There’s always something to howl about

The Odysseus Medal: Getting ARMs back up on their own two feet

If you didn’t look at this week’s nominees for The Odysseus Medal, you should. We had 20 posts on the short-list, but 24 more that were also very good.

Here are this week’s winners:

This week’s Odysseus Medal goes to Peter Coy at BusinessWeek for Believe it or not, the ‘optimal’ mortgage is an option ARM:

If you had to name the most toxic, dangerous, foolhardy kind of mortgage loan that exists, you’d very likely pick a pay-option ARM, which lets borrowers get deeper into debt by paying less than the minimum interest they owe each month and adding the unpaid interest to the loan principal. Worse yet, you might say, would be a pay-option ARM with a very high penalty for prepayment so borrowers can’t get out of it easily once they’re in it. There’s a move afoot to ban these worst-of-the-worst loans.

Guess what? The worst is actually the best.

Yes, according to a new study by professors from Columbia and New York universities, the “optimal” mortgage in a perfect world is precisely that kind of loan—an adjustable-rate mortgage with an option for negative amortization and a ban (or at least severe restriction) on prepayment.

Crazy? Not as crazy as you might think. The key, according to professors Tomasz Piskorski of Columbia Business School and Alexei Tchistyi of New York University’s Stern School of Business, is that this kind of mortgage is optimal only in a perfect world—namely, one in which borrowers are fully rational and always do what’s in their own best interest.

ARMs are like the miracle drug that can’t get over its tabloid reputation. This post won’t rehabilitate them, either, but it’s a start.

The Black Pearl Award become the Snow Pea Award this week. The winner is another testament to the epicentricity of the epicenter of real estate weblogging, Tucson’s Dave Smith, who graces us with Growing Peas in a Day! Here’s the Black Pearl:

Stop ripping your blog apart.

  • Pick a good theme
  • Activate good plug-ins
  • Use productive functional widgets
  • Add content regularly
  • Weed out the Spam and Eye Candy
    Now give it time to grow. It takes time to grow and be found and produce fruit.

You can’t be changing themes to make it pretty. Adding eye candy which slows down your load time. Weed out the Cute plugins and widgets which will supposedly bring you traffic and expect your blog to grow.

If something needs to be addressed or fixed do it. Too often I see bloggers either bored with the “Look” or going crazy over SEO and “Trying New Stuff” to improve their rankings. Harvesting Search Results and Rankings takes time.

Instead of spending your time on SEO gimmicks use that time to research, plan and write good quality content which is like watering your blog as it grows and the harvest starts to come in.

The Real Estate Blog Lab is a thing of genius. If it’s not in your feed reader, you’re missing out.

The People’s Choice Award goes to Bill Leider this week for Real Estate Is A Business – It’s For Grown-Ups Who Understand How Business Works:

Ultimately success is measured on sustained profitability – not on how often one can introduce the latest techie toy, or continue to use outmoded, ineffective advertising approaches. Selling real estate is about reaching people, building trust and creating sustainable relationships. It’s about being creative, timely, relevant and focused on profitable results – for clients and Realtors.

As a professional, Realtors must know more than their clients about what will work best to sell homes. Many of today’s consumers are more tech and information savvy than most Realtors. That doesn’t automatically make them better marketers.

I believe that many Realtors roll over and bow to clients’ unwise wishes simply because they don’t know enough or have the confidence to advise clients about alternatives. The attitude of, “hey, I know it’s wrong, but the client wants it and I never disagree with a client” might win a few battles but it’s a recipe for losing the war.

Most people want professional advice confidently and knowledgably offered by the people they hire. That’s why they hired you. Any given client can tell their Realtor that they want a particular Internet or print media presentation. At that point it’s the Realtor’s responsibility to diplomatically determine exactly why the client wants that approach, and, if their reasons don’t make for good marketing, to point out better approaches to reaching the market and selling the home.

Are you late to this party? The list of Odysseus Medal nominees has become the Sunday newspaper of the If you didn’t examine the list yesterday, do it now.

As always, if you see something remarkable nominate it.

Deadline for next week’s competition is Sunday at 12 Noon PDT/MST. You can nominate your own work or any post you admire here.

Congratulations to the winners — and to everyone who participated.

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5 Comments so far

  1. Hot Property September 24th, 2007 1:06 pm

    We just won a medal with a bloodhound on it…

    It is a special thing to be awarded a medal that prominently features a bloodhound, that paragon of lachrymose canine loyalty. It’s the weekly Odysseus Medal from BloodhoundBlog and we got it for my post last Friday about option ARMs……

  2. […] … have posted at the Bloodhound Blog. […]

  3. Matt Carter September 25th, 2007 5:32 pm

    See Calculated Risk for another take on the ARM study.

  4. Greg Swann September 25th, 2007 7:05 pm

    > See Calculated Risk for another take on the ARM study.

    They didn’t read the study — nor have I. What they have is a fisking of Peter Coy’s article in Business Week. The actual academic paper is here.

    FWIW, I thought the writing was fun, but bubbleheads live in a demon-haunted world. Everything they say seems to be colored by that bias. Certainly the point that adjustable loans are better for most buyers than fixed-rate loans is non-controversial — except to bubbleheads.

  5. Searchlight Crusade September 26th, 2007 7:02 am

    Trying to Rehabilitate the Negative Amortization Loan – NOT!…

    The negative amortization loan is a very popular loan with certain kinds of real estate agents and loan officers. It has two great virtues as far as they are concerned. First, it has a low payment, and despite the fact……