President Barack Obama

At the moment, the president is quickly discovering that for every foreign and domestic policy issue, there can be a political consequence. In the Middle East, he seeks to craft a policy fair to both sides, but that leads to attacks at home that he has abandoned Israel. He tries to act responsibly and reduce the federal budget deficit, but that looks like “selling out” to many who are in his Democratic base and still reeling from the recession.

Obama’s core political problem, however, results from failure to establish himself as a strong leader, one willing to fight aggressively for what’s best for the country rather than taking his scholarly, deliberate approach. What Americans want is not necessarily a president who is always right but someone who stands and fights for them. They want a gut feeling that the president is on their side, that he understands the struggles they face to keep or find jobs, and not to lose the home facing foreclosure.

This president’s decline certainly seems based much more on how people “feel” about their leader than his specific policies. He needs to get out of the White House to Ohio, Pennsylvania, Michigan, West Virginia and New Mexico. He needs to prove that he is not aloof and understands the challenges that millions of Americans, especially those in the heartland, face every day. And, when he’s on the grand stage in Washington, he must be the leader that Americans thought they were electing.

The president can’t make this comeback by himself. He needs a team that understands the pulse of the country. How could his advisers possibly think that unveiling a deficit-cutting plan that results in headlines about tax increases would be a wise political move? Instead, how about a headline saying that the president won’t allow working families to lose their homes to foreclosures and that he vows to continue the federal role in helping Americans purchase homes?

That would be leadership and smart politics.

Republicans shouldn’t start victory celebrations just yet. Election results in Jacksonville, Fla., this spring may have been overlooked in Washington but may be a good barometer for the national electorate.

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Florida’s largest city is in a conservative region that traditionally tilts heavily toward the GOP. Yet an African-American, Alvin Brown became the city’s first Black mayor by defeating a Tea Party candidate last May. Brown was the first Democrat in 20 years to sit in the Jacksonville mayor’s office.

One can only conclude that extremist positions promoted by the Tea Party were too outrageous for even Jacksonville’s conservative electorate.

The late Lee Atwater, architect of Republican victories in the 1980s, used to court the South assiduously as a GOP electoral base. But at the same time, he would caution privately that a backlash would occur if this powerful base were perceived as driving national policy for the Republican Party, which needed themes that could also win voters in other parts of the country.

Brown’s victory certainly raises questions of whether the GOP’s presidential candidates can run viable general election campaigns after aggressively courting the Tea Party during the party’s nomination process. The scenario seems to mirror presidential politics in the 1980s when Vice President Walter F. Mondale and Massachusetts Gov. Michael S. Dukakis were dismal general election candidates after wooing liberals to win the Democratic presidential nominations in 1984 and 1988, respectively.

In his mayoral campaign, Brown also won by displaying savvy political skills. These are traits that he surely learned as a close ally of Ronald H. Brown (no relation), the former secretary of commerce and Democratic National Committee chairman who led the party’s rebirth that resulted in Bill Clinton’s presidential victory in 1992. Alvin Brown was seen as more of a centrist than a liberal. He opposed tax increases and gained key financial support from leading Republican fundraisers. He built a broad coalition in Jacksonville, much as Ron Brown had done two decades ago for the Democratic Party.

Most important, Alvin Brown was able to gain support from Whites while aggressively energizing a base of African-Americans. In fact, one of the campaign’s strategies was to significantly increase the Black turnout, which it accomplished.

Brown also gave voters reasons to like him. He came across as energetic, aggressive and confident yet humble, hardworking and the type of person with values who was at ease joining anyone for a beer, a cup of coffee or a glass of wine.

As unusual as it may sound, perhaps the president of the United States could learn lessons about politics and personality from the new mayor of Jacksonville.

Craig Kirby is a Washington-based political consultant, who managed Alvin Brown’s mayoral campaign and was its chief strategist. This piece was original posted on America’s Wire, an independent, non-profit news service run by the Maynard Institute for Journalism Education.

Foreclosing on purpose seems to be a trend mortgage lenders don't like

More than ever, there are mixed messages out there for homeowners thinking about walking away from their mortgage obligations.

