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E Subsidizing Failure We appreciate real capitalism but not the kind practiced in the Real Estate Market. We remain in awe of the rational behind the mortgage interest deduction as a federal subsidy which allows homeowners to deduct the mortgage interest against their Federal Tax liability. If the deduction is $100.00 and the taxpayer marginal tax rate is 30% then the taxpayer’s tax bill is reduced by $30.00. So all other things being equal the taxpayer benefit is negative $70.00. People should purchase homes because they want to reside in the home. The mortgage interest deduction was designed to encourage purchases of residential real estate. Why? Smaller government and lower taxes includes no subsidies for individuals or businesses. Without the mortgage deduction fewer people would probably own homes which may be a good thing as they would instead live with other people who own or rent homes, remain with family members or economize in an apartment. Republicans can’t have everything they want either. Eliminating the Mortgage Deduction on new home purchases would stall or severely curtail said construction. This is a good thing so the existing inventory can be soaked up. The Mortgage Deduction can be phased out on existing homes with each sell, motivating people who want to retain their deduction to remain current on their loan. Many homeowners have already been relegated to lower tax brackets due to wage deflation diminishing the tax advantage of their mortgage deduction. Investors will soon follow suit {declining marginal tax brackets} with the pending reset much lower of the stock market and the forthcoming inevitability of municipalities defaulting on bond issues. Last November the federal government extended a tax credit of up to {$8,000.00} for persons not owning a home in the previous three {3} years. Seeking to build on that momentum the government added a new credit of up to {$6,500.00} for current homeowners. [5] Some economists suggest that tax credits do little to stimulate demand other than to accelerate sales that were going to happen anyway. [6] The buyer is motivated to act now rather than later to qualify for the tax credit. It’s the old car dealer trick where one can “back pack” new car sales into the previous month to keep those dealer rebates and other incentives flowing. The Realtors group has produced radio spots touting both tax credits as “the opportunity of a lifetime.” [7] The self serving effect of such ads is reflected when The Realtor Group suggest: “Each home sale contributes $63,000 on average to an area's economy, they claim: including real estate agent commissions, title company fees, insurance, and purchases like furniture and appliances.” The agent fee remains the most expensive portion of the outflow. [8] Our friend Bobbie in an animated display while flailing her hands in the air and upon visiting us in our new home in 2001 said: “When we bought our home money just flew out the window.” She’s right! So before signing that contract remember to bring your checkbook for the home inspection, pest inspection, appraisal fee’s, closing costs, property taxes, homeowners insurance, flood insurance, earthquake rider, supplemental insurance, utilities, ongoing maintenance/repairs, window treatments {blinds} and landscaping not included; and don’t forget you’ll want some furniture to fill up all that extra space and movers to cart your stuff to your new address. [63] We agree that the cost of owning a home does not stop with the purchase price but includes the aforementioned expenses some of which remain forever like property taxes and greed crazed homeowners associations who soak their members with fee’s and fines for infractions like leaving the portable basketball hoop on the edge of the sidewalk while management indulges in complimentary junkets or cruises to Mexico. Gone are the days when the sheriff would show up and politely ask you to move your extra transmission from the front yard and place it in your bathtub where it belongs. American Family Insurance Fraud We were amazed when a judge ruled against the people in or around Gulf Port Mississippi and adjudicated that a storm surge not the effects of Hurricane Katrina caused damage to their homes was considered flooding and not covered by their homeowner’s policies even if they purchased a Hurricane Rider. The message is that your homeowner’s policy is basically worthless; yes the policy they mail you as part of a rather large booklet including almost all of the language of a typical policy specifies the limitations and exclusions to coverage each one designed to protect the insurance company in your hour of need; and worst of all beware of anti concurrent causation clauses as they can erase your property insurance coverage completely. [64] Insurance was originally designed to minimize catastrophic loss to you but with the standardization of policy language from company to company the policy is designed to pay the bank back in the event that your house burns to the ground. They will pay the balance {or not} of your first mortgage and you can be debt free and homeless. The policy language prohibits almost any recovery by you for your personal effects. In some cases like with Am Fam or American Family Insurance they will sell you a policy for your home and one for your home based business. The business policy language is redundant and essentially worthless in duplicating the coverage that would be covered under the original homeowner’s policy except for your computers which they don’t cover anyway in either case! They say they do then restrict the coverage to the value of a hard salami. So you can pay twice the premium for half the coverage such as for your computers and rather than pay you for the loss of all your business data stored on back up systems which is invaluable to you they will offer to buy you a new disc for about $13.00 but again you must meet the deductible and have reported all losses to the police or you have not complied with additional contract language stuffed deep in the back of the policy, and don’t forget those nasty endorsements, amendments and addendums stapled to the back of the policy as they effectively revoke the contract language printed inside the policy since American Family is to lazy and cheap to