Wednesday, June 13, 2012

Government Fixes

I’m learning first-hand lately why so many business people are frustrated with government.

Not knowing much about the stock market, I persuaded my wife to invest our savings, which were in cash, in a house. Watching how the Federal Reserve is printing trillions of dollars with its “quantitative easing,” I figured cash wasn’t a good thing to hold.The house was a Fannie Mae foreclosure and we negotiated the price down as far as we could. When Fannie Mae took it back from the previous owners last fall, it hired a fly-by-night outfit to winterize it and that’s where the problems began.We wanted to carry a small mortgage on it so we could fix it up and rent it out, but we couldn’t get a low-interest mortgage loan because Fannie Mae, to whom our local bank would sell the mortgage, requires that the house be appraised.

We couldn’t get it appraised, however, because the seller is also Fannie Mae, and they couldn’t get it de-winterized. An appraiser has to come in and see everything working, but the fly-by-night outfit they hired to winterize it screwed up. The boiler cracked. Pipes burst. Fannie Mae didn’t want to spend the money to fix all that so we couldn’t get it appraised and qualify for the mortgage under Fannie Mae’s rules for mortgages - which banks must obey.Okay. Stuff happens, right? We negotiated the price down still further to cover the repairs and bought the house with cash. I figured we’d use a home equity line of credit on my existing home (which had been paid for) to fix up the investment house enough that it could be appraised, and then we’d qualify for a Fannie Mae-approved mortgage on it in just a few months.That was my plan, at least, until I discovered we couldn’t do that. Why? Fannie Mae regulations again. They say we have to wait a year before we can put a mortgage on the investment house we just paid cash for. After the sub-prime mortgage debacle - which Fannie Mae largely caused - they made another regulation to prevent house-buyers from taking out second mortgages. Didn’t matter that we wanted a first mortgage, Fannie Mae regulations prevent banks from writing any kind of mortgage until after we’ve owned it for a year.

Meanwhile I have this home-equity loan on my previously-all-paid-for primary residence with a variable interest rate. It’s only 4% - and that’s not bad - but it’s variable. The payments are easy now, but what will happen to interest rates in a year? Nobody knows, and that makes me nervous. All that Federal Reserve dollar-printing is bound to kick off major inflation and I’m worried that it will drive up interest rates before a year has elapsed.

So, I’ve applied for a fifteen-year mortgage on my primary residence and locked in a rate. I won’t need the fifteen years, but I might just take them anyway. If inflation does go up to 12% or higher like it did under President Carter, I’ll pay off the 3.25% mortgage with inflated dollars over the whole term. My local bank is savvy enough to understand that possibility, but like most banks they’re going to sell my mortgage immediately to Fannie Mae, so why should they care? Fannie Mae will be left holding the bag. That means government will be left holding the bag. That means the taxpayers will be left holding the bag, and I’m a taxpayer. No wonder Fannie Mae has to be bailed out so often.There’s an old Yankee expression that goes: “If it ain’t broke, don’t fix it.” Government, however, has a different outlook: “If it ain’t broke, we’re gonna keep on fixing it ‘til it is broke.” That’s the thinking it's been applying to the housing market. Now it’s “fixing” health care.

The house has aluminum siding, but the trim and the porch need scraping and painting, so I tried to hire a local contractor to do that. He looked at it and said that he doesn’t want to scrape it because the house was built in 1920 and government requires him to pay take a $500, several-day course in how to scrape any lead paint which might be on there, then buy a special license for hundreds more. He doesn’t want to do all that and who can blame him? If he goes ahead and scrapes it, he could be fined $37,000. But, he said, the homeowner can do it himself. So, guess what I’m doing this summer? The contractor will come in and paint it when I’m done.

I hired a heating contractor to install an energy-efficient boiler and he told me I would qualify for government grants if I bought the right one. I went online though and discovered that it’s all been spent. None left for me. I had to pay into that program with my taxes, but it won’t get anything back.

I’m going to add insulation in the attic and replace a few windows too. There were government programs to help if I bought the right windows and I did, but guess what? I’m too late. Money’s all gone for that too. Oh well.
 By August, I should be done with all the work and it’ll be ready to rent. What are the chances that between now and then I’ll be stalled again by more regulations I don’t know about yet? Pretty good is my guess.

