A Suggestion On How The Government Could Help The Housing Industry

The housing glut has the entire economy in handcuffs!

Here’s a great approach to get the folks who “deserve” the American Dream a chance!  This proposal from Blair Rugh at Trinovus is a government stimulus plan that will work! 

A Suggestion On How The Government Could Help The Housing Industry

by Blair Rugh

I have a suggestion on how government could help the housing industry. I am reasonably confident that neither President Obama, his economic advisors nor members of Congress read this weekly newsletter. But when you write something that has a reasonable circulation you never know where it will wind up, so here goes.

Three facts we know for sure. (1) The U.S. housing market is in the dumper. Some areas are worse than others, but no area has been unaffected. (2) The volume of foreclosures has harmed low- and middle-income borrowers, particularly African- Americans and Hispanics disproportionately. Many of the people foreclosed upon had no significant asset other than their home. (3) The provisions of the Dodd Frank Act relative to underwriting requirements and loans that can be sold in the secondary market, market conditions and enhanced regulator scrutiny and criticism of all lending will make it much more difficult for future borrowers to get a loan. For good, bad or indifferent the actions of the government and the regulators make it significantly more difficult for the housing industry to recover. Until it does, it will be difficult for the economy to recover.

There are a lot of qualified people who still have a job and can afford a reasonable payment on a home but cannot or will not be able to purchase one because they do not have the down payment. In today’s world, for a working class family, it is virtually impossible to save enough for a reasonable down payment. The husband and/or the wife may both have stable jobs and a stable income but saving the $20,000 or $30,000 required to make a down payment that will qualify them for a loan that they can afford is almost out of sight. Today’s housing prices are as low as they have been in the last 10 or 15 years. If we can just get qualified people into the system, it would be a great advantage for them and if we can deplete the nation’s housing inventory at the same time it would be a great boon to an economic recovery.

Let’s lend qualified borrowers a reasonable down payment on a home purchase, say a maximum of $20,000. Were it mine to do, I would make it available only to persons who do not presently own a home. The goal is to deplete the existing housing inventory, which is not accomplished if someone who owns a home is just moving up. Second, I would limit it to homes that were built before a specified date, say June of this year. The purpose of my plan is not to spur new construction directly. That will happen if the existing inventory of vacant housing is depleted. I would not have the federal government do it directly as I am not sure at this point if the federal government can do anything efficiently. I would have the federal government provide block grants to the various states depending on each state’s inventory of vacant homes.

I would grant the homebuyer a loan that would be secured by a junior mortgage on the home. The mortgage would not bear interest in the initial years and then after a reasonable period of time would require interest at some reduced rate. The loan would be payable upon the sale or transfer of the property or at some reasonable time in the future, say 10 years after it was granted. That should provide the homebuyer sufficient time for the housing market to recover its value and to reduce the first mortgage so that refinancing is achievable.

If 100,000 people qualified for the program, the government outlay at the maximum amount of $20,000 per loan would be $2 billion. While that is a lot of money to anyone I know, the federal government seems to treat it as you and I treat pocket change. And more to the point, it is not an expense of that amount as if properly handled the bulk of the money will be eventually repaid. What I suggest has to be refined and better thought out, but I think it is a viable solution to the housing mess. Moreover, it will put qualified people into housing that they can afford. I am generally pretty conservative and against any government assistance programs. I don’t like social security, Medicare, food stamps or anything similar to those programs. I think government should provide everyone an equal opportunity and then let the chips fall where they may. In this instance, however, the government created the problem so I think it takes a government program to hasten the recovery. The purpose of the program is not to provide relief to anyone but to rescue the housing industry. If it has a collateral result of helping people that is even better. I know you can improve on what I suggest. Add your improvements, and if you think it is a good idea make your representative or senator aware of it.

National Federation of Independent Business (NFIB)

I consider myself an entrepreneur.  My business, Integra Business Systems, was incorporated in March, 1988.  Our slogan is “advancing the paperless office.”  We develop enterprise content management (ECM) software also known as document imaging, or the electronic file cabinet.  Our customers include financial institutions and the financial services industry.  Our customers eliminate paper by digitizing documents by scanning paper or capture and archive “born digital” documents. Born digital documents include Adobe Acrobat (PDF) documents, Word, Excel, Google Docs, email, etc… We have 30 employees and growing.  We are a private, closely held, self-funded small business.

I believe the freedom and the success small business owners are blessed with and enjoy here in the USA, is based on the entrepreneurial spirit; individuals driven by God, family and freedom, the foundation America.  I believe my business and thousands of small businesses like Integra, make up the heart and soul of our great country.

I also believe you get out, what you put into something.  I discovered the National Federation of Independent Business (NFIB) several years ago while I was stumbling through some of our Human Resource (HR) issues.  The NFIB Employee Handbook available to members, opened the door to our long-term association.

