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Firms Accused of Fleecing VA Mortgage Borrowers

Thirteen lenders — including Wells Fargo, JP Morgan Chase and Bank of America — allegedly collected illegal fees worth millions of dollars from VA borrowers.

In hundreds of thousands of VA refinancing transactions, the lenders allegedly charged an additional $300 to $1,000 per loan, according to claims made in a lawsuit by two whistleblowers. In the last ten years, more than 1.2 million refinanced loans have been made to veterans and their families. Up to 90 percent of them may have been affected by the alleged fraud, according to the suit.

VA lenders are allowed to charge borrowers “reasonable” fees and costs, but the department limits closing costs and bars lenders from charging for things such as attorneys’ fees and other settlement costs.

The suit alleges the lenders flouted the regulations by misnaming fees.

“By concealing the unallowable fees they charged, the banks benefited in two ways,” alleged Mary Louise Cohen, a Washington, DC, attorney and one of several lawyers representing the whistleblowers. “The banks collected the illegal fees from veterans, and they obtained hundreds of millions of dollars in loan guarantees they otherwise wouldn’t have received.”

“Knowing they weren’t allowed to charge the fees,” alleged co-lead counsel in the case, alleged James E. Butler, Jr., with the Atlanta law firm Butler, Wooten & Fryhofer LLP., “the banks and mortgage companies inflated allowable charges to hide these illegal fees without telling the veterans who were the borrowers or the VA they were doing so.”

Earlier this year, subsidiaries of Bank of American and Morgan Stanley agreed to pay more than $22 million to settle claims they violated the Servicemembers Civil Relief Act, a law that safeguards active-duty military personnel from improper foreclosure.

In another case, JP Morgan Chase said in April  it would pay $56 million to settle allegations it overcharged military families and improperly foreclosed on nearly a dozen service members.

Additional information can be found at VAMortgageFraud.com.

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About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.

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Foreclosures Up, Mortgage Delinquencies Steady Say Feds

A new report from the federal government tells us that foreclosures rose in the second quarter while delinquencies fell.

A review of 34 million mortgages representing 65 percent of all first-lien mortgages found that “after several quarters of declining performance, the overall credit quality of the portfolio of loans serviced by the largest national banks and thrifts remained steady during the second quarter of 2010 after showing some improvement last quarter. Mortgage delinquency levels remained elevated, and quarterly data show no discernible pattern of improvement in overall mortgage asset quality.”

The research was done by the Office of the Comptroller of the Currency and Office of Thrift Supervision.

Other key findings included:

  • During the second quarter, 87.3 percent of mortgages were current and performing–unchanged from the previous quarter but a decline from 88.6 percent in the same quarter a year earlier.
  • The number of mortgages that were seriously delinquent (60 or more days past due) and newly initiated foreclosures fell during the quarter to the lowest levels of the last 12 months, but were up from a year earlier.
  • Mortgages that were 30-to-59 days delinquent increased during the quarter, consistent with seasonal trends. Early-stage delinquencies increased across all risk categories from the previous quarter, but were down from a year earlier for prime, Alt-A, and subprime mortgages.
  • Servicers initiated more than 292,000 new foreclosure proceedings during the second quarter–the fewest new foreclosure proceedings of any of the previous five quarters.
  • Completed foreclosures, in which borrowers lost their homes, increased by 7 percent during the quarter to nearly 163,000–a 54 percent increase from a year earlier, as the large volume of seriously delinquent mortgages and foreclosures in process worked through the system.
  • Servicers implemented more than 504,000 home retention actions in the second quarter, including 273,000 new modifications–an 18 percent increase from the previous quarter — 138,000 new trial period plans, and 93,000 payment plans. This volume included almost 109,000 permanent modifications and 65,000 new trial period plans implemented under the Home Affordable Modification Program (HAMP). During the past five quarters, servicers implemented almost 2.9 million home retention actions — modifications, trial period plans, and shorter term payment plans.
  • More than 90 percent of the modifications implemented during the quarter reduced the borrowers’ monthly principal and interest payments, and 56 percent of them reduced payments by more than 20 percent. HAMP modifications made during the quarter reduced monthly payments by an average of $608. Other modifications made during the quarter reduced payments by an average of $307. On average, the reduction in borrower monthly payments as a result of modifications increased 62 percent from a year earlier.
  • The focus on sustainable and affordable monthly payments resulted in lower post-modification delinquency rates for more recent modifications. At six months after modification, about 32 percent of the modifications made in 2009 were seriously delinquent or in the foreclosure process, compared with more than 45 percent of modifications made in 2008. Performance of modifications made in 2010 suggests that this trend is continuing. At three months after modification, 11 percent of the 2010 modifications were seriously delinquent, compared with 20 percent for 2009 modifications and 32 percent for 2008 modifications.