print a real policy with the necessary language changes; their preference remains to whittle down their old printings of obsolete language on previous stock so as not to waste anything. Remember this is a $6b company that initially insured farmers as drivers because they were a preferred risk class, who almost never drove their cars and when they did usually for Sunday spins on desolate Wisconsin back roads. This is a company so hell bent on minimizing their perceived risks by servicing white clients only they actually went to the mat with the United States department of Justice regarding allegations of redlining black neighborhoods {meaning they refused to write any business in certain zip codes or areas}. Claims adjusters like Stephen Opps of Arvada Colorado {if that’s his name} and his supervisor remain perfect gate keepers for preventing the payment of legitimate claims as experts in twisting policy language to their favor and their unique ability to redirect claims away from controlling policy language to newer policies with stricter underwriting standards lying to State Insurance Regulators with ease while projecting their alleged narcissistic personalities onto you so you may actually believe that somehow the loss was your fault. Yes if your house burns down and after an extended brawl with the adjuster you will probably receive a tiny little check enabling you to rent an apartment for a couple of months but remember your bank is going to confiscate the proceeds anyway to reduce the liability of your mortgage. Scam products like mortgage default insurance, homeowners insurance, flood insurance, earthquake riders represent little more than wasted money so fat executives with American Family Insurance the fraudulent Wisconsin based property insurance company can rent private suites complete with hosted bar and turn down service after Brewers games. The only reason they remain viable is due to the mandates of each state for all motorists to retain some minimum form of vehicle liability insurance. Although not typically competitive in this market either they retain enough auto insurance revenue to dupe some of their existing clients into converting their property and casualty policies to their syndicate. If you love non-competitive players like Am Fam in the auto, casualty and property market you’ll love the few “approved” companies to be mandated in health care insurance reform. American Family generates their “buzz” and their “victims” by renting space in now semi vacant or ghost strip malls on the cheap attracting little walk in traffic while anyone who can boot a computer is comparing quotes for GEICO and Progressive from the privacy of their home at their convenience and not having to contend with reading a “gone fishing” sign posted on the door of their hack American Family agent at lunchtime. We are concerned that if we actually visited their home office we might be greeted by persons living in a virtual time warp from the 1960’s in the way they dress and act and if we wandered into the break room we might witness the mailroom guy rolling a diesel for his next trip across town. American Family homeowners and business contract language was certainly relevant about fifty years {50} ago. Not to overplay the hand dealt to us but we must mention the riveting machinations afforded us by compulsive liars like Stephen Opps who screamed at my wife when she was describing our loss. He then obfuscated with his boss and quoted the wrong policy for denial of our claims when he knew the coverage was provided under the earlier and controlling policy; lecturing us in one of his diatribes that the mob was still at work and play in Las Vegas, described how he hated living in Arvada Colorado and wanted to raise his grandchildren back in Nebraska due to the continuous drug and abandonment issues of his own children toward their children {his grandchildren} the inadvertent conveyance of his mental concavities to us in the process. We were just filing a claim and if our adjuster seeks psychoanalytical feedback in the process who are we to decline him in his one safe moment of candid reflection? Nor were we stunned by his betrayal to us or even his own employer American Family Insurance. Apparently his behavior is commonplace for the American Family class of claims adjusters: But don’t take our word for it. The nightmare scenario and online postings by people waiting to get paid or denied claims by American Family Insurance is legendary as is the hate directed at this company. Fellow Americans who were subject to corporate redlining and probably continue to be rejected although for other more concealed reasoning; please appreciate that American Family Insurance not inviting you to buy into their scam is a good thing! Think of their business model as a giant insurance pyramid or ponzi scheme that relies on recruiting more marks to keep this pig afloat. You avoided the corporate equivalent of Bernie Madoff, Thank God! When we read that American Family Insurance may have conducted business past or present with the alleged fraudulent AIG, the company that accepted all sorts of premium as a re-insurer without assigning any meaningful reserves against said risks, we shuddered! Your taxpayer money of $180b and counting went to make Goldman Sachs and other entities whole with 100% paybacks. AIG upon receiving installments of taxpayer bailout money had to be goaded into canceling their all executive and customer appreciation exotic hunting {and drinking} trips to some sheik resort in Europe. Remember taxpayer loans and premium payments are not their money they just treat it like it is….so a partial solution for denial of insurance claims is to remove the adjusting process from within the company to an independent three person arbitration panel. Any claim not processed within 3-days or rejected would be scheduled for written or oral presentations by consumer and company alike. The companies would eliminate or substantially reduce their staffing of claims adjusters and the savings would be retained to blindly fund these panels. Claimants seeking additional independence could opt to fund the panel. The vitriol against these companies by their own clients would dissipate and companies would be less inclined to make up for their stock market or counter party losses on the backs of their