Why Your Town Can't Seem to Fix Anything

You pay your taxes, so why isn't that road fixed? Why hasn't the city finished off building the new park, or police station? Why? Because cities generally use bonds to get those done. You can imagine when Wall Street is on a lending diet that gets even more difficult for cities, and it couldn't be a worse time since defaulting mortgages also mean property taxes are not getting paid either. So why you care about bonding ratings is because it can help your city get better access to money and keep the projects going during lean years. And of course when the cities have to pay less, there's less reason to raise taxes. Most people's eyes glaze over when you say "bonds" much less "bond ratings" but this story really is about the quality of your life in your community. Now that you have that background, click here to read the New York Times' report.

Collision Course of Inflation and Adjusting Mortgages?

Unclogging the mortgage mess' drain meant the Federal Reserve was willing to lower rates in order to increase the amount of money institutions were willing to lend. More money being lent means more projects getting built (thus more jobs), and of course, more things getting purchased (from cars to homes). But, and this isn't new, from the moment that all the financial wizards agreed there was a problem in the market most news stories have had a cautionary paragraph at the end of their report which noted eventually increasing that cash flow would spur inflation worries. Guess what? Fed Chairman Ben Bernanke is getting more full throated about inflation concerns. Why do you care? Because when those other adjustable rate mortgages (ARMs) reset come next Spring we just might be at the point where the market it still stalled but inflation will mean no help in the rate cut. Result? Who really knows. But, we'd like to see more news stories explore both of those concepts colliding. If I were buying a house now, I'd be thinking about locking in a rate, but at the same time I couldn't be sure that prices wouldn't go down further. Especially given next Spring. If I were selling a house, I'd worry about next Spring. It puts a lot of pressure on brokers and sellers this Summer. In the meantime, check out CNN's solid coverage today on this.

The Double Whammy: Home Credit Line Crunch, and Looming 2009 ARM Reset Wave

You probably missed these two articles from the end of last week and Sunday's paper. But, you can't afford to. Why you care is because one explains how that home credit line you thought was there for a rainy day, may have gotten washed away. The other explains why those in the real estate business are bracing for Spring of 2009. Think of it this way. If the Mortgage Mess was a tsunami, when all those ARMs reset come next Spring it will feel like the second set crashing down on you. Why you care is because you can either ride the wave or get crushed by it. Read on.

Basic Math on Fixing Your Mortgage

CNNMoney.com has an excellent primer on the basics of fixing a mortgage that's in deep trouble. Included in the story are two things we always point out to people when they ask why can't all the mortgage problems just be fixed. First, as reporter Les Christie writes, "what's best for a borrower isn't always best for the lenders". That's absolutely true, and that's the struggle. On the other hand, there's something in the favor of the home owner - and that's the second point: A foreclosure costs a bank about $50,000 per home. Thus, why you care about that number is whether your mortgage can be fixed under that bar? Maybe so, maybe not. Still, this article is a great first step in understanding the process.

Slouching Toward Reform while Lehman seeks another Brother, or a Sister

While everyone is talking about the end of the primary season you can bet Wall Street and Capitol Hill banking types are more focused on two stories today. First in the Wall Street Journal's, "Lehman Is Seeking Overseas Capital" and second the New York Times' "Rating Firms Seem Near Legal Deal on Reforms". Why you care about these two articles is because it shows that while Wall Street is acknowledging that those who rate investment companies and products for potential investors are getting played off one another by the very people they are supposed to be evaluating. This, of course, is something we have been focusing on here for a while and most recently on our post, "Is this the U.S.' Plan to Prevent the Next Wall Street Meltdown?". Fixing the problem will eventually bring confidence back to Wall Street which is good for your pocketbook and 401k. Meanwhile, the Lehman Brothers story is a reminder that we are not out of the woods yet. If you read two financial stories today, these are them.

Building the Perfect Beast?

The Wall Street Journal has a good short article on defaulting construction loans. Why you care is because defaulting construction loans make lenders less likely to lend, and stopping up the market instead of fluidity makes your stock portfolio under perform. The other part of the story here that you care about is that construction means jobs, and even if you aren't a part of that sector, you need all portions of the economy doing reasonably well so that people have money in their pockets and bank accounts to look toward the future. What we'd love to see, and what would be most useful to you, is for the Wall Street Journal to take the next step and do this story but in a market by market analysis. We'd love to see San Francisco compared to Washington, DC - so on, and so forth. Until then, check out Lingling Wei's article "After Mortgages, Construction Crisis May be Building". (Wei's editor gets a nod for the headline).

Credit Crisis Kills Your Kid's College Loan

How is that for a reason as to WHY YOU CARE about the business pages? Lending institutions feeling the pinch are now deciding to not lend to some four year colleges and community colleges. Result? Well, for example, say you are an honor roll high school graduate in California that can get into pretty much any school you want but decides to do two years at a community college knowing you can then move on to a UC and come out with thousands upon thousands of dollars of less debt at graduation... Now you are going to have to get a second or third job while you are at that junior college because you have no access to a loan. This, like the mortgage crisis has been percolating for a bit. The business pages might not be the front section of the paper or the lead on the local news, but at the end of the day it is the difference between owning a home or not. Going to school or not. Making more money or not. Having healthcare or not. The New York Times' Jonathan Glater deserves credit for not only writing about this, but writing about it for a general news audience. You need to read this. There's going to be more on this, and this article is an excellent starting place.