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What’s A Qualified Mortgage In Real Estate

One of the better ideas to come out of the Wall Street Reform Act was to create something called a “qualified residential mortgage.” You want to know about such financing because most lenders will offer nothing else — and that’s good news for borrowers.

Under Wall Street reform several federal agencies are supposed to work out a final definition of the term “qualified residential mortgage” or QRM. However, we largely know how such loans will be defined because of the requirements of legislation.

Qualified Mortgage Standards

In basic terms, a qualified residential mortgage looks like this:

  1. The loan application must be fully documented. Income and employment claims must be verified. (Kiss goodbye to “no doc” and “lo doc” loan applications.)
  2. For fixed rate mortgages, the borrower must be qualified on the basis of monthly costs for mortgage interest, mortgage principal, property taxes, property insurance and related assessments (think of condo fees, mortgage insurance, etc.)
  3. For adjustable-rate mortgages, the borrower must be qualified at the highest rate possible during the first five years of the loan term.
  4. If the lenders knows or thinks that the property will be financed with a second loan, the lender must qualify the borrower on the basis of the combined loan costs. In other words, simultaneous second and piggy-back loans are fine as long as the borrower qualified for the total debt.
  5. Requires a six-month notice before the start rate for an ARM can be changed.
  6. The loan term cannot be more than 30 years.
  7. The debt-to-income ratio cannot generally exceed 43 percent.
  8. Points and fees are limited to 3 percent of the initial loan amount when more than $100,000 is being financed. Higher percentages are allowed for smaller loans, reverse mortgages and home equity lines of credit.
  9. To establish an interest rate most lenders will not charge more than 1.5 percent above the Average Prime Offer Rate.
  10. Allows prepayment penalties for qualified loans — but not for loans which are not qualified. The maximum prepayment penalty will be 2 percent the first year, 2 percent the second year and 1 percent the third year.
  11. Bans lenders from requiring single-premium credit life and similar products.
  12. Bans lender requirements for mandatory arbitration
  13. Requires substantially-equal monthly payments with no balloon payment at the end of the loan term.

So, generally, a qualified residential mortgage is a conventional, FHA or VA loan that requires three or fewer points for fees and points at closing and is underwritten with a full-docs loan application.

I say “generally” because there are some exceptions to the rules and likely there will be more when the final definitions are unveiled.

What’s clear, however, is that lenders who offer mortgages outside the guidelines will face significant liability, so much so that you can already see changes in the financing marketplace. If you don’t believe it just try and find an option ARM….

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9/11 — Nine Years Later

We all remember such days. We remember where we were when we first heard of the deaths of John Kennedy, Robert Kennedy, and Martin Luther King. We remember when we heard of the Oklahoma City bombing and those who are older surely remember Pearl Harbor.

And now, until the end of our lives, we will remember September 11th.

In the U.S., at least, such terrible days are not frequent. We are insulated from genocide, civil war, and famine. Suicide bombers are a rarity rather than a daily event. We do not have hostile nations at our borders. Considering the full term of human history and looking around the globe, we live remarkably well.

