HUD zero down payment mortgages

Craig Cantoni has pointed out the following January 19, 2004 press release from the U.S. Department of Housing and Urban Development:

BUSH ADMINISTRATION ANNOUNCES NEW HUD "ZERO DOWN PAYMENT" MORTGAGE
Initiative Aimed at Removing Major Barrier to Homeownership

LAS VEGAS - As part of President Bush's ongoing effort to help American families achieve the dream of homeownership, Federal Housing Commissioner John C. Weicher today announced that HUD is proposing to offer a "zero down payment" mortgage, the most significant initiative by the Federal Housing Administration in over a decade. This action would help remove the greatest barrier facing first-time homebuyers - the lack of funds for a down payment on a mortgage.

Speaking at the National Association of Home Builders' annual convention, Commissioner Weicher indicated that the proposal, part of HUD's Fiscal Year 2005 budget request, would eliminate the statutory requirement of a minimum three percent down payment for FHA-insured single-family mortgages for first-time homebuyers.

"Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of American families, particularly minorities," said HUD's Acting Secretary Alphonso Jackson. "President Bush has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal."

Preliminary projections indicate that the new FHA mortgage product would generate about 150,000 homebuyers in the first year alone.

"This initiative would not only address a major hurdle to homeownership and allow many renters to afford their own home, it would help these families build wealth and become true stakeholders in their communities," said Commissioner Weicher. "In addition, it would help spur the production of new housing in this country."

For those that choose to participate in the Zero Down Payment program, HUD would charge a modestly higher insurance premium, which would be phased down over several years, and would also require families to undergo pre-purchase housing counseling.

So, how's that program working out?

If you're not in a position to be able to save funds for a downpayment, you're also not in a position to be able to have an emergency savings account for all of the unexpected expenses that arise with home ownership.

EFF sues the NSA, Bush, Cheney, Addington, etc.

The Electronic Frontier Foundation has filed Jewel v. NSA to try another tactic in stopping unconstitutional warrantless wiretapping of U.S. residents. Their previous lawsuit against AT&T, Hepting v. AT&T, is still in federal court as the EFF argues with the government over whether the telecom immunity law passed by our spineless Congress is itself constitutional or applicable to the case.

Jewel v. NSA names as defendants the National Security Agency, President George W. Bush, Vice President Dick Cheney, Cheney's chief of staff David Addington, former Attorney General Alberto Gonzales, and "other individuals who ordered or participated in warrantless domestic surveillance."

Drugs in drinking water are controlled substances

In another amusing unintended consequence of the war on drugs, it turns out that the pharmaceuticals most likely to get disposed of into city water supplies are controlled substances. The restrictions on who has access to over 365 controlled substances are such that they can't be disposed of via normal hazardous waste disposal methods such as incineration, due to the costs of maintaining the controls on contractors who handle and haul away drugs for disposal.

As a result, hospitals and assisted living facilities are dumping drugs like codeine, morphine, oxycodone, diazepam (e.g., Valium) and methylphenidate (e.g., Ritalin) down the drains, behind locked doors with a witness to the disposal for record-keeping purposes.

The DEA is reportedly working out some modified regulations with the assistance of the EPA.

Sarah Palin and the John Birch Society

Orcinus has an interesting article about Sarah Palin, prompted by the finding of a 1995 photograph of Palin at her Wasilla city council desk with an article from the March 1995 issue of the John Birch Society's New American in front of her. Ben Smith at Politico has a more balanced piece on the same subject, which points out that there were lots of copies of that particular article sent out, and that Birchers themselves don't appear to be particularly impressed with Palin.

Government restriction on short sales may have unintended consequences

A lot of my investments are in S&P 500 index funds, which, until the recent dive by financial institutions, included financial stocks as its largest sector of investment (finance is now third after energy and IT). Over the past couple years, I've held shares in the Prudent Bear Fund (BEARX), a mutual fund that uses a strategy of shorting various stocks, purchasing put options, and investing in gold, as well as making some short-term trades of the exchange-traded funds ProShares UltraShort S&P 500 (SDS), which goes up when the S&P 500 goes down, and ProShares UltraShort Financial (SKF), which goes up when the Dow Jones U.S. Financials Index (DJUSFI) goes down.

I had been holding some shares of SKF for a couple weeks with a 30-day limit order to sell at $142, which would give me a nice profit. When it shot up Thursday, I upped my limit, and ended up selling some of my shares at over $150, and closing out my position. The market then reversed, and SKF dropped as low as $110, so I picked up a few more shares at around $117. Friday morning, SKF dropped to $87 and started to climb back up, when all of a sudden it stuck at $93 and no more trades went through. Trading was halted.

The SEC announced a "temporary emergency action" to ban short selling in 799 stocks of financial companies for the next ten business days (until the end of the day on October 2), which may be extended for up to another twenty business days (until the end of the day on October 31, bringing us right up to the election). The UK instituted a similar ban. Because of this ban, trading in SKF was temporarily halted. The SEC seems to be under the illusion that short sellers are responsible for the stocks of financial companies falling, rather than the fact that these companies have been engaging in risky behavior and are now loaded down with bad debt.

But a short time later today, trading in SKF resumed, after ProShares announced that they cannot accept orders to create new shares in the fund, since that would require taking new short positions in financial stocks, but those who hold existing positions are still permitted to trade them.

