Exam 3 Grades Posted to WebCT

Sorry for the delay. I have been away from a reliable Internet connection.

Grades have just been uploaded to WebCT. Please check your Exam 3 grade. Thank you.

TVM Completions Posted to WebCT

Sorry about the delay here. I have the TVM completions to WebCT.

Interestingly, I have up to 10 students who did not turn in the TVM tutorial. Please don't forget, you automatically get a "F" grade for the course if you do not successfully complete the TVM tutorial.

Week 15 (April 27, 2009):

*Read Chapter 16 (the final is comprehensive but I will give extra emphasis to Ch. 16), view video/audio clips, do practice problems etc. (the usual routine for each chapter).
*Review Investment Problem (IP) clips. This is an optional bonus problem that will be part of the final exam.
*Review Exam 3. Please download the file at www.uta.edu/faculty/hansz/3325/online/f08/exam3S09.wmv

Exam 3 Review Posted (use the address below)

The review for EXAM 3 has been posted. Please download the wmv file at the following address: www.uta.edu/faculty/hansz/3325/online/f08/exam3S09.wmv.

I will be posting the exam scores and updated TVM completion to WebCT, but this might not be accomplished until the end of the week. I will make a blog post as soon as WebCT has been updated.

Blog Bonus Submission: Share the Problem and the Blame

Blog Bonus Submission
Share the Problem and the Blame

Turn on the news or radio, open up a newspaper or magazine or simply talk with friends’ family and co-workers and the state of our nations economy will be discussed, dissected and judged. At the very heart of our financial woes lies the mortgage crisis and ever-increasing foreclosure rates, as we see more and more people removed from their homes and forced to find alternative living situations. Most of us are quick to blame big business and banks for their greed and investors and regulators for their lack of foresight and discipline, yet who’s really to blame for this financial blunder that is bringing our nation to its knees?

To understand the problem, it requires a look into the past to see where we began and the reasons behind those decisions. Since the Great Depression, federal regulation has changed the mortgage lending industry in an effort to create equality and uniformity in the lending process. Generally speaking, the government prefers people to own homes rather then rent since this provides many benefits to both the homeowner as well as our governing bodies. One such effort was the 1977 Community Reinvestment Act (CRA) which attempted to provide home loans to low-income individuals and families who did not meet the credit or financial criteria. Many feel that this was an effort to help minorities and other segments of our population who had been historically denied the same opportunities as others. While the debate on whether the CRA was created by left-winged lobbyists or provided needed opportunities sparks interesting conversation, that fight will have to wait for another day. This act laid the foundation for companies to provide sub-prime mortgages to borrowers who did not meet their high standards, allowing businesses to loan money to riskier individuals. In the nineties, banks began to see more and more pressure to extend these loans even further and the standards they had previously set began to slide lower and lower. According to Thomas J. DiLorenzo, a professor of economics at Loyola College in Maryland and author, banks have been pressured, coerced and forced into lending billions in the sub-prime market, bringing risk and bad assets to their company and the industry.

Wikipedia reports that as of March 2007, the subprime mortgages value was an estimated $1.3 trillion making up between 18%-21% of the total originations between 2004 and 2006. This number jumped from less than 10% in 2001 to 2003; while these subprime loans would comprise almost half of the total foreclosures of 2007 and roughly 16% of subprime adjustable rate mortgages were either 90 days past due or were already in the foreclosure process. At the same time we hear stories of a single woman on disability purchasing a home worth $300,000 or a family making less than $35,000 a year refinancing their home for $400,000 and getting $100,000 cash out. We wonder how lenders could be so blind and find it impossible to understand why investors are putting billions of dollars into these terrible loans. To understand how these kinds of things are happening, I spoke with a friend who is currently going through foreclosure and will soon lose his house.

His name is Matt, he is 26 years old, single and purchased a home in Arlington in 2003 for $225,000. When he was approved for the loan, he and I were roommates and two of our friends, who were also roommates, decided it would be a great idea for us to find a house to rent, rather then live in apartments. At some point, Matt decided he could buy a home and we could pay him rent, thereby offering him a return on his investment. He called various banks mortgage lenders, including Countrywide Home Loans, Wells Fargo and First Option Mortgage and was promptly denied by all three since his credit was in the mid 500’s and his debt to income ratio was staggering. Even their subprime mortgage department turned him down as his numbers didn’t fall into even their low guidelines. He then went to an individual mortgage broker who told him it wasn’t a problem and he would get him approved, which he did. Matt got the money, got the home and the four of us moved in to his beautiful home soon after.