Unlike any number of countries, we have a government which does not torture its citizens. We voice political opinions without fear. Our government does not tell us where to live, what job to hold, or which religion to prefer. As someone once expressed very well, no one cares what book you read, what day you pray, or if you pray at all.

As a nation we have our arguments and disputes. We have racism. We have faults.

And yet we understand that whatever our differences, we do better together than apart. We realize that debate and friction are necessary, and we act together as a nation not because we agree on everything, but because we have learned to channel disagreements without destroying the fabric of our society. Few nations, as an example, could have endured the close presidential contest we saw last year — a matter settled without the need to call up a single soldier.

The Nature of Terrorism

Blowing up civilian planes and buildings is terrible, barbaric and horrifying. The victims are wholly innocent.

Terrorists know this. The whole point of terror is that it’s illogical, unpredictable, unfair, and inhuman. It’s an effort by the few to cow the many.

What terrorists don’t understand is that a bombing, no matter how horrific, will not end our common purpose. The U.S. will be hardened by the events now taking place in New York and Washington, and no one will forget what has happened. Not since World War II has there been a greater sense of national unity.

Pearl Harbor is the immediate parallel which comes to mind when considering the events of the past week. The surprise Japanese attack on December 7, 1941 resulted in the murder of thousands of individuals and massive destruction.

But as Japanese Admiral Isoroku Yamamoto said after the attack, “We have awakened a sleeping giant and have instilled in him a terrible resolve.”

By June, 1942 — just seven months after Pearl Harbor — the U.S. Navy won the Battle of Midway, an event which largely ended Japan’s ability to control the seas. Never again would Japan pose a threat to the U.S. mainland.

Perspective

As bad, as awful, as frightening as the events of the past week have been, as terrible as the personal losses experienced by so many, we remain the world’s most-powerful nation. Our farms and factories are productive. Ninety-five percent of our people are employed. Homes are being bought and sold, and loans are being made. Grocery stores are filled, electricity flows, TV and radio stations are on the air, schools are open, government offices are busy, newspapers are being published, and the nation’s business is being done.

Now as before, we are a great and powerful nation, and we are a democracy.

A Caution

News reports and online postings are filled with descriptions of the perpetrators of last week’s attacks as “Arabs” and “Moslems.” But in this matter let us be careful not to generalize, not to condemn people on the basis of their group identity. Our fight — the fight that has been brought to us — is only with those individuals, groups, and governments that seek our destruction.

Our Strength

What is to come will not be easy and it will not end quickly. We are at war, but rather than fighting for land, oil, or power, the issue is culture — the existence or destruction of the modern society we represent and the values that terrorists despise.

The good news is that we have much on our side, we are not defenseless. Each day people worldwide can see the benefits of a society where education, medicine, science, security, entrepreneurship, and technology are valued.

Our most potent weapon in this battle is the ongoing spread of modern culture and the political democracy and pluralism it requires. But while it’s hard to imagine, huge numbers of people do not have access to information and ideas simply because basic technology is unavailable to them.

“There are 1 billion telephones in the world and the 48 least developed countries have some 1.5 million of them,” says the United Nations.

“More than 50 per cent of the world’s people have never made a phone call,” according to the U.N.

Think of it this way: If our world population includes six billion people, then three billion have never placed a phone call. Is a diversity of ideas possible, is progress plausible, in an environment where free access to information does not exist?

As more and more people are connected to one another via television, satellite, telephone, and the Internet, it will become increasingly difficult for even the most remote populations to ignore the benefits of modern civilization. It’s an appeal no terrorist can contain, and a threat to repressive governments everywhere.

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(Published originally on September 18, 2001 by Realty Times and republished with permission. Photo copyright 2000 Peter G. Miller, all rights reserved.)