This effectively turns SKF into a closed-end fund, making SKF shares more scarce than they otherwise would be. When I saw that SKF was again trading, I bought more shares at $90, reasoning that the financial problems are far from fixed, the proposed government action is likely to be full of holes, and with normal routes to short selling closed, more of those who wish to hedge their bets against further drops in the financial sector will turn to other alternatives such as put options (though options markets are likely to be hurt by this ban as well, since the U.S., unlike the UK, didn't make an exception for options market makers) or shares in funds like SKF, the latter of which they will only be able to purchase from existing holders of the fund.

It's a serious mistake to think that short selling is something solely done by vultures trying to destroy companies at risk--it's a defensive measure against catastrophe for those who are mostly holding long-term investment positions.

An Associated Press story on the ban shows that the SEC is starting to recognize that it may cause some unintended problems:

But on Wall Street, professional short-sellers said they were being unfairly targeted by the SEC's prohibition. And some analysts warned of possible negative consequences, maintaining that banning short-selling could actually distort -- not stabilize -- edgy markets.

Indeed, hours after the new ban was announced, some of its details appeared to be a work in progress. The SEC said its staff was recommending exemptions from the ban for trades market professionals make to hedge their investments in stock options or futures.

"I don't think it's going to accomplish what they're after," said Jeff Tjornehoj, senior analyst at fund research firm Lipper Inc. Without short sellers, he said, investors will have a harder time gauging the true value of a stock.

"Most people want to be in a stock for the long run and want to see prices go up. Short sellers are useful for throwing water in their face and saying, `Oh yeah? Think about this,'" Tjornehoj said. As a result, restricting the practice could inflate the value of some stocks, opening the door for a big downward correction later.

"Without offering a flip-side to the price-discovery mechanism, I think there's a pressure built up in stock prices that only gets relieved in a great cataclysm," he said.

Disclosure: I presently hold no shares of BEARX or SDS, but do have a position in SKF. This post does not constitute investment advice.

UPDATE (September 20, 2008): Paul Krugman critiques leaked details of the bailout deal. If accurate, I agree with him that it's a bad deal and I expect to see SKF climb on Monday.

Iraq peace: surge working, or results of ethnic cleansing?

Reuters reports that nighttime satellite photos from Sunni Arab areas of Baghdad show that the lights in those areas began to go out before the U.S. troop surge began in 2007, suggesting that population shift, rather than the surge, may have had greater responsibility for the drop in violence.

Sarah Palin's Yahoo account hacked

Sarah Palin has apparently been using a personal email account for State of Alaska business (perhaps following Republican precedent on how to avoid subpoenas?), and it's been compromised.

Wikileaks has the documents.

UPDATE (September 19, 2008): The screenshots used by the attacker showed that he used ctunnel as his web proxy, and contained enough information to identify his source IP in ctunnel's logs.

As pointed out by commenter Schtacky, it looks like they've identified the culprit, who used some Google research and Yahoo's password recovery feature to change the password on the account to break in.

This shows the problem with choosing "security questions" for password recovery that have answers which are easily publicly available.

I hope that this kid's actions don't sabotage the corruption case against Palin that may have been supported by evidence in her Yahoo email, evidence that is now tainted by the fact that it was compromised (and subsequently deleted).

The Religious Right's Religious Right

Ed Brayton at Dispatches from the Culture Wars discusses those right-wing Christians who oppose Sarah Palin because God doesn't want women to hold leadership positions or even vote.

He lays out some choice quotes from Covenant News, the website promoting these extreme views, and observes that this website is the home to contributors such as Gary North and Ron Paul.

Cindy McCain's drug-related crimes

Radley Balko at The Agitator replies to Jennifer Rubin at Commentary about why the Washington Post's coverage of Cindy McCain's addiction to painkillers and commission of crimes to support it is newsworthy.

Balko gives two reasons:

• John and Cindy McCain have touted her addiction an example in overcoming adversity. That presents quite the contrast to McCain’s legislative history as an ardent drug warrior. People accused of crimes similar to those Cindy McCain was accused of committing usually go to prison (even when they’re innocent). Her crimes haven’t been well-reported in the media. And they show how John McCain (who, by the way, is running for president) believes in one set of rules for the friends and family of powerful politicians, and a different set of rules for everyone else.
• While Cindy McCain’s addiction and theft from her children’s charity to support that addiction were lightly covered at the time, there has yet to be much coverage of it at all during this campaign. And one aspect of the case that’s been covered even less is John and Cindy McCain’s attempt to railroad Tom Gosinski, the guy who blew the whistle on Cindy McCain’s theft from her children’s charity. The Post story is one of the first to get his version of what happened.

And Balko concludes:

So here we have a U.S. senator who tried to destroy the guy who blew the whistle on his wife’s crimes, who then used his political power to work out a sweetheart deal with prosecutors to get his wife a slap on the wrist for those crimes (which often send others to prison), and who has then spent his entire career fighting for longer sentences and less leniency for people who commit similar crimes. And he’s now running for president.

The Washington Post story is here. Phoenix's New Times covered the story of Cindy McCain's drug addiction and Tom Gosinski whistle-blowing back in 1994. The New Times story contains much more detail than the Post story, including lies told by Cindy McCain as part of the McCains handling of the unwanted media coverage of the story.

Amy Silverman of New Times, who has covered McCain in detail for many years, has a lengthy recent article about McCain here, which includes stories about McCain such as his sabotaging a hearing of Arizona Gov. Rose Mofford, Barry Goldwater's irritation with McCain, McCain's exploitation of the illness of Mo Udall for publicity, and more.

McCain and Palin lie about factcheck.org

A McCain-Palin ad cites factcheck.org to claim that Obama has made false attacks on Palin--but the attacks haven't come from Obama. McCain and Palin are appealing to factcheck.org's accurate content in order to lie about Obama, and factcheck.org calls them on their dishonesty.