The Piercing Truth

This is right from the dictionary and seems to describe Albuquerque, Berry and Schultz. Fascism (f ash ,izem) noun An authoritarian right wing system of government and/or social organization. (in general use) extreme right wing, authoritarian, chauvinistic and/or intolerant views or practices. Fascism tends to include a belief in the supremacy of one group over another, national, ethnic, especially social strata or monetarily; a contempt for democracy, an insistence on obedience to a powerful leader, and a strong demagogic approach. Compliments of one of our Eyes

Dec 26, 2007

Tax Crunch

While everyone was out doing their last minute shopping and enjoying their family, friends and a well deserved eggnog, the governor's Task Force on Mortgage Lending weighed in its report on how to fix the subprime lending "crisis." The Christmas Eve story in the Journal is a perfect example of how government tries to slip a story past the public at a time when they are distracted by more pressing concerns. The last time we saw this type of chicanery was when the Almighty Alcalde tried to slip his trolley past the voters while we were focused on the 2006 mid-term elections.

According to the Journal, the Task Force's mission "was to evaluate the potential local impact of the subprime lending crisis and to come up with ways to protect consumers against abusive lending practices. (ABQ Journal - Subscription)." First of all, beware any time the government starts trying to "protect" the public, especially when it has to do with your money. Generally the result is your money being sent somewhere you don't want your money to go.

Strictly speaking the subprime mortgage "crisis" is not a crisis at all. It's the logical result of over-eager lenders making money available to people who shouldn't be getting it in the first place. The result is a tightening of the money available by the very people who were practically begging you to take out a loan just a year ago. The reality is that not everyone should own a home; there are those whose financial position is better suited to renting at least for now.

Back to the governor's Task Force... Since the subprime "crisis" was created by over-zealous lenders and brokers, you'd think that the recommendation of the task force would be some sort of restrictions on lending (not that we'd like that much either). Nooooo... The task force's recommendation is to make all private home sale prices public. Why? Because the task force blames the "crisis" on "unscrupulous appraiser[s]."
"One of the problems in the mortgage meltdown were loans based on inflated values," said task force co-chair Michael Loftin, who is executive director of Homewise, a nonprofit home ownership organization in Santa Fe. "So if you make more transparent what the values (home sales prices) are, it makes it harder to cook an appraisal."
First of all, the market has a perfectly functional mechanism for taking care of unscrupulous appraisers who either over-value or under-value property - lenders stop using them. Lending institutions rely on accurate appraisals to determine risk. When appraisals are inflated, lenders run the risk of having to foreclose on a property that cannot be sold at a price that allows them to recover their investment.

Second, the Journal story implies that appraisers have no access to sales price data and are somehow working in a vacuum seemingly coming up with prices based on some kind of gut feeling or something. Nothing could be further from the truth.

It's safe to say that most houses in Albuquerque are sold by Realtors using their private Multiple Listing Service. Every house sold through the MLS is recorded along with its sales price. Appraisers use this data (and have for years) to determine comparable prices or comps for a specific property. Since most homes are sold through the MLS the comps are usually very accurate.

So what is all of this really about? Since 2004 New Mexico has required that all sales prices be reported to the county assessors. That data was not to be used for assessing value. Of course if they have the data they will find a way to use it. Before 2004, property owners could choose to provide the sales price but weren't required to do so.
The Bernalillo County Assessor's office used to send out a very official letter to new homeowners that asked them to report the sales price. The letter was constructed in such a way as to make you believe that casual observers would believe that they had to report their sales price. In other words, before 2004 the county assessors would trick you into reporting your own sales price.
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Of course this whole thing isn't about protecting anyone from predatory lending; it's about separating you from your money. Requiring every sale price to be reported will allow the assessors to easily increase your property value and therefore increase your property taxes.

Before you start thinking "it's only fair that the assessed value track the market," remember that there's a very real possibility that people who have lived in a home for an extended period of time will be taxed right out of their home. In addition, our assessment system was taken into account when our property taxes were set so changing the assessment method will simply result in increased revenue not originally planned for. In other words, a tax increase where the hardest hit will be those on fixed incomes. (How's that for progressive taxation?!) Plus, you know that the sales data will be used to support an increase in assessed value and won't reflect market corrections when they occur.

With the state facing a substantial reduction in new revenue, we'd bet that Governor Richardson sees fit to put this on his upcoming legislative agenda. Make no mistake, this is about money not consumer protection and should New Mexico become a disclosure state we'll be filling state coffers on the backs of people who can least afford it.


James said...

Register Republican... stop the government from using your money to bail out banks and corporations and idiots in general...


Anonymous said...

Register Republican...

Lets keep the big oil companies in business!

Pucker Factor said...

The above assessment is comfirmed and word is getting out very quickly. I just sent out a corporate advisory to my customer organizations that are considering a move to NM and am told that all but one is immediately scheduling meetings to re-evaluate a move to NM vs other western locations. Just this sort of move has been a major factor into the decline and ultimate financial crisis that California finds itself in. Just in case you missed the report, CA is rapidly nearing an outright financial crisis. Soon, after the first of the year some fool has decided that releasing some "Low Profile" state prisoners is a great idea to cost savings.

Vote these fools out or face the consequences New Mexico.

Anonymous said...

Why do homes in the same neighborhood, same street,same access to infrastructure, etc. get such disparate property taxes?

Barbarossa said...

