Don't Mess with the Texas Housing Market

So here's something in Rick Perry's record that'll give our liberal friends cognitive dissonance in coming days. In 1998, following the Savings & Loan debacle, Texas enacted a law­—under none other than George Dubya Bush—limiting mortgage borrowing to 80 percent of the appraised value of a home. My awesome powers of deduction tell me this means that you can't buy a house in Texas without putting 20 percent down. This shielded the Lone Star State somewhat from a housing bubble.

The multi-million dollar question for liberals then is this: Should they hold the tough housing regulations that prevented the free market from running amuck in Perry's Texas as an example for the rest of the country? Or should they condemn Perry for continuing a policy that deprived poor people of homes in direct contradiction to Barney Frank's wishes? Frank, as H&R readers will recall, was for more affordable housing for the poor before he was against it.

Incidentally, for more on how to really fix America's housing crisis and prevent future bubbles, check out Reason Foundation's Anthony Randazzo's excellent study. It recommended getting rid of the mortgage interest deduction because it disproportionately helps useless rich folks even before Warren Buffett started feeling coddled by the oppressively low taxes he has to pay.

Update: Some readers note that they have been able to buy homes in Texas without putting 20 percent down. Here is what the WSJ editorial linked above noted: "…also cited a rule in place since 1998 in the backwash of the S&L debacle that limits mortgage borrowing to 80% of the appraised value of a home. Like a minimum down payment, this reduces overleveraging and means Texas wasn't hurt as badly by the housing crash as other states."

I invite readers to clarify what the actual regulation is if this is incorrect.

Comments

[Terr]

I put 10% down on my house here in Tx. I didn't want to spend more of my savings at one time so I just put down extra toward the principal each payment.

[Pat L]

Going to be a lot of crying Raisinites if George W Bush Jr. (Perry) gets elected. I love it!

[-]

It's spelled Raisinets.
http://www.raisinets.com/

[Moviegoer]

Goes along well with the goobers here.

[ranting ranter]

Dubya actually did and said a lot of cool things as governor.

Sigh...

[Bam!]

Did he shoot his best friend in the face and then made him apologize?

[Auric Demonocles]

That actually is a pretty cool thing. Not just anyone can make someone apologize for being shot.

[Bob]

I put 3% down on my home here in Texas. The law is that you're second mortgage cannot exceed 80% of your home equity.

[Joe M]

That can't be right. I bought a house four years ago and there was no minimum required. I remember because someone told me about the PMI for putting down less than 20%.

[Tim]

I live in my car.

[Abersouth]

At least you have a car. Can I bum a ride?

[Monty Python]

"We used to dream o' livin' in a cardboard box"

[Sudden]

A true libertarian would live in his mother's basement; or alternatively, an Uncle Scrooge style moneybin that he swims in while wearing a monocle made from the sculpted pelvic bones of Cambodian slaves. There is no in between allowed.

[heller]

In fact, they have to do both at the same time.

[Joshua Corning]

In Tim's defense there are hard core libertarians who don't even get along with their mom.

"No cookies and chocolate milk!!!"

"this is tyranny!!! I am out!!"

[Tim]

I don't do any of those things, but I'm not a "true" libertarian.

[Chaz Reinhold]

MA!! Meatloaf!!

[ld]

Buying my first house still and I'm super happy that I can put very low amounts of money down. Going for 3-8% or so. While there could be risk, it's a house my wife can afford (she's in a fairly secure field - nursing) but that I could pay off alone with the housing alotment of my current loans and still be better off then renting.

There is basically no risk unless both of us have tragic debilitating accidents. At which case, 20% down, or even 50% down, we'd still probably be screwed.

Low interest, low money down housing loans have their place. There are bad risks for it, but my wife and I are doubtlessly not alone in extremely low risk

[curiousgeorge]

If you put 50% down you would only be screwed in the sense that you might have to sell your home even though you don't want to. However, you wouldn't be underwater and thus would have a much easier time getting out of the situation.

[asdf]

Do you have kids? Why would ever need a house, it's a huge waste of money. Just rent and invest the excess into things that actually make money instead of coasting along inflation like housing.

[Drax the Destroyer]

I invest my excess cash flow in hookers and blow.

[Restoras]

Do you have a newsletter?

[Restoras]

Do you publish a newsletter?

[Zeb]

For me, at least, owning a house (and more importantly land) is what I want out of life. Buying a house is not necessarily a purely financial decision. And, especially with a low down payment, the right house could well cost less than renting a similar house. And unless you want to live in the city center somewhere, apartments suck.

[shikhadalmia]

What readers Joe M, Bob and Terr report from their own experience is interesting. Here is the relevant quote from the WSJ linked in the piece: "[a] rule in place since 1998 in the backwash of the S&L debacle that limits mortgage borrowing to 80% of the appraised value of a home. Like a minimum down payment, this reduces overleveraging and means Texas wasn't hurt as badly by the housing crash as other states." Is this false?If so, I look forward to hearing what the actual regulation is.

[CrackertyAssCracker]

I bought a house with 5% down in 1999 (in Texas) Maybe I was breaking the law, but i doubt it.I did have to pay PMI (which basically amounted to higher interest) until I got to 20% equity and re-fi'd.

[Spartacus]

Sounds like an invitation to agree on a selling price, and *then* get an "appraisal".

[sevo]

"I look forward to hearing what the actual regulation is."

Hey:
"Richard Fisher, the president of the Federal Reserve Bank of Dallas, dropped by our offices this week..."
According to the article, he's the guy that made the claim; why not ask him?

