Monday, Jan. 25
Written 8:15 a.m. EST
EQUAL TREATMENT: The headline in the New York Times article reads: "Huge Housing Complex in N.Y. Returned to Creditors."
The lead paragraph goes like this: "The owners of Stuyvesant Town and Peter Cooper Village, the iconic middle-class housing complexes overlooking the East River in Manhattan, have decided to turn over the properties to creditors, officials said Monday morning."
Let's shorten it to: "The owners of Stuyvesant Town and Peter Cooper Village have decided to turn over the properties to creditors."
Now, let's reword it -- "kitchen-table" it -- to this: "Mr. and Mrs. Smith, the owners of the house at 123 Main St., have decided to turn over the property to creditors."
When the owners of Stuyvesant Town and Peter Cooper Village walk away from their real estate debts, the news story presents it as an unfortunate incident, but nothing to be ashamed of. So when Mr. and Mrs. Smith do the same thing, their decision, too, shouldn't be considered shameful. Right?
The Times continues: "The surrender of the properties ... ends a tortured real estate saga that saw the partnership make expensive improvements to the complex and then try to rent the apartments at higher market rates in a real estate boom. But a real estate downturn and the city's strong rent protections hindered those efforts, leaving the buyers scrambling to make payments on loans due for the properties."
Again, I'll kitchen-table it: "The surrender of 123 Main St. ends a tortured real estate saga in which the Smiths made expensive improvements to the house and expected their incomes to rise enough to make the payments on their mortgage and home equity loan. But the home's value fell, and the Smiths' combined incomes didn't rise in a recession, leaving the Smiths scrambling to make payments on the loans."
The Times quotes the owners of Stuyvesant Town and Peter Cooper Village as saying that they tried to get a loan modification, but couldn't. The owners concluded that "the only viable alternative to bankruptcy would be to transfer control and operation of the property, in an orderly manner, to the lenders and their representatives."
My kitchen table version: "The Smiths tried to get a loan mod, and when that didn't work out, they decided to transfer the house to the lenders instead of filing for bankruptcy."
Were the owners of Stuyvesant Town and Peter Cooper Village feckless and reckless? It's hard to know for sure. Similarly, we should defer adjudication for families who bought too much house and expected their incomes to rise and ended up defaulting on their loans.
LOOKS LIKE A GOOD READ: Salon.com offers a review of a book called "I.O.U.: Why Everyone Owes Everyone and No One Can Pay." It sounds like a lively and understandable account of how we ended up in a financial crisis. I like how author John Lanchester describes the way credit default swaps were used: "It's as if people had used the invention of seat belts as an opportunity to take up drunk driving."
RTI REPORT CARD: Mortgage loan officer and blogger Dan Green participates in Bankrate's Rate Trend Index every week. That's where we ask mortgage experts if they think mortgage rates will be up, down or about the same in 35 to 45 days.
The expert consensus has a dreadful track record, Green concludes when he looks back on the past year. "(I)t turns out that the experts guessed right on rates just 23.4 percent of the time last year," he writes.
I'm glad that he did the tallying, although I wish our experts guessed more accurately. Green says he does better than 23.4 percent. I do, too. In the 52 predictions I made between Dec. 24, 2008, and Dec. 16, 2009, I was right 25 times, for a batting average of .481.