Blaming this on appraisers is insane. Appraisers are under scrutiny in NM only because out of state mortgage banks dont believe we still are holding our value here. Sure the market flattened out but we didnt take a hit like some other states. Caveat to the rant - there is not a "crisis" when people that should never have gotten a loan default, nor is there any defense for people who say they didnt know their adj. rate note would go up... who in the hell signs away a couple thousand dollars in a loan and doesnt read the paperwork--- let alone the fact that their broker explained it and their escrow officer explained it to them also.

Republican that reads said...

I must ask the author of the Eye, which is closed when looking at the current financial crisis, if you have ever set your eye on the words LONG TERM CAPITAL MANAGEMENT? This company almost took down the financial sector when it used the Black-Scholes formula to suck up nickels from option contracts that had were either to wide or narrow. The Fed orchestrated a bailout to prevent a further collapse of the financial markets.

The current crisis is a crisis because it is affecting large financial institutions. These institutions bought securities formed by combining sub prime loans into a security and selling them to investors. The loans were given to people who could not afford the homes they bought and these loans artificially inflated home prices. Now that the buyers of the homes are defaulting on the loans, the institutions, including some of the largest banks and retirement funds, hold the defaulted mortgages. The financial institutions are left with worthless mortgages or a small stake in a home. The homes are devaluing so the assets that could be sold to offset some the loss must be sold at a loss if they can even be sold. You have not been to California where neighborhoods that once had a few homes for sale now have hundreds.

Banks are loosing billions and those billions are eating up excess reserves that are supposed to be used to extend credit. The banks are not lending to anyone because they have nothing to lend. Ask local developers if there credit crunch has hurt Alb and they will say yes because the banks on both coasts have stopped lending for large developments. This hurts contractors, realtors, brokers, electricians, plumbers and any other organizations associated with real-estate development.

IF YOU DO NOT BELIEVE THIS IS A CRISIS GO TO CALIFORNIA TO SEE FOR YOURSELF. Or contact a local developer or contractor and ask they if they are confident about the future.

The crap you wrote about taxes is a gross misrepresentation of the facts and if it was not intentional they the person who writes this is a moron. Taxes on homes can only increase by a maximum of 4% a year. If you own a home that is valued at $100,000 and you pay $1,000 in taxes the most your taxes can increase is $40. If your home increased in price form $100,000 to $200,000 in five years, your taxes will not increase to $2,000. The tax will be $1,170. In year one the tax rate would be 1% of the value, five years later it would be 0.585%.

If you do not believe what I wrote, locate a home that sold in a market that was expanding rapidly like Down Town or Nob Hill. Then go to the County Assessors web site and look at the assessed value of the property. Then look at the assessed value of a home in the neighborhood that has not been sold for years. There is a huge spread because TAXES CANNOT INCREASE BY MORE THAN 4% A YEAR. The recently sold home is assessed at the full value and cannot increase more than, you guessed it, 4% a year.

The author of this blog should but an eye on a book to learn something.

Anonymous said...

Republicans...Democrats, like there's really a difference. One thing for sure needs to happen...get rid of these clowns, but if nobody steps up what is there really to do????

Anonymous said...

Now Bernalillo County wants to raise our property tax by 50%! Where does this end?

I think we need a taxpayers revolt like they did in California a few years back.

Anonymous said...

Yes!!! Revolt!!!

Anonymous said...

"The loans were given to people who could not afford the homes they bought and these loans artificially inflated home prices."

Well put.

And to make matters worse another contributing factor to the "crisis" at hand is this: With the decrease in interest rates and corresponding inflated value in houses came lots of refi's with cashout at closing so people could buy shit they don't need. Want to know where the consumer spending came from that has kept this nation's economy afloat since 9/11??? It was borrowed against the primary asset most American's have....their home.

Anonymous said...

So true!! And now Bern.County wants to raise property tax valuations and we're also looking at another increase in our NMGRT! TO PAY FOR THE JAIL. What a mess.

Anonymous said...

TAXES CANNOT INCREASE BY MORE THAN 4%? Not anymore. Bernalillo County wants a huge tax increase in property taxes and I believe that will go before the Legislature this session. So kiss your 4% theory bye-bye.

some random guy said...

RANM report, state had an upturn in housing sales in Novemebr. ALb. area homes showed appreciation still in the 5 to 9 % a year range. There is still nothing else that is a better investment than real estate, think about it, where else can you put money and have nearly as good a chance at growth? When the election cycle pushes the mortgage crisis (so called) off the front page everything in housing will return to about 2004/05 levels here in ABQ.

Anonymous said...

Bernco. wants to raise our property taxes 55% not just 50%.....look out!! the legislative session is just around the (overtaxed) corner!

carrie said...

I can only give you my personal account on property taxes here in the Albuquerque area.
We purchased a home on the west side on July 18th 2007. We got our home for $25000 less than what the previous owner paid for it. We thought it was a great deal and a better home for our family.
The previous family was paying $1820.70 in property taxes. We are paying $4488.72!!
Yes, that's right we are paying $2668,02 more than the previous owners for a home we paid less for.
This has hit us hard because now that property tax bill has to be paid and we have to fund our escrow to do it which has increased our mortgage to an uncomfortable level. We can handle it for now but we really thought we had covered all the bases. We paid down the interest rate to 5.75% and put down $96000 on the home to get a lower mortgage payment but we never thought the taxes would be at this level.