Liberalism and Smart Growth--Making Home Unaffordable in a Neighborhood Near You

I started in lending in 1998 making affordable housing loans in El Paso, Texas, at a time when our housing was truly affordable.  I did a lot of FHA fall out loans for a new home builder on the east side of El Paso, so several times a week I drove about 26 miles to take loan applications for first time homebuyers.  The inventory for the subdivision ranged from $45,000 to about $90,000. but most homes were priced at about $65,000 to $75,000 for a two or three bedroom, two bath home with a tiny yard.  This was no-frills housing, but it was brand new, painted and carpeted to the homeowners' tastes.  Some of the homes featured amenities such as bay windows, and all had central heat and air conditioning.  A colleague at the time used to smirk that I was financing "tomorrow's slums today," but I did not see it that way.  The housing was affordable enough that any working family could afford to purchase a home.

Fast forward 13 years, and housing prices have increased (of course) but El Paso is still a very affordable place to find a great home.  In October of 2011 I financed a 1368 square foot home on the westside of El Paso with 3 bedrooms, and 2 baths which sold for $113,500.00.  Just this month, I financed the purchase of a 1714 square foot newly remodeled townhome with 2 bedrooms and 2 and a half baths which sold for $130,000. 

Because our housing prices have remained affordable, even though El Paso has low incomes compared to the national average, El Pasoans can afford to purchase a home.  For that reason, we have never had a strong rental market here as compared to other cities.  It just did not make sense for people to pay rents when they could purchase a home for basically the same payment.  In fact, the Monday, January 24, 2011, issue of Inman News listed El Paso as number 10 of the top ten cities where buying is more affordable than renting.

Unfortunately, all of that is about to change for us.  Our city fathers (and mothers) hired the consulting firm of Dover-Kohl to help them understand how they can help our city embrace Smart Growth and Smart Code.  Two weeks ago, in my opening post on this subject I talked about how the Dover-Kohl representative made his hometown of Portland, Oregon sound like the "Happiest Place on Earth" full of walkable communities, green spaces and quaint little local coffee shops.  Now, the new city plan, Love El Paso, Plan El Paso, which is about to be adopted by city council, aspires to bring the Portland lifestyle to the Southwest.

Portland is a model of Smart Code, Smart Growth and UN Agenda 21 nationwide.  In 2010, Portland won the EPA's Smart Growth award for Programs, Policies and Regulations for "Making the Greatest Place: Metro's Strategic Implementation of the 2040 Growth Concept." 

In 2009, however, Portland was awarded a less distinguished honor by Business Week--Number One on the list of America's Unhappiest Cities.  Businessweek.com ranked Portland number 1 for depression, number 12 for suicide, number 24 for crime (both property and violent) and number 4 for divorce rate.  (The editor of Businessweek.com explains in a note that Businessweek.com ranked 50 of the largest metros based on depression rates (as based on drug company data for anti-depressant sales) suicide rate, (from the 2007 Big Cities Health Inventory) crime risk (based on FBI crime reporting for the seven most recent available years) and divorce rates (using info from the U.S. census).  The editors also looked at additional factors such as unemployment, population loss, job loss, weather and green space, with the heaviest weight being given to depression, suicide, job loss and unemployment and crime rates.  Apparently the editors of Businessweek.com did not perceive that the abundance of green space was enough to compensate for the other problems in Portland.

Maybe one reason the population of Portland is so unhappy is that the excessive planning of their city has made housing unaffordable.  Rent.com states that Portland, Oregon has an overall cost of living 20% higher than the national average.  In the same study cited above by Inman Group on January 24, 2011, Portland ranked number 9 out of 10 on the list of cities where renting is cheaper than buying.   According to City-data.com, the (mean) average price of a detached single family home in Portland in 2009 was $336,885.00.  The (mean) average price of a condo or town home was $299,518.00.  The same website states that the (median) average household income in Portland in 2009 was $50,203.   Put simply, it is impossible for the average family to afford the average priced home.  And because the emphasis is on density, and preserving green spaces rather than building homes that families can actually afford, no builder can come in to build a cheaper home to meet the needs of families.  According to the city data site, in 2010 435 building permits were issued for homes with an average cost of $220,300 each.

