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Dear Mr. President, I Can Rescue the Economy!

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Barack ObamaI have an answer the foreclosure crisis and a way to turn around the economy at the same time.

First, an outline of the problem:  The old way of doing things with foreclosures have not changed.  That’s the problem.

After a property is foreclosed, the bank lists it with (mostly) the same agents they have been working with for years.  Newbies who may actually know the market are not invited…..but that’s not where I am going.

The properties are just thrown on the market no matter what shape they are in because the bank needs to get it off their books.

So, that makes the homes available to only a few buyers…investors with cash, not the ultimate home buyers.  They end up paying retail after the cash investor fixes it up.

No, I am not against the investors making a profit, it’s just that there are too many homes and it makes no sense.

I know there are FHA 203k loans, but they are cumbersome, expensive and not available to all property or property types.

How about, Mr. President, making each property that is foreclosed by the banks fixed up to standards that an owner occupant can move into and finance properly.

Give income to the construction trades that are hurting and recoup the outlay when the home closes (with interest!).

What did we just accomplish?  We gave people jobs, we moved property faster and for more money, we added to the number of mortgages in the system with quality property that made mortgage backed security investors happy and to top it off, we stimulated an economy with the taxpayers making money!

I know someone knows someone that that knows someone who can actually get this idea to someone at the White House to get this rocking ASAP (May 1, the day there is no tax credit would be good!).

Realty Reality! That describes Fred, a sharp witted and outspoken realist for the mortgage and real estate world who has appeared on CNBC and NPR's Marketplace along with being quoted in the New York Times, The Wall Street Journal and other media outlets. Fred is the CEO of U S Spaces, Inc/Arrivva (a real estate brokerage firm in PA, NJ, DE and CA) and U S Loans Mortgage Inc (mortgage brokerage in PA, CA, FL and VA), and serves on the Board of Directors and is the Federal Legislative Director for the UpFront Mortgage Brokers. Fred is also the co-creator of real estate startup Rentscoper.com, a mathematically driven rental search engine. See everything Fred at fredglick.com.

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27 Comments

27 Comments

  1. Dean Ouellette

    March 7, 2010 at 8:27 pm

    Have to respectfully disagree with you on this one, more government mandates is NOT the way to fix this. Let’s keep the government out of it and come up with an alternative like the HEFI program or some fractional interest program where the bank can save face by cutting principle and make some of it back in the long run while giving the homeowner a payment for a house at market value.

    Now of course I know what you are saying, if we are going to spend govt money, let’s be smart about it, but let’s not give them any new ideas, let’s just tell them to step away and let the market correct itself or the banks to become innovative

  2. Fred Glick

    March 7, 2010 at 10:07 pm

    @Dean My ideas come after discussions with economists, Wharton professors, money mangers and highly respected politicians.

    The basis of the economy along with the world wide capital supply does not allow for the currently popular rhetorical method of economic reestablishment.

    The government is and must be a driving force to get an economy out of it’s doldrums. This has been true for every recession. Especially, this one that was so severe in combination with the power of a countries like China and Korea that have never threatened the US economy during an American recession.

    To give an example, think of this as a line of credit. It goes up, it goes down.

    I hope you see the point and if you would like, please email or call to discuss it further.

    • Nashville Grant

      March 10, 2010 at 1:02 am

      What if we simply paid demolition companies to demolish all of the foreclosed homes to create scarcity and rising pricing. This method also puts folks back to work in this industry, but uses the opposite approach. Solves over building too 🙂

  3. Ken Montville

    March 7, 2010 at 10:14 pm

    Are you saying that the Government should buy up all these foreclosed homes from the banks, fix them up ala the New Deal and then sell them?

    Certainly the banks aren’t going to sit still for a mandate to spend money. If they would, I’d rather they let some money loose for qualified borrowers or home owners that want to or need to refinance.

    Unless, of course, I can be a GS-15 Realtor for the Uncle Sam Real Estate Co. with full Government benefits and leave. 🙂

  4. Justin Boland

    March 8, 2010 at 9:40 am

    I agree with Dean — the only weak spot in this proposal would appear to be the part where the government is put in charge. There is not a strong tradition of understanding housing among bankers or academic economists. From 60’s tenement projects to the modern mortgage crisis, American homeowners and taxpayers have been the petri dishes for a whole lot of government experiments in the past several decades.

    Maybe it’s time to discuss fully privatizing the Federal Government and selling it to Berkshire Hathaway. They could, at least, afford it.

  5. Kristin LaVanway

    March 8, 2010 at 11:26 am

    Repairing the economy and cleaning up the housing market are really two separate tasks. I agree that the government must be involved in matters of national economy, but real estate is a local issue, and, in my opinion, is not benefitting significantly from government assistance.