The Federal National Mortgage Association, better known as Fannie Mae, recently announced that it would penalize borrowers who purposely forego their home loan payments and go into default—even when they can afford them—because the value of their home has fallen below the amount they owe the bank. Fannie Mae, in an effort to discourage these so-called “strategic defaults,” said it would prevent borrowers who walked away from obtaining “a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.” Of course, the rules only apply to homeowners who have the capacity to pay and choose not to.

At the same time in California, state lawmakers are debating proposed legislation that would protect homeowners who strategically default from debt collectors. The California state Senate passed a bill earlier this month that would prevent lenders from seeking recourse for the amount of the borrower’s original home loan. If the borrower subsequently refinanced and took cash out of their equity in the home, however, the homeowner would be liable for what they borrowed above the original loan amount. The legislation is still pending and has yet to be reviewed by California’s State Assembly.

Though media reports have noted the rise of strategic defaults as the U.S. housing market attempts a recovery, the exact number of purposeful foreclosures are hard to come by. One Morgan Stanley analysis released in February estimated that these defaults accounted for about 12% of all foreclosures in the U.S.

Critics argue that California’s proposed law creates an incentive for homeowners to walk away. Here at Black Enterprise, we’ve advised that it’s almost never a good idea to engage in a strategic default. (See “Don’t Walk Away,” April 2010 issue) The repercussions are too steep.

John Simons is an editorial director and personal finance editor at Black Enterprise.

Millions of homes across the nation are worth less than their mortgages.

The nation may be in recovery mode but millions are still stuck in a financial quagmire. Over the past few years, far too many were careless in managing one of their most precious assets: their home.

Let’s step back a few years to when this nation was in the middle of the biggest housing boom in more than a half century. Just six years ago, the Federal Deposit Insurance Corp. reported that 15% of the nation’s metro areas experienced real estate price hikes of a staggering 72%. During that period, hundreds of thousands bought their slice of the American Dream as financial institutions made them affordable and accessible, offering subprime loans, zero-interest loans, zero-down payment arrangements, and low-interest adjustable rate mortgages, to get virtually anyone into a home. For legions of newly minted homeowners, gaining shelter wasn’t enough; with skyrocketing home values, many got caught up in irrational exuberance and converted their homes into ATMs, using home equity lines of credit to borrow a lifestyle. Instead of making repairs and enhancements to boost the value of their properties, they purchased expensive cars, took exotic vacations, and bought other luxury items they simply could not afford.

When the bubble finally burst, the caviar lifestyle disappeared for some and the faux safety net evaporated for others. The collapse of the housing market wiped out roughly $7 trillion in housing value from the third quarter of 2006 to the end of 2009, according to the Federal Reserve. This past March, USA Today reported that more than 11 million homes across the nation are worth less than their mortgages, while some borrowers with negative home equity may not realize any positive gains until as late as 2020. (According to a Pew Research Center survey in February 2009, 12% of African Americans said their mortgages were “underwater.”)

My advice to those waiting for the market to rebound to pre-2008 levels is quite simple: Wake up! We must realize that although property can and should serve as a valuable wealth-building tool, it also serves a practical purpose—your house is a home.

Black Enterprise has reported on scores of individuals who have opted not to take serious action to correct their finances or sell their homes due to an emotional attachment to their property or a false idea of what it’s worth. As a result, their families suffer through staggering costs as they remain caught in a debt trap. Shortcuts or quick fixes are as effective as repairing a leaky roof with duct tape. I urge you, with the help of a financial adviser, to make a clear-eyed evaluation of your finances and recalibrate your life.

For one, adjust your expectations: It’s highly unlikely that your home will ever again increase in value 5% to 10% every couple of years as it did during the past decade. (In February, home prices fell 0.9% on a seasonally adjusted basis, according to the Standard & Poor’s/Case-Shiller index. This was the fifth-straight monthly decline.) If you manage your affairs so you can make monthly mortgage payments with no more than 30% of after-tax income and you’re not drowning in debt, hold on to your property for the long haul and anticipate an increase in wealth as the home makes slow but steady gains in value.

