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A Tale from the Housing Crypt: Horrors of the real estate bubble

The house I sold four years ago is in foreclosure. The bank is considering an offer of $255,000, but the Realtor who is trying to engineer the deal thinks it has about a fifty-fifty chance of going through.

The woman who bought it from me-let’s call her La Viajera, since she seems to have journeyed to the far reaches of common sense’s solar system-paid $211,000 for the four-bedroom house in a 35-year-old centrally located neighborhood. As the bubble blew, she borrowed against make-believe equity and now owes something like $316,000 on it.

Think of that. She put about five grand down on the loan, so her total indebtedness would be around $310,000. Some bank actually lent her that much against an asset worth maybe $250,000.

If the bank gets $255,000 for it and La Viajera has to pay the agent’s fee of about $15,300, then she comes out of the transaction owing around $70,300 for nothing. For air!

Talk about a stupidity epidemic! We know La Viajera, a grown woman with a Ph.D. and a lifetime of street smarts, had some psychological problems that evidently led her to take leave of her senses. But what on earth would possess a bank officer to make an obviously worthless loan?

Oh well.

If in fact the house sells for $255,000, that represents an increase in value of about 5% a year. Not too bad, given the present doom-and-gloom atmosphere. That’s about the increase I figure for the house I’m living in. At least it’s keeping pace with inflation.

Saturday, March 29, 2008

ment

2 Comments

BeThisWay

Sadly, this is not unusual at all.

Someone I know very well paid $120k for her house. She now has $320k in mortgages on it. That is nota typo. She refinanced twice, and took out two separate $40k interest only loans. Suffice to say that money is not her strong suit.

The house is now worth about $220k and in foreclosure. Being a smart idiot she got the 2nd mtg (the interest only loans guy) to buy the house from the 1st mtg. It’s the only way the 2nd mtg has any hope of seeing any of his money back, and if he keeps it for awhile it will appreciate back up. It’s in a great neighborhood.

So yes, her credit is totally screwed, but she is walking away owing no money. That’s better than it couldhave been.

Saturday, March 29, 200810:05 AM

vh

It’s to be hope that La V. walks away from this mess relatively intact, too.

While you could say she was irresponsible to live on a loan against the house and to delay getting a job as long as possible, the fact is she was suffering from psychological issues following a series of traumas that rendered her virtually nonfunctional.

The bank had no business lending a woman who had no means of support more than her collateral was worth. I lay all the blame at the feet of a financial industry whose practices had become so predatory as to be self-destructive.

Sunday, March 30, 200807:19 AM

Saturday Round-up: Sumer y-cumin’ in edition

The pool is almost warm enough to swim in (assuming you’re a polar bear). I managed to get in up to my waist, but couldn’t bring myself to take the full plunge. Another week of 90-degree days, though, and yahoo! It’ll be everyone into the drink!

My Money Blog has got a lively exchange running about whether financial considerations should play a part in the decision to euthanize a terminally ill (or maybe just a pretty sick) pet.

At Freelance Switch, Robert Janelle reflects on the cheesiness of freelance bidding sites, something I’ve had occasion to notice, too. Thanks, Robert!

Along those lines, Ramit at I Will Teach You to be Rich hosts an article by Free Money Finance proprietor FMF, who explores the best ways to make extra money. And at Millionaire Mommy Next Door, Erica Douglass reflects on a common mistake women make in starting a new business.

At Wise Bread, they’re talking about David De Franza’s speculation that Europe soon will again become an affordable travel destination for Americans. Money, Matter, and More Musings posts a rant about passport photo ripoffs and offers a clue to how to get 32 copies of an acceptable picture at a rock-bottom price.

Be This Way has an entertaining post on “saving by delusion,” a way to make yourself save, and also on the general subject of the psychology of money, Plonkee offers several excellent excuses for spending on clothes. Mrs. Micah is pleased that she and Mr. M. saved a chunk of dough on prescription drugs with YourRxCard.

Finally, J.D. at Get Rich Slowly points out the wisdom of asking after discounts and forgiveness for finance charges. A$k and ye shall re¢eive!

