NewGeography.com blogs

The national conversation in the wake of President Obama's introduction of a mortgage relief plan has centered on "fairness" and the conditions to qualify for a mortgage modification. This misses the point. The effects of "innovative" mortgage products were felt far more broadly than the relationship between a single buyer (responsible or not) and his particular mortgage broker (despicable or not). To illustrate the point, meet Mrs. Conservative And Responsible Mortgage Neighbor ("Carmen" for short).

In 2003, Carmen bid on a home and took a 30 year fixed mortgage with 20 percent down.

Fast forward to today. Carmen has enjoyed her home and made all of her payments to the bank on time. Unfortunately, her home has dropped in value to the point where it is now significantly underwater . Her investment portfolio has fared just as poorly, losing 40 percent of its value in the last 18 months. All the while, her mortgage obligation has slowly amortized lower.

If Carmen were to turn to her investments to pay off the loan today, she would come up short. Worldwide deflation has resulted in every asset in our little vignette having fallen by 40 percent. Carmen's debt burden, however, remains the same,, struck in yesterday's dollars.

How does the current mortgage relief plan – which certainly excludes all of the Carmens out there -- make sense? The short answer is that it doesn't. It is neither fair nor effective. It lacks boldness, universality and an understanding of the problem.

A far better answer to the problem is one time across-the-board principal reductions to all primary residence mortgages originated in the last ten years. Such a plan avoids the piecemeal approach of subjective formulae and doesn't make personal bankruptcy a precondition to the reduction of principal. It acknowledges that the nation's housing stock was overvalued because of unintelligent home buyers, products that have been discredited, fairly widespread fraud and inexcusable encouragement by naive government officials. Following the principal reduction, each loan can be re-amortized over its remaining life, resulting in the stimulus of a reduced monthly payment for every American homeowner.

I recently recieved this this link to a short essay and some stats titled "Texas on the Brink". I thought I'd share my response with you:

Although I don't really think "we're on the brink" (most of our economic growth stats outpace the nation), I do partially agree with it, with some caveats. Our air pollution is getting better/lower every year, although maybe not as fast as some would like. We have such a vibrant economy, and are a border state, so we attract a lot of uneducated immigrants (both domestic and international) without health insurance looking for work. The opportunities are better for them here, and they're better off here. So we're never going to look great on those sorts of stats compared to most other states. It's like Europe: you can severely limit immigration and reduce opportunities, but make your stats look better as you exclude certain disadvantaged groups from your population, but is the world any better off by keeping those groups away from opportunities? Countries, states and cities seem to play these games of "hot potato" with disadvantaged populations, trying to push/keep them over the border into other jurisdictions to make their own stats look better (and reduce their welfare costs), but it actually makes the world as a whole worse off (for the same reasons protectionism makes everybody worse off vs. free trade). Texas has always pretty much welcomed anybody seeking opportunity and willing to work hard, but in exchange we don't offer much of a welfare state apparatus. That's our deal. The states that are more welfare-oriented tend to have fewer opportunities, play the "hot potato" game by doing things like restricting housing to make it unaffordable, or, like California, simply start to go broke.

And if, as those stats imply, Texas is such a bad place, why are we attracting waves of both domestic and international migrants? Clearly they see value not reflected in those stats. (37th most 'livable' state?! Give me a break.)

All that said, we need to make good investments in both lower and higher education. But I think a lot of what is needed are better systems rather than more money, like increased charter school competition and forcing universities to stress teaching and graduation rates as much as research.

It's hard to find a quality of life ranking that satisfies the preferences and desires of everyone but Bizjournal's recent ranking of mid-sized metros does highlight and affirm the presence of colleges and universities as an increasingly common and important thread in quality of life analyses.

The study compared 124 mid-sized metros in 20 statistical categories, using the latest U.S. Census Bureau data. The highest scores went to well-rounded places with healthy economies, light traffic, moderate costs of living, impressive housing stocks and strong educational systems.

Mid-size places of 100,000 to 1 million residents have experienced strong growth since 2000, exhibiting some of the strongest domestic migration rates among all metropolitan areas regardless of size.

The Hadley Center in the UK has recently reported a “correlation between reduced prosperity and reduced greenhouse gas emissions associated with global warming.”

The report states that since 2000, as greenhouse gasses have risen 2 to 3 percent each year, the world gross domestic product has also risen. The current ½ percent reduction in GDP is therefore correlated with the ½ percent reduction in greenhouse gasses.

Paul Taylor, of the examiner.com, suggests that the “reductions in greenhouse gases will reduce GDP and punish economic prosperity.”

President Obama’s $646 billion spending bill on a new carbon trading system to mitigate greenhouse gases would enact a “cap and trade” system that is “in effect a massive new national tax…[that] would impose substantial additional cost on power producers and manufacturing,” according to Taylor.

The extent to which greenhouse gasses are a direct cause of the world GDP dropping or increasing remains to be seen – a myriad of additional factors should be considered – but these issues will continue to be at the forefront in such volatile times.

The flood fight is on in Fargo/Moorhead as the cities work to stem the flow of the raging Red River of the North. I was in north Fargo this morning (Friday) where crews continue to haul clay and sandbags to bolster dikes and protect critical infrastructure. Fargo Mayor, Dennis Walaker, said this morning that they “wouldn’t go down without a fight” and these two communities are putting up a herculean fight against all that mother nature can throw at them including record flood levels, a snow storm and continued cold temperatures. The two communities currently are in what they are calling a “stand and defend” position – strengthen and monitor existing dikes and levies and protect as much of their community as possible.

I went to Fargo with my 17 year-old Nephew who just last night was sandbagging in north Fargo, and had arrived in Grand Forks at 8:00 am this morning. When he heard I was heading to Fargo he asked “do you need help”? The resilience, energy and concern exhibited by this, and many, of the youth and young adults in this fight has been unbelievable and from my perspective, one of the major stories of this struggle. The overwhelming assistance – from junior and senior high students to the several colleges and their students from throughout the region – has been astounding.

Even former ND Governor and U.S. Secretary of Agriculture Ed Schaefer is driving a dump truck hauling clay. He said he came across a driver who had been driving for 27 hours straight and Ed figured he could use a break.

The endplay of this flood has yet to be written, but when it is all said and done the residents of Fargo/Moorhead along with an army of students (our best and brightest) will hopefully be able to slap each other on the back and say “job well done”. Stand and defend Fargo … stand and defend.

---

Here's an amateur video on the flood fight making the rounds on youtube:

Minnesota Public Radio's Bob Collins has been chronicling the story of a few families in Moorhead fighting to save their homes, even after their neighborhood has been evacuated and they've been cut off by a secondary dike.