My friend and partner, the ever-more-Unchained Brian Brady, posted a Facebook link to a Wall Street Journal article on the current push by the National Association of Realtors for extended loan subsidies for the rich:
To understand why 90% of U.S. mortgages are still underwritten by taxpayers, look no further than the nearby letter from Ron Phipps of the Realtors lobby. He makes clear that the Realtors, like the rest of the housing-subsidy crowd, are working hard to get Congress to reinstate a $729,750 loan-limit for Fannie Mae and Freddie Mac guarantees.
Why do rich people need taxpayer-underwritten home loans? They don’t, of course. The NAR needs loan subsidies at all income-levels to keep churning the real estate market.
In case you haven’t looked at your bank statements or retirement accounts lately, the NAR has already churned the American economy into a five-year coma. But like every other legislative vampire, the NAR won’t stop sucking away at unearned income until the body politic is entirely exsanguinated — bled to death.
This latest Five-Alarm Urgent Action Item — one of three or four a week Phipps and his minions spam-spew — is nothing more than an extension of the original NAR philosophy: Milk consumers, taxpayers and real estate salespeople for the benefit of brokers.
Do you doubt me?
The real estate licensing laws, written in their original form by the NAR, exist to limit competition in real estate brokerage, eliminating alternative sources of real estate brokerage to artificially sustain higher commissions for NAR brokers.
The sales commission co-brokerage fee — the vaunted “cooperation” among brokers — exists to create the Multiple Listings Service oligopoly, the golden handcuffs by which real estate salespeople are bound to their brokers and to the NAR — and which, not-coincidentally, continues the viciously anti-consumer NAR policy of de facto sub-agency.
The IRS “safe harbor” exclusion shielding real estate brokers from having to report income for their employees makes it possible for brokers to churn-and-burn gullible real estate salespeople like a toy store burns through your kid’s allowance money. No other business can afford to treat human capital — that would be you — like so much toilet paper.
And as Brian and the Journal note, the NAR’s innumerable loan subsidies not only induce economically-unwarranted churning in the real estate market, they prevent the emergence of a viable free-market in mortgage financing.
Much worse, the people who actually pay for those subsidies are the ones who don’t benefit from them. But don’t worry, the NAR has other Rotarian Socialist programs to put those folks into homes they have not earned by their own efforts.
The NAR is nothing but a vast, evil conspiracy, a criminal cartel devised to despoil consumers and taxpayers for the benefit of real estate brokers. Everything else is window-dressing. Get rid of the crime — the use of the police powers of the state to take money from people who earned it, giving it to people who did not earn it — and there is nothing left of the NAR.
So here is my challenge for Ron Phipps, who is this year’s Titular Grand Poohbah of the NAR: BloodhoundBlog Unchained will be in Anaheim on Friday. If you can refute — or even dispute! — anything I have said about the NAR, now or ever, we will give you time to defend your position, and we will make a video of your remarks and make them available here for all to see.
Why has the NAR never sought to contest my arguments? I think it’s because they know I am right. But if Ron Phipps — or anyone — can defend what looks to me like brigandry-in-a-Brooks-Brothers-suit, bring it on.
Brian Brady says:
The more things change the more they stay the same, right?
Bullshit–that’s not right.
I deliberately planned for the day the loan limits dropped when I attended a Reason Foundation dinner. I was fortunate to sit next to Anthony Randazzo (you see him on Freedom Watch a lot) who wrote, “Ten Arguments Against a Government Guarantee for Housing Finance”
http://online.wsj.com/article/SB10001424052748704858404576134131623164872.html
Anthony asked if I might seek investors, who were willing to buy jumbo loans, and solicit informal indications of interest as to: the size of their appetite, approximate guidelines, and rough ROI required. Naturally, being a pleaser with lingering collectivist tendencies (it was for the good of the country and my industry), I agreed.
I failed Anthony miserably because I couldn’t get specific indications as to size. Anthony was trying to build a model of the “shadow demand” so that he could make a legitimate policy argument when he testified before Congress. I was nowhere near the “big fish”, in the secondary mortgage market, he needed. Not a big deal. Anthony is arguing this point fine without my data.
While failing Anthony, I discovered a pretty darned good business model. I spent over a month soliciting hedge funds, investment managers, credit unions, regional banks, and pension funds. I put everything else on hold to roll out a unique product to real estate agents and brokers. I knew the loan limits were scheduled to expire on October 1st and I intended to be well ahead of the curve to meet the demand.