[iirc..]

I think the mortgage is limited to 80%. That's a fact. But you can get additional loans for the rest if you have the credit. You either need insurance or the seller needs to kick in the insurance with the house.

[johnl]

I forget the exact rule but I think it dealt only with seconds and possibly some refis, not firsts for a purchase. I'll try to check.

[johnl]

Please see the following story, which states that the restriction related to loans that cash out equity, rather than purchase loans. http://www.cnbc.com/id/36134970//

[Schempf]

There is a homestead law in TX that limits cash out refinances (1st or 2nd lien) to 80% of a homes value. It was actually relaxed under GWB.

[Dr. K]

This is correct. You can easily purchase real estate with less than 20% down in TX (I, like many others here, have done so). You can do it with both single-loan and two-loan deals, pretty much like anywhere else in the US.

What you can not do is a cash-out refinance to more than 80%. And the law used to be that you could not do a cash-out refinance AT ALL.

So there's some limitation on leverage, but frankly not very muchone. Purchasers can still get in over their heads quite easily - and it was purchasers, not refinancers, that blew up CA real estate.

[Ag01]

Schempf and Dr K are correct. The 80% limit is only on cash out refinances.

[Barney Frank]

I invite readers to clarify what the actual regulation is

Don't look at me.

[Tman]

I have office mates up in Canada who I've talked to about the housing market crash here in the states and all of them to a man were completely baffled that not only were people getting houses for 3% down (or less in some ridiculous cases), but we had a stimulus program used to PAY PEOPLE TO BUY HOUSES disguised as "tax credits". Canadians don't have a housing market problem and -surprise!- they have a 20% requirement for money down.

And people wonder why the US market is still a disaster.

I'm interested to find out more about Texas as Perry gets further vetted. I still won't vote for him because of the Willingham case, but it will be fun to watch liberals go crazy crazier about him.

[rts]

Canuck here.

The 20% isn't a requirement, but if you can't make 20% then you have to pay for extra insurance with CMHC:

http://en.wikipedia.org/wiki/C.....orporation

[Shmenge]

That's not entirely true.

In Canada, you can get a house with as little as 5% down, depending on the lender. The problem is, you also have to pay mortgage insurance, the amount depending on how much your down payment is, but usually adds up to several thousands of dollars over the life of the mortgage.

If you put 20% or more down, however, you do not have to pay the insurance cost.

[Tman]

I stand corrected. Never trust Canadians, is the lesson here apparently.

FOOL ME ONCE!!!

So the reason the Canadian mortgage market isn't fucked right now is because the banks didn't lend to people for under 20% unless they got PMI that would cover their losses.

Unlike in the US, where not only did we force/encourage banks to make loans to people who had bad credit for less than 5% down for homes they could never normally afford based on income, but then we bought all the bad mortgages through FM&FM; to "clear out the market". And then we spent $7 billion of Stimulus II ELECTRIC BOOGALOO funds for the home buyer tax credit to "encourage" the market to turn around.

And the market is still terrible.

The Government is here to help.

[ee cummings]

"Stimulus II ELECTRIC BOOGALOO"

you are a racist with bad caps lock etiquette

[sevo]

"Canadians don't have a housing market problem and -surprise!- they have a 20% requirement for money down."

This remains a mystery to me. Why should there be *any* government requirement?
If a lender is dumb enough to lend to someone with no money and no chance of getting it back, why should anyone other than the stockholders gripe? And if he's smart enough to loan to those with no money and figures he'll get it back, why, he might just start the largest bank in the US:
"It was a new bank for the hardworking immigrants other banks would not serve. He It was a new bank for the hardworking immigrants other banks would not serve. He offered those ignored customers savings accounts and loans, judging them not by how much money they already had, but by their character."
http://en.wikipedia.org/wiki/Amadeo_Giannini
Bankers are *supposed* to make judgments.

[Tony]

And bankers made the judgment that, since they were allowed to be investment houses, they'd make a bunch of short-term profit on a huge bubble with no regard to systemic risk. Everyone was affected so everyone has a right to be pissed off that their behavior wasn't better policed.

[John-David]

And nobody but the people who were shareholders of the bank would have had the right to get pissed, except Big Government was there to bail the bank out.

[unhyphenatedconservative]

What about folks like me that see my housing value go down when the idjits default and get foreclosed on, even though I did the vanilla 30 year fixed and make my payments on time. This is the problem with libertarianism in that it views people as islands and ignores negative externalities. THat said, we also need to look at unintended consequences and keep regs as limited and narrowly focused as possible,

[Amakudari]

What about folks like me that see my housing value go down when the idjits default and get foreclosed on, even though I did the vanilla 30 year fixed and make my payments on time.

Uh, where to start?

1. You're not entitled to home price appreciation.
2. All investments entail risk. If you want a guaranteed return you should purchase an insured annuity.
3. House prices would never have shot up as much as they did without such stupid lending practices. Your house's long-term value is unaffected.
4. The negative effects of those stupid lending practices were exacerbated by government, not regulated by it.
5. You get a subsidy on mortgage interest anyway.
6. And the rate determining that interest is further subsidized by a government guarantee.

[Joshua Corning]

3. House prices would never have shot up as much as they did without such stupid lending practices.

Not true.

the stupid lending practices was nation wide yet the housing bubble (price going up) was regional. Also there have been regional housing bubbles in the past most of not all of them were caused by regional land use regulations constraining the supply.

