Thursday, December 31, 2009
Saturday, December 26, 2009
Main Stream Media Continues The Strategic Default Drumbeat By Sharpening The Focus On The So Called Moral Imperatives
Essentially, the writer notes that strategic defaults are rising which is causing serious concern with mortgage bankers and business professors. The CEO of the Mortgage Banking Association is concerned about the message parents are sending to their kids. A business ethics professor firmly states that "borrowers who can afford to stay current are morally required to do so".
The writer correctly points out that corporations have been using strategic defaults since the dawn of time, so why shouldn't individuals. Hmmm. Let's think here. When a corporation decides not to pay its debts, even though it can afford to make payments, it is a wise business. When a citizen attempts to strategically default then it's Un-American; its destructive to the fabric of our society. By the way, do you know the definition of a Corporation? Just check Wikipedia's A corporation is an institution that is granted a charter...having its own rights, privileges, and liabilities...[and] are recognized by the law to have rights and responsibilities like actual people...[and] can exercise human rights against real individuals and the state..and...may be responsible for human rights violations". Seems that corporations are citizens too.
What's good for the goose....And by the way this brings up the strategic default principle of definition :Maximize Cash Flow, Protect Wealth and Minimize Losses. Always remember, when deciding to strategically default, you must always maximize your cash flow, protect what wealth you all ready possess, and always minimize your losses. More on this principle in future posts.
So why the double standard. Why can corporations use strategic default to maximize profits and minimize losses and ordinary people cannot. In an excellent analysis of this double standard, University of Arizona, law professor, Brent T. White, analyzes the moral and social reasons why people do not strategically default even though its in their best interest to do so. In my opinion the most important text from his article states
"most underwater homeowners don’t default as a result of two emotional forces: 1) the desire to avoid the shame or guilt associated with foreclosure; and 2) fear over the perceived consequences of foreclosure - consequences that are in actuality much less severe than most homeowners have been led to believe...Moreover, fear, shame, and guilt are...actively cultivated by the government, the financial industry, and other social control agents in order to induce individual homeowners to act in ways that are against their own self interest...[u]nlike lenders who follow market norms, individual homeowners are encouraged to behave in accordance with social norms of 'personal responsibility' and 'promise-keeping.'"
This is good news for ordinary people. It's time to right side up the upside down notion that it's morally and ethically proper to commit to a financial plan of action, which is completely against your financial interest. It's time to right side up the upside down idea that you have a societal responsibility to pay debts that continue to bleed you dry.
The main stream media will continue to beat the strategic default drum because it raises issues beyond just the principles of a strategic default. It puts into focus individual responsibility and collective responsibility, especially in the age of multi-trillion tax payer, printed dollar bailouts for corporations that strategically default.
Friday, December 25, 2009
Well, this holiday season helped me realize why a blog like this is important. The holidays are usually a time for collective activity with family, friends, or even time by yourself. It's also a time of giving to those who you care about and to those who need help. It's a time for reflection on your position in life. For myself, I am thankful that there is support from my wife, family, friends, clients and readers of my words. It is the support that is most important. We all need it.
Yet, I am in deep reflection right now. Through a series of self-made choices, I find myself in a very difficult position. A position that requires accepting full responsibility for my actions. I am constantly asking “How must one accept responsibility for one’s actions?” Perhaps I could lower my head, beat myself up, be angry and full of regret. Rack my mind with "Why? Why? Why did I do what I did” and “How could I have let this happen”. Living in fear of the future. The feeling of being chained to the problem with no escape. This weird feeling of dread because I want to bury my head in the sand. Well, to tell you the truth, I TRIED IT and WENT THROUGH IT. I played into self-pity, disappointment and loathing. I became irritable and angry. LET ME TELL YOU FIRST HAND…IT DOESN'T WORK. It left me breathless and weak. I WAS FROZEN AS TIME WENT BY.