Not that Portland has not made some effort to bridge the affordability gap for families.  An October 22, 2011, story in the Oregonian told the tale of Portland's newest affordable housing project, Killingsworth Station, which opened October 17, 2011.  When the Killingsworth Station Project was initially approved, 34 of the 57 condominiums were supposed to be affordable for households earning about $46,100 for a family of four.  (Since these are 1 bedroom condos, I wonder how a family of four is expected to squeeze in.)

Still, the condo project would have died if the city of Portland had not stepped up to provide Down Payment Assistance loans averaging about $25,000 to effectively reduce the $168,829.00 price tag of the condos to one that buyers might actually be able to afford.  And the Down Payment Assistance loans can be forgiven completely depending on the length of homeownership.  Brad Schmidt, writing for the Oregonian, explains "It is not unusual for Portland to subsidize projects--typically rentals--to help make the units affordable.  With regard to Killingsworth Station, a portion of the PDC real estate loan was expected to 'buy down' the cost of the units to make them affordable."

So let's review.  In its attempt to have "Smart Growth" Portland's Metro has limited new housing and development until homeownership is virtually unattainable, so the city (meaning the taxpayers) has to subsidize rental housing (and apparently 1 bedroom condos built in a less than desirable part of town) so that the residents will have a place to live.  Why would we want to imitate this system?  Why would anyone? 

I was curious about how people live who cannot afford to buy anything.  Rents in Portland appear to start at about $635.00 for a one bedroom apartment and range upward to $954.00 for a one bedroom.   I could not find very many houses for rent in my on-line search, but there appeared to be plenty of apartments.  The starting price for a two bedroom appears to be $750.00-800.00.

I was also curious as to how the truly underprivileged fair in a city where housing is so expensive.  Oregon City News featured a story last June about Poppy Michell, of Gladstone, Oregon (about 14 miles from Portland) in Clackamas County, who spent 10 years on a waiting list to get a Section 8 federal housing voucher from HUD. (Ten years appears to be the average wait time for a non-disabled, non-homeless person.  People in high risk groups such as disabled persons or homeless people only have to wait 4 to 5 years to get a voucher.)  For those unfamiliar with the program, Section 8 Housing vouchers subsidize rents for qualified Americans living in poverty.  As an unemployed single mother of three boys, Poppy qualified and received a voucher for $1226.00 a month to pay for her rent and utilities if she could find a place to live in 120 days.  Poppy was hoping to rent a house, but she could not find a landlord of a single family residence that accepts Section 8 housing vouchers, so when nearly at the end of her 120 day deadline, she was looking at renting a two or three bedroom apartment or else losing the voucher.  The turn back rate (the percentage of vouchers returned unused to the Housing Authority after the 120 day period because the recipient cannot find a place to rent) is about 10% in Clackamas County.  Trell Anderson, executive director of the Clackamas Housing Authority, explained to Oregon Live, "What we hear a lot is that people spend much of their time looking for that single family home and run out of time."

According to the same article, Portland had a turnback rate of 28% turnback rate for Section 8 Housing Vouchers in 2007, but they have reduced the turn back rate to about 7% in 2011, by speeding up payments to landlords and creating a $400,000 mitigation fund for landlords to repair damaged property.

Oregon's solution to this problem should not surprise anyone given the statist nature of their laws--the state representative wants to introduce a bill into the legislature forcing all landlords to accept Section 8 vouchers.

The moral of this story is simply this--the micro management of Smart Code and Smart Growth increases prices, which then requires that the government step in to provide subsidies and assistance to people on the lower end of the economic scale.  But the middle class worker who goes to work every day, does not lose his job, and pays his taxes diligently is on the losing end because he can never afford more than a small rental, while his tax dollars help to subsidize the rents of others.   Maybe the residents of Portland would be less depressed if they fired all of the politicians responsible for this ridiculousness and started implementing some strategies to reduce their costs. 

