by TOM MCLAUGHLIN
June 19, 2012
I'm learning first-hand lately why so many business people are frustrated with government.
Not knowing much about the stock market, I persuaded my wife to invest our savings, which were in cash, in a house. Watching how the Federal Reserve is printing trillions of dollars with its "quantitative easing," I figured cash wasn't a good thing to hold.
The house was a Fannie Mae foreclosure and we negotiated the price down as far as we could. When Fannie Mae took it back from the previous owners last fall, it hired a fly-by-night outfit to winterize it and that's where the problems began. We wanted to carry a small mortgage on it so we could fix it up and rent it out, but we couldn't get a low-interest mortgage loan because Fannie Mae, to whom our local bank would sell the mortgage, requires that the house be appraised.
We couldn't get it appraised, however, because the seller is also Fannie Mae, and they couldn't get it de-winterized. An appraiser has to come in and see everything working, but the fly-by-night outfit they hired to winterize it screwed up. The boiler cracked. Pipes burst. Fannie Mae didn't want to spend the money to fix all that so we couldn't get it appraised and qualify for the mortgage under Fannie Mae's rules for mortgages - which banks must obey.
Okay. Stuff happens, right? We negotiated the price down still further to cover the repairs and bought the house with cash. I figured we'd use a home equity line of credit on my existing home (which had been paid for) to fix up the investment house enough that it could be appraised, and then we'd qualify for a Fannie Mae-approved mortgage on it in just a few months.
That was my plan, at least, until I discovered we couldn't do that. Why? Fannie Mae regulations again. They say we have to wait a year before we can put a mortgage on the investment house we just paid cash for. After the sub-prime mortgage debacle - which Fannie Mae largely caused - they made another regulation to prevent house-buyers from taking out second mortgages. Didn't matter that we wanted a first mortgage, Fannie Mae regulations prevent banks from writing any kind of mortgage until after we've owned it for a year.
Meanwhile I have this home-equity loan on my previously-all-paid-for primary residence with a variable interest rate. It's only 4% - and that's not bad - but it's variable. The payments are easy now, but what will happen to interest rates in a year? Nobody knows, and that makes me nervous. All that Federal Reserve dollar-printing is bound to kick off major inflation and I'm worried that it will drive up interest rates before a year has elapsed.
So, I've applied for a fifteen-year mortgage on my primary residence and locked in a rate. I won't need the fifteen years, but I might just take them anyway. If inflation does go up to 12% or higher like it did under President Carter, I'll pay off the 3.25% mortgage with inflated dollars over the whole term. My local bank is savvy enough to understand that possibility, but like most banks they're going to sell my mortgage immediately to Fannie Mae, so why should they care? Fannie Mae will be left holding the bag. That means government will be left holding the bag. That means the taxpayers will be left holding the bag, and I'm a taxpayer. No wonder Fannie Mae has to be bailed out so often.
There's an old Yankee expression that goes: "If it ain't broke, don't fix it." Government, however, has a different outlook: "If it ain't broke, we're gonna keep on fixing it ‘til it is broke." That's the thinking it's been applying to the housing market. Now it's "fixing" health care.
The house has aluminum siding, but the trim and the porch need scraping and painting, so I tried to hire a local contractor to do that. He looked at it and said that he doesn't want to scrape it because the house was built in 1920 and government requires him to pay take a $500, several-day course in how to scrape any lead paint which might be on there, then buy a special license for hundreds more. He doesn't want to do all that and who can blame him? If he goes ahead and scrapes it, he could be fined $37,000. But, he said, the homeowner can do it himself. So, guess what I'm doing this summer? The contractor will come in and paint it when I'm done.
I hired a heating contractor to install an energy-efficient boiler and he told me I would qualify for government grants if I bought the right one. I went online though and discovered that it's all been spent. None left for me. I had to pay into that program with my taxes, but it won't get anything back.
I'm going to add insulation in the attic and replace a few windows too. There were government programs to help if I bought the right windows and I did, but guess what? I'm too late. Money's all gone for that too. Oh well.
By August, I should be done with all the work and it'll be ready to rent. What are the chances that between now and then I'll be stalled again by more regulations I don't know about yet? Pretty good is my guess.
Government is going to fix our economy? I don't think so.
FamilySecurityMatters.org Contributing Editor Tom McLaughlin is a (now retired) history teacher and a regular weekly columnist for newspapers in Maine and New Hampshire. He writes about political and social issues, history, family, education and Radical Islam. Email him at email@example.com.