If you face the possibility of default, seek a loan modification through such programs as Making Home Affordable. You may find, however, that selling your home is the only option to remain whole. There’s not a bit of shame in rightsizing—eliminating unmanageable debt, scaling back on nonessentials, boosting your savings, and preserving your credit. Done right, you’ll position yourself to purchase an affordable home, sock away emergency funds, and develop a comprehensive retirement plan. Lastly, don’t ever treat your property like a piggy bank again.

My parents’ generation believed when you bought a home, you didn’t try to time the real estate market. You scrimped and saved until eventually you owned the property outright. It may seem old school, but we all need to embrace the basics of homeownership.

Earl “Butch” Graves Jr. is the president and CEO of Black Enterprise.

Kirk Charles

Yesterday afternoon I was in an attorney’s office and a gentleman came in for a real estate consultation. Unfortunately he fell way behind on his mortgage and he had to face the fact that a short sale was his only option. He then asked me, “How will the short sale affect me when I try to buy another home?” Well, it ain’t pretty, so let’s see what we can do.

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

When bankers look at your credit report, the biggest concern is how timely are your payments, especially your mortgage payment. The issue with the short sale is, although you were not officially foreclosed upon, your credit report still says “foreclosure” in the mind of the banker. How could that possibly be when you haven’t been booted out of your home? It’s very simple. With most, if not all short sales, the homeowner is at least four months behind on his mortgage. Actually, if the homeowner wasn’t at least that far behind, the short sale would probably not be approved by the homeowner’s bank anyway—keeping in mind the bank must give its approval to consummate the short deal. So, in the banker’s mind, being four months behind on your mortgage is tantamount to being in foreclosure. I know, selling short is technically not the same as foreclosure, but it can be considered the same thing when a bank is deciding to lend you a couple of hundred thousand dollars.

So, back to the original question of how will a short sale affect any subsequent purchases? If on your credit report it shows something like “11/09-120″ regarding payments on your mortgage, the translation is “in November of 2009 you were 120 days late with your payments”. Red flags go up and your possibility of getting a home in the near future will probably go up in smoke. When I say the near future, let’s say approximately the next four years. Many lenders won’t touch you with a ten foot pole for at least that period of time after the foreclosure, if you’re looking to make another purchase (refinancing is a different issue). However, that period of time isn’t written in stone. The policy is lender specific, so it may be longer or shorter.

So, if you’re forced to sell short, speak to as many lenders as possible about their short sale policies regarding purchasing a home. It all depends on your situation. Let’s say you fell behind and you’re selling short because of the physical incapacitation of one of the breadwinners in your household, who could no longer work. However, when you go to purchase your next home, you could afford the purchase solely on the income of the one healthy breadwinner who is still working. Maybe an explanation like that would appease a lender when considering your mortgage application. In today’s economic climate it’s hard to predict from one day to the next what the new rules will be, so hang in there until the storm subsides.

The real deal is to not be in a position where you need a short sale. Obviously that’s easier said than done, but here are a few obvious tips to save some money so you can make those mortgage payments:

Cut back on some seemingly necessary expenses. My better half and I have cut way, way back on some things we thought were absolutely necessary a few years ago. As an example, we just found out we won’t bore each other if we don’t have cable TV.

Stop eating out. If you haven’t done so already, make your home your favorite restaurant. I love to wine and dine my wife, but I think she’s actually starting to appreciate culinary artistry, especially when we can eat like royalty for less than $10, and have left overs.

Turn the heat down or off when nobody is home. I live in the northeast and it’s about to get freezing cold really soon, which means my heating bill is about to get sky high. However, my better half and I are not home at least ten hours of the day during the week because of work. It makes no sense to keep the furniture warm.

Kirk Charles, a.k.a. The Mortgage Confidant, is a mortgage consultant and author of The Real Deal: How to Get a Mortgage During & After the Subprime Crisis

A common scam is the foreclosure “rescue” scheme. This usually often begins with a someone promising to pay off your delinquent mortgage, allowing you to stay in the home as a renter with the option to purchase the home back when your financial situation improves. But the so-called rescuer’s real objective is to cash out the equity in your home and disappear. Here are some of the characteristics of this scam:

-As part of the “rescue,” the homeowner will be required to deed the property to a new borrower who is often “investing” in a rental property but is really part of the scam.