I mentioned earlier in this post that the 2010 winner of the EPA's Smart Growth Awards for Programs, Policies, and Regulations was Portland, Oregon.  The 2011 winner of the same award was El Paso, Texas.  When our city council is finished ramming through the new city plan, we too will be on our way to unaffordable housing.  Maybe next year we, too, can make Business Week's Unhappiest City list.

Alexandra Swann's new novel, The Planner, about an out of control, environmentally-driven government is available on Kindle and in paperback. She is also the author of No Regrets: How Homeschooling Earned me a Master's Degree at Age Sixteen. For more information, visit her website at Frontier 2000












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There's A New Predatory Lender in Town

Last week I started a series on the ways in which UN Agenda 21 is being implemented through Smart Growth and Smart Code initiatives to radically transform the American way of life. (And I will be getting back to it in the coming weeks.)  I  have been in loan origination for nearly 14 years now, and I have watched the federal and local governments declare full scale war on housing in the last few years.  But normally, when I tell people that home ownership is under attack in America from virtually every sector, their eyes glaze over and they answer back some version of the following:  "That can't be true.  After all, Obama is encouraging everyone to refinance and working to help people stay in their homes."

I spent the greater part of today doing something I have not done in a long time--calculating mortgage loan quotes for customers.  Since the Consumer Financial Protection Bureau headed by Richard Cordray has announced that they will have the qualified residential mortgages ready to implement this summer, which will basically apply a tourniquet to what flow of mortgage money is left in the U.S., I thought this might be a good time to see if any of my previous borrowers wants to take advantage of truly historically low interest rates while they still have a chance at getting approved for the loan.

Having been a loan originator since 1998, I have seen both boom and bust in this industry.  And I remember when borrowers either qualified for a loan or they didn't.  Up until a couple of years ago, a borrower who qualified for a conventional Fannie Mae loan was eligible for whatever the best rate available that day was.  Whether he actually received the best rate was an entirely different matter and depended in part on his shopping skills and who his originator was, but all in all Fannie and Freddie interest rates were offered on a pretty democratic basis.  Then in September of 2008, the federal government took Fannie and Freddie into conservatorship.  Suddenly these entities were no longer mainly privately held--they were now owned completely by the government.  Very soon, interest rate pricing was no so democratic--interest rates were now tied to the borrower's credit scores in 20 point increments.  The borrower with a 680 credit score got a better interest rate than the borrower with a 679 score; the borrower with a 740 credit score got a much better rate than the borrower with a 700 score. The new system favored the financially stronger borrower over the financially weaker one. 

But as the economy worsened dramatically and families lost the equity in their homes, the federal government attempted to rush to the rescue with HARP and HAMP to help borrowers refinance their homes.  Borrowers could, in theory, refinance a home at 105% and later 125% of its appraised value, provided that they could satisfy a long set of conditions and caveats.  And though their interest rate and costs were not the same as the ones offered to the person with the 740 score, they still got a lower rate than their previous mortgage.  Borrowers who could afford to refinance into a 15 year or a 10 year note did not have any credit score based interest rate adjustments, so those loans remained pretty democratic.

Now it is 2012, and the president has circumvented Congress once again to introduce a new wave of help to struggling homeowners.  With so many Americans underwater in their homes and unable to refinance, the government is rolling out HARP 2.  In this new and improved version, the borrower' s ability to qualify for a mortgage loan will not be based on the appraised value of the house.  We have been promised that the borrowers will have limited obligation to prove income.  We have also been promised that many of the conditions and caveats which prevented homeowners from refinancing in the past have been removed.  HARP 2 will help struggling homeowners to refinance out of those pesky adjustable rate mortgages and balloon notes that they have not been able to escape and transition into the world of the fixed rate mortgage.  So finally, after much trial and error the federal government has finally gotten it right.  Right?

Not exactly.  We all tend to forget that nothing is free.  Fannie and Freddie are owned by the government, and they have lost hundreds of billions of dollars over the last 3 and a half years.  So any help to drowning homeowners should naturally help Fannie and Freddie too.  Rather than conduits for packaging and selling mortgage-backed securities, Fannie and Freddie are being transformed in sources of revenue for the federal government at the expense of American homeowners.