Five years later, Matt continues to work his job waiting tables and working valet on the weekends in Dallas, but the rest of us have moved on and moved out. He has other roommates from time to time, but more often than not he’s not getting the income that he needs to pay his mortgage. We looked over his original loan paperwork and discovered that not only had the broker changed Matt’s credit score, but he changed his job, his income and financed the property as a rental with the Matt actually making money from the people he was supposedly renting to. The broker did the deal, charged a $7,500 brokerage fee on top of the $2,500 in other fees added into the loan and promptly sold the loan to Countrywide.

Countrywide, one of the original companies that denied Matt, now owned the servicing rights to the loan, but had sold the actual loan via mortgage backed securities through Fannie Mae. Not only did the broker make a killing on the loan, but he set it up as a one year interest-only ARM loan, despite assuring Matt that it was a 30 year fixed, principle and interest payment loan. Rates steadily increased from 2003 to 2008 and every year Matt saw his interest only payment go up and up, while his balance remained the same. Since then, the broker has closed up shop and is nowhere to be found.

I see two major issues that the majority of us fail to realize and the media fails to mention in their analysis and judgment of the situation: there were a lot of small brokers, firms, title companies and appraisers that plaid a key role in the lending of subprime mortgages and individuals should also be responsible for their actions, in spite of the underhanded dealings of banks and brokers. In the end, many of the people who are in foreclosure or are behind on their payments never should have purchased or refinanced their home to get cash out because they were unable to afford doing so. Just because a bank is willing to give you money, doesn’t mean you should take it; each of us is responsible for what we do. If they bank or broker was dishonest, you still enjoy a three day right of rescission on your primary residence, three days to comb the paperwork to make sure everything is in order and correct. If you are unable to do so or don’t want to take the time, hire an attorney to do it for you. How many people who were misled would have paid a few hundred dollars to an attorney if they could have prevented the situation they are in?

My point is simple, yes banks made bad loans, yes the government failed to regulate properly, but how many times can we blame others for our mistakes? Many people are in terrible situations and have lost most, if not everything and I truly feel sorry for them. I’m sure it was a very hard lesson to learn, but hopefully we will all realize that we have to be responsible and make sure that our own business is in order when it comes to our finances.

Kenneth M Sturgill

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis
http://www.lewrockwell.com/dilorenzo/dilorenzo125.html

Blog Bonus Submission

The Changing Face of Irving, TX

For many North Texans life and the Dallas Cowboys are twisted into one thing. The same can be said about Irving, TX. On October, 24, 1971 the Dallas Cowboys made the switch from the Cotton Bowl to the newly built Texas Stadium, and put my home town of Irving on the map. As you can already see from the new stadium being built in Arlington, and what we heard from the professionals during business week, new stadiums are explosive to local economies. They create new jobs, new roads, and new businesses, which completely transform a community into something new and better. In the 1960’s Irving had a population of about 50,000 people, and after the stadium was built the population boomed to the 200,000 plus population estimate we have today. But what happens to a city when its main attraction is gone?

In 2004, Irving lost its partnership with the Cowboys when Arlington voted to build a new stadium in its city. 2004 was also the first year that Irving voted to allow the sale of alcoholic beverages. Irving was already anticipating the loss of revenues created by Texas Stadium, but this proposition was voted down. In late 2008 it was voted on again, and passed, I believe because residents were anticipating the loss of the city’s largest revenue earning real estate property. With the Cowboys leaving and a lagging economy, the city is looking to transform its downtown into more of a Downtown Dallas type of feeling. Plans for new housing communities, condos, lofts, bars, and restaurants are all in the works. Downtown Irving is not much to look at right now, with only a few historical buildings, some banks, and other small businesses. McDougal Companies is company in charge of the redevelopment process With the Trinity Railway Express line stop right in downtown; it connects Irving directly to DFW airport and to Downtown Dallas. This is a prime location for redevelopment and will greatly compliment all the development that has been done in the cities northern areas of Las Colinas and Valley Ranch. Different apartment complexes in the Downtown area that “haven’t met code” have already begun to be demolished to make room for the new project. I am completely for Irving to clean up this area and redevelop, but it is interesting to see how the city quickly goes about creating new codes and stricter enforcement of an area they have neglected for years when they see a potential for profit. New ordinances are also changing the face of Irving. The first of which is on multifamily housing, making apartment owners clean and improve there properties, if they want to keep them. Other ordinances are involved with sign standards, convenience store standards, and commercial standards. All of which are supposed to create a more visually appealing Irving.