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Why Foreclosure Prevention Is Not Enough

Fannie Mae has opened a new consumer education site which it says “outlines the choices available to homeowners who are struggling with their mortgage payments, and provides guidance on how they can contact and work with their mortgage company to find solutions.”

The site, Know Your Options.com, has the usual bells and whistles for a modern site and includes sections devoted to refinancing, repayment plans, forebearance, modification, short sales, deed in lieu of foreclosure and a deed-and-lease back plan.

The site also has some useful and nicely-laid out forms such as a financial checklist and a contact log. There is, of course, lots of advice against walking away from your home, a so-called strategic default.

“Through foreclosure prevention programs, borrower outreach, underwriting guidelines and servicer engagement, Fannie Mae is taking a comprehensive approach to helping struggling borrowers,” says Jeff Hayward, a Fannie Mae senior vice president. “Identifying accurate resources and finding the right answers can be a difficult challenge for borrowers facing hardship and a flurry of disparate, incomplete and sometimes fraudulent information. Know Your Options is the company’s newest effort to reach distressed homeowners and is designed to bring the best information and guidance together in one place so that struggling borrowers can focus on finding solutions that work for their particular circumstances.”

[pullquote]Where is the parallel site for would-be borrowers who have yet to have an encounter with lenders? [/pullquote]

What’s Missing

The new Fannie Mae site has some valuable information and the site itself is certainly well-designed. That said, where is the parallel site for would-be borrowers who have yet to have an encounter with lenders? Why wait until someone faces foreclosure before providing valued consumer information? Why not have warnings and red flags in place to help borrowers at the beginning of the mortgage process?

The new Wall Street Reform Act provides a perfect platform for Fannie Mae and other major players in the mortgage arena to openly tell the public that we now have such a thing as a qualified residential mortgage. In basic terms that’s a conventional, FHA or VA mortgage underwritten with a fully-documented loan application, a mortgage where prepayment penalties are limited to the first three years of a fixed-rate mortgage and banned for ARMs. A qualified residential mortgage is also a loan with fewer than 3 points and where the lender has an obligation to assure that the borrower is receiving a net tangible benefit.

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A History of the AOL Real Estate Center

How did it all begin?

It was back in 1991 that I wrote the cover story for Home Computing magazine. And there, toward the back of the magazine, was an ad for a small Internet provider, what is now called America Online.

I had written about electronic bulletin boards for an advertorial in The Washington Post and online services seemed to be the next step. Their advantage was that the use of graphics created a system anyone could use.

So, I called AOL, at that time in Tyson’s Corner, Virginia, just outside Washington, DC, and asked to speak with the company president. In short order I had a guy named Steve Case on the line and asked if he would like a real estate section. Soon thereafter we met, had lunch at a nearby deli with a circus motif and the deal was done: I would be with AOL.

It took a little time to understand the back-end of the system and to operate the features offered by AOL, but in early 1992 the Real Estate Center on America Online was launched, with me as the creator and host. It was then that I adopted the online name, OurBroker.

I, of course, had very little idea where this would go. AOL at the time had about 120,000 members and the servers were actually the machines banks used to operate ATM networks.

  • Area usage was enormous, Annual site visits — not just “hits” — were well into seven figures, and the sheer size and activity of the area clearly influenced the development of real estate sites across the Internet. And remember, this was at a time when the Internet was a small fraction of what it is today in terms of users and usage.
  • The area created one of the first online MLS services. Judging from comments received, this was likely the first time attorneys contacted state regulators to determine the acceptability of an online MLS. This was important because at the time regulations in several states said only newspapers and real estate brokers could show properties for sale.
  • The area developed the largest non-commercial real estate message boards online, boards holding some 60,000 messages at any one time, a place where consumers and professionals could get information, exchange ideas, and debate issues. The actual number of messages was far greater, but the system was cleaned almost daily.
  • The area developed online rules and guidelines which allowed people with a variety of views and interests to interact. Over the years many state regulators have applauded the value and utility of these standards.
  • The area was open to brokers and non-brokers, MLS officials and self-sellers, lenders and borrowers, folks with questions and experts who could provide answers.
  • We received thousands and thousands of “thank you” messages from both consumers and professionals.
  • We had a live, weekly online chat. It was a great place to “meet” people from all over the country you would otherwise never know.
  • Many, if not most, of the leading online real estate areas today were started by people who began with AOL and adopted the ideas and standards found in the real estate area.
  • The area included a Board of Advisers composed of people from across the country with enormous expertise and a willingness to share ideas and information without pay or compensation. I often thought that Board members were active with us because they saw involvement in the area as a kind of pro bono effort to assist the public.

