Posts tagged ‘Megan McArdle’

Education Bubble, Grade Inflation, and Illiteracy

We already know housing was a bubble and we are dealing with the ramifications of the pop back in 2007. Yet the higher education bubble keeps moving higher and higher.

Dr. Housing Bubble: California Household Income and UC Tuition Compared

In 1980 the typical California household would be able to finance 17 bachelor’s degrees at a UC with one year of household income. In 2000 that number had dropped to 5. Today it is only enough to purchase one bachelor’s degree at the UC system. Now keep in mind we are looking at the cheaper public option partially backed by the state of California. You have other institutions in SoCal like USC that charge over $50,000 per year. Without a doubt higher education is in a bubble more so in the private sector.

In 1980 the median California household income would have purchased 17 UC bachelor’s degrees. Today it can barely purchase one UC degree.” by Dr. Housing Bubble, May 5, 2011

And what are the results for money spent on public schools in Detroit?

Creative Commons License photo credit: JSFauxtaugraphy

A study funded by 10 major foundations reported yesterday that 47 percent of Detroiters are functionally illiterate–unable to read a bus schedule, fill out a resume, or make sense of the directions on an aspirin bottle.
. . .
The report notes that half of the illiterate population has either a high school diploma or a GED. That’s beside the point. Virtually the entire illiterate population has completed elementary school, the level at which reading is theoretically taught. That’s seven years of schooling (k-6), at a cost of roughly $100,000, for… nothing.

Nearly Half of Detroiters Illiterate. Cause Apparently a Mystery.” by Andrew J. Coulson, Cato@Liberty, May 5, 2011

Speaking of bubbles and inflation:

Robin Hanson has been arguing that perhaps along with redistributing income, we should redistribute grades. I have myself been known to argue that perhaps we should consider redistributing PhDs and Harvard professorships, to limited success with the sort of people who have those things.

Should We Redistribute Grades Like We Do Income?” by Megan McArdle, The Atlantic, May 4, 2011

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Real Estate, Title Insurance, and the Torrens Title System

Uh oh…

If you thought the real estate market was bad, just wait until you can’t get title insurance. This mess is making the Torrens Title system look better by the minute.

Creative Commons License photo credit: mmatins

6. Selling REOs & Foreclosed Properties: Relative to the economy, here is the greatest concern: Banks are sitting on millions of foreclosed properties. Given their mishandling of foreclosures, there are now credible concerns that Title companies will not insure new REO transactions due to the banks’ administrative negligence. Without Title insurance, these houses are worth from 25-50% less than they would have otherwise sold for at REO sale or auctions. If this affects a million REOs times even $100k, that is a lot of money. And, it is potentially much worse.

The Impact of Error From Securitization to Foreclosure, by Barry Ritholtz, The Big Picture, October 15, 2010,

Not looking good at all.

I believe this is the first time a major media outlet has discussed the issue of the failure to convey notes (the borrower’s IOU) through the conveyance chain (usually four parties in total, although it can be more) as described in the contract governing these deals, the pooling and servicing agreement.

The Times has a completely different sort of account, with a headline that is remarkably blunt: “Avoid Foreclosure Market Until the Dust Settles.” This is the sort of article that gives industry lobbyists nightmares. And with good reason. It contains a horror story that is enough to scare lots of people who are thinking of buying properties out of foreclosure.

Just as the account of a man who had his house foreclosed upon when he has no mortgage persuade a lot of people that there could be real problems with foreclosures, this one illustrates how title has become a mess.

Todd Phelps and Paul Whitehead bought at a foreclosure auction. It turns out the lender who had seized the house was the second mortgage-holder; unbeknownst to them, the property had a large first mortgage outstanding, which meant it was now their obligation.

MSM Distancing Itself From Bank Party Line on Foreclosure Crisis, by Yves Smith, Naked Capitalism, October 16, 2010

Lots of homeowners are certainly hoping it doesn’t “get that far”:

Folks hoping that now the banks finally get what’s coming to them should be mindful of the fact that if we decide there’s no clear title on houses with existing mortgages, that probably means you can’t sell your home, either.

But I doubt it will ever get that far; either courts will find a way to wrap this up, or legislators will, by creating some alternate process by which titles can be established and claims reconciled. It will be messy, time consuming, and expensive, and it will delay still further the day when we can all be confident that the housing market has bottomed. The US legal system is slow to deal with emerging crises, and the solutions it crafts generally satisfy no one. But for all that, they usually work tolerably well.

Fannie and Freddie in a Mess, by Megan McArdle, The Atlantic, October 14, 2010

Yep. The uncertainty of the status of real estate titles won’t hurt only the folks losing their homes through foreclosure:

Already, it’s apparently impossible to sell a foreclosure–and people who have bought foreclosed homes are starting to sweat, wondering if they’re going to get embroiled in a lawsuit. But what about short sales? Again, if a company doesn’t have the authority to foreclose, it doesn’t have the authority to authorize you to sell it for less than the value of the mortgage. Things seem cleaner with ordinary sales, but what if some other company comes out of the woodwork to claim that the note wasn’t properly registered, and you paid the wrong guy? Does the lien go back on the house? Who owes the money?

This is why people are worried that the title-insurance system will break down.

Who Suffers From the Foreclosure Mess? Just About Everyone, by Megan McArdle, The Atlantic, October 15, 2010

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