    Here in Phoenix, one of the nation’s hardest hit housing markets, the market is very brisk, especially in the price ranges below $250K. Fix-and-flip investors pick up distressed properties and turn them into a market-ready product. They are effectively doing what you propose in your article, but with private finds, not tax dollars. Buy-and-hold investors provide rental properties for displaced homeowners who won’t be buying in the near future. And owner-occupants buyers do have a selection of affordable homes.

    Reducing the number of foreclosures is the real problem…once these foreclosed homes hit the market, the laws of supply and demand are doing their job.

  6. Aaron Charlton

    March 8, 2010 at 3:27 pm

    You’re advocating for giving up our freedom to the government in the hopes that they can make better decisions than we can. They tried that 100 years ago in Russia…and 50 years ago in Cuba. Didn’t work so well for them.

  7. Benn Rosales

    March 8, 2010 at 3:39 pm

    Because it’s the gov handling the improvements the best we could hope for is ADA compliance and that it meets code. Why not just turn the 8k credit into a home improvement credit, didn’t hud do this in the 80s to move inventory? Zero down to 100 down with improvement incentives?

  8. Aaron Charlton

    March 8, 2010 at 3:46 pm

    To be honest, these are good ideas. I just personally don’t trust the government with money. It scares the heck out of me! If they can’t figure it out with the money they’ve already printed, more programs and more money can only make it worse. I’d like to see them take a step back.

  9. Greg Barnhouse

    March 8, 2010 at 10:56 pm

    Really? I’d say keep the government far, far away from foreclosures and short sales. The government has proven they cannot be trusted with our money. Even the banks gave the “bail-out” money back. I’m all for less govenment.

    I’d say, let it run its course. It will get sorted out.

  10. Fred Glick

    March 10, 2010 at 8:47 am

    @Grant,

    I actually called for that awhile ago on CNBC for new construction.

    It is a logical add-on to my idea.

    Someone has to do a market survey on each house to see which ones would get the rehab. We are not going to rehab houses so they will sit.

    Also, I would like to see Fannie and Freddie expand the financing that they are offering for their REOs where you can get 97% with no MI for owners and 90% for investors.

    All they are doing is transferring the paper to people that have great credit and income. But, they are blanking out others of similar situations from homeownership and recovery by making them go through mortgage hell.

    If we can replace a Fannie Mae no-doc with 500 credit with a 95%, 750 credit score full doc but with 3% down and no-MI, aren’t we all in better shape?

  11. Fred Glick

    March 11, 2010 at 7:14 am

    Here we go, the CNBC interview:

    https://www.youtube.com/watch?v=o3mc8_e2v9I

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Politics

California’s gig labor bill hurts the people it’s trying to protect

(POLITICS) The law has loopholes for industries with good lobbyists, but it’s costing independent contractors, freelancers, and creatives their jobs.

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Uber subverts ab5 bill

So, there’s a new bill in California, Assembly Bill 5, that’s doing immense harm to freelancers across the state and throughout the country. The bill was intended to prevent tech companies from taking advantage of their employees by branding them as freelancers. But the thing took too wild a swing, and a lot of people have gotten hit by it.

We’re going to talk about how and why, but let’s get one thing straight, right off the bat:

We absolutely need something to help workers in this country. When we talk about why AB5 doesn’t work, I want to be very clear that I’m not turning my nose up at the idea of something like it. Rather, it’s this specific law that’s hurting a lot of people.

Let’s take a quick review at the environment that gave rise to Assembly Bill 5:

We live in an incredibly rough economy for most people. The stock market is doing phenomenally! But the stock market isn’t the same thing as the economy. The economy is made of people who are barely getting by, propping up a class of billionaires who are hording an amount of wealth that is increasing at a mind-boggling pace, instead of “trickling down”.

Productivity and wages used to rise together, but they got divorced in the 70s, and productivity’s been doing a lot for herself while wages have just sort of lazed around on the sofa, getting drunk. Productivity has grown 6 times more than pay since 1979. In the last ten years, the costs of education, housing, and medical care have ballooned, while the minimum wage has held steady at $7.25/hour. Not only is this financial climate hard for the average American, it’s going to be hard for a LOT of people, when the purchasing power of the middle class dwindles away to nothing and the bottom drops out of the whole contraption.

And there’s plenty of room for it to keep dropping! Because it turns out that a LOT of tech’s “innovation” just means “circumventing labor laws in ways that nobody’s made illegal yet”. Sometimes the tech world finds cools ways to get money and opportunities to people. Think of crowdfunding, or subscription services like Patreon that let middle-class artists do their thing sustainably.