A team of agents for the McDougal Company have been canvassing the downtown area informing the people of their project and making offers for their homes. My best friend and his wife lived in the neighborhood, and had met with one of the agents on several occasions. The agent let my friends know that this was going to be a ten year project and that they were just in the early stages of it. The agent then talked about how they were going to rejuvenate the area into a downtown city life. A new housing community would be built to replace their old homes. The company plans to buy all the homes in the area without the city having to use the power of eminent domain. Since the project has a large economical potential, the city has the power to take the property for public use. He then offered them a chance to sell their house to the company. After of few months of negotiation with the agent, my friends decided to sell there 88,000 dollar home for 118,000. Thirty thousand dollar turn on a house in this economy, and for only owning the property for two years is great. With only a small percentage of the homes sold so far, who knows how high they will be willing to go for each property.

The potential for this project is endless. If this area is developed just right, Irving can become the new Frisco, right in the heart of the Dallas metroplex. Instead of being stuck in traffic for hours, a business person working in Dallas could hop on the train and take a 20 minute trip right to their front door. I was ready to move out of Irving when I graduated, but I am now thinking of buying some real estate in the area because of the great investment potential. The Dallas Cowboys have brought on great change for Irving and Arlington, and it will be very interesting see how far that change goes in the next decade. Hopefully the change will breathe new life into Irving and create a new real estate market. If you leave in the Irving area, check out the Irving website for new updates on the project.

By Brian Wisdom

References

City of Irving Website
http://www.ci.irving.tx.us

Irving Information
http://www.city-data.com/city/Irving-Texas.html

Dallas Cowboys History
http://www.nflteamhistory.com/nfl_teams/dallas_cowboys/stadium.html

Local Residential Housing Crisis

Bonus Blog Submission:
Local Residential Housing Crisis

By: Henry Bauer

Background

Foreclosures are reaching all time highs in many areas that were traditionally stable. The Dallas Morning News reports more than 90,000 vacant home sites available for buyers to purchase - many in far suburban areas of Dallas-Fort Worth. The economy has affected many industries including housing and real estate. People are desperately looking to rid themselves of any decreasing assets. Thousands of foreclosure signs are being put up in front of homes around the Unites States. So is this a buyer’s market? What are potential buyers doing? Are people using this as an opportunity to buy or should buyers wait for the market to stabilize?

Local Foreclosures

According to Steve Brown of The Dallas Morning News, “Home foreclosure filing in the Dallas-Fort Worth area has risen to a record high, with more than 5,500 properties facing forced sale next month. And the number of houses threatened with foreclosure in May rose 25 percent from a year earlier, breaking all previous records, according to statistics released Thursday by Addison-based Foreclosure Listing Service.” Most of these foreclosures are due to the fallout of the economy, resulting in homeowners being unable to pay their mortgage.

Homeowners

The biggest problem lies in the fact that local home owners cannot get rid of these toxic assets. Many sellers in this situation are desperately posting their homes for sale, but no one is responding. “They have no choice but to continue posting the properties for foreclosure while they negotiate with the borrowers,” says George Roddy, Foreclosure Listing Service president. Most of the current foreclosure postings are repeats, meaning they have been posted and heard no responses so they are forced to post again.

Builders

With the struggle to sell the homes that are currently owned, the market is flooded with homes and builders are having a difficult time reducing their inventory. Much of the home construction has been cut back due to the lack of available financing. There are numerous empty lots that are ready to be developed, but there is no financing to fund them. “Home starts have declined almost 67 percent, while the lot supply has fallen only 2 percent,” said local housing analyst Ted Wilson.