We saw the first example of this when in December Congress passed the two month payroll tax extension. To do so, they raised fees on loans offered by Fannie Mae and Freddie Mac for the next ten years.  Ten years of fee increases to pay for a two month payroll tax extension?  Really?

And that was just the beginning.  The HARP loans were originally priced almost the same as regular refinances--they just allowed qualified homeowners to refinance a little more easily.  But not anymore.  I first learned of the changes three weeks ago, when I received a telephone call from a pharmaceutical sales rep who wanted to refinance her home at a lower rate.  The woman (who has great income and credit scores in the 700s) was concerned that her home had lost too much value since her last refinance in 2009 and that she would not have 20% equity.  She wanted me to quote her on a HARP loan.  I entered the figures into the loan calculator on the website of a major lender whom I use freqently and received a real shock. This woman qualified for a 3.99% rate with no discount points using a regular rate and term refi, but using HARP her 3.99% rate had a 4% discount.  That means that to refinance her $336,000 loan she would have to pay an additional $13,440.00 in fees (discount points) just to close.  Presumably, these costs would roll into her loan.  (Fortunately, we were able to refinance her on a conventional loan as it turned out that she did have sufficient equity to qualify.)

Today, I priced several refinance loans using HARP guidelines with the same lender.  A borrower with a 675 mid credit score wanting to refinance a $400,000 mortgage loan with less than 20% equity to a new 30 year fixed rate mortgage can expect to pay up to 12% in discount points to Fannie and Freddie for the privilege of doing so. That is more than $48,000 in fees.  And unlike the last incarnation of HARP, the new fees apply to both 15 and 30 year loans.

I checked with another lender and their pricing is about a 1% discount on these loans.  On a $400,000 loan, that would be about $4000.00 in additional fees, which is still a lot but substantially less than lender A is quoting,  so I am wondering whether Lender A--who normally has cheaper pricing than anyone else I work with--has put additional overlays on their HARP loans because they don't want to take on these loans.  Will this additional pricing be carried over to HARP II?  How many lenders will follow suit by raising the pricing so that they will not be stuck with upside down mortgages without charging a high premium for the privilege of making the loan.

There is so much wrong with this new pricing model on so many levels, but as far as I am concerned, what is most wrong with it is that HARP loans are aimed at people who are unable to refinance their existing mortgages because of lost equity.  These are people in adjustable rate mortgages where the initial term has expired or people in mortgages with high interest rates.  When HARP 2 guidelines were announced in November, the government said that it would make these loans available only to borrowers with less than 20% equity in their homes because they were for borrowers who "really needed them."  In the old days of subprime loans, loan originators and lenders who ladled on fees which stripped the equity out of borrowers' homes were considered predatory.  But the price adjustments we are seeing today would make the old subprime lenders blush.  The discount points for these loans will be added to the loan balance of an already underwater mortgage, further damaging an already debt-strapped homeowner.  And while they will undoubtedly generate millions in revenue for Fannie and Freddie, that revenue is being generated under the guise of helping struggling Americans when in fact nothing could be further from the truth.  Although the stated goal of HARP 2 is to encourage Americans to refinance into 10 and 15 year mortgage loans which they will pay off quickly, thus regaining the equity in their homes, the whole idea of implementing massive fee increases on American homeowners is outrageous.  And in a climate such as the one we are in today, where many advocate "strategic default" and walking away from homes to allow them to go into foreclosure, the fee structure of the new mortgage loans may be the final push that some homeowners need to throw their hands up in the air and say "I'm Done."

Anyone seeking a HARP refinance needs to be aware that there can be wide differences in the pricing on the loans and they need to shop accordingly.  Otherwise, they may end up with a refinance that is much higher cost than the loan they are trying to escape.

Alexandra Swann is the author of No Regrets: How Homeschooling Earned me a Master's Degree at Age Sixteen. For more information, visit her website at http://www.frontier2000.net/.

St. Paul Withdraws From US Supreme Court Case Potentially Pivotal To Fair Housing Actions

Last November, we reported on Gallagher v. Magner, 619 F.3d 823, 829 (8th Cir. 2010), and its potentially lethal effect on a cornerstone of Fair Housing actions: disparate impact and the application of the McDonnell-Douglas “burden-shifting” analysis.