The NFIB became a reliable source of content related to the needs of a small business in areas to include HR, finances, sales and marketing, legal and regulatory issues.  Like all small businesses, all these areas are costly and difficult to navigate alone.  While I cannot advocate the NFIB as a replacement for professional consultation and their services, the NFIB serves as an affordable surrogate source and Garmin-like resource for small business.

I realize this sounds like a “paid ” endorsement.  The only shameless promotion here is my own.  In fact, any involvement you have or partake upon with the NFIB is entirely up to you.  Like I said, “You get out, what you put into something.”

NFIB President Dan Danner

Towards that end I want to share with you what I think this is the best and most timely message to the public with regard to understanding the plight of small business and the economy that anyone could have delivered to this president and the rest of the politico in DC.

There is so much smoke and mirrors coming from the media and the Obama administration with regard to small business, I just wish more media outlets would have published this message (follow the link) from Dan Danner, NFIB president.

Note:  Please help us get the good word out.  Share us on your favorite social media site and Stumble Upon.  Thanks.

While Big Government Talks the Talk – Small Business “Walks the Walk”

Follow us, Mr. President.  Follow our sisters and brothers who make up the heart and soul of America.  We “walk the walk.”  Our families,  friends, neighbors and millions of Americans walk in our shoes, share our successes and failures.

We truly live the American Dream, Mr. President and the miracle of it all is we spend many sleepless nights living it and we dream still.

Like our brothers and sisters in small business across the country, we dream someday, we can “talk the talk” and someone in big government will listen.

We are a software development company, a small business founded over 25 years ago.  We currently employs over 35 full time employees (FTEs). Our slogan is “advancing the paperless office.”  Our company fits the mold with regard to President Obama’s State of the Union address when he talks about “innovation” and ”poised for progress.”

Are we wrong or was the President’s  entire speech crafted from the pages of the book, The World is Flat, by Thomas Friedman?   In Friedman’s book there are many enlightening passages with reference to America’s need for competitiveness with India, China and other progressive nation’s.  The book leaves you enlightened with with heightened anxiety.  What to do?  Move to Switzerland?

In an earlier post on this Blog, India and Switzerland are mentioned… “Other countries (our competition) are offering significant economic incentives and tax breaks to attract IT companies to do business in their countries, provinces, cities… in the case of Switzerland we’re talking “cantons”, like Schaffhausen, a canton in northern Switzerland who offer tax breaks to attract businesses and perks like an executive hotel near the Zürich airport.  Oh and by the way, the Swiss have figured out how to provide a National Healthcare plan that works.”

Generally speaking, we can hardly agree with the concept of one nation competing against another as opposed to one company competing against another.  Further, government intervention can only prevent “free enterprise” as opposed to enable it.  So in what context the president using these words?

As an example, if you do business with community banks, consider community banks to fall under the category of small business.  If we are going to have a TARP program, why stop with too large to fail?  Give community banks a chance to recover from their mistakes.  Better yet, forget TARP.  Let the big banks fail and the community banks can compete for the large bank customers.  Sure this is an oversimplification, but the facts are many community bank customers have been taken over by the FDIC in the last 12 months, more will follow.  Aside from the fact communities are disrupted, especially when 30-40 bank employees lose their jobs, their suppliers and taxpayers are left holding the bag.  Why does government get to choose who wins and who loses?

The president said, “We are a nation that says, ‘I might not have a lot of money, but I have this great idea for a new company.”   We have a great idea.  We have been building upon it for over 25 years.  Our software products are designed to eliminate paper.   Go green.

Obama said, “We are poised for progress. Two years after the worst recession most of us have ever known…”  We have managed to hold on to our entire staff of FTE’s throughout this recession.  There were no pay cuts here, no cut in benefits.  There were no raises either and we had to renegotiate our health care insurance to include higher deductibles.  That is and has been our investment towards the future.  We were able to retain and build with our people, intellectual property and now we are poised for growth.

You might think the portion of the stimulus, $19B plus, set aside to help health care providers purchase Electronic Medical Records (EMR) would help us.  Why does the government have to create a handout?  If it makes sense, why not do it?  We have a medical management company that said this about our software…

“The purchase of  Enterprise Content Management ECM software has allowed us to no longer store the voluminous amounts of paper that is indigenous to a medical practice. We estimate that the use of the ECM system has allowed us to store and instantly retrieve in excess of 1.5 million page equivalents. In the past, we needed 1 full-time FTE plus ~1000 sq. ft. of filing/storage space plus the necessary supplies to create tens of thousands of file charts, etc. Additionally, there were immeasurable man-hours in pulling charts/files, looking through them for the applicable data and then copying the information needed.”  References provided on request.