Local Investors

While the housing prices are low, wouldn’t it be best to invest now and take advantage of the low prices? Some would tell you yes. Others think waiting it out is an option that may prove to be positive in the near future. Larry Taylor is a businessman that is sure that this is a time to take advantage of the current housing situation. He has recently formed a partnership with an affiliate of Starwood Hotels and Resorts to buy land and lots in the DFW area. “We did this in the late 80’s, when we bought tons of property from the FDIC and RTC.” They would buy these cheap properties and fix them up to turn a profit. According to The Dallas Morning News, “Taylor’s new TD Star Land plans to invest $75 million in lots and vacant residential land in the D-FW area.” While Taylor and some investors see this as a time to pounce, other investors think time is what it will take to rebound. “As the demand for new homes strengthens, the demand and prices of lots will quickly firm up in the high-growth area,” said David Brown, who heads the Dallas office of housing analyst MetroStudy Inc. Most of the lots available today will probably be picked up by investors in the future rather than potential homeowners as in the past.

Conclusion

The bust in real estate in the DF-W area has definitely taken it toll on the local citizens, but it may ultimately create more opportunity for investors and stabilize the economy in the future. If investors have the courage to invest funds in houses and wait, with time these investments will stimulate the economy by providing affordable homes.

Works Cited

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijAap5OBWfi2QIQ7ciDB8e60w898g7F-9VEIpySfp53JzL04HwCJX4zYiRMx-FMFYjBcKoZh6s-EDzWkVLYu5kZhQMEuYgjesO-jIZosCx7ZfVmDI_D15LT4qou5n1OSIG2bh4-Wm-YLAz/s400/April+2008+foreclosures+chart.jpg “US foreclosures chart picture”

http://www.dallasnews.com/sharedcontent/dws/classifieds/news/homecenter/realestate/stories/041709dnbuslots.355be8e.html “Lots!”

http://www.dallasnews.com/sharedcontent/dws/classifieds/news/homecenter/realestate/stories/041609dnmetforeclosure.dff07822.html “HIGH FORECLOSURES picture"

http://blogs.trb.com/features/family/parenting/blog/decision-making.jpg “investor search picture”

“Filings jump to record,” The Dallas Morning News, April 17, 2009, p. 1D.

“What’s on investors’ minds? Lots!,” The Dallas Morning News, April 17, 2009, p. 5D.

Blog Bonus Submission: Christopher Nguyen

To Rent or To Buy a Home, that is the Question! 

How does a person decide to rent a home/apartment or to purchase a house? What advantages and disadvantages are there to owning a home compared to taking the cheaper route by paying monthly for an apartment or leasing a home?  When is a person ready to purchase? Is my credit good enough for a mortgage loan? Do real estate brokers have my best interest or are they just earning their paycheck? These are among many other questions that most people often ask when it comes to home buying. However this topic is hard to determine the answer and can still be undecided after hearing an answer. After researching these topics dealing with real estate, I have come up with some information to determine which choice could possibly be better and hope that it will be a great help to anybody that reads this! 

            As of right now, I am currently renting out an apartment. This is due to my circumstances of being raised in Houston, Texas but moving to Arlington Texas to pursue my education. Hoping one day to graduate and find a good paying and secure job in the future. Because of where and how I live, I often question myself if I should continue renting or to step it up and purchase a house. Since there has always been rumors about apartments and leasing homes are considered throwing your money away. Given that the economy nowadays is worse than before, there have been many claims of falling house prices, historically low interest rates, and tax credits that are encouraging renters to become homeowners. According to Bruce Norris, “there are still going to have a tremendous amount of foreclosures, price declines, and best opportunities to buy properties at amazing prices”, after reading this statement, many people become more interested in obtaining a house. But the real question is “if that is a good idea?” or are statements like this; tricks to suck people into blowing off their money by buying houses that they can afford, but isn’t a necessity. With even more encouragement from Bruce stating “the affordability has never been this high.” announcements like this can trap people by continuingly pushing them to consider acquiring a house, instead of saving for their family’s future, if not their own. 