However, on Friday, February 10, 2012, the parties withdrew the case from the US Supreme Court just a few weeks before the scheduled argument of February 29. The US Supreme Court granted the withdrawal.

The parties in the case were the City of St. Paul, Minnesota (namely, the Department of Neighborhood Housing and Property Improvement [DNHPI]), and property owners who allege that their homes were targeted by housing code enforcement personnel and their draconian treatment of so-called violations of the housing code. The Plaintiffs brought suit against the City of St. Paul and the DNHPI alleging that the city’s enforcement of its housing code had a disparate impact on minority home and property owners, “whose customers were mainly individuals or families with low incomes, with a large share of them — perhaps 60 to 70 percent — African-American tenants.”

As a cause of action, disparate impact and the McDonnell-Douglas “burden shifting” analysis were indispensible tools in the fight against housing discrimination. During the infancy of the Fair Housing Act, (passed in 1968) Arlington Heights v. Metropolitan Housing Development Corporation decided that the four part “burden shifting” test, first used in McDonnell-Douglas Corp. v. Green and Texas Dept. of Community Affairs v. Burdine, both cases dealing with discrimination in the workplace, could be applied to housing discrimination cases. In the housing context, the Arlington Heights disparate impact claim turned on four factors: 1) A showing of discriminatory effect/impact, 2) Some showing of discriminatory intent, 3) The defendant’s justification, and 4) The relief requested by the plaintiff.

However, the court in Arlington Heights ruled that “official action will not be held unconstitutional solely because it results in a racially disproportionate impact … [such] impact is not irrelevant, but it is not the sole touchstone of an invidious racial discrimination." Arlington Heights, citing Washington v. Davis, 426 U.S. 229, 242. “A racially discriminatory intent, as evidenced by such factors as disproportionate impact, the historical background of the challenged decision, the specific antecedent events, departures from normal procedures, and contemporary statements of the decision makers, must be shown.”

Proving this discriminatory intent was what made disparate impact cases an invaluable weapon in the fight against housing discrimination. Arlington Heights held that proving discriminatory intent turned on three factors: 1) the impact of a discriminatory law or action by state authorities, 2) if the impact of such law or action is not determinative, other factors, such as legislative or administrative history, and 3) the shifting of the burden of proof to the state to prove it would have adopted the law or regulation at issue without discriminatory motives.

Gallagher v. Magner turned on whether these types of claims could still be brought under the Fair Housing Act. While some believe that such claims have serious issues pertaining to equal protection, the consensus in the fair housing community was that the court would have confirmed that disparate impact claim was a valid theory, but were not sure as to the what test the court would have chosen. Disparate impact continues to live to fight housing discrimination another day.

GLC rings alarm over growing mis-selling of consumer credit products across the UK

With around £9bn of Payment Protection Insurance (PPI) mis-sold to UK consumers the issue of the mis-selling of financial products is big consumer news; yet the potential for the mis-selling of consumer credit products - particulary pay day loans and second charge mortgages regulated under the Consumer Credit Act - is relatively new and unchartered waters.

Govan Law Centre believes alarm bells should be ringing over the growing potential for mass mis-selling in the UK consumer credit market, with the growth of aggressive pay day lending and the ongoing mis-selling of expensive home secured loans. Changes introduced by the 2006 Consumer Credit Act have opened new gateways for consumer redress in law and through the independent Financial Ombudsman Service.

GLC todays publishes a 'think piece' paper which discusses the scope and possibility for consumer redress in relation to mis-sold and unfair consumer credit products in the UK. The paper is available here. Thoughts and comments are welcome and can be made below.

UN Agenda 21 and Smart Growth--Transforming American Life

At the end of January, I got an email from a long-time acquaintance of mine about the city of El Paso's new Master Plan.  Bob is a developer with one of the most prominent commercial real estate developers in the city, and he was concerned because he had just finished examining the city's 800 page new master plan--part of Love El Paso/Plan El Paso.  Since I am the immediate past chair of the El Paso Hispanic Chamber of Commerce, he wanted to know if the business community is aware of the huge changes that are coming to our city as part of our leaders' efforts to "love and plan" it.