Saturday, March 29, 2008

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1 Comment

Mrs. Micah

Not quite that warm here, but pleasant enough. 🙂 Thanks for mentioning the post…they’re pretty exciting cards.

Side Job: Episode 2

At last! The eightieth paper is sent back to its author.

Never again will I take on 80 writing students as a side job! Particularly not online, where collecting their papers takes as much as a minute apiece and sending the things back takes as long.

No joke: I measured it. By the time you’ve gone pointedy-clickety-pointedy-clickety- pointedy-clickety-type type type type-pointedy-clickety-pointedy-clickety-pointedy-clickety to upload and send a paper to a student through BlackBoard (GDU’s online course software), you’ve spent between 40 and 60 mind-numbing seconds. So it takes almost a mind-numbing hour just to return one section’s papers.

If I hadn’t wrenched my leg, I would have had to take this week as vacation time to read the 80 papers that showered down on my head last weekend. It’s taken a good 50 hours to plod through the stuff. So the time off for the injury was a nice (in the classic sense) confluence: my boss feels sorry for me and I use time I would have had to take off anyway to read papers with my foot up. It’s occupied the entire week. I worked until 1:00 a.m. this morning, then carried my computer to the Renovation House to meet a worker and thence to the doctor’s office, and finally home again to finish grading papers, forming 15 carefully crafted groups, entering grades in Excel and online, issuing instructions, writing and posting announcements, figuring out how to make the group discussion boards work for student members, and on and on.

Well, the worst is now over: the rest of the coursework will be turned in as group papers. So, instead of 80 papers at a time, I’ll have 15 to read.

Some of these people are amazing: a Korean kid with a long string of writing awards in Asia and fresh from an internship to die for; a Chinese student who did not learn English until after high school and already writes more intelligibly than certain native speakers of our recent acquaintance; and the usual run of blue-collar kids, men, and women bootstrapping themselves into the middle class. Let’s hope they all make it.

So, here’s the PF question:

When is a side job worth it? How much extra work are you willing to take on to obtain a second stream of income, and how large does that income stream have to be to justify taking on another job?

In my case, the 14 grand GDU is paying for me to teach the equivalent of four writing sections (a full-time courseload) works out to about $860 net a paycheck. Every penny of it is going in to the Renovation Loan savings fund.

But with an adequate (not great) salary coming in from my real job, I wonder if this extra work is worthwhile. I’m setting aside $250 a month out of my regular pay for the Renovation Loan savings fund, and meanwhile I’m snowballing down the principal by about $100 to $160 a month. It certainly does accelerate the goal of accumulating enough liquid cash to pay off the loan in one swell foop, if need be. But I wonder if there’s any hurry. Since the monthly payment is not onerous, what’s the hurry to collect enough cash to pay off that loan? Should I really be beating myself up for this?

If I lost my job and the only income I had were Social Security and the proceeds from investments, I would need the teaching income to live. I can’t make ends meet on much less than I’m earning, and if I collected Social Security now, it would come to less than a third of my present income. But not having lost my job…

What say you? When is working two jobs worth the effort?

Frugal Crafts Friday: The musical fruit

Not feeling much into tools, glue, and paint today, I offer yet another food craft, this one very ancient. Let us us speak of beans. Wonderful, delicious, amazingly nutritious and astonishingly cheap beans!

You can buy beans, as you no doubt have noticed, mighty cheap in bulk at places like Sprouts and at various ethnic stores. Canned beans also are cheap, but IMHO they’re soggy and never as good as dried beans made from scratch.

So you have a bag of these dried beans. What do do with them?

Dried beans can be cooked in a pressure cooker, but I don’t do so because the prospect of clogging the safety valve gives me the whim-whams. Instead, I cook them in a regular Dutch oven on the stove.

Just about any kind of dried beans can be treated this way. I happen to favor great northerns. Also much enjoyed: pinto beans, navy beans, black beans…oh what the heck. Try them all!