My association with AOL ended in 1998, a time when the company had tens of millions of members. For me, it had been great.

I have always been grateful to Steve Case for his insight, decency, and belief that the Internet could change the world.

Years ahead of the curve he was surely right.

Reviews

Over the years we were lucky enough to hear from a number of reviewers. Here are some of the reviews we received.

Loads of advice and information give home-sellers and buyers an edge in real estate deals,” Christian Science Monitor, June 15, 1998.

One of the 10 “best spots of the Web for financial info and advice,” Ten for the Money, Verge magazine, Summer, 1997.

“There are more than 15,000 real estate Web sites in the naked cybercity. This one is among the best,” San Jose Mercury News (“VRE Web site to see: OurBroker’s fast lane to real estate data,” August 16, 1997).

“Remember the Internet’s simpler days,” asked the Mercury News, “when you went surfing for hard copy and didn’t get wiped out by interminable waits for graphics-laden screen redraws? Then you’ll appreciate the OurBroker Real Estate Information Center. No dancing icons, fade ins or fade outs, blinking, winking, lashing or splashing, just lots of raw real estate data without the fat makes for smooth surfing to valuable real estate content.”

“The best location, bar none, can be found on America Online’s Real Estate Online Forum.” Surreal Estate, NetGuide, April, 1995.

“The best online forums and home pages seem to have one thing in common: an intelligent, dedicated sysop who doesn’t mind spending an unthinkable amount of time in front of a computer. America Online has found that in Peter G. Miller.(How to Buy or Sell Your Home Online, Money (Online Edition), August, 1995.

“Author, real estate broker and all-around real estate expert Peter Miller understood long before most of us that real estate was made for the online revolution. He jumped onto the early days of the America Online bandwagon and began offering a feast of real estate-related services,” Thoughts From Online Real Estate Pioneer, Inman News Features (September 9, 1996), an online real estate news service.

“Miller responds to every e-mail and has served as an ethics official, cheerleader and pundit for on-line property ventures,” says Inman. “He is stubborn and sometimes suspect of new ideas, but for the most part he is credited with legitimizing the on-line real estate world.”

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Did Condominiums Really Start In Rome?

Did Caesar and Nero really rule in a city filled with condominiums?

Search through the Internet and the unavoidable answer is largely yes, but in fact there were no condos along the Tiber or near the Coliseum at the height of the empire.

Don’t believe it?

Get out your copy of the Oklahoma City University Law Review, the one from Spring 1987 and there we can find a thorough examination of the subject by Professor Robert G. Natelson.

In an article entitled Comments on the Historiography of Condominium: The Myth of Roman Origin, Professor Natelson says “the truth of the matter has never been a secret to serious legal historians, and the works of those historians have been freely available in America for many years. What is astonishing is the extent to which American legal writers have overlooked the conclusions of those historians, neglected the original source materials, and cited each other back and forth in a curious roundelay of error. Those conscientious few who have been skeptical of the fable of Roman condominiums, and have cautioned against undue credulity, have in turn been misquoted and misunderstood themselves.”

Natelson says that while there was space occupancy by floors and apartments that does not mean there was space ownership by apartments or floors.

