Saturday, May 24, 2008

The Foreclosure Crisis

HouseI've been reading a lot about our nation's foreclosure crisis and it's an issue that has hit my area (NE Ohio) pretty hard. I am having a really hard time deciding who to blame. The list of suspects is long:

  1. Borrowers

  2. Real Estate Agents

  3. Brokers

  4. Lenders

  5. Banks

  6. Wall Street and Big Investors

I think that is a (roughly) accurate view of who relates to a mortgage.

Blame the borrowers

Being a person who owns a house and is fairly good with numbers, I find it easy to blame the "irresponsible borrowers."

Buying a house is a huge deal and there is a correspondingly huge amount of paperwork involved. Some of that paperwork describes in painful detail a payment schedule. I realize that one of the problems here is that people received exotic loans with varying payment schedules, but I'm talking about people who couldn't make the first payment. There are reports all the time about people falling behind from day one--not when their 5-year ARM shot up.

On the other hand, home buying is a complex and emotional process. This is why we have agents and lenders. These guys are supposed to help protect us from ourselves. But they don't.

So let's blame them.

Blame the agents

This is a tough one for me. We had a great experience with both homes we purchased and felt that our agents helped us through the process. At our first closing, it was our agent who uncovered a couple errors and ultimately netted us a couple hundred bucks back.

I can't say for sure if either agent would have stopped us from getting in over our head, though, I'd like to hope so.

OK, so the agents are off the hook--let's blame the brokers and lenders instead.

Blame the brokers and lenders

This is where I get really fired up and here's why: these guys have virtually no incentive to be responsible. A broker's job is to basically connect people who want money to people who have money--they facilitate and take commission from a transaction without risking any of their own money!

As I understand it, all a broker has to do is convince a bank to fund the loan. Since this is a free market, the broker can shop the loan package to multiple banks until someone bites. Over the last few years the standards of a "good loan" have erroded to the point where my dog is considering his own place--all driven by the insatiable demand for mortgages as investments.

NPR's This American Life has an incredible story about this part of the crisis and I highly recommend it.

Who is funding these loans? Banks.

Blame the banks

Monopoly ManSomehow in their 20-hour work weeks (closed national holidays, weekends, paydays, full moons and days that end in "y"), bankers managed to buy any and every loan. Despite no income, assets, or SSN, Pirate was approved for a sweet crib in the hills.

This is the last line of defense when it comes to investment quality. Banks had no business buying horrible exotic loans but their thirst for mortgages clouded their judgement and the money was good.

From hereon, mortgages were bundled together and sold as packaged securities. This had the nice property that they were easy to invest in but one nasty caviat: so much detail was obscured in aggregation that risk was very difficult to gauge. But hey, they're mortgages--those are like super safe investments, right?

This is where it stops with me. I don't blame Wall Street or the big investors. They thought they were buying good stuff with AAA ratings.

So, Blame everyone but Wall Street

OopsiesBorrowers need to be smarter. Education is key here. A simple, accurate monthly budget might have prevented a lot of this. Losing your home and destroying your credit is probably enough punishment so I'll let them off the hook for time served (20% of the blame). As much as I think a bailout of any kind is unfair to the rest of us, something needs to be done--but that's for another time.

Brokers and lenders take a hefty portion of the blame (30%) for selling people things they couldn't afford. These guys are the first line of defense but since they're part is over when the loan closes they have all too much motivation to look the other way, commit fraud, or just plain oversell us. As I see it, this level is also the biggest opportunity for fraud.

I place the remaining half of the blame with the banks. Just because everyone else is buying crummy loans doesn't make it right. It sounds like I'm talking about a child and maybe I am. These are the guys with the calculators, spreadsheets, forecast models, degrees, etc.--They're supposed to be the experts! I am really struggling to wrap my head around when bankers must have been thinking when they bought junk mortgages. Maybe the truck-loads of cash helped.

What Now?

That's a toughy. I don't think more paperwork is the answer--that's part of the problem. I think the process of buying a house should be overhauled and simplified. There's little reason for it to be so ridiculously complicated and the devil's in the details with this one--if you can't understand what a paper says, it could be screwing you big time.

