February 6, 2010 1:56 PM
More job stimulus legislation is needed to help displaced workers and perhaps more importantly, to prevent the recession from getting worse. How it is structured is less important than other priorities. Most government job stimulus programs are inherently inefficient, no matter what the delivery vehicle. So were the financial services firm bailouts by Presidents Bush and Obama, which have also created a moral hazard that must now be addressed. Senior financial services executives have effectively been rewarded for their bad decisions with bigger bonuses, while the firms' losses have been socialized to taxpayers, and their stockholders have suffered badly as well.
The government bailouts by both Presidents were necessary to prevent another Depression, and job stimulus programs are necessary until we get beyond the risk of a worsening recession. At this point the more important debate should not be about which job stimulus program will work better, but over which financial services reform legislation will be the most effective in preventing senior financial services executives from taking further advantage of the current moral hazard. Once we've precluded the kinds of irresponsible decisions that caused the current economic crisis in the future, we will have prevented the need for both inefficient future financial services firm bailouts and job creation programs.
February 1, 2010 10:34 AM
The world's foremost annual international gathering of government and financial services leaders finished a five-day meeting in Switzerland on January 30. There was almost universal agreement among world political leaders attending the World Economic Forum that the root cause of a near global economic crash was irresponsible risk taking by bankers all over the world. French President Nicolas Sarkozy summed up the sentiments of both government leaders and voters world-wide in calling for a return to ethics and morality in the financial services sector. Some bankers in attendance agreed. "The banks who stayed strong are angry at the banks who had poor management," said Robert Diamond, President of Barclays, a large British bank.
Just as happened in the last 100 international financial crises, financial services firms have managed to socialize the losses by passing them on to taxpayers while retaining their profits, according to the World Bank. This moral hazard must be stopped through unified international regulation, and financial services sector leaders must relearn that the purpose for their sectors' existence is to efficiently provide credit for the real world. In our increasingly integrated world economy. New regulations that will force senior financial services executives who caused the problem to recognize their fiduciary responsibility to their stockholders and moral and ethical responsibility to society should be coordinated internationally to provide consistency.
January 20, 2010 4:00 PM
The American Homeowners Grassroots Alliance hailed the repeal of New Jersey's state law prohibiting real estate brokers and agents from providing commission rebates to home buyers. State real estate associations have also managed to pass similar laws in other states in recent years, despite the opposition of the American Homeowners Grassroots Alliance, the U.S. Department of Justice, the Federal Trade Commission, and many other consumer advocacy organizations. The legislation became effective with Governor Jon Corzine's signature of the legislation (A-373 and S-139) on January 17, 2010.
The legislation will allow New Jersey real estate consumers to receive real estate commission rebates from real estate brokers and/or agents. As mortgage lending standards have tightened, leading to higher down payment requirements, those rebates have become increasingly important in facilitating home sales. Commission rebates, which can amount to as much as 2% of a home's selling price, may enable a home sale that would otherwise not be possible, especially for low and moderate income buyers. As a result, real estate commission rebates are becoming increasingly popular in states where real estate trade groups haven't passed similar protectionist legislation.
"We believe that the repeal of this bill will increase the pool of buyers and help to slow future declines in New Jersey home values, " said AHGA President Bruce Hahn. It's particularly helpful in states like New Jersey where the economy is tough and many buyers have difficulty scraping up a down payment. "We're delighted at this positive step, and hope it signals a trend towards removing similar barriers to competition in other states," Hahn added.
January 13, 2010 1:29 PM
The importance of an open Internet to economic opportunities and the wellbeing of homeowners and other consumers grows every day. It is important for commerce, education, healthcare, and provides many other opportunities, such as the ability to work from home. Homeowners are fortunate in that the Federal Communications Commission has done a very good job of assuring that the providers of the networks used by consumers to access the Internet continue to be open and neutral.
The way in which we access the Internet is also changing. The four principles of network neutrality, which guide the FCC's efforts to preserve an open Internet, were written at a time when most of us accessed the Internet from our homes or offices. Today mobile access is becoming much more important, and the FCC is modifying its rules to address this new environment. The American Homeowners Grassroots Alliance supports that exercise. In our January 14 FCC submission we thanked the commission for their commendable performance and urged a similar approach to the new environment and the issues that arise from it.
We also urged the FCC to collaborate with the U.S. Department of Justice and the Federal Trade Commission to address some serious antitrust challenges that are outside of the scope of the current inquiry. The nation's national online network of homes for sale has faced repeated efforts to deny home sellers the services of discount real estate brokers who provide sales assistance at a fraction of the typical 5-6% real estate commission. Currently about 90% of home buyers search for homes on that consumer-facing online network, so it's imperative for home sellers to get exposure on that network. If they are denied access to that network because they prefer to use a discount real estate broker, an owner of a $200,000 home might be forced to pay a $10,000 - 12,000 real estate commission instead of a few hundred dollars a discount broker would charge.
The Federal Trade Commission has taken the lead on addressing this challenge and has initiated efforts to stop the efforts of numerous local Multiple Listing Services (MLSs) across the country who have sought to limit home sellers access to their networks through discount brokerage services. The FTC has been successful in the ongoing series of cases, although one MLS is now appealing the initial FTC finding against it.
Federal competition laws or regulations must be strengthened in order to more effectively discourage dominant private Internet commerce networks and search firms from engaging in such actions. In our comments AHGA urged the FCC to support such changes.
December 31, 2009 1:46 PM
The new federal government home mortgage finance rules requiring better disclosures to consumers beginning 1/1/2010 are a step forward, but more improvement is needed. They were watered down over the many years it has taken to develop the current rules. At the end of the day HUD officials in both the Bush and Obama Administration deserve the thanks of consumers for stiffening their resolve in the face of intense lobbying pressure from mortgage brokers, lenders, title insurers, and real estate brokers to abandon the process. They were able to get nearly half of Congress to sponsor legislation that would have prevented the new rules from being implemented. Lead sponsors of that legislation, Reps. Judy Biggert, R-Ill., and Ruben Hinojosa, D-Texas, failed recently in their last ditch attempt to delay the implementation of the new RESPA rules. Last October they sought unsuccessfully to amend the bill that would create a Consumer Financial Protection Agency.
I learned of one of the remaining problem areas when I went to settlement on the refinancing of the mortgage on our home this past Wednesday. Our new monthly mortgage payments turned out to be about $200 per month more than the estimated amount in our Good Faith Estimate. The difference was that the estimated property tax and hazard insurance figures in our GFE were $200 less than the actual amount we have been paying. We provided our current real estate taxes and property insurance numbers to our mortgage broker before he gave us the GFE. We assumed he would use those numbers in his estimate and therefor didn't bother to check them. As a result the low GFE monthly payment estimate he gave us made us smile, and certainly reinforced our decision to go forward with the refi.
One thing the new rules do not address is problems like this. Curious as to whether there is a tendency for mortgage brokers to low ball taxes and insurance to make their GFE new mortgage payment numbers look better than they actually will be, I asked the settlement service executive what share of the refis that come to her with GFEs in which the mortgage brokers used very low and obviously incorrect real estate tax and insurance amounts rather than the homeowners current actual payments. "Most of them", she told me. This and a number of other RESPA problems need to be addressed, but at least we're making a start.