The two phenomena I am sure feed on each other but they have different root causes and different effects.

[Amakudari]

No, that's not true. I say this as someone who worked closely with such loans at a large, multinational bank. Regional housing bubbles were heavily correlated with the regional frequency of subprime lending, particularly high LTV ratios and payment options. The root cause of home price appreciation was the massive increase in demand, that is, people who couldn't possibly afford a home now having that bid underwritten by a major bank.

The major originators were all regional: Golden West (through Wachovia), WaMu and IndyMac were all in California, with some operations in Florida. BankUnited was in Florida. Countrywide was the most national, but even for them they focused on Southern California and Florida. Also, they were all thrifts, which meant their borrowing capacity related highly to the conditions of their local FHLB.

Tolerance of those practices was nationwide, but in terms of the actual capacity to underwrite those loans, that's more of a long-term investment, and it began in California.

Anyway, here's a map of payment option mortgage origination. Loans with minimum payment options were attractive to banks when they figured out that, without lending any additional money (no change in liabilities except for credit reserves... which should be minimal, right?), they would book a profit as the customer's balance grew (loan balance, an asset, went up). For some thrifts around half of profit was from this deferred interest.

Those options loans also typically featured a fixed grace period at a miniscule interest rate (as low as what you'd pay on a 1% 30-year fixed for several years), so combined with the option they shielded borrowers from needing to make a substantial payment for several years. The point was really for banks to be able to leverage an investment in the real estate of hot localities: borrower gets a home, we originate and collect a fee, then we securitize and sell it off for mortgage servicing rights, borrower sells, rinse and repeat.

Another reason it was regional was because you had to sell bankers and customers on the idea that home price appreciation was perpetual. That is, even if you couldn't afford the loan, the borrower had to be able to flip the property. And home prices already had to be so unaffordable that such desperation existed. Again, you could sell that idea a lot easier in the Bay Area than you could in the South.

And here's a foreclosure heat map.

[Lost_In_Translation]

The self-limiting factor would have been when banks cash to loan ratio entered the red zone. Then banks would have had to raise rates on new loans or cut back on them. The fact that they were able to sell the loan to someone who then securitized it (and split into thousands of unrecognizable pieces) is what kept the banks capitalized to continue lending and collecting fees. Essentially one of the biggest brakes to the system (the accounting requirements for cash to loans) were removed.

[LarryA]

What about folks like me that see my housing value go down when the idjits default and get foreclosed on, even though I did the vanilla 30 year fixed and make my payments on time.

Your home has the same real value today as it did last year; it's the place where you and your family live. As my wife says about my guns, "Nothing you have is an investment until you're ready to sell it for a profit."

Particularly for houses, if the government keeps the monetary value of your home artificially high you have two problems:
1. If your house's appraised value is higher than anyone can afford to pay, then its actual value is $0.00. You can't sell it.
2. If your house's value is high so are the values of all the other houses. It doesn't matter how much profit you make selling it if you must turn around and spend that profit to purchase an equivalent place for your family to live.

[Barak A. Pearlmutter]

If deposits are insured by the govt, then the govt is on the hook for that if the bank goes seriously bust. So even if there is no bailout, the taxpayer can end up footing the bill for a really big housing bubble. I'm not sure how to solve this; maybe only insure 95% of deposits, to give depositors an incentive to check the bank's finances, and therefore give the bank an incentive (in order to attract deposits) to keep its house in order?

[Amakudari]

Deposits were only insured to $100,000 (which was changed to $250,000 during the crisis) per account ownership category. So you could have any account at bank A in your name, another at bank B in your name, and another at bank B as a joint spousal account, etc. and be fine. That may sound permissive -- and it is -- but in practical terms few people go that far. The money center bank I worked at was unable to verify the FDIC insurance on half of its deposits. That, by the way, is one of the big reasons the FDIC didn't want a huge bank to fail: not only would they have to blow up the Deposit Insurance Fund, but they'd also have so many people lose a ton of their savings that it could trigger other bank runs.

The big problem with FDIC insurance IMO is that for problem institutions it amounts to a significant subsidy.

[JD the elder]

Amakudari, you raise a good point that's not mentioned often enough. The FDIC works, most of the time, but if you actually look at the numbers, it's hugely "oversubscribed", having nothing like the ability to cover most of its liabilities at once. All it would take is a couple large bank failures at once to expose the weakness of the FDIC. It has various emergency powers, but even those don't go too far.

BTW, I think it was in one of Harry Browne's books that he mentioned discussing the FDIC with a lawyer, who told him that if he ran a private insurance firm the way the FDIC is run, he could do prison time for fraud...

[Amakudari]

Very true. This is why they resorted to "emergency measures to stabilize the financial markets;" they had nowhere near the money necessary to actually cover the deposits that would be lost. Covering a Citi, Wachovia or BofA failure alone was impossible. Heck, the WaMu failure and its aftermath almost broke the Fund. Hence they look for other ways to deal with large, insolvent institutions.

And in that discomforting sense the DIF is perpetually solvent; when it runs out of real reserves it can always call on Congress to tap the national credit card.

[Fist of Etiquette]

Governor Bush didn't care about low income home buyers.

But more importantly, Randazoo?

[rts]

Canuck here:

20% down isn't a requirement, but any less and you're required to get insurance from CMHC (Canadian Mortage and Housing Corporation). I'd link you to the Wikipedia article but the squirrels flag it as spam.

[rts]

This was in reply to TMan... lousy squirrels.

[Shmenge]

Great minds think alike!