Until then, I encourage buyers to run budgets with a close friend or higher a planner (and be realistic about the numbers) before looking at houses. Once you know what you can afford, don't look at anything higher and stick to conventional fixed-rate loans.

With respect to holding the industry accountable, it looks like the market is taking care of that for us (and bringing everyone down with it, unfortunately). I have no sympathy for the banking and mortgage industry but have resolved myself to the fact that our government will probably continue to bail them out, too, until this blows over.

Friday, May 23, 2008

Searching in Outlook

OutlookLove it or hate it, Outlook is the email solution for a lot of people. When it comes to work-related email, I'm one of those suckers.

Now that Google has spoiled us with archive-and-search-everything email, I've run into issues with my enormous work inbox. I have mimicked by gmail setup in Outlook with the aid of the fantastic search tool Lookout.

Lookout was acquired by MS a few years ago but was apparantly discarded. More on that from Joel Spolsky. The original author clearly explained how to obtain and configure Lookout for Outlook 2007.

If you're stuck with Outlook, consider this free tool to make searches quick and easy.

One final tip: if you are using Outlook 2007 and hate that annoying "Click here to enable lame instant search" nag bar, fear not. This is how to disable it:


  • Tools > Options > Other > Advanced Options

  • Uncheck "Show prompts to enable lame InstantSearch"

Disable Outlook Instant Search Nag Bar

 Happy searching!

Journalism At Its Best

I snapped this headline back in January and am just now getting around to posting it:

fed cuts rates to stop bloodbath

There is no doubt that times are tough and the credit market is a mess but a bloodbath? No. Newspaper man: you can't open with a headline like this and then not deliver. I can't follow your story with gross exaggerations like that.

In attempting to find the source I snapped that pic from, I discovered that I'm not the only one who picked up on this. As others have noted this seems to have originated as an MSNMoney article that still exists in some outlets. However, the original story has a new headline (but is still the top search result for the bloodbath line--go Google!).

Thursday, May 22, 2008

Look Out World!

Maya crawled for the first time tonight. Eek! More to come :)

Maya Grace

Best baby ever

Heads up: the best baby in the world has made an appearance over in the gallery.

Monday, May 19, 2008

Surf Quietly and Securely at Work

The internet is vital for my job. I search technical articles all the time and when my company's network filter blocks a site I am trying to get to, I get frustrated. I'm not abusing the network (usually), I'm just trying to do my job.

This is what I did to get around it.

I have a Linux box running at home (which happens to run this website). Here's how this works from a high level:

  1. Setup a server at home to accept SSH connections (like secure telnet)

  2. I setup a proxy on my home server to accept connections only from local addresses (not from the internet)

  3. I configure my laptop to connect to my home computer over SSH (a secure connection)

  4. I configure my laptop's browser to use a localhost proxy on some random, high port (like 31234)

  5. I bridge my laptop and my home network via an SSH tunnel so that connections to on my laptop are handled by my home server at (the proxy)

SSH Tunnel

That's a lot of information, I know. Each of these steps is pretty easy if handled one at a time. Here's how it's done. This was performed with a Gentoo-Linux machine at home acting as the server and proxy and a Windows XP machine at work acting as a client.

Setup a server at home to accept SSH connections

This is outside the scope of this doc. If you have a Linux machine, you probably have SSH running, too. In fact, I have never seen a Linux install without SSH setup out of the box.

Setup the network router at home to port-forward the SSH connections from the internet

Once you are able to connect to your Linux machine from inside your network, you will need to open up a port on your router/firewall so you can access it from outside your network. This is vendor specific so you're on your own there.

I setup a proxy on my home server to accept connections only from local addresses (not from the internet)

I used TinyProxy as my proxy software because it is lightweight and easy to configure. Since I'm running Gentoo, this is as easy as:

  • emerge -vat tinyproxy

The configuration file is pretty self explanatory so dig in and read the man pages. Don't forget to add it to the start up services with rc-update!