What I did find that worked was… TAKING ACTIVE CONTROL AND PUTTING IT ALL BACK ON TRACK. I committed to real action to make things better. It required a deep breath, a confident posture, and the knowledge that it can and will get better because I wanted it to. I did my LIFE MATH and found that the good was greater than the not-so-good. It required daily prayer, meditation, strong words from wise people, and the belief that I can get up from any fall. It also demanded complete honesty about my mistakes to those who love and depend on me and to myself. It required a discipline and commitment to the right action. The right action that would improve my position.
It demanded a show of strength so grand, that even I could not believe it at first. I am a believer now.
There are some many people I have counseled and talked to who are taking their personal financial problems painfully. For many, it becomes an internalized personal failure. It has left some desperate and depressed. It has left all stressed. It has created this air of defeat…this idea of…”How Could I Have Let This Happen To Me”. It has frozen so many in time.
You are not the first or the last person to have financial problems. Especially now. I have worked with doctors, lawyers, policeman, business owners, teachers, accountants, financial advisors, retirees, the unemployed, real estate professionals, mortgage brokers, and other workers and professionals. I have counseled family, friends, and even acquaintances at events. I have worked with all types of people representing various races, ethnicities, and spiritualities. all spanning the socio-economic spectrum.
What I am trying to say is “You are not alone. We are all in this together. There is way forward.”
Everything you find on this blog and other blogs referenced here, are intended to keep you moving the right way on your financial path with confidence and the knowing that you can TAKE ACTIVE CONTROL and PUT IT ALL BACK ON TRACK. You are in control of your life.
I thank you for reading this holiday post and thank you for being an outlet for some of my feelings. The New Year is upon us. I am confident it will be good for you too.
Tuesday, December 22, 2009
THAT SAID...the decision to strategically default is much more complicated for the individual and their family. Our daily research shows that there is a moral and ethical TUG OF WAR about whether it's right to just NOT PAY a debt, even if you have the money. Questions about values abound, seemingly and inextricably linked to perceptions of When Is It OK to Break A Deal. In general, once we sign the dotted line, we are (psychologically) chained to that deal. No key until the deal is over.
Well, it ends up being a very personal choice, so let's look at some personal expressions about strategic defaults. This post is the first Act of a continuing play that we will present to you as time goes on...
This writer powerfully links his and other active duty soldiers experience with purchasing a property and watching as all of the equity is wiped out. It's a good read on the moral and ethical questions some soldiers may have regarding whether to strategically default. Read the post : Strategic default: a soldier’s perspective - www.interfluidity.com.
Monday, December 21, 2009
In any event I have decided to provide a link to the BEST strategic default articles all over the web. These articles best highlight the growing phenomenon, the reward and the risk. You will learn the different perspectives and recognize that Strategic Default is here to stay.
For the next twelve months, I will provide up to date, relevant information about Strategic Defaults. If you want to learn more about it then this is the place to come. Also make sure you bookmark this link, there will be fresh updates:
An Honest Look At Homeowners Who Decide Not To Pay (Even Though They Have The Money) & The Real Risks. While looking at the real life decisions to Strategically Default, this article reminds those who decide to do it that there are risks. The biggest risk being that a lender can still sue for any deficiency if the property does not satisfy the entire debt. In fact, the same lender will probably sell the right to the deficiency to a third party. Read More from The Wall Street Journal: Debtor's Dilemma: Pay the Mortgage or Walk Away: In Down Real-Estate Market, Homeowners Are Deciding to Abandon Their Loan Obligations Even if They Can Afford the Payments
Morgan Stanleys Intentionally Defaults On A $6.5 billion Dollar Loan Obligation. When explaining the reason for a Strategic Default on 17 million square feet of office buildings acquired for $6.5 billion in 2007, a spokeswoman said “This isn’t a default or foreclosure situation...We are going to give them the properties to get out of the loan obligation.” Read More from Bloomberg: Morgan Stanley to Give Up 5 San Francisco Towers Bought at Peak
