand.
Another kid (who shall remain nameless) got 58 right, and he got the Three Musketeers.
I went home and asked my mom why this made sense. I was one of the many times a nine-year old learns that life is not fair.
* * *
"Only owner-occupied homes qualify; no home mortgages larger than the FHFA conforming limit of $729,750 will be eligible. This program will focus solely on supporting responsible homeowners willing to make payments to stay in their home - it will not aid speculators or house flippers."
The best part is when they get to the "incentives to help borrowers to stay current."
"To provide an extra incentive for borrowers to keep paying on time under the modified loan, the initiatie will provide a monthly pay for performance success paymentthat goes straight towards reducing the principal balance on the mortage loan."
What?
If you stay current on your mortgage payments under this plan, you can get an extra $1,000.00 knocked off your principal! Well, fantastic! Doing something you are supposed to do, nets you a free $1,000.00?
I don't even have to get into how this affects the financial markets, but clearly, rewarding someone, for something they should be doing anyway, is not what we should be getting into.
Not especially at the cost of $75 Billion Dollars!
While it's terrible that people might lose their homes, because of foolish decisions they made a few years ago, that's not a reason to saddle the rest of us who succeed for a living.
* * *
The following week, Rick Danmeier kicked a long field goal to win at San Diego, and the Vikings survived a Chuck Muncie late touchdown. When Mrs. Matherne announced that the new Mad Minute, (that I was now eligible to win,) had started, I wrote "5" on every answer and turned it in. She shook her head in disappointment at me, and let's say that the parent-teacher conferences were fun that time.
* * *
America will have conferences again in 2010, and I hope we will make sure to separate emotion from logic.
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