Technology Transactions

by Peter Miller

Peter G. Miller OurBroker® A funny thing has happened with the little red school house: Congress has determined that local folks should have more control over how their education dollars are spent, an idea which is likely to be applied with equal fervor to housing money. "Ed-Flex" -- short for the "Education Flexibility Partnership Act," provides that instead of mandates and demands directed from imperial Washington, state officials and local school boards will have more control over some $11 billion collected by the federal government for use in public schools. The program is already used by 12 states, but will now be available nationwide. The Ed-Flex concept is not a partisan issue -- it passed 330-90 in the House and 98 to 1 in the Senate. But it"s evidence that the days of blank checks for federal departments may be at an end. HUD, too, is now before Congress trying to increase its budget. The huge department is asking for $28 billion -- up some $2.5 billion from last year. And what does it want to do with such money? First, it wants to encourage companies to expand or relocate in poor areas -- and, of course, such a effort would also create a need for more HUD programming and spending. Then there is the continuing effort to have appraisers act as home inspectors. This is an inherently unwise idea because appraisers are not trained to inspect homes and do not open electrical service boxes or climb on roofs but -- of course -- if approved there would be a need for more HUD programming and spending. In total HUD wants about $900 million for such new programs, but before we spend the money, consider that: *HUD investigated several critics of its California low-income housing program -- and a federal judge has ruled that such efforts were intended to s tifle free speech. The judge also ruled that federal officials could be personally liable for damages in the case. *Special counsels have now spent $35 million investigating HUD. Two former assistant housing secretaries, among others, have been convicted, according to the Washington Post (See: "Report on HUD Details 1980s Pattern of Abuse," Oct. 28, 1998 and "Counsels Have Spent $62 million Investigating Administration," Oct. 1, 1998) *HUD claimed that it forced a Maryland lender to accept a $6.5 billion anti-discrimination settlement. The lender denied it had discriminated against anyone -- and that it had made such a settlement. *The General Services Administration has found that HUD loses $365 million a year to fraud and waste. In the same way that local officials now have greater control over education dollars, the same must happen with HUD funding. The Department is too big, has too many programs, and is charged with an enormously difficult job which is often handled best at the community level. What"s needed is "Home Flex" -- a program that moves HUD dollars into local communities with fewer mandates and requirements. If such an approach is good enough for schools, why not for housing? You can bet that a number of representatives and senators are asking the same question. Follow-Up In September we looked at the subject of interest rates and wondered how low they could drop. It was pointed out that overnight bank rates in Japan were then at .25 percent -- and could fall lower. Now The New York Times has announced that "Japan"s central bank pushed overnight interest rates to the unprecedented level of effectively zero this week." ("Japan Lowers Rates Again, and for Banks it"s a Big Zero," March 6, 1999.) The paper says the overnight rate for banks has fallen to 0.02 percent. At this rate, the cost to borrow $1 million for a year is about $98.55. But "unprecedented?" Hardly. Such a rate has been seen before -- and in the U.S. As the September column noted: Even at a moment of overwhelmingly good news on the rate front, interest levels have the potential to fall further. According to Forbes magazine ("A Brief History of Stock Fads," September 14, 1992), "T-bills got so popular that for brief periods between 1938 and 1941 they carried negative interest rates." Question Of The Week What is a "trailing spouse?" A Sometimes a job offer elsewhere requires a family to move. The catch is that while one individual has a job, that may not be true of the wage earner"s husband or wife -- the so-called "trailing spouse." The problem is that families may want to quickly buy in their new community, but initially only have one income where there used to be two. The result is that their ability to borrow is substantially reduced. Lenders regard such situations on a case by case basis. Does the trailing spouse have the training and skill to acquire a new position with a given income level? Is there an earnings history, written job offer, or marketplace demand for the spouse? If possible, it"s best to have jobs for each income earner lined up before moving. If that"s not possible, speak with lenders regarding the evidence they will require to support a loan application before a second job is obtained. Weekly Resource More and more local assessment offices are placing property records online. A good links collection for offices around the country is maintained by the International Association of Assessing Officers

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