Stovetop, you have a choice of (relatively) fast-cooking them or of preparing them the traditional way. Either way, you need the following:

  • 1. A cup or two of beans
  • 2. Five or six cups of water (the proportions are very forgiving: just add plenty of water, enough to cover the beans two or three times as deep as they are in the pan)
  • 3. A colander or big strainer
  • 4. A big pot

The Quick Way (and “quick” is a relative term here)

Put the beans in a colander or large strainer. Run your fingers through the dry beans, picking them over to remove shriveled-up or discolored beans and any little field stones that might have made it all the way to the market.

Rinse well under cold running tap water.

Pour the cleaned dry beans into a big pot. Cover generously with water-I use about five cups water for a cup or so of beans. The beans will swell up and make lots more food than first appears to be the case.

Turn the heat to high and bring the pot to a boil. If you’re using an electric stove, turn one of the other burners to low, so it will be ready when you need it. As soon as the water comes to a rolling boil, count off 60 seconds.

When one minute at a fast boil is over, turn the flame to low (or turn off the hot electric burner and move the pot to the burner set to low). Allow the beans to simmer gently until they reach the stage of softness you like. Simmer; don’t cook at a full boil. I personally prefer mine on the soft side of al dente; others may like them soggier. The longer you allow them to simmer, the softer they will get.

This process may take from 40 to 90 minutes, depending on your preference and on how old the beans are. The older the beans, the longer it takes them to soften up.

You can tell when beans are done by blowing on a few in a spoon. If the skin peels off when you blow on them, they’re ready to eat. Taste them, though, to check for your desired degree of doneness.

You now have a pot of cooked beans, which you can use in a vast array of recipes. See below for a couple of easy ones.

The Classic Way

I believe an old-fashioned overnight soak yields a much better cooked bean. The fast-cook method gives you a fairly mushy product. With this approach, the beans stay firmer and they seem to taste better. Also, the extra change of water diminishes the “toot” effect we all know and love.

Start the evening before you intend to cook. Pick over and wash the beans, as described above. Place them in a pot and cover well with water, cover the pot, set the pot aside, and go away. Allow the beans to soak in the water at least 12 hours.

Next morning, drain the water off through a colander or large strainer. Rinse the beans under running water. Place the beans back in the pot and cover generously with water again. (Five or six cups to about a cup or so of beans.)

If you would like to add a bit of flavor at this stage, you can put in a coarsely cut up onion and a piece of salt pork or a smoked ham hock. But it’s also good to cook the beans in just plain water and gussy them up later.

Turn the heat to medium and allow the water to come to a simmer. Turn the heat down and regulate it to keep the water simmering gently. Cover and allow to cook slowly for an hour or so. Check now and again for doneness by blowing on a few beans held up in a spoon; if the skin peels off when you blow on it, the beans are about ready.
Recipes

Beans á la Mode of My Great-Grandmother

Having learned this as a child in the kitchen of a grand old lady who was born in the 1860s, grew up in New England, and spent her adult life in California (when California was California), I love beans in their simplest form.

Using a slotted spoon, lift cooked beans out of the hot liquid and place in a bowl. Add a pat of butter, if desired. Sprinkle with white vinegar. Season with salt and pepper. If desired, add a dash of Tabasco sauce.

Fastest Comfort Food in the West

Once you have a pot of cooked beans, you can whip up a very fast and very delicious dish.

Drain the water off the beans. Cover the bottom of a small frying pan with olive oil. Mince some garlic and, if you have them, cut up some fresh herbs. If you don’t have any fresh, use dried herbs of any variety that pleases you. I generally use marjoram or thyme, oregano, chives, parsley, and sometimes tarragon-any or all of those. In the dried herb department, a teaspoon or two of fines herbes will do nicely.

Heat the olive oil over medium heat. Add the minced garlic. Stir the garlic around for a minute or two, till it softens. Add the beans, stir around a bit, add the herbs, and stir until the whole mess is heated through. Sprinkle with the juice of half a lemon. Or a whole lemon, if you like. Season with salt and pepper. Eat. Enjoy.

This makes a great side dish, an awesome bean sandwich, or a fine lunch with a little salad.

If you use canned beans, drain the beans in a colander and rinse well before proceeding with the recipe.

Bean Salad

Cook a pound of white beans, in the fashion described above; hold the onion and pork. When done, drain the beans well.