Configure browser to use local port for proxy

This part's a piece of cake so long as you keep the referencing straight. Since SSH will be bridging a "localhost" port on my laptop to a "localhost" port on my server, it's all just localhost. I do not configure the proxy with any server-specific addresses.


Configure SSH client's tunnel

Now that the server and client are configured, all we need to do is bridge them together. Inside Putty, create a tunnel like so:

Putty Configuration

Benefits, Issues and Alternatives

This works well but won't be a walk in the park to configure if you're new to networking or Linux--I skipped a lot of steps. There are also some speed issues as this is routing in/out of my home broadband connection which isn't very fast and in the cases of others, might be firewalled at the ISP level.

There are many other options out there including the use of an existing proxy or using simpler page retrieval techniques. For example, a friend did something similar by creating a webpage that would serve back whatever url you included in the query string.

Perhaps the easiest in-a-pinch technique is to VNC to the server and run a browser from there.

When evaluating alternatives, don't overlook the benefit of the SSH tunnel, though. This provided a secure connection over the web to my house and enabled me to move bits without punching new holes into my firewall at home or exposing my traffic to inspection at the office.

One final note: if you are looking to do something particularly nefarious or sensitive, this isn't by any means a solution you should consider. This solves a small set of simple problems. If you have more than casual needs for security or anonymity you better ask someone who knows what they're talking about.

Firefox 3.0 (RC1)

Heads up: Firefox 3.0 RC1 is out. If you are running the betas or anything from the 2.x branch, I recommend trying out Firefox 3.0. It's much, much improved. Aside from the polish that has been rubbed into the interface, the damn thing is fast.

Firefox Logo

I'm not one of those browser benchmarkers, this is just from casual use. Now that I've been on the 3.0 train for a while, using a 2.x build is a little painful--you don't notice the tiny delays between page loads until they are gone...and come back.

I don't care if it's just a visual rendering tweak or actually a performance improvement (a better network interface, a better memory manager, more aggressive caching, etc.)--it doesn't really matter because the fact is, I perceive it to be significantly faster.

Anyway, I think it's safe to go ahead and get the release candidate build. It'll upgrade you to the final copy when it eventually comes out in a few weeks.

Sunday, May 18, 2008

Pizza Structures

My wife and I were walking into Target today when we were overwhelmed with a foul odor in the cart area.

I'll try to describe the smell. If you birthed, raised, and slaughtered a dozen pigs in your basement, then for the first time cleaned that basement and fed the wash water to an elephant and waited for that elephant to eliminate and smelled his dung, you'd have some idea of what this odor was like.

I complained that I had planned to hit the restroom but didn't want to because of the "situation" and this is the dialog that followed:

My wife said, "go ahead, it might just be the Pizza Hut [express]."

My reply, "do you realize what you just said?"


"'Yeah' indeed"

The most confusing part about this whole (true) story, is that we actually like pizza hut. This brings me to something else: pizza company names.

What's the deal with all the Pizza [structure] places around here? We recently brainstormed a list of possible names, which I cross-referenced to see which ones actually existed. This was actually a travel game where we took turns coming up with another place.

  1. Pizza Hut

  2. Pizza Cottage

  3. Pizza Inn

  4. Pizza House

  5. Pizza Hotel

  6. Pizza Motel

  7. Pizza Shack

  8. Pizza Wigwam

  9. Pizza Tee-pee

  10. Pizza Mansion

  11. Pizza Tree-house

  12. Pizza Tavern

  13. Pizza Silo

  14. Pizza Barn

  15. Pizza Bed-and-Breakfast

  16. Pizza Chair-Lunch-Dinner (thanks Mitch)

  17. Pizza Stand

  18. Pizza Van

  19. Pizza Condo

  20. Casa la Pizza

  21. Pizza Tower

  22. Pizza Castle

  23. Pizza Igloo

  24. Pizza Bunker

  25. Pizza Cave

  26. Pizza Cavern

  27. Pizza Church

  28. Pizza Palace

  29. Pizza Tent

  30. Pizza Cabin

Pizza StructuresFor those keeping score at home, that's a 53% hit rate. Considering some of the ridiculous names on there, I'd say that's not bad. Let's branch out a little, ok?