NYC Attorney Consults with Clients Who Intentionally Stop Paying Their Mortgage To Protect Their Savings Or To Make Money. NYC Attorney Augustine Diji advises his clients on how to property consider a strategic default. In some instances, his clients strategically default in order to make money. Read More from the Real Deal: Investors defaulting to make money, Some NY investors go into foreclosure on purpose
USA Today Reports on the Growing Trend of Strategic Default. This report begins with a recently laid off homeowner who decided NOT to use all of her savings to pay her mortgage. Instead she decided to stop because it did not make sense since her house was worth less than the mortgage. This continues to confirm that Strategic Default is a growing trend. Media, banks, and government officials are beginning to take notice. Read More from USA Today: More walk away from homes, mortgages
A Law Professor Effectively Argues Why It's in the Best Interest of A Homeowner To Strategically Default When Necessary and Not Feel Guilt or Shame. Brent White, an associate law professor at the University of Arizona has written the best and most comprehensive argument regarding Strategic Defaults. He strongly argues that property owners should make the decision on whether to continue mortgage payments based on their own interests that are “unclouded by unnecessary guilt or shame.” He says "strategic default might not only be a viable option, but also the wisest financial decision". He correctly points out that lenders do the same thing, when they “ruthlessly seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility.” So it's TIME FOR TO BE RUTHLESS ABOUT YOUR FINANCIAL CONCERNS. Read Brent Whites Paper: Underwater and Not Walking Away.
The Moral and Social Issues of Deciding NOT To Pay A Mortgage (Even If The Property Owner Can Afford Payments) Can Keep A Property Owner From Using A Strategic Default. This research paper explores the moral and society norms factor heavily when deciding to strategically default. Essentially, the researchers found there is a correlation between people who believe it is immoral to strategically default and amount of negative equity in their property. The greater the value of their property is below the mortgage balance, the more likelihood the property owner will use a strategic default. Read More from Luigi Guiso, Paola Spaienza, & Luigi Zingales, Moral and Social Constraints to Strategic Defaults on Mortgages
There Are Two Sides To The Strategic Default Coin. This writer argues that "the greatest cause of the rise in mortgage defaulters is the gradual erosion of social and moral standards in a market where cheating became common and a loan nothing more than a financial strategy to be discarded at the first sign that it no longer made sense." Huh!!!?!!. I am unabashedly in favor of strategic default. However, the arguments on both side are very important and very serious. You should never take anything for granted when considering the implications of a strategic default. Mortgage Deadbeats Plague Home Market by Steven Malanga.
Please bookmark this page. We will continuously update.
Many people are heavily indebted and are seeking a way out. Financial institutions are not extending credit unless the borrower meets a strict set of criteria. In order to obtain a loan, one must have excellent credit, verifiable income, and substantial cash reserves. This is a tall order for many people and business alike.
One of the greatest forms of wealth comes from real estate ownership. It is now estimated that trillion dollars of real estate wealth has been lost. Furthermore, individuals and investors own properties with unaffordable mortgages payments that have principle balances greater than the value of the property.
There are many people who have decided to “intentionally” stop making mortgage loan payments, even if they can afford to do so. They have decided to make a so called “strategic default”. Generally, the primary rational for a strategic default is economic. Currently, strategic default is associated with home mortgage loans. However, strategic defaults is a tool used for credit card debt, business loans, home equity lines of credit, and personal loans.
There are moral and social issues that arise when making a decision to stop making loan payments even if the money is available. These moral and social issues intersect with an individual’s “rational” decision to stop losing money. Our society general places a strong taboo against breaking an agreement. Furthermore, there are social costs to consider when an individual decides to abandon a property and stop making mortgage payments.
What is a Stategic Default?
Generally, it is considered, a property owner’s decision to stop making mortgage loan payments even if the property owner can afford to make the payments. A property owner normally considers a strategic default when the value of the property is below the mortgage balance due a lender. Furthermore, there is a concern that monthly mortgage loan payments will become a permanent drain of available cash savings with little chance of recovering the loss. The rationale is that it does not make economic sense to make mortgage loan payments on a property that has no equity or any hope of gaining equity.