Government is going to fix our economy? I don’t think so.


Anonymous said...

When a large mainframe computer can't handle something in the Control Language, it may call the error "Mutually Exclusive Keywords".
"Government Fixes" sums this up perfectly.
Good luck with renting it Tom.

Sam Stone said...

Nothing you brought out here surprises me Tom. The way our government helps out with regulations is driving a lot of manufacturing overseas, its referred to by some as exporting our pollution.
I hope the renting works out for you too.

Anonymous said...

Refer to 40 CFR Part 745 for more info on Renovate Right and the National Lead Information Center 800-424-LEAD for do it yourself projects.EPA also publishes a guide for lead safety.
Good luck

buttercup said...

Tell us, Educator McLaughlin, how do you manage to negotiate the world without using public roads? Given your hatred of all things government, it would be the height of hypocrisy for you to use public roads, bridges, water, or sewer systems.

Tom McLaughlin said...

Buttercup also commented:

"Yet, McLaughlin just retired from his job as a (God help us all) teacher. A teacher who has a pension and benefits that his teacher's union fought for. Like so many angry white men, McLaughlin is all too happy to reap the rewards of union negotiations, but wants to pull the ladder up after him. He's got his, you see."

As blog administrator, I got an email that she'd posted it, but for some reason I don't understand, it didn't appear here.

My response is that I'd have been much better off if I had been able to negotiate on my own behalf. The union, however, bullied me aside and became the exclusive bargaining agent for all teachers - most of whom were mediocre at best.

Although I sometimes caused fits because of this column, I was a superior teacher and my administrators recognized that. They would have compensated me at a much higher level to keep me happy than the union, as collective bargaining agent, did.

Regarding my use of roads and bridges, I'll say this: If that infrastructure were to have been built privately, it would be in much better shape than it is. I'd gladly pay a toll to drive over smoother roads built by private contractors. It would be cheaper than the taxes I pay to compensate those people who lean on their shovels all day and delay me as I pass over their bumpy roads.

It seems you cannot think past government, Buttercup, as a way of solving problems and getting things done. You think we're all helpless without government, when the truth is that it tends to make us helpless by trying to do everything.

Worse, government does just about everything badly and it's taking over more and more.

I only hope Obamacare is ruled unconstitutional in a couple of weeks. Let that be the beginning of the end of government expansion.

buttercup said...

The reason my comment didn't show up on this thread is that it was posted on a different one, O Great Teacher.

Your excuses for being "bullied" by the union are pathetic. If you were all that and a bag of chips, you would have gone to teach at a private school, where you could have made all kinds of non-union money teaching the scions of the wealthy. They didn't want you, is my guess. Fryeburg Academy??

As for infrastructure - you'd like all roads and bridges to be privatized? How many tolls do you suppose that would amount to? What about the folks working low wage jobs? I guess they'd have to work within walking distance?

Real American said...

Wow...haha, explains a lot.
All along you're just a paranoid narcissist.

Patriot said...

I am not sure Justice Rogers is all the rogue he is being made out to be by "conservatives". 1. We know Romney is against a Nat'l program - but supportive of a State program. 2. We know no one read the Obama/Bush Medical program (yes Bush because it was in the works prior to 2008) 3. There is no Partisan loyalty once an elected person arrives in DC. It becomes US as in Undo Soveirgnty. Case in point Issa & Gallegly endorsing a Dem Incumbent against Republicans running in a primary. Districts & Legislation are traded like Monopoly cards. 4. We need to STOP Romney & Co from agreeing any gov't health care is good. It's a scam to assure the insure companies are guaranteed business and paid for that biz by Uncle Sam. Period. 5. Since no one read the bill and Dem/Rep realize it will be expensive to maintain. They made an agreement. We'll "fight" - we'll let you/Rep write the opinion to call it a tax - then we'll let you/Rep submit legislation to veto the tax AFTER July 4th. Republicans will be villanized by Dem's and hailed hero's by Republicans. And come Jan a new rewritten healthcare will breeze through and NO ONE will object.