Not The Fault Of Schools Or Teachers

From today's NY Times:

WASHINGTON — Despite the addition of more than two million jobs last year, soaring corporate profits and continuing economic growth, income for the typical American household did not rise in 2012 and poverty failed to fall, new data from the Census Bureau show. 

“The poverty and income numbers are a metaphor for the entire economy,” said Ron Haskins of the Brookings Institution. “Everything’s on hold, but at a bad level.” 

Over a longer perspective, the figures reveal that the income of the median American household today, adjusted for inflation, is no higher than it was for the equivalent household in the late 1980s. 

For all but the most highly educated and affluent Americans, incomes have stagnated, or worse, for more than a decade. The census report found that median household income, adjusted for inflation, was $51,017 in 2012, down about 9 percent from an inflation-adjusted peak of $56,080 in 1999, mostly as a result of the longest and most damaging recession since the Depression. 

Most people have had no gains since the economy hit bottom in 2009. 

The government’s authoritative annual report on incomes, poverty and health insurance, released Tuesday, underscores that the economic recovery has largely failed to reach the poor and the middle class, even as the unemployment rate continues to sink and growth has returned.

In the past 12 years, there have been two recessions, one of which was the worst economic downturn since the Depression, two bubble bursts (tech and housing), two major wars that have eaten up a lot of tax money, an endless War on Terror that continues to eat up tax money, and most of the middle class jobs that disappeared in the last two recessions have been replaced with crappy service jobs.

This is an economic problem caused by capitalism, not an education problem caused by schools and teachers.

Beware The Bubble

House prices have shot up over the last year despite a shaky economy, a stagnant job market and a whole host of other economic head winds.

Might there be another bubble?

There might:

Despite the green shoots reported by the Case-Shiller index last week that home prices rose a blistering 9.3 percent in February from 12 months ago, Edward Pinto, a former executive at the government-backed mortgage business, says another crash can’t be too far behind.

Pinto faults Uncle Sam’s housing policy of guaranteeing 90 percent of new loans in the gigantic $6 trillion market through Fannie Mae.

He goes on to say the feds are providing billions in fat trading profits to Wall Street banks and artificially — but temporarily — propping up housing prices.

Sooner or later, he says, economic reality will catch up with this fairy-tale market, which will lead to another depressing housing collapse.

The fundamentals that matter most are falling behind the latest house prices. These include job and wage growth. And that’s amidst a surprise loosening in lending standards and tightened inventory because of the snail’s pace of moving foreclosed properties to market, says Pinto, a resident scholar at the American Enterprise Institute.

Astonishingly, as much as 50 percent of all mortgages today are issued with zero-down payments, which includes many refinanced homes for the banks’ better clients.

In the meantime, Wall Street powerhouses reap their windfall gains, trading these complex mortgage-backed securities.

The Street makes out like a bandit. In this game, banks accumulate nickels and dimes on each side of the trade, profiting on shifting interest rates, mortgage prepayments and other variables — but not on the “real” value of the underlying mortgages.

“The Street makes millions and millions of dollars on these securities,” Pinto told The Post.

“That’s the dirty little secret. The government guarantees repayment of principal and interest payments on a timely basis, regardless of what the borrower does on an individual mortgage level.”

Borrowers also get another lift. The Fed, scrambling to lower mortgage rates, currently near 3.5 percent, buys up $40 billion monthly in these mortgage-backed securities.

But Pinto doesn’t buy it. The trends are remarkably clear, stretching back 150 years through American real-estate history.

“When interest rates go up, which they inevitably will — and we seem to be at the bottom right now — they go up gradually but deliberately over a period of 20 to 30 years,” Pinto said, noting this long-term trend.

When that occurs, the housing market will be hammered again.

By his calculations, if mortgage rates rise from 3.5 percent to 6 percent, incomes would have to rise by 33 percent, or house prices would have to drop by 25 percent, to stave off an otherwise inevitable housing disaster.

Since personal incomes have been static since 2007, that part of the equation is hardly guaranteed. So a home price bust is not far behind, says Pinto.

 Nah - I'm sure this will all end well.

Go ahead, bid up some real estate next weekend.

The market is BACK, baby!

Housing Market Bubbles Up Again Thanks To Wall Street

I'm sure this will all end well:

MIAMI — Big investors are pouring unprecedented amounts of money into real estate hard hit by the housing crash, bringing those moribund markets back to life but raising the prospect of another Wall Street-fueled bubble that won’t be sustainable.