Strategic defaults are generally associated with individuals who stop making mortgage loan payments. However, we are finding that strategic defaults are being used for credit card payments, business loans, and various personal loans.
I will be discussing strategic defaults in depth in later entries. I am an advocate of stategic defaults when properly considered and effectively implemented.
For now think about it. You may decide to use it yourself.
Monday, October 5, 2009
"There comes a time when a person must be willing to sacrifice in order to take a stand for what's right...Now, this is one of those times, and if I'm successful this will be the proverbial first shot fired in an American debtors' revolution against the usury and plunder perpetrated by the banking elite, the Federal Reserve and the federal government...You are evil, thieving bastards...Stick that in your bailout pipe and smoke it."
And so it begins. The idea of a video Debtor's Revolt is catching wildfire. And by golly, it sure worked. Not long after Bank of America contacted our heroine and offered her a deal. That's good, however it's to late. The cat is out of the bag. Why...
Because the front line (customer reps) of banks have to deal with faceless customers demanding a reasonable settlement to their debt issues. The managers, officers, and executives could sip their lattés without having to speak to, hear from, or face unhappy customers who were ignored and disrespected. Customer complaints can be posted on You Tube for the world to see. No more will full ignorance by the top brass at banking institutions. No blind eye.
Let's face it, the Debtor's Revolt theme is slowly becoming the rage because 1.) It can work because a bank is not looking for negative publicity, especially thru viral videos 2.) It's a great way to vent, to be seen. To be heard. 3.) IT CAN WORK...
It is an excellent technique for those of you who do not mind putting your business out there. And may I say again...It Can Work. Trust me. I will be sure to tell clients about this method, so they can get a deal if a bank is unwilling to be reasonable.
There is nothing wrong with Public Shame. I believe that it's been a method used by every society on this planet to get a "just" result. Of course, justice is in the eye of the beholder.
So let's thank Ann Minch of Red Bluff, California for taking a stand. We love it. So let's introduce her video for all to view - DEBTOR'S REVOLT
As you know, this blog is about taking control of your life. Your money. Your wealth. We focus on how to protect yourselves against the MONEY GRAB going on by banks. While most banks stay on the right side of thing...the fact is WHEN A BANK IS TROUBLE, WATCH OUT BECAUSE IT'S YOUR MONEY THAT'S GRABBED. Almost Everyone one, every organization has a debt problem. But of course, when debt problems add up to Trillions of Dollars. Who pays for it?
You all ready now the answer. Yet, you can't just sit back. You need to stand up and take control. Even when times are tough, if you persist and dig deep, you can improve your life.
WE ARE ALL CAPABLE OF CHANGING OUR LIVES. WE ALL HAVE CERTAIN GIFTS AND SKILLS THAT CAN LED US TO SUCCESS. WE HAVE THE INHERENT ABILITY TO OVERCOME ANYTHING.
I saw this article today and it reinforced a theme, an idea running thru my head. Essentially employer's are having trouble finding qualified applicants for accounting, health care, software sales, actuaries, data analyzing, physical therapy and engineering. There seems to be a "mismatch" between the skills current job applicants have and the skills needed for the job.
While the media screams "recession, recession, hopelessness, recession" (Yes it's true there is a recession), it could also be pointed out that there are opportunities to succeed. You do not have to stay jobless or without money.
Kate Lorenz from Career Builder has a great article on How to Find A Job During A Recession. She talks about 9 steps to getting yourself back on track. The italicized Bottom Line are my interpretations of each step.
The steps are:
Step 1.) Take a close look at industry data. Bottom Line: Do research on industries looking to fill jobs, find out how is hiring, & learn to do what it takes to get that job.
Step 2.) Freshen up your skills. Bottom Line: The internet equalizes the knowledge field. If you don't have time to learn offline then study online. No excuse.
Step 3.) Try part time of freelance work. Bottom Line: Become some persons apprentice or intern so you have a foundation in the skill area you are developing.
