katherinez1sb: Making Money Your

This, of course, will upset some people. Let me give my disclosure: I’ve never been foreclosed on.

But many years ago I lost a house due to lack of money (after my first business, but before my second, third, fourth).

Close family members also have lost homes when I was younger and it had a profound impact on me. I also know many people in the process of foreclosure and I get the pain that it causes

Nevertheless, there is a positive side to foreclosure.

1) People have more money. This is common sense. If you aren’t paying $2500 a month on your mortgage then you have an extra $2500 a month to spend. Many of the foreclosures are occurring not because people lost their jobs (although that’s certainly part of it) but because mortgage rates got adjusted higher after scam mortgage issuers enticed borrowers with artificially low starter rates. The rates got higher, the borrower couldn’t pay, so he stopped. Hence, more money each month to spend for the borrower.

So what do people do with the money? They pay down credit card debt. Its no surprise that since mid-2009, when foreclosures began going through the roof, that the stock of PRAA (the largest credit card debt collector) has gone up almost 300%. And their competitor, ASFI has gone up almost 500%! People don’t enjoy being in debt and giving up on the mortgage allows them to pay down and consolidate their smaller debts. Again, you can argue with this, but the proof is in the strong ability of the companies that buy debt from the banks to collect on those debts. Additionally, personal consumer expenditures are at an all-time high. You can argue if this is good or bad. People stop paying their mortgage, they start buying things at the local mall, personal spending goes to all-time highs. Fact. Is this good? Well, more spending ultimately leads to more jobs. So you decide.

2) Foreclosed houses are cheap for investors. This is common sense as well. If the bank owns a home all they want to do is get rid of the property and get it off the books. The banks are overloaded right now with foreclosed properties. You can buy many properties for 10% of what they were initially sold for or less. The downside is that you are buying them “as is”, i.e. the bank did not make any repairs and the prior owners probably left the home in a state of extreme disrepair. But if you are handy, have the money, and want to work hard at navigating the loopholes and disadvantages of buying a foreclosed home then the advantages are extreme (you make a lot of money). At some point the opportunity for investors is so great that a floor will be put in place on housing prices.

3) You can stll live in your home after you stop paying. I’m not recommending people stop making mortgage payments. The disadvantage is that your credit becomes so bad you might not even be able to rent again after you finally get evicted. But actually getting kicked out of your home after you stop paying the mortgage is often a six to eighteen month process depending on the lender and the state. So you have a place to live while you plan the next big move in your life, all the while you save the amount you would’ve spent on mortgages (and probably the money you would’ve spent on basic repairs).

4) Unemployment rate will eventually go down faster. This seems weird – why would unemployment go down faster. Here’s the basic idea: unemployment, like any market, is a function of supply and demand. Supply of jobs matched by the supply of demand for those jobs. The more people who own homes (i.e. are prevented from making a quick move) the more problematic it is for employers who want to hire people because their supply is purely local, i.e. the people who live in the surrounding area. The more supply there will be around the country. This doesn’t matter as much now with a 9%+ unemployment rate (there is plenty of supply) but as the economy continues to improve, this will make an enormous difference.

5) Banking regulations will improve. The banks are a mess and every day it seems there is a new scandal about who was foreclosed on inappropriately. This is a national shame and embarrassment. Already banks have slowed down their foreclosure rates (so the benefits of numbers 1-4 will keep increasing) as they look through their regulations and improve things so this doesn’t happen again and to as great an extent.

Ultimately the pain, embarrassment, and financial distress of being foreclosed on is not worth the benefits. But short-term, the foreclosure process is one part of the process of how a capitalist economy heals itself. Consumers end up with more money, employers have more possibilities to fill jobs (once things improve), other debts get paid off, spending goes up (temporarily), and banks improve their regulations.

Weekly Pulse: GOP Plays Chicken with the Debt Ceiling

By Lindsay Beyerstein, Media Consortium blogger

Sen. Jim DeMint (R-SC) is calling for a "big showdown" over the upcoming vote to raise the nation's debt ceiling to $14.3 trillion from $13.9 trillion. The debt ceiling is simply the maximum amount the government can borrow.