Drawn by the prospect of double-figure profit margins on rents and the resale of homes whose prices plummeted in the crash, hedge funds, Wall Street investors and other institutions are crowding out individual home buyers.

If the chain of easy credit and dangerous leverage that started on Wall Street fanned the housing bubble and eventual crash, some analysts find it disturbing that major investors are the ones snapping up the bargains — and eventual big profits — left in its wake.

“There is the possibility that Wall Street and the banks and the affluent 1 percent stand to gain the most from this,” said Jack McCabe, a real estate consultant based in Deerfield Beach, Fla. “Meanwhile, lower-income Americans will lose their opportunity for the American Dream of building wealth through owning a home.”

Real estate executives say institutional investors — who in some cases are bidding on hundreds of homes a day — account for as much as 70 percent of sales in some Florida markets. Over the past two years, analysts say, they also have accounted for a majority of purchases in other parts of the country where housing prices are rebounding sharply.

The influx of investors may explain why home prices have been rising in parts of the country most affected by the housing crash, despite high jobless rates and relatively few new mortgages being issued by lenders. In the past year, prices have risen 23 percent in the Phoenix area, 15 percent in Las Vegas, 9 percent in Tampa and 11 percent in Miami, according to the Case-Shiller home-price indice. Nationally, prices are up more than 8 percent over the past year.
 
“I don’t know whether things are as good as they seem to be. A lot of properties are being occupied by institutional investors, not the end-user,” said Scott Kranz, co-principal of Title Capital Management, a firm that helps big investors scout, buy and manage homes in Florida. “The end-user would need to see a great increase in jobs, availability of mortgage money and a loosening of the reins that have been holding them back. But all the economic indicators are that we are not at that point.”

And of course as the housing market tightens and the rental market tightens, prices go up for both rentals and sales.

Too bad there are no jobs to sustain those kinds of levels.

This housing bubble ended so well last time that you have to ask, what could possibly go wrong this time?

One more example of how the 1% screw the rest of us.

WSJ: Home Sales Data Phonied Up

We live in an era where data fetishists worship numbers, stats and data - but increasingly, we are coming to see that the data is phony.

Whether it's Bloomberg's crime stats that downgrade felonies to misdemeanors and misdemeanors to lost property or the BloomKlein test score miracle that wasn't or the unemployment rate which consistently undercounts the employment problem, so much of the data used by the media and the political establishment is just bullshit.

Today, the Wall Street Journal reveals that the National Association of Realtors has been phonying up the home sales data (surprise, surprise!):

The housing crash may have been more severe than initial estimates have shown.

The National Association of Realtors, which produces a widely watched monthly estimate of sales of previously owned homes, is examining the possibility that it over-counted U.S. home sales dating back as far as 2007.

The group reported that there were 4.9 million sales of previously owned homes in 2010, down 5.7% from 5.2 million in 2009. But CoreLogic, a real-estate analytics firm based in Santa Ana, Calif., counted just 3.3 million homes sales last year, a drop of 10.8% from 3.7 million in 2009. CoreLogic says NAR could have overstated home sales by as much as 20%.

While revisions wouldn't affect reported home-price numbers, they could show that the housing market faces a bigger overhang in inventory, given the weaker demand.

In December, NAR said that it would take 8.1 months to sell some 3.6 million homes listed for sale at the current pace, but the number of months it would take could be even higher if sales are revised down. Any revisions wouldn't have an impact on homeowners, but it could have consequences for the real-estate industry. Downward revisions would show that "this horrific downturn in the housing market has been even more pronounced than what people thought, and people already thought it was pretty bad," said Thomas Lawler, an independent housing economist.

NAR said the data, which are used by economists, investors and the real-estate industry to gauge the health of the housing market, could be revised downward this summer. Lawrence Yun, chief economist at NAR, wasn't specific about whether and by how much the revisions could reduce reported sales, and he raised the possibility that the CoreLogic estimates have understated the number of home sales. "This is a very important issue, and we are looking at it carefully right now," Mr. Yun said.

Barry Ritholtz notes that the overcounting of home sales goes back to 2000, not 2007, and takes a closer look at the problem here.

Accidental miscounting problem or fraud?

Hmmm....

Why Aren't Bill Gates, Arne Duncan, And Tom Friedman Trying To Reform This?

Arne Duncan, Bill Gates and Tom Friedman all called for teachers to make less money, lose job protections, and have their pay tied to performance-based data.

