MitiGate Blog

Ranting towards policy, behavior, or analytics


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Non-profit Housing Pulse


Each month, or not, I will test the waters is some randomized, nonspecific way to see where our businesses may be going. You got a poll you want to climb? Email me, and maybe, I’ll post it.

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How to buy the shirt off your own back

Awareness event #41:

I shopped for a few suits this week (the wardrobe has started to look a bit tattered or at least arguably frayed after a decade of airport sloughing). Lucky for me, the clothier I would seek was literally giving away the store.

Here was the pitch I walked into: What was $900 for one suit was marked down to $900 if I would be willing to chose a total of three suits; or what would translate to 67% off each garment. And then, because of the dizzying effect of the giveaway and the likelihood that I would stumble out before they had a chance to close the deal, they would also give me another 25% off that. It was actually nearly an insane ‘savings’ of $2,000 (based on the retail price that they marked in crayon on the tag).  They would literally be handing me cash if I would just give them $600+. That’s certainly better than any email from a Kenyan Emirate offering me a hefty share of gold they had discovered if I would just send them some funds to keep the rebels at bay.

So how could I, in all my brilliance (of which there is a lot), not be enticed to the purchase? I mean, it’s not like they are actually $96 suits, sold by a $13/hr haberdasher, in a $25 warehousing place to make $38 of profit per outfit.  No, that would be clear and obvious.

All of this is to say that the products and the costs may have been mostly valid. But it is about the marketing and empty-headedness that is expected by us thinking that we are being ‘given’ something and their thinking that we are, in fact, stoopid and completely disconnected from all things financial.

[Leaning in closely] So here is how I escaped the madness – I figured out what I needed (1, maybe 2 suits), what they should cost and what it would be worth (I often think – if I had a garage sale for something I just bought how much would I charge and that at least gives me a roadmap to its actual value), and what I can afford (meaning resources that, in their absence, will not create stress on my bills).  And here is the kicker – I did that BEFORE I enter the merchant’s lair.  BEFORE they tell me what I want.

Just an idea.

Oh, and the hemming, $12/pant.  The only close to legitimately accurate representation of cost in the joint.  So in all, financially, not a value move or not a ‘good trade’ as they would say in Dances with Wolves. But emotionally & psychologically?  Well hell, I’d have be wise enough to, say, earn buying myself those cufflinks!

Of course, if you are going to avoid thinking, you might as well buy the ass-less chaps, too. After all, they are on sale.

Feedback welcome!


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Quality discussions from shoddy survey work

Here are 7 presumably interesting findings from our Qualtrics 10/12 Credit Usage and Access survey:

  •  Only 30% of respondents had a written budget
  •  Of those likely pay up to $50/month in fees, none had a written budget
  •  Of those using debit cards for 40+% of transactions, all had written budgets
  •  Of those using credit cards for 40+% of transactions, none had written budgets
  •  100% were ‘somewhat’ to ‘likely’ to overspend when using a credit card
  •  Of those that had designated “fun money”, only 20 % paid late fees in the past month
  •  All persons without a “fun money” source paid late fees

 

What can this tell us about the conversations we should have in financial education?  I think flexibility counts. Maybe planned waste actually saves in the long run. Rigid adherence with finances may actually stimulate money problems. Maybe a simple written budget won’t kill you (or will it?).  Admittedly laborious, can’t we offer an easier alternative?  Maybe its not a regular item but a touchstone to examine once a year.  And maybe the document alone can save a few hundred dollars (causality questionable, but hey, I like suppositions). Lastly, credit card users are becoming Monopoly players – got to get back to the real legal tender.  Maybe they don’t just overuse but are also likely to overpay for their purchases.

That’s it for now.  Next survey will focus on… yep, you guessed it, something else. If you are collecting surveys are you using them for program development or just satisfying a compliance requirement? What are you learning?


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Body snatchers, greying the lines, and how the wallet vacuum works

A few days ago, I stopped into a grocery store to purchase money.  Cabbage, if you will.

If you are not yet focused on these features, they have been commonplace for years (in-store retail banking, money order services for utility payments, etc.)  And if you don’t need them or are not focused on making limited dollars stretch, you don’t see them.  But there they have been, often right on the other side of the checkout area.

And now, for a while, they have been lurking behind you.  The end-caps have prepaid cards, gift cards to retailers, phone minutes, and more.  And if you purchase them you will save thousands of fractions of pennies.  What a deal?  IN A GROCERY STORE.  Really, just for fun, read the fine print.  Its gag-able.  Humorous even.  Not all abusive, just not particularly sophisticated opportunities.

Acquiring food can possess an innately positive feeling.  Particularly, if you grab some chips while you’re at it.  Attaching purchasing money in the same space is just good marketing.   And may be smart for the recipient, if is a comparative and thoughtful acquisition.  But who stands in a grocery store and reads the disclosures?  (The ice cream is melting).

So where are we going in our consumption?  I educate people, then they return to the world and repeat their actions.  Because they are nudged into mindlessness. Remember when you could get on an airline without being offered a credit card.  Hmmm?  Not so unlikely now.