But often, you instead wind up with companies like Uber, Lyft, and Favor. Rideshare apps view their drivers several different ways. They tell the government that they’re independent contractors. Drivers often claim that they’re running a small business, with the rideshare app’s help. Internally, (and to the SEC) they think of their drivers as the customers. The people who call for rides aren’t the customers—they’re the product that the app delivers to their customer, the driver.

What all of this means is that rideshare companies don’t have to pay minimum wage. They don’t have to offer benefits, like time off or healthcare. If the people who work for you are your customers, instead of your employees, you don’t have to take care of them the same way. (Funny how that works out, right?)
And in some ways, I can see the temptation to do things this way. Insurance is expensive, and it’s kind of wild that we make employers pay for it. Somehow saddling small businesses with that expense is considered the “conservative” option; I’ll never understand how that’s supposed to be good for the market. We’re the wealthiest nation in the world, and yet we’re just about the only country that puts the burden of healthcare on business owners instead of the government.

But here’s the thing: That’s how health care works in this country! It’s what we have. We have a public option, technically. But it’s been systematically gutted to the point of uselessness, intentionally, by people who resent it being passed in the first place. So until we get some kind of national healthcare system, it’s on business owners to make sure that their employees don’t die because they can’t afford medical care. That’s the law, and that’s the ethical thing to do in our current situation.

And tech companies tend not to like that. So we get situations like Uber, where people who are clearly employees are being framed as literally anything else. Because the companies hiring them would rather burn millions trying to render their employees obsolete than spend that money keeping them alive. (Fun side note: Remember when one of those self-driving cars killed a woman because Uber forgot to tell their AI that humans can exist outside of crosswalks?)

And just like I understand why companies would try to dodge those costs (even if it’s clearly wrong), I also understand what AB5 was trying to do. They’re trying to close that loophole. They’re trying to stop companies from BSing about who is an employee and who isn’t. That makes sense.

So the bill defines freelancers with help from a court case, Dynamex Operations West, Inc. v. Superior Court (2018). The main features are

1. Is the worker free from the control and direction of the hiring entity. Is the person who hired them telling them where, how, or when to do the work?
2. Is the work being performed outside of the normal course of business for the hiring entity?
3. Is this work that the worker normally does, independently of this one business relationship? Do they genuinely have their own business in this field? Or is this “freelancing” something they’re just doing for one company?

You can immediately see some huge questions raised here. Among them:

– How strict do you define “telling someone how to do their work?” Because I’ve never had a creative assignment that didn’t come with some sort of deadline, right?
– How do you define “the normal course of business?” The normal course of business for a magazine involves hiring dozens of writers to write hundreds of pieces. Does that stable of writers suddenly get smaller if you can’t afford to give them all benefits?

And we’re already seeing fallout from this. Large multimedia platforms, from Vox to CollegeHumor, are laying off huge swaths of their staffs. Under the new law, writers aren’t allowed to submit more than 35 pieces in a year and still be considered freelancers. That means that these outlets were going to have to either cast a much wider net for their bullpens, or cut their staff and focus on a core group of (presumably grotesquely-overworked) people. Unsurprisingly, they chose the latter pretty universally.

And it’s not just writers. Musicians are getting hit, too. A petition to secure an exemption is nearing 50,000 signatures on change.org. Any creative endeavor other than “a day job with a desk at Disney” is going to involve a network of people floating in and out as projects start and end. There’s a lot of room for exploitation, and there’s a lot of room for quashing that exploitation. But right now, this bill is mostly just putting people out of work.

And just like California’s (much-needed, fantastic) privacy protection laws are having an impact across the country, (because you never know if the data you’re collecting is on a Californian!) so too is their (terrible) freelancing law rippling out. Because work doesn’t happen in offices anymore. It happens everywhere. I recently released a song with musicians from six countries performing on it. That wasn’t even something I was trying to do. That’s just where my friends were!

Now, my piece was just me getting together with some friends to have fun. But professional recordings happen that way, too, all the time. And right now, if the person on either the hiring or performing side of that equation is in California, that relationship is in jeopardy.

And of course, the really fun thing is, that a lot of the industries that were intended as targets of the bill are sidestepping it with court challenges. And many industries lobbied for exemptions, meaning that real estate agents, CPAs, lawyers, surgeons, referral agencies, and lots of others were exempt from the get-go.

So what we’re left with is a law that’s meant to protect people. But many of the people it should’ve protected aren’t covered by it. And many legitimate freelancers are getting screwed out of business relationships that they used to rely on. The big publications that they used as cash cows to pay their bills are either capping them at 35 articles, or letting them go altogether. It’s not hard to see that this is wildly misguided, and that it’s causing more harm than help. We’ve got to pump the brakes on AB5 and try to figure something else out.

