Oh, How Quickly We Forget

One of the biggest contributors to the downfall of the housing market was the fact that there were too many houses on the market--we were saturated we people who bought houses that they weren't ready to afford yet. Then, when they vacated those homes, property values fell..for almost everyone.

That led to people leaving houses that they could pay for but chose not to because they were upside down on it. (In other words, if they took out a 200,000 mortgage and the value of the house fell to 125,000 they would still owe the 200,000 but would instead balk on the deal, even if they could afford the monthly payments.) This would cause a larger inventory of empty homes, and prices would fall further.

Well, one lesson we definitely learned from that was to tighten up lending standards so that people that bought property were really going to be able to handle the responsibility. We learned that, right? Clearly, Washington lawmakers won't do something crazy like convince two of the biggest lenders in the country to relax the rules again, right?

Uhhh...

(Reuters) - Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.

In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.

In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.

The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added.

OK, any takers seeing something good come out of this? I give it 3-5 years before we start seeing craziness happen again. What say you?

Anyikire: Just Keeping Up

My fellow colleague Chikaod Anyikire shows his Ramsey Roots in the excellent guest post below. I hope to get him to write for us more in the future.

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The American culture has in recent years evolved around accumulating debt. One of the reasons many people have gained so much is because of the age old adage “Just Keeping Up with the Joneses”. Now, it has become more common to file for bankruptcy and depend on credit cards to maintain a financial lifestyle. Now, after a year of bailouts and stimulus packages there is a small group of people who are saying “I just want to Keep Up”. There are many ways to get your life back on track and gaining financial peace. There are so many spokesmen and women, books, and internet sites that provide information about digging ourselves out of the hole we created.

An effective way is to become conservative when it comes to handling financial decisions. A radio host, Dave Ramsey teaches that aggressively paying off your debt, tearing up your credit cards and never using them, and “Living like no one else, so you can live like no one else” are just a few things he teaches through his books and programs. This means making some tough decisions by sitting down and creating a budget, living off of ramen noodles or rice and beans until you pay off your debt, then taking steps to saving up for retirement, education for our kids, and charities. This financial philosophy creates the foundation to live a life full of financial peace where a person has not to worry about debt collectors, garnishing of wages, and liens against where your family sleeps, your home. The benefits outweigh the future stress that would develop without taking steps to paying off your debt.

Let’s hope that this culture of paying off debt and leaving under our financial means thrives in our culture like a once wealthy Babylon, so that we all can achieve financial peace.

More information about Dave Ramsey … www.daveramsey.com

GM, Citigroup Bow Out of Dow

The Dow has dropped these "dead-weight" companies from the DJIA and "inexplicably" sees the market rise nearly 200 pts as of 10:30 this morning. GM filed for bankruptcy protection, Citigroup did not (as far as I know). Citigroup has not gotten the negative coverage GM has. I wonder why.