[Fist of Etiquette]

It's always the squirrels' fault, isn't it, rts?

[Tulpa]

Not very fair to pick on the squirrels when they can't defend themselves.

[Joe M]

I had the same problem. I think the squirrels distrust a link with the words home equity loans, which is actually a pretty suspect link on average.

[SIV]

Cash out re-fi your mortgage

Skwerls r cool wit dat

[SIV]

Cialis Oxycodone cheap from Canada no prescription required

[Joe M]

It looks like the 80% borrowing limit is for home equity loans.

[Joe M]

It looks like the borrowing is only for home equity loans. Check here.

[carr1on]

No minimum down for first mortgages here in Texas. I bought my house with a FHA loan with 2.5% down.

For Home Equity laws in Texas, it is 80% CLTV, which means cumulative loan-to-value. This means that the first mortgage and home equity loan (2nd mortgage) can't exceed 80% total value of the home.

[cynical]

OT, but I wanted to scoop Aqua Buddha before tomorrow's morning links.

ATF promotes Fast and Furious supervisors.

According to the article, "McMahon [who was the ATF's deputy director of operations in the West where the illegal trafficking program was focused] was promoted Sunday to deputy assistant director of the ATF's Office of Professional Responsibility and Security Operations ? the division that investigates misconduct by ATF employees and other problems."

I think it's incredibly disrespectful to us when a cover-up/whistleblower punishment operation becomes this transparent. So, since no one has answered before, is there any technical reason that the ATF's leaders could not be the subject of a RICO investigation, assuming that the federal laws broken are on the list?

[Amakudari]

Is there any technical reason that the ATF's leaders could not be the subject of a RICO investigation, assuming that the federal laws broken are on the list?

They're government employees. Technically.

[some math]

If the reg is no more than 80% of the appraised value, and the purchase price is less than the appraised value, the down payment would then be less than 20%. You get yourself an MAI (made as instructed) appraiser and get it appraised in such a way that you can afford the down payment.

[Sudden]

Master of the Appraisal Institute? No need, and besides, they're generally the most credible among the profession. A simple licensed appraiser would be able to do that for you.

However, a few things to note, the HVCC required that the vast majority of appraisals ordered for mortgage lending purposes have to be originated by the lending bank, and cannot be contracted by the broker.

[some math]

If the reg is no more than 80% of the appraised value, and the purchase price is less than the appraised value, the down payment would then be less than 20%. You get yourself an MAI (made as instructed) appraiser and get it appraised in such a way that you can afford the down payment.

[Tony]

The multi-million dollar question for liberals then is this: Should they hold the tough housing regulations that prevented the free market from running amuck in Perry's Texas as an example for the rest of the country? Or should they condemn Perry for continuing a policy that deprived poor people of homes in direct contradiction to Barney Frank's wishes?

Since we can have housing programs and regulations on the housing market at the same time, what's the problem?

If you want to blame the housing bubble on government homeowner encouragement policies, you'd be mostly wrong, but you still wouldn't be able to put it all on Dems. How soon we forget how the GOP hasn't always been a radical antigovernment protest movement. They once were the party of the ownership society. Perry used to be a state campaign chair for Al Gore.

So if you want to play who gets the gold star, I don't give a shit, because Obama and liberal bashing, which is all this site seems to do, is a substitute for ideas of your own. You don't have to care about whether poor people have homes or whether the housing market is underpoliced for deceitful practices, because you're special because Ayn Rand told you so.

[Sy]

C-

[Amakudari]

shit, because Obama and liberal bashing, which is all this site seems to do

You may want to check here.

I see:

As governor of Texas, Rick Perry leaned on federal stimulus funds more than any other governor, using about $6 billion in federal stimulus funds to close roughly 97 percent of his state's budget shortfall in 2010. But that didn't stop him from complaining loudly about the stimulus legislation. ...

This year, with stimulus money unavailable, he turned to other methods to balance the Texas budget. ... Perry's new budget "ignores a $4.5 billion structural deficit that happens every year." ... Perry's budget also closed a big part of its budget gap by delaying a $2.3 billion education payment a single day.

and

But in the end, [Perry] didn't make any real effort to remove his state from [Medicaid]. Instead, he ... signed a budget that left $4.8 billion in expected Medicaid expenses unfunded. ...

As of today, Perry is carefully shaving the rough edges off his criticism of Social Security.

and

For [the] next decade after Nixon's announcement [of imposing wage and price controls, and ending the convertibility of the dollar into gold], the United State would endure ever escalating inflation and interest rates, and a stagnant job market.

and

There was so much unanimity on stage that you could almost hear the strains of kumbaya over the woofing between Michelle Bachmann and Tim Pawlenty ... they all agreed that illegal immigration was the bane of America.

Can we please get some better trolls here?

[Joshua Corning]

Can we please get some better trolls here?

ROADS!!!!

[Amakudari]

Is requesting better trolls a meme, too?

Seems reasonable.

[SFC B]

DRINK!

?

[Restoras]

I had no idea there was no W or Republican bashing going on here pre-The One. Anyone else?

[Home insurance quote ottawa]

Very interesting topic, not so sure what I think yet. You really seem to have mastered your craft though. Well done!

[bagoh20]

If banks didn't get bailed out for making bad loans none of the rest would be needed. They could loan on any amount they think you would pay.

And why would eliminating the interest deduction be good? That's just more of my money wasted by government, probably helping a bank make bad loans.