Natelson points out that “perhaps the most serious legal bar to condominium in ancient Rome was the juristic attitude toward horizontal property ownership. This attitude is summed up in the much-cited maxim ‘superficies solo cedit,’ which, translated literally, means ‘an improvement yields to the soil,’ and, translated freely, means ‘title to things connected to the ground is vested in the owner of the ground.’”

Brian Madigan, an attorney and real estate broker with Royal LePage Innovators Realty in Ontario, offers a similar view. In Condominiums: From Ancient Rome!, Madigan says:

  • “There were no condominiums in ancient Rome.”
  • “There was nothing like the horizontal ownership of real property.”
  • “No Latin scholars have found original sources to support the theory.”
  • “This type of property ownership was not used in the middle ages when Roman Law was the trend in Europe.”

Rome is a wonderful place with terrific art, lots of plazas, exceptional food and great monuments. The historical sites are remarkable. But was it the place where condos could be found many centuries ago? Nope. That’s just an old and untrue tale.

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American Homes Keep Getting Bigger

HUD has come out with a new housing survey and not surprisingly it finds that “U.S. homes today are bigger with more bedrooms and bathrooms than 1973.”

HUD’s 2009 American Housing Survey (AHS) also tells us that most families with young children live within a mile of a public elementary school. The most common home heating fuel in the U.S. is gas. Only a third of American homes have a working carbon monoxide detector.

First conducted in 1973, the survey’s long-term design allows analysts to trace the characteristics of U.S. housing units and their occupants. For example, the 2009 survey reveals that significantly more American homes are larger and have more bedrooms and bathrooms than homes 37 years ago. In addition, homes of 1973 were significantly less likely to have central air conditioning and other amenities considered commonplace today.

HUD says:

  • There are 130,112,000 residential housing units in the U.S.; 86 percent of these are occupied.
  • Sixty-eight percent of U.S. homes are owner-occupied.
  • Fifty-one percent of all U.S. homes are located in suburban areas; 29 percent in central cities; and 20 percent outside metropolitan areas.
  • The median age of ‘the American home’ is 36 years, though the survey finds that homes newly constructed since the 2007 AHS are generally larger, more expensive, have more bedrooms and bathrooms, and are more likely to include amenities such as central air conditioning.

More from the HUD study:

Unit Size

The median size of a home was 1,610 square feet in 1973. Newer homes now have a median size of 2,300 square feet.

Median lot size for single-family homes, including mobile homes, is 0.27 acres (compared to .36 acres in 1973) with owner-occupied units generally having more land than renter-occupied ones.

Rooms

Most homes (53 percent) have six or more rooms, with owner-occupied units generally having more rooms than renter-occupied ones. In 1973, only 39 percent of homes had six or more rooms.

Newly constructed homes generally have more rooms – 65 percent have six or more rooms.

Most homes have three or more bedrooms (64 percent compared to just 48 percent in 1973). New homes generally have more bedrooms – 80 percent of them have three or more bedrooms.

More than half of U.S. homes (51 percent) have two or more bathrooms compared to just 19 percent in 1973. Again new units have more bathrooms, with 89 percent of them having two or more bathrooms.

Equipment

All units have a refrigerator and kitchen sink and almost all homes (99 percent) have a cooking stove or range. Overall 98 percent of units have a full kitchen.

The most commonly used cooking fuel is electricity (60 percent) followed by piped gas (35 percent).

Two-thirds of the homes (66 percent) have a dishwasher, 51 percent have a disposal in the kitchen sink and three percent have a trash compactor. New units are more likely to have these amenities.

More than eight in ten homes have a washing machine (84 percent) and clothes dryer (81 percent).

About two-thirds of U.S. homes (65 percent) have central air-conditioning and another 21 percent have window units – new units are more likely to have central air-conditioning (89 percent). By contrast, only 17 percent of U.S. homes had central A/C in 1973 although 30 percent contained window units.