Guess what? The supply is there. The secondary market, while fragmented, exists for jumbo loans. The lenders and investors require a bit more skin in the game and a 50bp premium in return. In short, it’s like 1999 in the jumbo mortgage market. You know what the best part is? Every single one of those investors, who indicated an interest to buy that loan product, wanted to do business with me. I was WAY ahead of my competition and, I’m not ashamed to say, deserved to be. I put in the work, staked my reputation, and had an “unfair” (but earned) advantage.
Guess what else? As is typical in mortgage banking, there are no secrets when money is to be made. Within three months, the jumbo mortgage market thawed. Not a full on, “the oceans are going to rise” thaw but a “Summer on the Alaskan tundra” thaw—like jumbo financing in 1999. My unfair advantage was now simply a marketing jump and that was fine with me.
I hate to sound like a frustrated ant but I didn’t buy into the grasshopper game of bribing public officials for more subsidies. I fully intended to crowd out the grasshopper contingent from the real estate agents’ field of vision. Wouldn’t you know that my own Congressman sided with the grasshoppers, and sponsored this legislation, to the detriment of those whom he represents. The simple fact is that SDAR offered a bigger bribe than I could afford.
It’s frustrating enough to make a lingering collectivist “Go Galt” but I’m not ready to do that just yet. Rather than just complain about being usurped, by Mr Phipps and Congressman Bilbray, I’ll lay our the collectivist arguments AGAINST this theft. If Mr Phipps decides to accept Greg’s invitation, he’ll know exactly what I intend to argue:
1- Median home prices, in the affected areas, are about 50-60% of the existing loan limits. Median home prices, in the affected areas, are about 55-65% of the proposed (reduced) loan limits. This means that a super-majority of taxpayers are subsidizing the top 10% of home purchases in Southern California.
2- The rent-to-ownership ratio, for these “affected homes” is extremely out of alignment with the median-priced homes in Southern California. Median-priced homes are approaching parity which can provide a “natural” bottom. Essentially, this legislation is aimed to benefit the SELLERS of these homes, many of which are underwater, and is a tacit continued bailout of the banks, Two popular taxpayer movements, the tea party and Occupy Wall Street, share this one common grievance.
3- It won’t work. Housing prices are seeking parity with the rent ratios regardless of the subsidies.
4- It is entirely unnecessary. The premium the private market wants is only 50bp right now. Remove the subsidy and you’ll have lenders shedding their rent seeking ways and actually competing on price and terms. The spread should narrow to 25 by and PMI companies will be forced to compete in higher LTV products (or they’ll go out of business). This action could very well delay that sorely needed banking competition, we so desperately need for recovery.
5- This costs jobs. Those of us, who anticipated this government exodus, planned for the boom in free-market mortgages. We started recruiting and training personnel but arrested those actions because our volume, in this specific product, was eliminated by this legislation. In a country with a 9% unemployment rate, and an industry that’s lost half its jobs, this action is designed to kill new jobs.
6- This is a regressive tax against the poorest among us. These loans are backed by the wealth-eating, political monsters which are the GSEs. The many will subsidize the few, exposing the many to extraordinary losses when prices crumble. Have we learned nothing from the crash?
Mr Phipps, there is absolutely no excuse for the loan limit extensions. The extension defies economic logic, is a threat to the public treasury, is a job-killer, and encourages more bad behavior. I hope you’ll accept Greg’s invitation to address us this Friday but doubt your arguments will hold water.
November 9, 2011 — 11:44 am
Greg Swann says:
> Essentially, this legislation is aimed to benefit the SELLERS of these homes, many of which are underwater, and is a tacit continued bailout of the banks.
You bet. In Phoenix right now, a home under $300,000 listed at its market value has a shelf-life of ten days or fewer. Above $500,000, average time on market is measured in months. The NAR desperately needs higher GSE limits to put lipstick on a bunch of overpriced pigs. Even then, the intended beneficiaries are not the sellers, nor even the listing agents. With the NAR, it’s always about the brokers. Higher loan limits, the NAR prays, will buy back the losses brokers are taking on their listings for overpriced pigs.
November 9, 2011 — 12:12 pm
Bethany says:
The same type of situation is happening across the country and the same scheme has been reoccurring for decades. At least now, I am glad it is being exposed.
November 10, 2011 — 4:07 pm
Derek Morton says:
It’s nice to see someone stand up and call them out. It’s amazing how these people are against bailouts, unless it benefits them in some way.
November 12, 2011 — 12:37 pm