[mad libertarian guy]

It oftentimes pushes some towards either A) taking out a loan in the first place that they might not otherwise have taken with the full intent of using it as a tax deduction, or B) taking out MORE than they otherwise might have, justifying it with the deduction.

Ultimately it's an incentive to take out a loan and buy when it may not be the best choice. In order to fix the housing market, you need to remove all of the government introduced distortions, and the tax deduction is one of them.

[Drake]

I don't like the mortgage deduction - just give me a lower rate. But it isn't much of an issue.

It is phased out for high-income earners through the AMT.

[Home Insurance Quote Ottawa]

I think that regulation is the problem. it a barrier to new entrants and a cost to the public.

[Jim]

It's only on equity, not purchase liens.

I will say that Texas has the most liberal (in the old-fashioned sense of that word) foreclosure laws in the nation. We have by far the shortest average time from default to repossession. This allows the market to correct itself faster, because there aren't deadbeats living in a house without making any payments for years at time, like in Florida, Ohio, NY, CT, VT, just to name a few that I have personal knowledge of.

The crap part is, you'd think, given market principals, that we'd get lower interest rates here, to reflect the lower risk of the lender not being able to take repossession in a timely fashion. But nope, we got nothing. Basically all of us paying mortgages are subsidizing the high-risk loans made in higher regulatory states. Pisses me off to no end (I didn't know about all of this until well after we had bought our home, and I took a job in the foreclosure dept. of a bank).

[toxic]

The simpler solution would be to, you know, not implicitly back a quasi-private entity that, as a result of this backing, doesn't give two shits about keeping the books right.

[Joshua Corning]

Some readers note that they have been able to buy homes in Texas without putting 20 percent down.

HAHAHAHAHAHAHAHAHA!!!!

the WSJ are wrong imagine that.

Reason will have to come up with some new way to avoid the obvious...that smart growth regulations artificially constrained supply caused the real estate bubble.

[Lost_In_Translation]

Umm, Las Vegas had "smart growth"?

[dunphy]

renton cop cartoonists punished by cop-o-crats
http://www.komonews.com/news/local/127799048.html

RENTON, Wash. -- High-ranking Renton police officers have been punished for their role in a cartoon controversy.

The Renton Police Department just released the details of their disciplinary measures over the video a sergeant created and posted online.

The 87-page report condemns the sergeant and the the officers, including a deputy chief, who knew about the video.

The eight-minute cartoon depicts an interaction between an officer and a SCORE employee dressed as a clown. SCORE stands for South Correctional Entity, which oversees the regional jail.

The department report calls the video offensive, demeaning and hurtful to their relationship with the jail.

The sergeant created an anonymous e-mail to post the video, the report said, and a deputy chief advised him to post it from the library to keep from getting caught.

The sergeant claimed the video should be protected by his First Amendment rights. The department disagreed, demoted him to officer and reassigned him. The deputy chief was demoted to sergeant.

Another sergeant and acting sergeant received reprimands for not sharing their knowledge of the video.

Internal investigations are also planned for eight similar cartoons posted since, which the department says could only have been made by a city employee.

The department had been pursuing a cyberstalking case into the cartoons, but dropped the criminal investigation last week.

[Tulpa]

And here I thought internal investigations never found any wrongdoing. My faith in the ability of police departments to police themselves is restored, I guess.

[dunphy]

and again, this is another reason canard (although i realize you might be joking).

IA complaints are sustained all the fucking time.

sometimes justly, sometimes, unjustly.

but the idea that IA always clears officers is beyond ridiculous

[Joshua Corning]

To be honest i am stunned that this turned out the way it did. Good for Renton.

Now about that 130 lb homeless guy who was beaten to death....

[dunphy]

you think this guy SHOULD have been disciplined for the cartoons?

[Amakudari]

Probably not, but pretty much every business/entity ever should be able to, at their own discretion, discipline someone for airing internal griefs publicly. They're under no obligation to pay someone who's attempting to damage their reputation.

That said, they're probably giving more publicity to the story by being aggressive.

[dunphy]

a police dept. is a govt. agency not a business entity and as such, different rules apply.

if you work for subway and say jared is a clown (even when off work), of course they can fire you

if you work for a PD, and say your chief is doing a terrible job, you are criticizing a politician , it's a matter of PUBLIC concern, etc.

anyway, volokh summarizes the test as

Rule: The government may not fire an employee based on the employee's speech if

1. the speech is on a matter of public concern, and

2. the speech is not said by the employee as part of the employee's job duties, Garcetti v. Ceballos, 547 U.S. 410 (2006), and

3. the damage caused by the speech to the efficiency of the government agency's operation does not outweigh the value of the speech to the employee and the public (the so-called Pickering balance). Connick v. Myers (1983) (p. 567).

? Thus, if the speech is on a matter of private concern, or the speech is said as part of the employee's duties, the government can do what it pleases.

? Likewise, if the government prevails on the Pickering balance, it can do what it pleases.

[dunphy]

i want to make this entirely clear (and it's a point i have made MANY times)

police dept/s are not private companies. they are govt. bodies and as such there are and should be very different rules about criticism etc. by employees.

heck, we are SUPPOSED to have open govt. remember that? we should APPLAUD officers for outing misconduct (unless they are lying) in their agencies or other agencies

[Lost_In_Translation]

when they stop harassing/shooting/beating citizens for exercising their rights and then being cleared by IA, maybe then I'll care about internal affairs abuses against them.

The police are losing alot of respect when they do unjustly clear bad officers of wrongdoing.