About nine in 10 homes (93 percent) reported a smoke detector while 36 percent reported having a working carbon monoxide detector.

Heating

About two-thirds of U.S. homes use warm-air furnace for heating; 12 percent use an electric heat pump; and 11 percent use steam or hot water system.

The most commonly used home heating fuel is piped gas (51 percent) followed by electricity (34 percent), though new units are more likely to use electricity.

Plumbing

Almost all units (99 percent) have complete plumbing facilities.
The most commonly used fuel for heating water is piped gas followed by electricity.

More than eight in ten units (88 percent) receive water from a public system or private company, and the remaining units received water from wells.

More than nine in ten households rated their water as being safe.
Eight in ten units use the public sewage disposal system and 20 percent use a septic tank, cesspool or chemical toilet.

Amenities

Most homes have a telephone (98 percent), porch, deck, balcony or patio (85 percent) and a garage or carport (66 percent).

About half (48 percent) have a separate dining room and three in ten units (30 percent) report two or more living rooms or recreation rooms.

About one-third (35 percent) have a usable fireplace.
New construction is more likely to have all these amenities.

Neighborhood

Ninety-five percent of units are located close to a grocery or drug store, and 97 percent of residents with access were satisfied with the stores near them.

Slightly more than half of U.S. homes (54 percent) are located near public transportation, with about seven in ten of the residents (71percent) living in these units saying that they live within a 10 minute walk to such transportation. However, just 17 percent of households living near public transportation report using it for commuting or school.

Most communities (90 percent) do not have secured entrances, though new construction is more likely to be in secured communities.

Residents, overall, were satisfied with police protection in their communities (91 percent).

Most residents reported that their neighborhoods did not have vandalized buildings (88 percent), barred windows (84 percent), and trash, litter or junk (89 percent).

However, 40 percent of residents said that their streets needed repairs.

Nearly half the households (45 percent) had access to community amenities such as a community center or clubhouse, trails, golf, daycare, shuttle bus or private beach or park area.

Noise from traffic was a problem reported by almost one-quarter of residents (23 percent), though fewer resident of new construction found this to be a problem (15 percent).

Six in ten households with children under the age of 14 years (60 percent) said that there was a public elementary school within one mile of their homes.

Less than one in ten households with someone 55 years or older (7 percent) reported living in an age-restricted community.

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The Real Meaning of July 4th

Each year on Independence Day the U.S. is filled with parades, fireworks and hot dogs. July 4th is a great day to celebrate.

The founding of the United States was a tremendous change from the governments and institutions of the time. Based in part on the writings of such philosophers as John Locke and Thomas Hobbes, the Founders believed that government derives its power from the governed, that government power is limited, and that individuals are entitled to certain rights as an matter of citizenship.

England at the time of the revolution was the super-power of its day and the colonies were largely a collection of farms and hamlets located near the Atlantic coast. Opposition to English authority was not a matter undertaken lightly and many in the colonies did not support the revolution. Along with others in the Revolutionary War, the small group of Founding Fathers literally risked their lives, their fortunes and their sacred honor to create a better form of government. For some, the decision to sign the Declaration of Independence would mean impoverishment, ruin and imprisonment.

The experiment which started with the signing of the Declaration of Independence was hardly perfect, whatever “perfect” might define. Woman certainly did not have equality and the revolution permitted the practice of slavery. As St. George Tucker explained in 1796:

“Whilst America hath been the land of promise to Europeans, and their descendants, it hath been the vale of death to millions of the wretched sons of Africa,– he wrote. “The genial light of liberty, which hath here shone with unrivalled lustre on the former, hath yielded no comfort to the latter, but to them hath proved a pillar of darkness, whilst it hath conducted the former to the most enviable state of human existence. Whilst we were offering up vows at the shrine of Liberty, and sacrificing hecatombs upon her altars; whilst we swore irreconcilable hostility to her enemies, and hurled defiance in their faces; whilst we adjured the God of Hosts to witness our resolution to live free, or die, and imprecated curses on their heads who refused to unite with us in establishing the empire of freedom; we were imposing upon our fellow men, who differ in complexion from us, a slavery, ten thousand times more cruel than the utmost extremity of those grievances and oppressions, of which we complained.”

