Housing ka-boom

LONG article about how a popular type of mortgage, the option ARM, does not actually provide money for free, and is about to annihilate a lot of homeowners’ finances:

After prolonging the boom, [option ARM] mortgages could worsen the bust. They also betray such a lack of due diligence on the part of lenders and borrowers that it raises questions of what other problems may be lurking. And most of the pain will be borne by ordinary people, not the lenders, brokers, or financiers who created the problem.

Gordon Burger is among the first wave of option ARM casualties. The 42-year-old police officer from a suburb of Sacramento, Calif., is stuck in a new mortgage that’s making him poorer by the month. Burger, a solid earner with clean credit, has bought and sold several houses in the past. In February he got a flyer from a broker advertising an interest rate of 2.2%. It was an unbeatable opportunity, he thought. If he refinanced the mortgage on his $500,000 home into an option ARM, he could save $14,000 in interest payments over three years. Burger quickly pulled the trigger, switching out of his 5.1% fixed-rate loan. “The payment schedule looked like what we talked about, so I just started signing away,” says Burger. He didn’t read the fine print.

After two months Burger noticed that the minimum payment of $1,697 was actually adding $1,000 to his balance every month. “I’m not making any ground on this house; it’s a loss every month,” he says. He says he was told by his lender, Minneapolis-based Homecoming Financial, a unit of Residential Capital, the nation’s fifth-largest mortgage shop, that he’d have to pay more than $10,000 in prepayment penalties to refinance out of the loan. If he’s unhappy, he should take it up with his broker, the bank said. “They know they’re selling crap, and they’re doing it in a way that’s very deceiving,” he says. “Unfortunately, I got sucked into it.” In a written statement, Residential said it couldn’t comment on Burger’s loan but that “each mortgage is designed to meet the specific financial needs of a consumer.”

This is one of those instances where the financial industry is at fault, but they couldn’t have pulled it off without the help of idiotic consumers. Any transaction I get into worth $500,000 is not going to involve someone who put a flyer in my mailbox.

C’est Levee, or Once More Unto the Breach

It’s the first anniversary of Hurricane Katrina’s whomping of the Gulf Coast. I’ve been down to New Orleans four times since then. I’ve tried to chronicle a little bit of the reconstruction, or at least my viewpoint on the progress.

My perspective is limited, of course. Amy’s family lives about 25 miles from the city, so the people I see the most down there talk more about the after-effects, not their own property loss. We’ve made trips into the city each visit, but mainly in the central business district and the French Quarter. I haven’t gone through the lower Ninth Ward in any of my visits, but I also don’t visit the South Bronx when I go to New York.

Or does the WTC site serve as a better analogy? Ray Nagin seemed to think so, when he contrasted NOLA’s rebuilding pace with the five-year span since the Twin Towers were knocked down: “You guys in New York can’t get a hole in the ground fixed and it’s five years later. So let’s be fair.”

It was a cheap shot, but Nagin’s a mentally unstable grandstander, so that needs to be factored in.

How does the city get rebuilt? Darned if I know. I wouldn’t exactly trust a “master plan” developed by the crooked politicos of Louisiana in concert with the ass-clowns in Washington, and the Army Corps of Engineers is already covering its ass about the possibility of the current levees being unable to handle another major storm. I’m having enough trouble just trying to settle on a color for my home office, since the official VM wife objects pretty violently to the deep green currently in place.

(Witold Rybczynski in Slate has a neat piece about how a new-urbanist project in Denver provides an example of how to start putting together neighborhoods, but it all presupposes that the neighborhoods aren’t built in a locale that’s existentially flood-prone.)

I’m having trouble coming up with anything to say that I haven’t gotten at already, so why don’t you, my dear readers, tell me what you make of New Orleans? A bunch of you came to visit in March for my wedding, but I want to hear from those of you who haven’t seen it, too. Tell me what you remember of the city, if you’ve been there before, what you thought if you’ve been there post-Katrina, and what you think of the ways and means of rebuilding a city that wasn’t in great shape before it’s cataclysm.

(Update: I know it’s hard to believe, but Ray Nagin has more to say!)