[dunphy]

YAWN on the troll attempt

[Restoras]

What's the reasoning though? Just asking, not picking a fight.

[Joshua Corning]

Fuck

I read it wrong...i thought the investigators of the cartoon guy got nailed.

My bad.

[dunphy]

if only. they dropped the criminal case, which undoubtedly would have been unconstitutional . the ACLU also to their credit offered their assistance

[Lost_In_Translation]

believe it or not, the ACLU defends people against consitutional violations. I think some police departments have heard of this thing called the constitution. but its hard to tell.

[dunphy]

wow. thx for the tip/. i have great respect for the ACLU. always have. don't always agree with their positions, but that holds true of almost any civil rights agency.

but they do good work

[Zeb]

Seemed pretty obvious from the start that the criminal charges were just there so that they could get warrants to find out who made the cartoons. I doubt they ever even intended to take the case to court.

[Amakudari]

Yeah, I don't think he was just punished for depicting people as clowns.

"You need at least one sustained internal. Or, you can wreck two cars which equals to one sustained internal. However, if you have an affair outside of marriage with either someone on your shift or in Crime Prevention, that is also worth two internals. Now, if you want to get on the fast track, you could have a collision in your patrol car while having sexual relations with someone in Crime Prevention. If you want to go all the way, you can have sex on duty with a prosecutor, get caught in the act, deny the allegations, and end up chief of another department. ... Plus, when you make it to administration, you can not only continue to have extramarital affairs, but you can also conduct the internal investigations on others."

[dunphy]

i'm not sure i get your point. imo, he SHOULD have the right to say this stuff in the video. the dept. disagree. according to prof. volokh, the test is...

Rule: The government may not fire an employee based on the employee's speech if

1. the speech is on a matter of public concern, and

2. the speech is not said by the employee as part of the employee's job duties, Garcetti v. Ceballos, 547 U.S. 410 (2006), and

3. the damage caused by the speech to the efficiency of the government agency's operation does not outweigh the value of the speech to the employee and the public (the so-called Pickering balance). Connick v. Myers (1983) (p. 567).

? Thus, if the speech is on a matter of private concern, or the speech is said as part of the employee's duties, the government can do what it pleases.

? Likewise, if the government prevails on the Pickering balance, it can do what it pleases.

[Amakudari]

I'd argue that the speech to the public is just the airing of internal, unsubstantiated griefs with the department. They attempt to damage the department's reputation, but fail to provide any clear evidence that would enhance public awareness of real ethical problems.

Again, I'm not saying I agree with the punishment, just that I don't think this decision violates any free speech rights.

[dunphy]

again, those are two seperate issues.

first of all, any SUSTAINED complaints he commented on are by definition public record. if they were UNsustained, they are not (although i have heard several people comment they should be)

if he is slandering somebody, then OF COURSE he could be disciplined or sued.

furthermore, parody has rather broad protection. let's not forget falwell v. hustler.

regardless, if you believe in open govt., etc. you should applaud this officer's actions.

imnsho

[Amakudari]

if you believe in open govt., etc. you should applaud this officer's actions.

Of course, if there is this huge problem with philanderers and bad cops getting promoted, sure, he's done a good job. I'm just speculating that these are personal grievances, based on personal experience with similar opinions when a company I worked at merged. They were just sour grapes. His stuff probably contains some hyperbole, and within that I think they figure they have grounds.

The administration's handling is pretty eye-opening, though.

[dunphy]

yea, the REAL egregious actions was trying to turn this into a criminal thang. but like i have said for a loong time, WA's cyberstalking law is prima facie unconstitutional. however, i have never heard ONE case of it being actually applied in such a manner.

hyperbole is part of political satire, etc. and govt. criticism, not to mention comedy, of which these videos are all 3.

like i said, the philandering is the most problematic part, since it is neither a violation of dept. policy nor the law. otoh, he didn't mention anybody by name, so who exactly could say they were harmed by his allegations?

regardless,i would just like to see this vetted in court, to flesh out some of these issues.

[Amakudari]

yea, the REAL egregious actions was trying to turn this into a criminal thang.

Absolutely.

the philandering is the most problematic part, since it is neither a violation of dept. policy

Most workplaces have regulations requiring co-workers to report relationships, especially if one person has a supervisory role. They probably have rules about sex in the office, too. And, of course, if someone isn't upholding those rules for internal, political reasons, that's some more potential wrongdoing. So conceivably there could be a real violation here, which would make him in the right. If that's not true, the department can but shouldn't be as aggressive, and if it is true then good on him. I think we're saying the same thing here; I'm just skeptical about the video's proximity to the truth.

As for parody, I got nothing. I have no clue how much that applies legally. Obviously it prevents public figures from suing for damages when parodied, but I know nothing about how or whether it applies to things like a demotion for offending a local SCORE unit.

[Amakudari]

And yes, I'm aware that the discipline was ostensibly for making fun of SCORE. That, to me, sounds like the department wanting to detract attention from pretty much every other video, which criticized his own department.

[dunphy]

imo,if what he claimed was true, it's a matter of public concern and he should be immune from discipline.

if it's UNTRUE and he had reason to know that it was, then of course he should be disciplined and.or a possible tort for slander etc. should be possible

[Amakudari]

I assume they considered that. But he's not pointing out individuals for misconduct but everyone in administration and a significant number of sergeants.

That's also perhaps why they chose the SCORE video; if it's merely insulting without pointing out any misconduct then the demotion may be easier to defend. IANAL and this is pure, uninformed speculation, but it's possible they could use that as leverage for the officer to avoid punishment for the other videos in exchange for an agreement not to protest the demotion.