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Politics

How USMCA is different than NAFTA and if/when it will finally be passed

(POLITICS) The USMCA should be set to replace NAFTA early in the year, which will help small business and real estate alike with easier trade.

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USMCA signing

The United States-Mexico-Canada Agreement (USMCA), which has been a priority for President Trump, is one step closer to replacing NAFTA. Amid the impeachment hearings, the House of Representatives passed the USMCA by a vote of 385-41. The Senate must still approve the agreement, but according to CNBC, once the Senate gets back in session in January 2020, the agreement will pass.

The USMCA is a renegotiation of the North American Free Trade Agreement (NAFTA). It was informally agreed upon by President Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto in 2018. However, each country’s legislature must approve the agreement before it is ratified. Mexico’s legislature has ratified the agreement, but Canada has not. It is anticipated that the agreement will be re-introduced to the Canadian Parliament this session.

What’s the difference between USMCA and NAFTA?

NAFTA was created to reduce restrictions on trade between Mexico, Canada and the United States. It was to increase market access and investments between the North American countries. President Trump has referred to NAFTA as “the worst trade deal ever made.” The USMCA builds on NAFTA, but does alter some of the provisions. It’s unknown when the agreement will go into effect. Canada has not ratified the agreement.

How will the USMCA affect small businesses?

The official text of the USMCA hasn’t been released, but we do know a few of the provisions. The biggest impact for businesses may be in the automobile industry. Under USMCA, 75% of auto components must be manufactured in Mexico, U.S. or Canada to be eligible for zero tariffs. Under NAFTA, the figure was 62.5%. In addition, by 2023, 40% of workers who assemble cars or trucks must make at least $16/hour.

The USMCA reduces the timeline for brand-name biologic prescription drugs to be produced as generics. Some popular biologics include Humira, Lantus and Botox. Another key component of the agreement is opening the Canada dairy market. US farmers can now export up to 3.6% of Canada’s dairy market. The National Association of Realtors® (NAR) supports the USMCA because it will make it easier for real estate investors to travel between the countries.

Although the USMCA is not in effect yet, it does seem likely that it will be ratified this year to provide more opportunities between Canada, Mexico and the United States.

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Politics

FFEE Act wants to save you from having to pay to freeze your credit

(POLITICS NEWS) The FFEE Act wants to help give consumers more rights more control over how credit agencies use their data.

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impulse ffee

Taking action

Following the compromise of consumer data from credit reporting bureau Equifax, Senator Elizabeth Warren (D-MA) and Senator Brian Schatz (D-HI) have introduced the Freedom From Equifax Exploitation (FFEE) Act.

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This act aims to give consumers more rights more control over how credit agencies use their data.

The bill

The bill is available here, but here is a few of the bill’s highlights:

  • Create a uniform, federal process for obtaining and lifting a credit freeze.
  • Preventing credit reporting agencies from profiting off the use of consumer information for the duration of a credit freeze;
  • Strengthening the fraud alert protection from 90 days to a one year, with a year renewable.
  • In ID theft cases, a 7 year fraud alert is created.
  • Require any credit reporting agency who charged a fee to freeze credit in response to the data breach to refund those fees,
  • Allow for an additional free credit report (consumers already get one under the Fair Credit Reporting Act through annualcreditreport.com)

Freezing credit

The most important feature here is the removal of any fee to freeze your credit. Currently, agencies like Equifax charge nominal fees to freeze credit (anywhere from 3-10) dollars. If this bill passes – not only will that service be free, but it will restrict the way credit agencies use that information while the freeze is active.

The idea behind making this free also keeps credit companies, whom many believe are responsible for the security of credit information, from profiting off information breaches. Given that many financial advisors have advised those impacted to freeze their credit, this would be a benefit to consumers.

It is important to note here that Equifax has suspended the fees to freeze credit for the next month.

A credit freeze restricts access to your credit report. Simply put, it requires the credit agency to contact you first to ensure it was you who applied for credit, thus making it harder for you to apply for credit. You would need to unfreeze your account to apply for new credit. You must also freeze credit with each bureau, which can lead to some expenses as you must pay anytime to lift a freeze.

Remember: a credit freeze doesn’t impact current accounts or your credit score. If you apply for credit often, or open new accounts often, then a credit freeze may not be for you.

Lots of names

The bill has several original co-sponsors, including Senators Sanders, Franken, and Blumenthal. Companies like the National Consumer Law Center, Americans for Financial Reform, CREDO, and the Consumer Federation of America all have also endorsed the bill.

#CreditFreeze

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