Up until about a year and a half ago, I was unfamiliar with Smart Growth and Smart Code.  Then in the fall of 2010, Chris Dodd made a push to pass what would have been his final bill before he retired from the Senate, "The Livable Communities Act."  In researching the bill and its ramifications, I got a crash course in Smart Growth and Smart Code.  Dodd's bill turned out to be a failed attempt to do on a federal level what many states and communities are already doing on a local level--to remake American society and to fundamentally alter the way we live, work, play, worship, educate our children and raise our families--in short to completely remake the United States.

Smart Growth and Smart Code are local communities' attempts to implement the United Nations' Agenda 21.  Passed in 1992 in Rio de Janeiro and reaffirmed several times since then, Agenda 21 calls for highly dense "human settlements" with green spaces, ultimately transitioning away from private property ownership and into communal living.  In the United States, local communities that sign on to the goals of "sustainability" are implementing Agenda 21 by taking private land through eminent domain and by rezoning communities to require higher density living areas which rely heavily on public transportation.

The result is very expensive, unaffordable housing, narrow streets, and "walkable neighborhoods" where cars are discouraged as the residents walk to their various destinations or take public transportation.  Our new Master Plan was developed with the help of the consulting company Dover, Kohl & Partners who conducted community-wide meetings to help the members of the community understand how Smart Growth could benefit El Paso by refurbishing older areas.  I attended one such meeting (I was actually the only person from the community who showed up so I was able to see the entire presentation and ask questions.)  Dover, Kohl hails from Portland, Oregon--the home of Smart Code--and the consultant told me how wonderful it was to live in his picturesque community where he walks each morning to a small local coffee shop and gets his coffee and then goes to work.  Of course, the consultant did not mention that, according to the city of Portland's data, the average temperature in Portland, Oregon, in the summer time is no higher than 80 degrees, whereas in 2011 El Paso experienced approximately 50 days of temperatures over 100 degrees and it was not our hottest summer on record.  These are minor details for an advocate of Smart Code.

Smart Code proponents do not want suburbs--they want us to redevelop the cities and live in mixed use, mixed income neighborhoods where we can shop, eat, play and raise our children.  No more driving to the Super Walmart for groceries--instead we can walk to a local Mom and Pop grocery store and carry our groceries back.  No more two car families--Smart Code homes that have garages feature detached garages behind the house and no parking on the street.  But only the lucky few who can afford a single family home get a garage at all--one bedroom town homes have just a single parking pad.  Hopefully you don't have a car with a custom paint job that will peel in 100 degree plus temperatures.  Families need to learn to depend on public transportation and with gas rising to $4.00 a gallon families really cannot afford to drive anyway, so driving needs to be discouraged. No more owning a home with a backyard for your kids to play in--Smart Communities feature tiny yards and small "pocket parks" throughout the community where your children can go to play.  Of course, if you don't have time to escort them to the "pocket park" whenever they want to go play, you will have to hope that you have been blessed by The Planners with good, safe neighbors.

What Dover, Kohl consultants apparently forgot to mention is that even in Portland, Oregon, the Mecca of Smart Code, the residents are rebelling.  According to the EPA's website, Portland Oregon was the 2010 winner of  the EPA's National Award for Smart Growth Achievement in the Policies Procedures and Regulations category.   In 2002, a citizen's group called Oregonians in Action got a initiative on the ballot to prevent Portland's Planning Commission--"the Metro"--from forcing high density into single family areas.  Smart Code design plans call for apartment buildings, single family residences, and mixed use multi story retail with apartments above to be zoned together in one community.  The problem is that the owners of existing single family homes don't want mixed use retail and apartment buildings in their neighborhoods because it leads to congestion, problems with ingress and egress and declining property values. Oregonions in Action believes that it would have won the issue if "the Metro" had not floated its own ballot initiative--deceptively written, according to OIA--which also purported to prevent new high density initiatives in single family neighborhoods.  That measure passed with 66% of the vote to OIA's 43%.  So essentially the voters in Oregon voted almost unanimously for differently worded initiatives to stop the Metro from forcing them into high density neighborhoods. As Portland has continued to push Smart Code policies, the prices of housing in the city have risen dramatically and  many residents are not happy and have dubbed their city "Fake New York."