Again, I'm not saying I agree with the punishment, because it's thin-skinned. I just think there's enough material unrelated to matters of public concern. can =/= should and all that

[dunphy]

i hope the ACLU helps out and he goes to arbitration and.or does court action

i know most renton cops hate the videos, but some think they are cool. definitely mixed opinions on this from the guys i talked to .

[Sidd Finch]

So even cops get some extra-judicial punishment for making fun of cops?

[dunphy]

all IA investigations are extra-judicial.

although, i would assume the disciplined cops would have the right to appeal their discipline to an arbitrator, assuming the union backs them. at least that's how it works in many other agencies

[Sidd Finch]

Well ... duh. But this is just thin blue line punishment. I agree with you more than most WRT the "Reason canard," but this story doesn't make that case.

[dunphy]

i am simply saying that i believe in open govt. and that officers of an agency are not employees of a private company, and as such, their criticisms are CRITICISM OF GOVT. and PUBLIC FIGURES and deserve very high level of protection.

this isn't a subway employee calling out jared.

this is a cop alleging misconduct in his dept. and getting punished for it.

unless it can be shown he willfully made false statements of fact, IMNSHO it should be protected from disciplinary actions, generally speaking.

the adultery stuff, not so much, since it's neither a violation of dept. policy and imo purely private. but the other stuff? heck ya

[Sidd Finch]

I agree with all that. I thought you were making a point to counter the Reason meme that cops are never punished. That doesn't seem to be the case, so ... my bad.

[dunphy]

well, that meme IS absurd.

but that wasn't really my primary point

[Sidd Finch]

You're whit at Volokh, right?

[dunphy]

yes

[heller]

This is less newsworthy than dog bites man. It's dog bites dog.

[Name Nomad]

This is kind of a long-shot, but do they take part-time IA investigators or would you have to go through all the academy/patrol nonsense first? That seems like it's be a fun job to do on weekends, but I don't think I'd want to do what it takes to get up to that position.

[Joshua Corning]

the financial crisis does not equal the housing bubble.

they are related but they are not the same thing and have different causes.

the housing bubble was mostly regional and dependent on local land use regulations. believe it or not there were parts of Washington state that avoided it. In fact the tri cities was the fastest growing region in Washington state yet their home prices stayed at inflation. the reason being is that they have something like 3000 acres of land zoned for residential housing...ie the supply was not constrained.

The financial bubble was national if not world wide and was caused by the government dumping 6 trillion dollars on the home loan market through Fanny and Freddy by purchasing loans and guaranteeing them. Banks had no incentive to make sure the loans were any good because they did not have to...they would simply "flip" the loan by selling it to Fanny or Freddy and get the money with none of the responsibility.

[Joshua Corning]

Of course this explains how Texas avoided the housing bubble yet did not escape the Financial crisis.

Their home prices did not rise like other regions because they had no artificial constraint on supply...builders simply built more homes.

It is a hell of lot easier to pay a $175,000 loan that you can hardly afford then it is to pay a $400,000 loan which you cannot afford.

[Lost_In_Translation]

Umm, there was also real growth in Texas and alot of credit worthy borrowers compared with other states. Arizona and Nevada also saw an explosion of new homes, but their markets cratered in value during the financial crisis, moslty because their economies were highly based in feeding the system (lots of initial construction causes lots of employment causes lots of home purchases which causes even more construction).

Texas cities are still being fed by high oil prices and many expanding businesses. What home losses were suffered are also turned around and put back into the market quicker to cut down the zombification issues.

[E. Scott]

Has this requirement caused an increase in the use of purchase money mortages, i.e. owner financed down payments?

[yelly]

Has this requirement caused an increase in the use of purchase money mortages, i.e. owner financed down payments?

Nike Free Run + Mens Running Shoes - Grey/White/Blue

[yelly]

Nike Free Run + Mens Running Shoes - Black/White,Classic
Nike Free Run + Mens Running Shoes - Grey/White/Blue

[Liberal Response]

Should they hold the tough housing regulations that prevented the free market from running amuck in Perry's Texas as an example for the rest of the country? Or should they condemn Perry for continuing a policy that deprived poor people...

Poor people should be given free housing.

Duh.

[Just Me]

Article 16, SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION ALLOWS CERTAIN LOANS TO BE SECURED AGAINST THE EQUITY IN YOUR HOME. SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS.

--(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS MADE MUST NOT EXCEED AN AMOUNT THAT, WHEN ADDED TO THE PRINCIPAL BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE THAN 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME

[Lost_In_Translation]

so basically you can't turn you house into an ATM until you've paid down 20%+ of the principal to keep you from going underwater do to home equity lending. Sensible, but not a significant requirement overall.

[ALW]

I have a crazy idea: how about we let the banks decide how much of a risk a person is and then set the terms. I don't think requiring 20% on a first house is a prerequisite to a stable housing market. If a bank thinks I am a low risk borrower and is comfortable with 8% down, it should not matter to you.

[Old Soldier]

Sure - just don't ask for a bailout of you screw up.

I don't care if you smoke 5 packs a day either - as long as I'm not paying your doctor's bills.

[Restoras]

I think this is fine as well but as OS points out, when the loan blows up the bank eats it.

[CatoTheElder]

Here's a crazy idea: eliminate Fannie Mae, Freddie Mac, and VA, HUD and all other government guarantees of mortgage repayment. Then let the banker decide what your downpayment should be.