policy holders. Insurance companies currently retain a vested interest to deny all claims. The adjuster is compensated and relies on his employer like American Family Insurance for his or her job security, self esteem and invitations to the annual Christmas Party. Many of these property insurance companies are not publicly traded so no financial disclosures are required; they offer up an annual slate of pre approved directors so the fix is in at least for another year. The smartest guy is the CEO or Chairman who retains his or her power by surrounding themselves with lawyers and people who retain less aptitude to deflect challenges to their incompetence. Today in America we have people running giant companies who promote and institutionalize themselves by retaining intellectual dwarfs as their direct subordinates and asleep at the wheel Directors who happen to serve on many boards all over town; mainly to be seen, collect a check and chat with other pretentious idiots for a few hours now and then. Even publicly held corporations like AIG were run into the ground taking many shareholders with them due to the lack of oversight and the opaque nature of the new accounting standards or no standards of reporting profit and loss with companies allegedly imitating ENRON and simply moving toxic assets or liabilities off the balance sheet and dispatching them into thin air and then reporting quadruple profits quarter after quarter and year after year. Much of the aforementioned discussion represents criminal fraud. Until the F.B.I. cranks up their corporate malfeasance and fraud unit handing down grand jury indictments and effectively removing the executives at AIG {including the new ones} and other corporate chieftains like those at American Family Insurance in silver bracelets for converting the companies to their own casino piggy banks the rage will only intensify and eventually spill out into the public square threatening to dethrone more than a few fat cats; the greatly reduced but remaining stability of this administration at stake too! President Obama cannot afford to absorb additional body blows the multiple fiascos on his watch; many calamities self inflicted and completely unnecessary save for EGO or Edging God Out! He still preaches a good blame game but almost everyone except him knows the jig is basically up except Katie Couric. He should do the honorable thing and resign before his mistakes escalate into a full blown political crisis and force his eventual removal and a run on the bank when people hoard gold and silver rejecting paper money and fiat currencies as worthless. The trust of the people squandered by his administration having managed to somehow marginalize the entire citizenry one person and group at a time. The early tell was when President then candidate Obama wrestled “Joe the plumber” to the mat; the smear campaign to follow of “Joe” that he wasn’t really a plumber or a licensed plumber in Ohio or Indiana or wherever the stand off was filmed, their arrogance and abuse of power only escalating since then to now when in our greatest hours of need in many generations for solutions to the Gulf Oil Spill; Border Security in Arizona now infiltrated by organized heavily armed drug and human smugglers not to mention the hundreds of thousands of immigrants feeing the Narco-Terrorism of Mexico; the madness of Apocalyptic leaders in Iran to seize control of the oil rich middle east through Nuclear extortion and lest we forget an economy that sputters along the infusion of massive amounts of government financed debt ill focused and allocated to states to fill budget holes rather than force serious reforms, Belch! That was great can we have some more? Almost a Trillion dollars later we are still waiting for those shovel ready projects Mr. President. His retort is that we prevented unemployment from escalating to even higher levels. So you bought us a year of 10% unemployment for 900M plus interest payments on the outstanding balance. What will you do for an encore? You were correct about one thing though, the unemployment rate would be higher and unfortunately it will rise once the stimulus is exhausted like the cash for clunkers program. REAL unemployment hovers around 17% and will probably exceed 20% by the end of 2011. Let’s face it the bounce was artificial like catalog implants and we are currently in a depression with fake growth attributed to insane fiscal and monetary policies. So let’s embrace the new reality and deal with it rather than back loading the pain. Stop with all the form a committee and appoint illegal czars and self-aggrandizing. The cost of your shake, rattle and roll party in the White House will certainly include a massive hangover, certain depression and hind site to never trust man made Muslim leaning tormented but partially faithful followers again. Yes we can’t. Until then drink up!
The business of selling the American dream of owning a home with all the incorporated mandatory extras has ruined the lives for many Americans some of whom choose to remain sleep deprived for fear of embracing Freddy Krueger emulating their personal hell or nightmare on Elm Street. For any realty group to suggest in a rare form of self incrimination that each home sale contributes an average of $63,000.00 to the local economy validates our theory that housing prices have much further to fall and that financing dysfunctional corporations like “Am Fam” or American Family who rake in billions in premiums but fail to honor even basic contract language must be terminated so these corporate models may fail in the new economy. {we appreciate that American Family Insurance donated tons of other peoples money to build a Children’s Hospital}, however committing fraud even if for altruistic intentions does not immunize any person or corporation from the underlying elements of the fraud perpetuated on your policyholders and clients, will not help to rehabilitate your reputation and represents the worst form of disdain for your clients. Life After Money Real Estates Economics:
CSNY / Déjà Vu Live 2008.2
Last updated 2010.03.10 2013.12.02 rev. |
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Life after Money Part II Real Estate & Economics |
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Opinion |
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