-The proceeds of the sale pay off the delinquent loan and the new borrower removes all the equity in the house, never to be seen again.

-The distressed homeowner is now merely a renter in a home they no longer own, unaware that the new borrower is not making payments.

-When the new borrower defaults on the loan, the homeowner is evicted from the home — they have lost the house and all the equity in it.

What are some of the signs of these and other foreclosure scams? They are the same for most schemes to con you out of your money:

-The terms of the deal are complicated and difficult to understand, but you are pressured to trust in the expertise and honorable intentions of your “rescuer” and go along with it anyway.

-You are asked to sign blank documents or documents with incomplete or false information.

-Your rescuer plays on your feelings of victimization, or desperate need for a solution, by harping on the unfairness of your situation. They may even appeal to you based on racial solidarity (They’re just trying to help “our people”) or religious grounds (For example, they want to be “a blessing” to their fellow Christians).

-The rescue is unsolicited, either by mail, e-mail or phone, or a direct approach from a stranger. In other words, you didn’t reach out to them– they found you.

Once again, if it sounds too good to be true, it usually is. The first people you should contact when you think you are in danger of defaulting on your mortgage is your lender. The biggest mistake homeowners make is ducking the lender, as opposed to informing them of potential problems immediately as they arise, to try to work out a solution that will help them keep their homes and maintain their mortgage commitment. Also, reach out to organizations such as NeighborWorks America, which offers foreclosure solutions and counselors for homeowners who get in trouble with their mortgage.

Finally, to learn more about other types of foreclosure scams, go check out the following links at FreddieMac.com and AllForeclosure.com.

A record number of homes are headed for foreclosure, as many as 1.5 million by the end of this year, thanks largely to the subprime mortgage mess. While this is a terrible set of circumstances for the families living in these homes, as well as the economy as a whole, it has put would-be buyers in the driver’s seat. However, this is true for all homes, not just those in foreclosure. There is already a glut of newly-built homes as well as existing homes, with owners offering all kinds of incentives to lure potential buyers. Depending on the market, it is possible to get a great deal on a home that is not in foreclosure, which for most people (assuming you have an income, good credit, and enough cash for a healthy down payment) is far easier, and far less risky, than pursuing a foreclosed property.

That said, if you really want to test the foreclosure market, there are three basic ways to go, each with its own set of challenges and risks.

You can buy property in a pre-foreclosure stage—the time between when the current owner receives a notice of default from their lender and the day the lender puts the property up for auction. This period may offer the best bargains, but it is also the most difficult, because you have to try to cut a deal directly with the owner of the house, who may not even know that the house has been placed on a foreclosure listing. Also, assuming you and the owner can come to terms, you have to complete the transaction quickly, with only a month, depending on the state, before the bank puts the home up for auction. You can go to RealtyTrac.com or Foreclosures.com for information on the foreclosure laws in each state. Unless you are an experienced real estate investor, trying to buy a pre-foreclosed property is an extremely difficult way to go.

However, next to buying a home at auction, buying a home pre-foreclosure may seem like a piece of cake. The auctioning of a home is the next stage of foreclosure. If you want to get in this game, you have to ante up cold hard cash—you can’t finance the purchase of auctioned properties. Plus, you have to buy the house sight unseen, as is—without title insurance. That means if there is a tax lien on the property you bought, you have to pay it off on top of the cost of the property itself. This is only for those with a stomach for risk and lotsof cold hard cash. Of course, if you have that kind of money, you could just buy one of the many non-foreclosed homes on the market.

Bank-owned properties—foreclosed properties that are not auctioned off and become owned by the bank (also known as REO or real estate-owned properties)—will be put it up for sale through a real estate broker. This is the easiest option for those seeking to buy a foreclosed property, but you may not get as good a price as you might with the other two options, as the bank is going to do its best to get a sale price at or near market value for the property. However, the sheer number of foreclosed properties on the market, with thousands more to follow, has put banks under pressure to move these properties, which could give you some leverage in negotiations. Tap the REO Network’s database to find REO brokers in your area.