More than two hundred years later we continue to debate how government is best organized and operated, yet the ideas and systems set in motion during the summer of 1776 remain central to us today. As Franklin Roosevelt said in 1941, “since the beginning of our American history, we have been engaged in change — in a perpetual peaceful revolution — a revolution which goes on steadily, quietly adjusting itself to changing conditions — without the concentration camp or the quick-lime in the ditch.”

Enjoy the 4th, be safe, speak to your children about our history — and please use the links below and visit our historic places.

Our Founding Documents
The Declaration of Independence
The Constitution of the United States

The Signers
The Signers of The Declaration of Independence
The Price They Paid

Important Notions
The English Bill of Rights
Civil Disobedience by Henry Thoreau
Common Sense by Thomas Paine
The Federalist Papers
Inaugural Address, John F. Kennedy, 1960
A Second Bill of Rights, Franklin Roosevelt
The Four Freedoms, Franklin Roosevelt
Give Me Liberty Or Give Me Death, Patrick Henry (As recorded by Henry St. George Tucker)
The Gettysburg Address by Abraham Lincoln
The Leviathan by Thomas Hobbs
The Writings of John Locke

Historic Places
The White House
The Capitol Building at Washington
The Supreme Court
Federal Hall, New York City
Independence Hall
Washington’s Mount Vernon
Jefferson’s Monticello
Colonial Williamsburg

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Published originally in part by Realty Times in 2001 and posted with permission.

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Should We Tax Our Vets?

The IRS has created an excellent Web page — Tax Information for Members of the U.S. Armed Forces — which explains tax issues for those now on active duty. There are a huge number of rules, most of which greatly benefit those now fighting overseas.

But when you look at the forms, deductions, exceptions, alternatives, and deadlines you have to wonder: Why are we asking military people to pay taxes at all?

Conservatives often believe that taxes should be reduced because cash is the fuel which permits government expansion — cut tax revenues and you also cut the size of the government. As well, many conservatives believe that since the rich pay most of the taxes, they should benefit most from reductions, reductions which will fuel economic growth in general. Liberals routinely argue that tax cuts are fine as long as they are “revenue neutral” and benefit the poor and middle classes, the folks with the fewest economic choices.

If there is an itch to cut taxes and enjoy the wonders of growing deficits, why not please both conservatives and liberals and do something which actually makes sense: End the taxation of military incomes.

We don’t pay much to members of the military in terms of cash salaries and that’s absurd — leading officials at Freddie Mac, Fannie Mae, Enron, Wall Street “analysts,” and trial attorneys have been far-better compensated and look how much they have helped the country. It seems terribly short-sighted to believe that we can combine an all-volunteer military with a minimum wage and continue to attract an ongoing stream of qualified personnel to do the country’s important and dangerous work.

So why not make all military wages go further? Increase military pay now, today, by simply making it tax free. No forms, no deductions, no deadline, no accountants, no exceptions and no paperwork. The value of military salaries would automatically rise, making service more attractive. And for those who favor fewer dollars for government, a tax cut for service personnel in the armed forces would do just that.

Tax-free military incomes would make federal service more attractive and lift many military families out of poverty — a national disgrace. In terms of real estate, combine a tax-free income with VA mortgages and members of the military could afford bigger mortgages and better housing — results which benefit us all. And while we’re at it, let’s gut home sale regulations which unfairly tax members of the military stationed overseas for lengthy periods.

So write your nearby representative or senator and see what they have to say — it will be interesting to see who opposes an idea which is no more than a decent thing to do and in the country’s best interest.

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Published originally by Realty Times on April 22, 2003 and posted with permission.

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