Obama's Housing Shell Game; Short Sales and Relocation Assistance

We've now come full circle. Instead of trying to get people to stay in their homes, Obama is willing to pay them to leave. Please consider Program Will Pay Homeowners to Sell at a Loss.

In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

Short sales are “tailor-made for fraud,” said Mr. Lawler, a former executive at the mortgage finance company Fannie Mae.

Under the new federal program, a lender will use real estate agents to determine the value of a home and thus the minimum to accept. This figure will not be shared with the owner, but if an offer comes in that is equal to or higher than this amount, the lender must take it.

Big Shell Game

Diana Olick describes the situation perfectly in Mortgage Principal Writedown Won't Save Housing.

And so it begins. Big gun lawmakers are making the move toward principal writedowns as the last resort to save the housing market.

The problem is prices. Home prices have fallen so far in the hardest hit areas, the areas where the bulk of the troubled loans are, that banks would have to write down principal 30 to 50 percent to put borrowers back in the green. Accounting rules require that banks write down the value of those loans on their books, and experts tell me that if banks really accounted for all the losses in the home loan market, they'd all be insolvent.

That's why the Obama Administration has created this kind of shell game in the first place.

I stole that shell game idea from housing consultant Howard Glaser: "We're spending tens of billions of dollars on a tax credit to get people to purchase homes, we're spending federal money to keep them in their homes through the modification program, and now we're going to pay them to move out of their homes. This is not a sustainable system for the housing market. It's a shell game. Bernie Madoff could have created this system," Glaser told me today.

F.R.A.U.D.

Let's take real estate agents who might not have had any sales for 6 months or even a year, and agents who have a vested interest (a commission) in selling a home, and let's put them in charge of figuring out what a home is worth. Good idea.

Oh...there's no chance real estate agents will sell homes to their friends for cheap or to total strangers for that matter, just to get a commission. Indeed, real estate agents have been the paragon of virtue throughout the crisis so this is the culmination of a perfect idea.

Even appraisers working directly for the bank might be tempted to make special arrangements with favored real estate agents. A final approval process at the bank would make fraud harder, but that is contrary the idea the lender must take an offer if it hits the established minimum bid. A secondary review would also slow things down.

That aside, even with the chance for fraud, lenders are losing money by doing nothing, and in many cases by letting people live in homes rent free for 18 months or longer. Perhaps dealing with fraud issues is the lesser of two evils, assuming of course the banks can afford the loan losses. Then again, what alternative is there besides pretending loans on the books are worth full value?

This is what our affordable housing program has become: Giving tax credits to new home buyers, spending taxpayer money to keep people in their homes, paying people to move out of their homes, and bankrolling Fannie Mae and Freddie Mac with tax dollars for unlimited losses.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

December 15, 2009 10:00 AM PST

Hands-on with the Entourage Edge

by Ina Fried

• Font size
• Print
• E-mail
• Share
• 29 comments

Share 

With all the buzz over the tiny LCD screen on the bottom of Barnes & Noble's Nook, I was excited to get some time with the Entourage Edge, a device that pairs a large 9.7-inch E Ink screen with an even larger 10-inch LCD touch screen.

I got that chance on Monday, when the company stopped by CNET with a prototype of the product, which is set to ship in February for $490.

The goal of the Edge, the company says, is to offer a device that can replace the textbooks and notebooks carried around by typical high school students.

"We just thought here was a way to take technology and apply it to what they carry around," said Entourage Systems Vice President Doug Atkinson. "The initial goal was to put a 30-pound backpack in a device. I think we've achieved that."

There are a lot of features to like about the three-pound device, although, it definitely has the look and feel of a first-generation product.

The Edge's main selling point is, of course, the fact that it has two screens to do true work on. Unlike the Nook, which uses its color screen only for navigating the eBook and as an on-screen keyboard, the Edge's LCD can be used to run a variety of Android applications or to browse the Web.

The electronic ink side, meanwhile, can be used not only for reading books, but also for taking notes, using a stylus.

One of the Edge's many neat tricks is letting you go back and forth between the two screens. In particular, one can draw a line over a diagram in an electronic-book and--assuming the graphics are actually stored in color--see the same image in full color on the LCD screen.

The Entourage Edge pairs a large 9.7-inch E Ink screen with an even larger 10-inch LCD touch screen.

(Credit: Entourage)

The Edge also lets users highlight or annotate text and then navigate between highlights by touching on the color screen, using automatically created bookmarks. The device works with both EPUB and PDF files and has USB ports and SD cards for moving data back and forth, as well as a built-in Wi-Fi connection. It's also one of the first devices to sport a new chip from Marvell.

In addition to its book display abilities, the Edge also has two microphones for recording a lecture and blocking out background sounds with noise-cancellation (It doesn't have is the ability to synchronize one's class notes with the audio, a la Livescribe, but Atkinson said that is something that might be considered for future versions).

For all its cool features, there were a considerable amount of bugs yet to be worked out on the units I saw. Entourage still has a couple months to iron out the kinks, though.

Also, at three pounds and almost $500, the Edge is floating up into Netbook territory on both price and bulk. That, for me, raises my expectations on what the device should be able to do on the browsing and productivity front. I like the idea of a dual-screen e-book, but at that weight and price, it would have to really replace a laptop to earn its way into my already-packed carry-on.

Nonetheless, I look forward to checking out a production unit to see how much progress the company has made.

Originally posted at Beyond Binary