They say this will make teachers more "professional" and bring much-needed business practices to education.

Meanwhile in the real world, here is what business practices have brought us:

MIAMI — All she wanted was $50,000 from the equity in her house to help pay the bills while looking for a job in nursing. What Imogene Hall got was a brutal lesson in the sometimes shady ways of the mortgage industry.

It's a lesson learned by untold numbers of homeowners in Florida, epicenter of the foreclosure crisis gripping the nation.

"Everywhere I turn, someone else is scamming me,'' said Hall, a 49-year-old Jamaican immigrant who stands to lose her Miami Gardens home the Monday after Thanksgiving. "All I do is work hard, and I get surrounded by thieves.''

A review of court records found evidence of misconduct at nearly every stage of Hall's experience. Consider:

_ Johnson Cuffy, a former mortgage broker now serving an 11-year prison sentence for grand theft, handled Hall's refinancing in early 2006, using a strategy a state investigator described as ``outright mortgage fraud.'' He faces up to 30 more years in prison if convicted of 16 other mortgage fraud charges he's facing.

_ The title agent who signed the crucial deed transfers that Hall's fraud claim rests on operated an unlicensed title company that stole more than $1.5 million from South Florida home buyers during closing proceedings between 2005 and 2007, according to Florida Supreme Court records.

_ A man who listed his employer as a nonexistent Blockbuster Video store in New York somehow used Hall's home as collateral to secure a $230,000 loan from subprime lender Argent Mortgage.

_ Hall's foreclosure was processed by the Florida Default Law Group, one of four Florida law firms being investigated by the state attorney general for using flawed documents to repossess homes from thousands of owners.

QUICKIE OUTCOME

After spending more than three years in the judicial system, Hall's case was transferred to Miami-Dade's County Court's new foreclosure-only division in July. There, Judge Jeffrey Rosinek, who was fresh to the case, quickly tossed out Hall's fraud defense, and granted the bank a swift summary judgment in a process critics describe as a "rocket docket.''

Hall's foreclosure defense lawyers, in what has become a booming -- and sometimes predatory -- business, charged her more than $20,000 while regularly failing to show up in court. One lawyer charged Hall $2,800 for work he did trying to withdraw himself from the case.

Law enforcement officers are scheduled to come to Hall's house to evict her and her family next week, nearly five years after a mortgage broker showed up on her doorstep unannounced, pitching a stress-free refinance.

Hall, who lives in the modest home with four children and three grandchildren, says her troubles began in late 2005 when she was struggling to find work as a home health nursing aide. As her bills piled up, she considered tapping into the equity she had built in her three-bedroom home. The market was booming, and homeowners all around her were using equity to take vacations, remodel kitchens and pay down consumer debt.

She says she received an unsolicited visit from Cuffy, manager of BlueKap Financial Group, who promised to handle a refinance and help her get $50,000 equity out of her home.

According to state investigators, Cuffy's strategy was steeped in fraud. In a scheme he allegedly used multiple times in South Florida, he recruited a ``straw buyer'' -- someone with no real intention of occupying the property -- to take deed to Hall's home. He then used an inflated appraisal and the straw buyer's credit information to take out a $230,000 mortgage before transferring the deed back to Hall.

The Miami-Dade County property appraiser had valued the home at just under $132,000 the year before the loan was taken out.

$25,000 FEE

Closing documents from the sale show that Cuffy and his affiliates made more than $25,000 in transaction fees, and pocketed more than $180,000 from subprime lender Argent Mortgage Company, without Hall's knowledge, she says. Hall received the balance of the $230,000 loan -- about $50,000 -- the proceeds of what she thought was a simple refinance.

R. Scott Palmer, the attorney general's Mortgage Fraud Task Force chief, said similar mortgage fraud schemes were prevalent during the boom years as fraudsters looked to take advantage of a rising market and unsuspecting homeowners.

"They preyed on people who had equity in their homes that they could strip, and what you described happened to this person has happened to a lot of people,'' he said.

John Swope, a Department of Financial Services agent who has been investigating Cuffy and his entourage for the last three years, said the mortgage fraud ring made millions of dollars in Florida real estate transactions that closely mirrored Hall's.

"The loan is never anticipated to be paid back,'' he said. "Unfortunately, I've had people who have become homeless because of this individual.''

Others involved in the sale -- closing agent O.J. Odunna, title issuing company Organized Title and BlueKap affiliate Cliff Johnson -- have all been either charged or convicted by law enforcement officials of mortgage-related offenses in other South Florida cases.