And Portlanders are rebelling in other ways.  In spite of a huge city wide commitment to public transportation in the form of light rails, trolleys and buses, self-proclaimed veteran environment journalist Todd Woody writes in his blog Grist that only 12.2% of Portland residents take public transportation to work, 4.9% walk to work and 61.5 % drive to work alone. This is in spite of the fact that downtown Portland contains the "free rail zone" where the public light rail system is actually free to ride.

The rejection of the use of public transportation by the residents has led to traffic congestion.  In 2009, A Kirkland-Washington based traffic firm ranked Portland-Hillsboro-Vancouver 22nd on its list of the 100 most congested urban centers in the U.S.  Since Smart Growth focuses on investing in public transportation rather than road projects, the traffic congestion is unlikely to improve any time soon.

Unfortunately, Portland is now a model city for Smart Growth and sustainable living throughout the United States. Over 1200 cities in the United States have pledged a commitment to sustainable living; El Paso, Texas is one of them.  Over the next few weeks, I will be writing about the ways in which Agenda 21 and its implementation through Smart Code and Smart Growth will be changing the way we live and work, here in El Paso and in other communities throughout the U.S.

Alexandra Swann's new novel, The Planner, about an out of control, environmentally-driven government is available on Kindle and in paperback. She is alxso the author of No Regrets: How Homeschooling Earned me a Master's Degree at Age Sixteen. For more information, visit her website at Frontier 2000

GLC secure unsecured loan write-off using CCA

In RBS plc v. Ahmed, a creditor sought to recover payment under a unsecured loan agreement for a sum just under £2,500, together with its legal expenses, which would have been on the undefended summary cause scale, at Glasgow Sheriff Court.

GLC had defended the action upon the basis the statement of claim was lacking in specification, and was irrelevant on a number of grounds, including failing to indicate whether a default notice under section 87 of the Consumer Credit Act 1974 (CCA) had been properly served prior to proceedings being raised.

RBS agreed to dismiss the action with expenses at 10% of the sum sued in favour of the defender, together with an undertaking to write off the debt under the loan agreement. The case serves to illustrate the importance of advisers always checking court documents for payment, as opposed to taking the debt and charges as stated as being necessarily due at the level claimed, or being lawfully due.

Richard Cordray and the Remaking of America

On January 4, President Obama used a recess appointment to make Richard Cordray the director of the Consumer Financial Protection Agency.  Most Americans who follow politics and the news now understand that the irony of the recess appointment is that the Senate was not actually in recess at the time but rather on a long weekend.  And since the Dodd Frank bill calls specifically for the nominee to CFPB director to be confirmed by the Senate, Cordray's appointment is illegitimate by anyone's standards.

What we witnessed in the Cordray appointment is the beginning of the remaking of the United States into a dramatically different society than the one in which we have grown up.  This remaking begins with an illegal appointment that disregards the rule of law in favor of expediency when the White House is frustrated at attempts, no matter how weak,  to thwart its efforts and it ends with an all powerful agency accountable to no one which is about to permanently transform how we live and work.

Cordray's stated primary goal for 2011 is enhanced regulation of non bank lenders--payday lenders and non bank mortgage lenders with a heavy emphasis on the latter.  Just two weeks after his appointment, he announced that his agency will have the qualified residential mortgage guidelines ready to implement this summer.  From what we have seen of the drafts of the Qualified Residential Mortgages, the guidelines for qualification will be so strict that only a tiny percentage of Americans will qualify for these new standards to obtain optimum housing financing at the lowest possible rates. Even the FDIC has said that these new standards are purposely strict because "Qualified Residential Mortgages (which will be the only types of mortgages that non-bank mortgage lenders will be allowed to make) are intended to be only a very small slice of the pie."  All borrowers who do not meet the stringent new standards will have to get a mortgage through a major bank which can afford to retain 5% of the balance of the mortgage for the life of the loan.  On a $250,000 mortgage loan, that would amount to the lender keeping a $10,000 interest in this loan for as long as the loan shall last.  And since the lender is taking on this additional risk, these mortgages will be substantially more expensive for the consumer. (Some estimates say as much as three times higher.)