Step 4.) Rev up your social networking. Bottom Line: It's all about connections. Whoever you meet, just tell them what you seek to do. Be come a walking, talking billboard.
Step 5.) Think in terms of results. Bottom Line: Talk about your achievements and what you have actually done.
Step 6.) Role play. Bottom Line: This is not about your acting skills. Practice what you will do and say to create your opportunity and get what you want. Don't care if you stand in front of a mirror, or talk to your pet, or video record yourself and play it over and over. Just Do It.
Step 7.) Polish your brand and market it. Bottom Line: We all "judge a book by it's cover". Never assume. Dress for Success and put forward the best you.
Step 8.) Find opportunity in your current position. Bottom Line: Perhaps there are tasks in your current job that can put a positive eye on you. Maybe there is an opening. Brighten your star with current management. Do a little extra. A door can open.
Step 9.) Be Realistic. Bottom Line: You are not alone, so there is competition. It will take time but never give up. Just focus on your efforts and believe in yourself. It can take several months so be ready.
I truly hope this helps you. The goal is to provide a spark, so your engines start revvin' up.
Remember to believe in yourself. Accept the support and love from family and friends. Always remain hopeful. Commit to action. Just Do it.
Tuesday, September 8, 2009
We are living in the Economic Theory of Relativity. It goes something like this. In the beginning of the year we were told that THIS IS THE WORSE ECONOMIC CRISES SINCE THE GREAT DEPRESSION. Fear everywhere. Banks were collapsing. Governments were crumbling. People hoarding cash. Pensions going bust. Trillions of Dollars in citizen wealth vaporized.
So the Heads of State got together and announced Massive Measures to save the world. They said we must give trillions of dollars to the banks for without them we shall suffer. So they gave. We must lend trillions of dollars to big businesses for without them you shall have no jobs. no security. So they gave and gave and gave.
Wait a minute...are not the world governments in Debt. A Resounding "YES, but it doesn't matter". We can just print money. Print money. Raise the taxpayer debt burden. Just print and give.
So give they Did. The results are MAGNIFICENT. Did you hear? Banks are making more money than before. The Auto industry is way up. Can you say "Cash for Clunkers". Wow. Health Care companies can't stop making money. Oil is Up. Mobil, Chevron, and their buddies are just rolling around with loot. Will you look at that, the stock market is up. Give Praise. Give Thanks. Hand slaps. Hugs, kisses, job well done. Businesses are Back in Business.
But wait a minute Where's Our Bailout. The Citizen Bailout. Well you didn't notice. The BIG STIMULUS was passed. And it sure STIMULATED. We received job security. We were given a break on paying our bills. Every persons pension, IRA, stock investment was protected and insured. The government sent out $50,000 checks to everyone...Oh Yeah wait a minute...
We were STIMULATED by Media Noise. Yes. The Media told us things are better. And Dammit It Sure seems that way...IN MY MIND.
So let's look at a few recent indicators of the success of our economy.
Surge in Homeless Pupils Strains Schools. This is how the bailout money protects children!!!!!!
Gold Way Up. Just Broke $1000 per ounce. Dollar Way Down. That's great. Oh wait a minute. Most people have their investments in dollars not gold.
Consumer Credit Contracts a Record $21.6 billion. Love it. That means we are no longer debtors...Oh hold on. Banks will not lend. Banks are hoarding cash, including the bailout money. Less credit. Less small business loans. Less spending. More job loss. With cash gone many people relied on credit.
Food-Stamps Reach 33.8 Million in April, 5th Consecutive Monthly Record. There is nothing good about this.
216K Jobs Lost, 9.7% Unemployment Rate. This highest unemployment rate in over 25 years. Ummmmmmmm.
Let's not forget that there are more foreclosure than ever before. More not less. Foreclosure filings are UP not DOWN.
Let's close out with Health Care Stats from SICKO.
So goes the Citizens Economic Theory of Relativity.
Let's move on. Work together and fight for what's good for us all.