I suspect it would not be less than 20% unless you could pledge collateral in addition to your house.

[PR]

it's probably been addressed in the comments but the 80% rule in Texas only applies to cashout refinancing, taking equity out of your home for cash, debt consolidation, etc. Prior to 1998, Texans could not borrow against the equity in their homes. You had to sell your home to access the equity, a sop to the realtors.

[PR]

the equity rule only applies to your primary residence, not 2nd homes or rental property, though the market has now limited the LTV on rentals to 75-80%.

[joe-bob texas]

There is an income cap on the "mortgage interest deduction" If you make too much money you don't get it. Taking something away from the rich who aren't getting it doesn't solve anything.

"It recommended getting rid of the mortgage interest deduction because it disproportionately helps useless rich folks even before Warren Buffett started feeling coddled by the oppressively low taxes he has to pay."

[Old Soldier]

Yep. Us wage-earners who are doing fairly well get our deductions capped and phased out with the AMT.

Warren Buffett probably files as a corporation with a bunch of lawyers and accountants looking for every write-off possible. In other words, he's full of shit and has no idea what he is talking about.

[CatoTheElder]

Warren may be FOS, but he knows what he is talking about.

[CatoTheElder]

I haven't read through all the comments here yet, but here's the real deal.

Following the Panic of 1837, Texas prohibited the forced sale of homesteads for just about any reason other than failure to pay the original mortgage or property taxes. When Texas became a state, this prohibition was incorporated in the state constitution. After purchase of a homestead, a homeowner could only borrow for home improvements, in which case the lender would not issue a check to the homeowner but rather make payment directly to the home improvement contractor, or to pay outstanding taxes, or to buy out a divorced spouse. This did not just affect the availability of home equity loans; cash-out refinancings were also effectively banned.

It took an amendment to the Texas Constitution to allow home equity loans. On Nov. 4, 1997, Texas voters approved an amendment that accomplished this ban.

http://www.window.state.tx.us/.....qty03/#fn3

The "law" was not "limiting mortgage borrowing to 80 percent of the appraised value"; rather it was an amendment that allowed homeowners with more than 20% equity to take out a home equity loan for any purpose whatsoever.

Governor George Bush stated that legislature's drafting of this amendment for voter approval was one of "two of the session's major accomplishments". Dubya doesn't deserve any credit for wisdom in this.

In September 2003, Texas voters approved two more amendments that further liberalized home equity loans. These permitted the origination of HELOCs and reverse mortgages.

http://www.tlc.state.tx.us/pubspol/homeequity.pdf

The Texas real estate market was not ravaged as much as elsewhere for a combination of many possible reasons. Among them and not in any particular order:

1) Loose or non-existent zoning meant nearly limitless supply of land available for new housing of every sort and price range. Urban planners can complain about sprawl, but the prospect of new supply makes existing housing more affordable and reduces the possibility of a speculative bubble.
2) Many Texans understood that home prices do not always go up because they had experienced the mid-1980s and early 1990s bust in Texas real estate. Texans were naturally leery of the real estate bubble taking place elsewhere in the country.
3) Various constraints on home financing further suppressed demand, though local mortgage brokers were making many of the ridiculous loans available elsewhere (interest only, no doc, no down, etc).
4) Restrictions on home equity and HELOC loans meant that Texans had to build and retain some equity once they purchased a house. Since neither had been available to Texas homeowners for more than a few years, most Texans had not developed the reckless habit of using their homes as ATM machines.
5) High property tax rates caused homeowners to continually protest to tax appraisers that their appraisal was too high, not too low. Texas tax appraisals are supposed to approximate market values. Though mortgage appraisal are something else, a large fraction of Texas homeowners had an interest in lower appraisal values generally.
6) The real estate sector did not comprise as large a fraction of the 2008 Texas economy as elsewhere in the US. Further, consumer spending in Texas was not propelled by home equity extraction as much as elsewhere. So there was no death spiral in Texas like in Nevada, Arizona, Florida and parts of California.
7) A Texas homeowner can't stiff his mortgage lender as easily as elsewhere. Texas is a recourse state: state law permits deficiency judgments if the market value of a foreclosed property is insufficient to repay the mortgage.

[JaimInTexas]

I bought my home in 2001 with an FHA, sub-prime loan. I think it was a 2% down payment. It was spend money moving again -- I was renting and the owner was placing the house on the market -- or buy. Purely a financial decision. I did not particularly want to buy a house at the time. So, I do not know anything about this financing only 80% business. BTW, I bought way below of what I was told I qualified. The amount of mortgage that I supposedly qualified for was nuts! And, that is the real problem. I find it interesting that supposedly libertarian website advocates mommy government. CatoTheElder, I concur and kudos.

[Brandon]

Just shut up and write about Ron Paul.

[Esteban]

Bought two houses in Texas after 1998 with 5% and 10% down. Not FHA loans, just fixed rate loans from mortgage brokers sold to two different banks. That law must apply to something else or it was easy to get around.

[Texas Realtor]

It's already been noted, but just for clarification...

Anyone can buy a home in Texas with a small down payment - or even zero down. FHA loans are very common and require 3.5% down. VA, USDA and certain other programs will put you in a Texas house for 0% down.

What you can't do is piss away your equity. You can only borrow against equity to the extent that you leave 20% in the house. If you don't have 20% equity, you can't borrow.

This did save a lot of Texans from themselves and helped to keep Texas real estate out of the kinds of trouble that other places saw.