Unfortunately the fees to become certified as a vendor to work with the HIT program remain too costly, restricted to two certification companies which is all about politics and it is a bureaucratic nightmare to the extent only consultants are making money thus far.

The American Recovery and Reinvestment Act (ARRA) has set aside nearly $20 billion in incentive payments for physicians who adopt EHR technology over the next five years. In order to qualify for the up to $44,000 in incentives, physicians must be using “certified EHR technology” in a “meaningful manner.”  Excerpt from the “The Happy Hospitalist” blog.

Money and resources better spent, with greater certainty, lead us to “stick to our knitting,” which are financial institutions and financial services companies.

Government spending is largely hit or miss.  Tax relief, on the other hand is all about performance and performance would fuel the economy, not push some businesses or entities forward and leave others behind.

President Obama said in his speech, “In America, innovation doesn’t just change our lives. It’s how we make a living. Our free enterprise system is what drives innovation.”  

He needs to set down Friedman’s book and pick up Let My People Go Surfing,  a book full of inspiration with an explanation, written by Yvon Chouinard, founder and owner of Patagonia, Inc., maker of adventure equipment and clothing.   He exudes the true principles of entrepreneurship.

To the extent many entrepreneurs do, we “walk the walk” and we “talk the talk.”

Made in the USA

Made in the USA

Monday, October 19, 2009 at 9:16pm

“Made in the USA” isn’t about the Big 3 automakers…
It’s time to put the brakes on government spending. The road to recovery lies with the success of small businesses, not with behemoth car companies and big labor. If we were going to bailout anyone, we should have bailed out the car dealerships and auto supply companies to allow them to remarket, retool and invest in new technologies. We should be growing our tax base, which is only going to happen if we fuel the small business private sector. Speaking of which, why are we not doing more to grow and keep promising small business technology companies and their technology jobs in the USA, where our best talent and our best jobs can remain right here at home?

“You will find men who want to be carried on the shoulders of others, who think that the world owes them a living. They don’t seem to see that we must all lift together and pull together.”    Henry Ford

We have Bill Gates and Microsoft, Larry Ellison and Oracle; and Eric Schmidt and Google, not to mention a plethora of phenomenal technology and software companies that started from nothing and today generate thousands upon thousands of high paying private sector jobs and tax revenues, all “Made in the USA.”

What’s more, most technology companies, in particular software companies, do little to harm our ecology (true green); they do not tax our ports, our roads, our bridges or our rail. This reduces our carbon footprint, while not adding to the tremendous and costly burden on the seemingly never ending and costly construction of our roads and our beleaguered transportation infrastructure.

Competition is increasing dramatically from foreign countries who wish to attract our talent, both foreign and domestic grads educated here in the USA, many getting their higher education with the help of US taxpayer dollars. The number of “propeller heads”, a.k.a., the savvy entrepreneurs and highly skilled workers “Made in the USA”, are leaving for a more favorable business climate or jobs overseas.

Our foreign competitors are offering much lower tax rates and hundreds of thousands of dollars in incentives to technology business startups and to their highly paid – highly skilled employees. They are advertising a better quality of life, improved infrastructure and a lower cost of living. Our foreign competitors recognize what we increasingly take for granted, which is the huge tax and revenue potential from small business startups, in particular in the technology field; with their disproportionally high numbers and high salaries as it pertains to job creation. This is coupled with the minimal impact on their country’s costly transportation  infrastructure.

The now and next generation of Bill Gates’, Larry Emerson’s and Eric Schmidt’s may find our politics too ambiguous, too costly and too unimaginative to breed success here in the USA. There are hundreds of thousands of small businesses and entrepreneurs right now who are losing the battle against a poor economy accentuated by high taxes and ever increasing regulation. There are hundreds of thousands of entrepreneurial ventures not even born yet that will never pass the incubation period.

Where should we, the United States of America, concentrate our efforts to keep our existing technology gurus and attract the next generation of “byte heads?” We need to provide education and programs that offer immediate and future tax relief to small businesses and their employees, like a payroll tax holiday. To do this we need to elect government representatives who want less government, who do less for Wall Street, who care less about big government and big union.

We need tech savvy, forward thinking, feet on the ground, “been there, done that” politicians who have missed a few paychecks like the rest of us and who want to do more for small businesses and the working class. Get started by offering existing small businesses and their employees, tax relief with a payroll tax holiday of 6 months or more. Offer new business start-ups, especially technology and software businesses who are Made in the USA and who are 1) less impactful on our transportation infrastructure; 2) provide green technologies; and 3) provide the high end wage earners, which is our future tax base, lower taxes and less government to stay and grow their businesses here in the USA.

“What’s right about America is that although we have a mess of problems, we have great capacity – intellect and resources – to do some thing about them.”
Henry Ford

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