Combine the following to make a dressing:

  • 1. 2 Tbsp white vinegar
  • 2. 1 Tbsp Dijon-style mustard
  • 3. 4 drops Tabasco sauce (optional-I never have this around)
  • 4. Whisk in 1/3 cup olive oil or other vegetable oil

Place the warm beans in a bowl. Add these to the beans:

  • 1. 2 Tbsp chopped fresh basil or 2 tsp dried basil
  • 2. 1 ½ tsp chopped mint leaves, or 1 tsp. or so dried mint
  • 3. 3 Tbsp chopped parsley
  • 4. 2 chopped green onion
  • 5. ½ tsp finely minced garlic.

Stir together with the dressing. Season to taste with salt and pepper. Cover and chill at least 6 hours. Before serving, add cherry tomatoes and garnish with sprigs of mint.

As you can imagine, this gets better overnight. With a loaf of French bread, it’s a perfect summer meal.

Boston Baked Beans

These are meant to be sweet and porky.

Preheat the oven to 250 degrees.

Drain the cooked beans well. Place them in a baking pot. Bury a quarter-pound piece of salt pork or a smoked ham hock in them. Mix in about ½ tsp dry mustard plus a half-cup of maple syrup, or a quarter-cup molasses plus 2 Tbsp sugar. Then cover with boiling water. Cover the bean pot, place it in the oven, and let the beans bake all day: 8 to 10 hours. Check now and again and add more hot water if necessary.

This also is a dish that gets better after spending a night in the fridge. And IMHO cold Boston baked beans are right up there with leftover meatloaf as the Perfect Sandwich Filling.

Neat News Item

One of my clients, Ellen Van Goethem, has seen her excellent study of the politics of medieval Japan, Nagaoka: Japan’s Forgotten Capital, published by Brill, a prominent Dutch scholarly press. It appears as volume 29 in Brill’s Japanese Studies Library.

Hers is one of the rare scholarly works that is truly interesting. Japanese history is better than soap opera! I actually enjoyed editing this amazing book.

Bartleby, the late, great scrivener

Deus ex machina, my stress-manufacturing personnel problem has resolved itself, because the Problem quit.

For almost four years, I’ve had to deal with my own Bartleby. It’s been four years of hassle, grief, and resurgent annoyance that peaked, for me, about a year ago with a stress attack that landed me in a hospital for 12 hours of poking and prodding while ER doctors tried to figure out whether I was having a heart attack or merely taking a long dive off the deep end.

During those four years, I’ve learned from Bartleby. Bartleby taught me a lot about stress and a lot about management.

First, I believe I’m right in saying the “time is money” metaphor is off-kilter. In fact, stress has more in common with money than does time. Stress is like interest and principal on a debt. The more stress you pay down on a problem up front, the less you will have to pay over time. The less you invest up front, the more stress you’re going to owe over the long run.

Like the narrator in Melville’s Bartleby the Scrivener, I felt a lot of empathy for my Bartleby, an older person who had been alone for several decades. As an older mind, I know how difficult it is to keep up with the fluid changes in computer technology, that failing eyesight and slipping memory create daily challenges—more and more of them with the passing days. As a single person who also lives alone, I know the odd twists and eccentricities we develop as solitary beings.

But a manager’s job is not to be empathetic. A manager’s job is to keep an operation running and see to it that everyone in that operation can and does function productively. That is not to say a manager should not try to be kind; only that a manager can not let kindness get in the way of the job.

By the time I fully appreciated that my Bartleby was wrong in the nonexempt job for which I had hired her, the six-month probationary was almost over. My request that she be dismissed hit HR exactly one day after her probationary period ended.

To fire a nonexempt state employee, a manager has to go through the tortures of the damned. The process involves a series of disciplinary reports, each of which must be reviewed in detail and approved by an HR representative, followed by a series of committee hearings. Some employees will quit in the face of the onslaught this involves. However, if the employee is smart and knows how to work the system, she or he will recognize that there is no reason to quit. So, the process can stretch out over a year or more. Much more.