With Cordray at its head, the CFPB is now fully empowered to implement whatever regulations it wants.  But this empowerment is coming at a time when the U.S. housing market is already severely crippled.  2011 was the worst year on record for new home sales and new home builder starts.  Last fall the Obama Administration announced that rather than dumping nearly 200,000 new foreclosures on the market and further causing housing prices to deflate, the Federal Housing Finance Authority would take bids from Wall Street private equity firms who might be willing to buy the houses that had been foreclosed on as a bundled group and keep them as rentals.  Even so, there is currently an estimated 800,000 home "shadow inventory" of properties which are in default and are expected to be foreclosed on and housing prices are expected to continue to go down.  So the real question is, why the big rush to further cut off access to mortgage credit and hamstring the housing market? And that leads us to the second question, Does anybody out there seriously believe that more regulation from the nation's newest consumer advocate is really going to make financing easier to obtain?  After all, 2012 is an election year--shouldn't our elected officials be trying to make things better, for this one year at least?

After carefully studying this situation, I have concluded that the fact that 2012 is an election year is precisely the point of Cordray's rushed appointment and his race to stalk and destroy as many providers of mortgage money as possible.  If Obama wins in 2012, then he can say that he has a "mandate from the people" to continue remaking our society.  But if he loses, this massive regulation will already be in place.  Campaign promises aside, dismantling huge government programs can often be a difficult and sometimes impossible process.  More importantly, as Cordray's agency drives mortgage lenders out of the market, new ones will not be able to easily come in to fill the void.  Faced with high expenses and punishing rules and regulations coupled with an extremely lethargic market, many entrepreneurs will decide that mortgage lending is too high risk and too low profit.  The owners and employees of the companies exiting mortgage lending in 2012 will find other jobs and move on with their lives, so that even if some future president is able to get all or even a substantial portion of the housing regulations repealed, they will not reenter the industry.

What that means in practical terms is that most consumers will be cut off from housing loans.  Right now, Americans are being systematically persuaded that homeownership is an old-fashioned, stupid idea.  Based on the number and tone of the comments I have received on my post "Suze Orman is Wrong--Don't Walk Away," about strategic default, I gather that a large number of Americans truly believe that walking away from their mortgage and letting their home go into foreclosure is an acceptable and desirable alternative to being inconvenienced by having to make the payment.  What these people don't seem to understand is that the house they are walking away from is very likely the last one they will ever own.  As our government cuts off access to financing on a national level, on a local level our governments are rewriting city codes to determine where we can build, how we can build, and where we are allowed to live and work and raise our families.  These new "Smart Codes" which are creating "Sustainable Communities" are driven by a green agenda that is part of the United Nation's Agenda 21.  They will transform us from a nation of homeowners to a nation of renters; from a nation with automobiles to a nation tied to mass transit; from a society which aspires to choose where we live and where we work to a society where the government makes these decisions for us.  

The problem that the ideologues who implement these sweeping changes to our society face is that most Americans are unwilling to voluntarily choose communities with narrow streets where they must rely on mass transit.  For that reason, when Sustainable Communities and Smart Growth are introduced into our cities, they overwhelmingly fail.  That's where Cordray comes in--by destroying mortgage lending he cuts off access to credit and lending which means that Americans can no longer choose to get a loan for a single family residence so they will to accept the Sustainable Communities.  And, after this generation is gone, the next generation will not have any concept of the standard of living that we once enjoyed in this country and they will accept government domination of every area of  their lives without questions.

We are truly in the process of the most insidious transformation our society has ever seen. 

Alexandra Swann is the author of No Regrets: How Homeschooling Earned me a Master's Degree at Age Sixteen.  For more information, visit her website at http://www.frontier2000.net/.