Congress routinely raises the debt ceiling every year. It's common sense: Since the government has already pledged to increase spending, Congress must authorize additional borrowing. (Remember that the government is now forced to borrow billions of extra dollars to pay for tax cuts for the wealthy, which Republicans insisted on.) If the ceiling isn't raised, the United States will be forced to default on its debts, with catastrophic consequences.

Why would default be catastrophic? The principle is the same for countries and consumers alike: If you have a good track record of paying your bills, lenders will lend you money at lower interest rates. If you don't pay your bills on time, or default on your obligations altogether, lenders will demand higher interest rates.

Congressional Republicans say they oppose raising the debt ceiling because they favor fiscal responsibility. This kind of rhetoric is the height of recklessness. The interest on our debts is a big part of government spending. Even idle talk about defaults could spook some creditors into raising interest rates on U.S. debt and cost taxpayers dearly.

Steve Benen of the Washington Monthly quotes Austan Goolsbee, chair of the White House's Council of Economic Advisers, who says that congressional GOP members are flirting with the "the first default in history caused purely by insanity."

Making work pay (for real)

An astonishing 80% of full-time minimum wage workers can't afford the necessities of life, according to new research by labor economist Jeannette Wicks-Lim of the Political Economy Research Institute, featured on the Real News Network.

Wicks-Lim argues for a two-part solution to the crisis of working poverty in America: i) raising the federal minimum wage to $12.30/hr from $7.50/hr; ii) Increasing the earned income tax credit to 40% of income. She estimates that these two policy changes would raise the income of a minimum wage worker from $15,000 to about $36,000 at a manageable cost to employers and taxpayers.

Her proposal is a revamp of President Bill Clinton's attempt to "reform" welfare by cutting social service benefits and shifting government spending to tax credits. Currently, the Earned Income Tax Credit is a subsidy for the working poor that is designed to "make work pay"--i.e., if workers aren't making enough in wages to secure a decent standard of living, the government provides an income subsidy to reward them for working.

However, if a decent standard of living remains out of reach for 80% of full-time minimum wage workers, Wicks-Lim argues that the minimum wage is too low and the subsidies are too modest to achieve the stated goal of making work pay.

Colorado minimum wage inches up

Speaking of minimum wage issues, Scot Kersgaard of the Colorado Independent reports that the minimum wage in the state ticked up from $7.25 an hour to $7.36 on January 1. The modest increase represents the annual adjustment for inflation. Every bit counts, but Colorado families are falling further behind. According to a new report by the Denver-based Bell Policy Center, 8.3% of working families in Colorado live below the federal poverty line, which is $22,050 for a family of four. Fully one-fourth of Colorado families do not earn enough to meet their basic needs, which requires an income approximately twice the FPL, according to the report.

Colorado is one of only 10 states that automatically adjust their minimum wages for inflation.

Wage theft epidemic

Unscrupulous employers are stealing untold millions of dollars from hardworking Americans, Dick Meister reports in AlterNet:

The cheating bosses don't take the money directly from their employees. No, nothing as obvious as that. The employers practice their thievery by underpaying workers, sometimes by paying them less than the legal minimum wage. Or they fail to pay employees extra for overtime work, or even force them to work for nothing before or after their regular work shifts or at other times. Some employers make illegal deductions from employee wages. And some withhold the final paycheck due employees who quit.

In New York City alone, an estimated $18 million worth of wages is stolen every week. Workers in the restaurant, construction, and retail sectors are at increased risk of wage theft. Wage thieves disproportionately target undocumented workers because they assume that these employees will be less likely to report the crime.

Debt collection from beyond the grave

The dead don't tell tales, but they have been known to sign debt collection papers, Andy Kroll reports in Mother Jones. Martha Kunkle died in 1995, but her printed name and signature appear on paperwork filed by the debt collection agency Portfolio Recovery Associates as late as 2006 and 2007. The ruse was discovered and PRA, facing a fraud lawsuit, agreed in 2008 that the "Kunkle's" documents couldn't be used in court. That didn't stop the agency from trying to use them again in 2009.

The attorney general of Missouri has announced that he will investigate whether any of Kunkle's handiwork was used to support debt collection in his state. The attorney general of Minnesota is already investigating whether debt collectors have used fraudulent paperwork in court.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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Monday, January 10, 2011

Making Money Your

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