With all the back-and-forth between me and HR, it took six months to prepare the first disciplinary memo. Writing this document was agonizingly stressful. It required me to articulate frustrating and difficult matters and then to rehearse them, over and over, through revision after revision. Meanwhile, I did feel empathetic and indeed I often felt sorry for my Bartleby. These feelings added to the stress of working up a disciplinary statement, because they added a load of ambiguity and guilt. As time passed, the stress built.

Did my Bartleby resign when faced with several pages of complaints and demands about performance? No. Bartleby preferred not.

My Bartleby evaded dismissal by correcting everything described in the disciplinary memo. But the problem was, for every correction a new eccentricity or incompetence developed. When it became clear that six months of anguish had come to naught, I made the a decision to try to accommodate Bartleby’s oddities. She was, after all, laboring under a disability: she clearly had mental problems, some of them evidently cognitive issues related to age. Did I not have a duty to accommodate her disabilities?

Well, no. That was a mistake.

What I actually was doing was avoiding stress that I should have confronted, accepted, and taken on in a timely way. Had I “invested” the stress required to demand competent performance and to report and discipline incompetence, I would have saved myself and everyone around me—Bartleby included—a great deal of grief.

Bartleby’s incompetence increased everybody’s workloads. Admins in other parts of the unit quietly took on her responsibilities, because in her inability to do routine tasks she created more work for others. It was easier to simply do the tasks than to try to tutor her through them and make her undo the fiascos she created. I found myself spending evenings and weekends redoing assignments I had given her and undoing messes she had made.

About eighteen months ago, after she infuriated one of our client journal’s authors with an episode of screaming incompetence that involved habits she had repeatedly been warned about, stupidity and arrogance of monumental proportions, and astonishing absence of common sense, I removed her from all functional tasks and started assigning her busywork. This kept her out of everyone’s hair except mine; I took on the function of firewall between Bartleby and the rest of the world.

At the request of my boss, who correctly observed that my annual reviews of Bartleby’s performance were altogether too mellow (not to say “cowardly”), I decided to use the busywork as a training device and a well from which to draw support for a 2008 annual review that would honestly describe the incompetence with which we had been dealing for some time. I would review each of her make-work projects and explain, in writing, every error she had made and what she needed to do to correct it. This resulted in my repeating myself over and over and over—but now I had a year-long record of the fruitless repetitions. It also doubled my workload, because I had to reread documents I had edited months before, many of which had already gone to press; I had try to figure out what Bartleby was doing and articulate every single error, every incident of stubborn disobedience, and every misapprehension. Meanwhile, of course, I had to keep up with the new work that flowed across my desk every day.

A year of negative memos full of examples of errors and bêtises, each one repeating the same instructions over and over (mostly “learn Chicago style” and “learn how to use Word”) must have convinced Bartleby that I intended to fire her. Rather than accept that, she decided to resign.

Melville’s solicitor, the real Bartleby’s employer, never did get around to demanding adequate performance, but continued—as I was doing—to accommodate the eccentric employee’s bizarre behavior out of empathy, guilt, confusion, and downright flummoxing. The disaster that ensued was and was not the solicitor’s doing.

In the case of my Bartleby, however, the long-drawn-out ordeal was entirely my fault. I made two enormous mistakes:

1. I felt sorry for my Bartleby and I allowed that feeling to influence me; and

2. I tried to evade the stress I should have accepted at the outset, the stress that would have been entailed in cracking down on my Bartleby from the beginning.

By deferring stress, I only bought more stress for myself and all my coworkers.

I suggest to you that there is a metaphor here, one that works: stress is like interest payable. The longer you put it off, the more you pay.

It’s a money metaphor that applies in any situation where you could make things better over the long run by “paying” to address problems up front. It applies to parents who indulge their children and teenagers instead of insisting on civil behavior. If you don’t help a child to learn what is responsible—how to earn your way in life—you will end up with a young adult who will bring vast quantities of grief home to Mom and Dad. It applies to the predicament we get ourselves into when we run up debt to indulge our wants and then find ourselves over our heads—if we’d “invested” some stress early on to get our spending under control, we would not have to expend so much effort and grief later to get ourselves out of debt.

Stress is money, my friends. Soylent Green is people. To Serve Humanity is a cookbook.

Ah, Bartleby. Ah, humanity. Indeed.