Unlike most homeowners fighting foreclosures, Hall claims she had been making her mortgage payments when she received a default notice from the bank. At the urging of Cuffy, she made monthly mortgage payments of $1,500 to Tamarac-based BlueKap Financial, but the money was never used to pay the lender, she said.

Court records show that BlueKap sent her bogus receipts each month indicating ``mortgage paid,'' but a few days after receiving her eighth receipt, she got a letter from Argent Mortgage saying the lender intended to foreclose on her home.

"None of the money I gave [Cuffy] went to pay the mortgage,'' said Hall, whose monthly mortgage bill more than doubled after the refinance. ``Such a wicked man. He did nothing but lie to me.''

Cuffy is currently serving an 11-year stint for grand theft, and faces a host of mortgage fraud charges, along with family members who helped him run the now-defunct BlueKap. Swope said the company targeted homeowners who were in distress.

GUY FROM NEW YORK

His alleged straw buyer, Kervyn Harris, is a prime example of how easy it was to get a home loan during the housing boom as money moved fast and due diligence was often scarce in banks' loan origination departments. Harris, of New York, ran up a quick $1.3 million bank tab in South Florida with five different mortgage loans in an eight-week period between Dec. 8, 2005 and Feb. 1, 2006.

Although his mortgage applications listed a job at a nonexistent Blockbuster Video in New York, he had no trouble getting $230,000 in loans from Argent Mortgage for Hall's Miami Gardens house. All of the homes Harris bought during his spree -- each at inflated prices and with subprime financing -- immediately went into foreclosure, court records show. He is listed as the borrower and main defendant in Hall's foreclosure case, but has never been to any of the court hearings. He could not be reached for comment, and the Department of Financial Services wants to reach him for questioning, Swope said.

In a case where mortgage fraud is alleged and the victims include both the lender and the homesteaded property owner, foreclosure court proceedings between those two parties are especially complex.

Deutsche Bank, a trustee representing Argent Mortgage in Hall's foreclosure, has denied knowledge of any fraud in court, claiming that it is entitled to recoup the lender's losses. A Deutsche spokesman said the bank does not comment on individual cases.

Deutsche Bank is a trustee for several lenders and it became the trustee for Hall's loan after it acquired a pool of loans that included hers, in 2006.

Jonathan Heller, a defense lawyer representing a Miami homeowner who is facing foreclosure and claiming mortgage fraud, said banks are generally determined to foreclose in spite of evidence of fraud, and judges are too overwhelmed with huge case backlogs to consider complicated defenses.

LARGE VOLUME

``These cases are handled in large volume -- and the majority of them are pro forma -- but many of the files are tinged with fraud and irregularities,'' he said. ``The court simply does not have the time to hear the grievances of a homeowner raising fraud issues, which are fairly prevalent.''

Hall's court hearings started in 2006 -- before the tsunami of defaulting loans flooded the court systems -- and lawyers sparred over the legitimacy of the loan for more than three years. In the early stages of Hall's foreclosure proceedings, Judge Ronald Friedman prevented the lender from closing the case on multiple occasions, pointing out irregularities and allowing Hall to mount a legal defense.

But lingering case-files like Hall's have become the bane of the Miami-Dade court system as it has amassed the largest foreclosure backlog in the state and new filings have poured in faster than judges can close out old cases.

In July, armed with $862,053 in state funding, Miami-Dade initiated sweeping changes to the way it handled foreclosures. The funding came with strings attached: the county was expected to clear out 52,000 cases in a year -- about 200 per day -- more than have ever been solved in such a short span of time. Miami-Dade's backlog currently stands at about 70,000 cases. The number is about 39,000 in Broward County and nearly 3,000 in Monroe County.

The reform measures included the creation of Section 50, a floating courtroom designed specifically to take on foreclosure cases that were more than two years old, and make them quickly disappear.

Hall's foreclosure case-file was transferred to Section 50 in July.

A new judge, called back from retirement, made quick work of the proceedings in August, approving the foreclosure in the type of swift hearing that many have criticized as a ``rocket docket'' that favors lenders. Between July and September, some 46,940 foreclosure cases in Florida were decided by summary judgment, according to the Office of State Courts Administration. Only 23 cases in the entire state went to trial.

Hall claims that during her 15-minute hearing, the judge did not allow her or her lawyer to get in a word.