And this may go for places of faith, too! I recently asked a group in a survey if they would purchase financial products from a place of religion.  It seemed like an appropriately ridiculous consideration, but many of us tithe and we do get something for the relationship, so why not test it?  So far, the same number of people (everyone) said they would not likely seek a financial product from a church nor a grocery store.  Yet here the abyss lay.  May be a curious, and sad, future path.  How would we respond in a confessional, if we could get forgiveness on sale?


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Counseling & education fees: dedicated HUD-1 line-item or allowable write-in?

After 15 years of being a counseling practitioner (way back) and a trainer for both consumer and educator (less back), I marvel at the apparent widespread indifference by investors and insurers to not focus on protections for their stockholders that ensure that borrowers have been armed with a higher level of awareness for the processes they are engaging (how’s that for a run on?).   I mean most of the white-collar, non-mortgage industry types that I run with, couldn’t find their APRs with both hands.  So we all need to be clearly alerted to this type of ‘owners’ policy’ or safety net.

A problem is that the common path is only first-time, HOEPA, HECM triggered homebuyers/homeowners are made privy or incentivized to access these services.  Yet mortgages can become significantly comparable in servicing aspects after they are transacted.  If we omit inclusion of this item from a settlement statement, let’s omit some other ones that consumers don’t see the benefit of as well.  Heck, not all transactions involve real estate professionals (lines 700s), so let’s even the playing field and either remove that or include this in the 8/900s.

After all, wouldn’t it be like only recommending home inspections when you visibly identify a concern?  Or suggesting waiving title or appraisal fees for those that have good credit & high liquidity?  Risk is risk.  When I am at a physicians’ office, I have to fill out more disclosures just to allow someone to make me to turn and cough.  How is a six figure transaction not similarly balanced?  This is not a ‘poor folk’ product.  Education and counseling is not defined solely to the transaction benefit or mortgage product acquisition.  It can and often does encompass credit enhancements, budget designing (akin to necessary escrows), smarter insurability and responsibility, and planned maintenance.  So let’s not omit the sugar in this cake (I’m on an analogous roll).

Incentivize all mortgages for this, but at least ensure, that all government backed lending (RD, VA, and FHA) will be given a baseline of prescriptive protections and give the housing counseling and education industry line 808 (even if it becomes filled later with a N/A), at least its fair and gives everyone a chance to do better data mining, monitoring, and accountability for this service as well (another discussion).


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Things can benefit from vintage – except laundry and the self-serving

Inaccurate title – its really about predators (ooooh, horror scream).

In 1999, after a few years of specializing in mortgage transaction examination, I thought I understood predatory lending.  I did/do.  But I was myopic in my telling of the tales.  What I left out was information from some loan closings that really set the stage for the bigger picture problem.  For example, where I experienced a few real estate ‘professionals’ and lawyers having a good chuckle (before the next victims arrived) about some other dupable customers that had taken on not-so-smart products (loans or home).  These pros were akin to local high school populars making fun of the new kid (all trying to earn their stripes by advantaging someone else).  I wasn’t angry with them (in this case, a r/e broker that may have been a former beautician and a lawyer that was disconnected from the concept of fiduciary tasks); I simply felt sad for their chosen positions in the transactions (later I would try to run one of them out of business along with their mortgage broker of choice). This was their regular business modality (hard to pin illegality – just far from moral).

So in short, what I think is, we should be relabeling ‘predatory lending’ as Abuses in the Mortgage Marketplacebecause its not a vacuum and its not just lending.  If you are party to or helped to create a HUD-1 situation – your actions count.  We should look back at who else made out in the transaction (not just originators).  And recognize that those that do wrong – some literally are unaware of ‘where’ abuse starts, only what it is in extremity.  Much work to do… because we will return to this place in a normalized market and since the irresponsible or self-serving probably have not adjusted their ways.  They are just waiting.  Vintaging.


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What’s the difference between 15% Off and a Liquidation Sale?

Answer:  The time of day.

If I were to, say, make a dress – I would need fabric, sewing machine, my time, the ability to export, promote, protect, package, etc.  Whether it is made out of reams of polyester or silken buttercups, many of these costs are probably a constant.  Once you consider the bulk and wholesale process of these multiple transaction (scaled for efficiency), you would have an understood cost of production (and a lot of other economic variables that are beyond my scope).

But here’s the issue:  Why cannot we comprehend variations in words like production cost versus worth and/or value?  Why do we react differently when we purchase an item that says ‘Save 50%’ if it costs $20 regularly with no discount, but costs $20 (when marked up to $40 with a ‘1/2 Off!’).  Did we forget to eat our Flintstone chewables on the way to the store?

As a child I listened to my mother giddily make proclamations about all the money she saved on her new dresses (probably saved into near impoverishment).  Mind you, she was a knockout in high heels in upper governmental management, and it brought her great pleasure to look nice – so I get the investment.  But really, Clearance?  My ass.

I have a habit of thinking about what I think something should cost (as raw materials) before I see the product.  It gives me an ‘anchor’.  Then I go see the shiny, sparkly, and the sales woman, who will happily tell me I would look good in this seasons’ Nurse Ratched outfit with matching loafers (That’s another post).

Connect thyself to your purchases!