Bush Saves New Orleans

Last night, we had CMT’s Hee Haw Weekend Marathon on while Amy worked up a dose of Emeril’s spicy tomato glaze. My parents didn’t watch Hee Haw much when I was a kid, although my dad developed an unhealthy attachment to Willie Nelson in the 1980s (unhealthy inasmuch as he really loved that duet with Julio Iglesias). My in-laws asked if I listened to Buck Owens. I told them I never did, but that Amy was pretty broken up when Owens died this year.

I made my first visit to a Wal-Mart yesterday. Where I live (northern NJ) it’s not a huge feat to avoid them; my grocery needs aren’t extensive and the only store I know of nearby is up in Western Samaria (aka Rt. 59 in NY state). Down here, it’s more of a necessity, especially post-Katrina. I took one step inside and Got It: huge, well-lit venue, cleaner than any of the local markets, good selection of food products. And then there’s all the other stuff: a family passed us with a shopping cart filled with food, back-to-school clothing, and a color inkjet printer. Wal-Mart doesn’t carry everything, of course.

In the “efnic food” aisle, we bumped into Amy’s cousin Wade, whom I last saw during his visit to NYC with his wife. He pines to retun to the city.

I always wonder about how different regions see each other. It reminds me of that scene in Annie Hall, when Woody Allen tells Tony Roberts, “Don’t you see? The rest of the country looks upon New York like we’re left-wing, Communist, Jewish, homosexual, pornographers. I think of us that way, sometimes, and I live here!” But Wade really liked visiting, and no one down here’s given me any crap for, um, being who I am. Even if the housepet is a little judgemental.

The news here is focused on yesterday’s six murders — the murder rate is skyrocketing this year — but the top story is that Reggie Bush signed his rookie contract with the Saints. In the Times-Pic, it takes top billling over a misguided idea to build a “Jazz Park” to replicate Chicago’s Millennium Park.

Tonight, we’re staying in New Orleans at the same hotel we stayed in leading up to our wedding. I’m flooded with memories of last March, and so is Amy. We had a little snack (if that’s possible) at Café Du Monde, and reminisced about the end of our wedding evening. I love being in this city, but I have a hard time imagining how it’s going to recover from the disaster last year. I’m glad we did what we could to boost the economy via our friends’ alcohol consumption.

It’s a Sunday afternoon in mid-summer, so it’s kind of dead outside. I was hoping to get some good pictures, but there really isn’t much to see that I haven’t snapped in past trips. We’ll be dining at NOLA tonight, then getting up earlyish to fly home. If I do manage any good pix tonight, you’ll be the first to know.

Highways, Byways, etc.

On Sunday, George Will offered a tribute to the Interstate Highway System, which celebrates its 50th anniversary this summer:

Eisenhower’s message to Congress advocating the interstate system began, “Our unity as a nation is sustained by free communication of thought and by easy transportation of people and goods.”

No legislator more ardently supported the IHS than the Tennessee Democrat who was chairman of the Senate Public Works subcommittee on roads. His state had benefited handsomely from the greatest federal public works project of the prewar period, the Tennessee Valley Authority, which, by bringing electrification to a large swath of the South, accelerated the closing of the regional development gap that had stubbornly persisted since the Civil War. This senator who did so much to put postwar America on roads suitable to bigger, more powerful cars was Al Gore Sr. His son may consider this marriage of concrete and the internal combustion engine sinful, but Tennessee’s per capita income, which was just 70 percent of the national average in 1956, today is 90 percent.

Meanwhile, a 3-ton slab of concrete fell inside Boston’s Big Dig tunnel, killing a passenger in a car. Evidently, this is not connected to the Big Dig concrete fraud case. But after going $12 billion over budget, you can imagine that corners had to be cut somewhere, right?

Mile Low?

Witold Rybczynski has a new slideshow up at Slate, examining the architecture of Denver’s art museum, on the occasion of Liebeskind’s new addition, to be completed in September.

Whether you like this sort of mannered architecture is a matter of taste. Frank Gehry’s swirlings and churnings have always seemed lighthearted and whimsical, buoyed by an endearing take-it-or-leave-it quality. Libeskind’s forms strike me as aggressive. Standing in front of his building is like being buttonholed by someone shouting insistently in your face: And this! And this! And this!

I hope my “Denver correspondent” (that means you, Craig) will provide some comments on this.

(I really need to get around to reading his City Life sometime this summer, but it’s The Chinatown Death Cloud Peril for me right now, followed by Gilead.)