Although the economy for purchasing houses is great, there can also be a negative side to this impact as well. For example, if the economy is doing so bad than doesn’t that mean many organizations and businesses are loosing money as well? This can result too many layoffs and termination of jobs. How does a person that can afford a house at present time know if they can afford it in the near future? Without knowing if one has the job security to remain with their company for at least five or more years, one can reconsider about purchasing a house. Many people feel that renting can be a huge benefit compared to buying a home since it can be cheaper. But just because there are great interest rates for mortgage loans nowadays, it doesn’t mean that everybody and anybody will be able to obtain these rates. Bad credit can affect a person’s rate majorly, which in the end can give many people high interest rates still. Another benefit from renting is how easy it is to terminate a lease, in a case of relocating jobs or being laid off. But most of all, the greatest factor to renting is based on if the right home or apartment complex has been chosen, which can save a lot of money by not only paying cheaper monthly payments but one can continue to save money every month too. Choices like determining if it really is a good idea to live in luxury now, and possibly encounter troubles later; or to continue renting and saving money while focusing on a more luxury life in the future can be a huge risk.

After analyzing the economy and figuring out if one has enough job security with a stable income that flows through their pockets constantly. The next topic to consider about home owning are the advantages and disadvantages between renting and owning. A couple of advantages for renting is that there are fixed costs for the term of lease, as well as no risk when it comes to equity. There is a smaller down payment for renting compared to buying, and there are less maintenance cost and more ease when it comes to relocating. Like everything else, when there is a good to something it will have a bad as well, which are no tax gains, not being able to personalize or modify the rented quarters, and no gain whatsoever on equity. Advantages for buying a house are that the mortgage balance will eventually decrease while equity increases; you can modify the home with unlimited ideas, and if done correctly one can receive a huge tax return from home ownership. While this sounds like a awesome idea to buy, some disadvantages are that most home buyers will need to put down a larger down payment, and maintenance if any can be costly and is provided by the owner. Another huge disadvantage is moving; most people that need to move for any particular reason will most likely need to sell the current home before moving which can result to a loss of time, more work, and more money to sell the house. 

In conclusion, I feel that there is no correct answer to either renting or buying. Although renting has no return, it saves people money in short term and is a lot easier to let go. Owning a house can bring great reward in the future, but initially; a huge risk must be taken to purchase a home. One must have great credit for the best interest rates, a very stable job and a huge down payment compared to renting. After all this research about renting or buying a home, I feel that the answer to this question varies for each person, and can sum it down to one phrase; “Only if you can afford it!”

  

References 

http://www.hud.gov/buying/comq.cfm

http://realtytimes.com/rtpages/20090410_houseafford.htm

http://www.ourfamilyplace.com/homebuyer/buyorrent.html

http://homebuying.about.com/od/buyingahome/qt/BuyorRent.htm

 

Exam 3 Room Change

We had a scheduling conflict with another group and we need to move Exam 3 to room 239. Exam 3 starts at 10 AM sharp and goes until 11:30 AM.

Please bring your picture ID, Scan-tron, calculator, and pencils. Also, you TVM tutorial if you have not already turned it in.

TVM Tutorial Deadline

The TVM tutorial deadline is this Saturday. If you haven't already, you may submit the TVM Tutorial at the beginning of the exam. Please remember, that you must have the TVM cover/signature page and all sections or we cannot accept your submission.

Week 14 (April 20, 2009):

Exam 3 Week and TVM Tutorial Final Deadline and Blog Post Deadline
*Chapter 17 and 18 view video/audio clips, do practice problems etc. (the usual routine for each chapter).
*EXAM 3 Saturday, April 2th from 10:00 AM to 11:30 AM in Room 147. Exam 3 will cover chapters 8, 9, 10, 11, 12, 17, 18, and 19.
Please bring your PHOTO ID, pencils, calculator, and Scan-tron answer sheet.
*TVM Tutorial Final Deadline and the Blog Post Deadline is also this Saturday. Please turn-in by 10:00 AM.
*****You must complete the TVM Tutorial or I am required to give you an 'F' for the course.*****

Week 13 (April 13, 2009):

*Chapter 11 (continued, this is a big chapter) and 12 view video/audio clips, do practice problems etc. (the usual routine for each chapter).
*REMINDER: Third exam is next Saturday. Also, the final TVM tutorial and blog post deadlines are coming up. (see next week's assignments)
*Please read all student blog posts this week. I will ask your help and options regarding their quality and usefulness to the course.

Week 12 (April 6, 2009):

*Read Chapter 11 view video/audio clips, do practice problems etc. (the usual routine for each chapter).

Drop Deadline!

April 3rd Last Day to Drop a Class