``The first judge was so nice -- helping me, helping me,'' Hall said. ``Then they [transferred] my case, and the second judge wouldn't listen to anything. He just said `You're going to lose the house, you're going to lose the house.' ''

BAD TO WORSE

Hall has had even worse luck with her legal representation along the way. Foreclosure defense is a growing business in Florida, where hundreds of thousands of homeowners are facing the prospect of losing their most valuable asset. Many are turning to lawyers and foreclosure rescue agencies.

Hall paid her first lawyer, Alan Soven, more than $10,000 to fight the foreclosure. At one point Judge Friedman rebuked the Miami lawyer for subpar legal work, and the Florida Bar ordered him to refund $2,000 in legal fees to Hall in a mediation settlement. With a $400 hourly rate, he charged Hall nearly $3,000 for the 7.2 hours he spent trying to get legal approval to quit the case, court records show.

Soven declined to comment on the case.

Hall's next lawyer, Johnny Kincaide of The Kincaide Law Group in Weston, routinely skipped crucial court hearings and failed to file a response to a court ruling, causing the judge to penalize Hall with an order of default. Kincaide's firm is being investigated by Attorney General Bill McCollum after several homeowners said he promised to help them get a mortgage modification and then disappeared after taking their initial deposits. He did not return calls seeking comment.

The unlikely common denominator for all of this is a humble home on a quiet side-street in Miami Gardens, where Hall has lived for 13 years. She paid just over $80,000 for the home in 1997. Despite overwhelming evidence that Hall was likely a victim of mortgage fraud, Deutsche Bank won its foreclosure case, with a final judgment of $303,000 for the home, which the county appraiser valued at $98,310 this year.

Hall, who grows emotional when she talks about what now appears to be an inevitable eviction, says losing her home would be a devastating end to what has been a nightmarish ordeal.

``I can't sleep at night -- I worry, worry, worry about where I'm going to go,'' she said. ``I looked for help but nobody wanted to help me. I don't know what I'm going to do.''

Key quote - "Everywhere I turn, someone else is scamming me."

I know the feeling.

God help this woman and her family.

I'm not a religious sort, but I do hope if there is something akin to John Bunyan's hell, all the people who scammed Hall spend some time in it.

And the same goes for Gates, Duncan, Friedman, and all of the others who have conducted this concerted effort to destroy public education and the teaching profession.

We Live In A Third World Country

Here's more evidence of that:

Thousands of commuters into New York City confronted another round of potentially heavy delays on the Long Island Rail Road on Tuesday morning, a day after an electrical short in a pair of cables sparked a fire in a control tower, causing an almost total shutdown of train traffic for part of the day.

The railroad canceled 33 westbound trains into the city from Long Island — about one-fourth of its normal morning rush-hour traffic — and warned of “significant schedule changes and delays” for the morning and evening rushes.

Rail service was also temporarily suspended along the busy Northeast Corridor for the second time in less than two weeks because of an Amtrak power problem. New Jersey Transit officials said the problem was affecting Northeast Corridor, North Jersey Coast Line and Midtown Direct trains.

Infrastructure is falling to pieces and instead of using stimulus money to rebuild it, they used it to fire teachers, close schools and open charters.

And the economy is tanking anyway - here's the latest evidence of that:

Housing sales in July plunged to their lowest level in more than a decade, exceeding even the grimmest forecasts.

The National Association of Realtors said Tuesday that the seasonally adjusted annual sales rate of 3.83 million was 25.5 percent below the level of July a year ago.

July was the first month that buyers could not qualify for a tax credit of up to $8,000, so analysts were expecting weak results. But their consensus called for a decline of about 13 percent.

“Truly gut-wrenching,” said Jennifer H. Lee, senior economist for BMO Capital Markets.

July sales were down 27.2 percent from June. It was the lowest rate for existing-home sales, which include houses, condos, co-ops and town houses, since 1999. For sales of single-family homes, it was the lowest rate since 1995.

The number of homes on the market increased only slightly but the large drop in sales was enough to push inventory levels up to 12.5 months. A normal market has an inventory level of about six months.

Higher inventories tend to cause prices to decline, as many sellers compete to take advantage of fewer buyers.

The drop in sales came despite the lowest mortgage rates in decades.

Foreclosures continuing to rise, 13 months of inventory already on the market, lots more "shadow inventory" of foreclosed properties and homes not yet put on the market - whew!

Look out below!

Well, at least NY State won money to fire teachers, close schools and open up charters.