I have been involved in some really heated discussions on Facebook relating to health care and insurance. And of course I had to spend some time thinking about it all, of course after posting lots of stuff that was just off the top of my head. After some considered thought, here are a couple things you might think about.
First - As children we are programmed to be socialists: You can't have that unless you brought enough for everyone. We have to share. And a hundred other similar comments. Is this a bad thing? I think it probably is, because it programs us at an early age in a way that might not be appropriate for survival in a capitalistic society. When we later see that someone has something we like, and they aren't sharing it with us, do we feel resentful? Jealous? "Why didn't they bring enough so I can have one, too?"
Maybe this sort of thing is appropriate when we are talking about cookies, but it is not when we talk about laptops or cars. As an NLP practitioner, I can tell you that the unconscious mind will not make any distinction! So this preschool programming is a bad idea.
Second - Insurance is a socialistic thing. Premiums are gathered from everyone, and the "beneficiaries" get paid for their trouble. We all pay for a small group's misfortune. Perhaps it is a good business decision to buy insurance. More on that in a moment. The other side of insurance is that it is necessarily a profitable business, if run correctly. An insurance company must hold massive amounts of wealth in order to guard against a rainy day. Therefore an insurance company (aside from the "side business" of actually insuring) is really a massive investment vehicle for the insurance company stockholders, who by the virtue of the business model, profit from investing other people's money, without being accountable to them because the customers do not expect to get their money back unless a catastrophe occurs.
Finally, let's talk about health insurance. I think it is a different animal than say, car insurance or homeowner's insurance. Why? because health insurance (for the most part) is not catastrophe insurance, as it is implemented by most employers today.
Car insurance pays when you have an accident. You don't go out looking to get in an accident, and you don't usually spend the insurance company's money trying to not have an accident as you drive around (Insurance companies may invest money doing this, like Geico did when they funded some radar guns in the past). Pretty much we dread getting in accidents, and we dread having our home get damaged, or robbed, or vandalized.
The difference with most health insurance plans is that we are almost encouraged to go to the doctor for the smallest thing. After all, it is just a $10 co-pay. Why not go spend a hundred bucks of insurance company money, it only costs me 10, and who knows, this headache might be a tumor, and besides I need some time away from the office.
I worked in corporate America for many years and this is exactly the attitude many people had, at the several places I worked.
You can see how this entitlement mentality could cost insurers lots and lots -- reflected in increased premiums for everyone.
I'm one of those people who has to be near death to actually go to a doctor. I've been blessed with excellent health, and I see a physician on the average of once or twice a year. And it comes out of my pocket, because my insurance plan has a huge deductible and no co-pay. I go, I pay. And, being self-employed, time away from work is time not making money.
So I think the very nature of most health insurance is different from most other insurance. There are two simple things which can change this. First, we need to de-couple employment and health care. Employers should not offer health care. This should be something a person makes their own decision about and buys on the open market. Second, no co-pays, no prescription drug plans, none of that. Insurance pays, after your deductible, the amount of the loss. Just like home owner's insurance. This puts a dis-incentive in place to be sick. It should be as massively inconvenient to be sick as it is to be in an accident or have your home robbed, if you want to insure against it.
What about the people who cannot afford health insurance? This is a harder question. Today, in the United States, if you show up at an ER, for the most part, you will get treated. Should the government pay for it, should they be involved? I don't think so! Let's look at it another way. If you think that it is the job of the government to provide a health benefit for everyone, then what about a basic housing benefit and a basic food benefit? Is it any different? What is means is that those of us who choose to work and pay taxes will support those people who are either unwilling or unable to work. The government, at least the federal government, has no place doing these things.
Bottom line: We live in a capitalistic society. That means that there will be winners and losers. We should create incentives for people to try and win. Offering things for free, or that other people pay for, is not an incentive. I have no incentive to conserve energy when I stay in a hotel. The price is the same whether I set the thermostat on 60 or 75. Insurance should create an incentive to NOT use it. No co-pays. You go, you pay.
Patrick
Monday, August 31, 2009
Thursday, August 27, 2009
PFTA: AN ALARM, NOT A SOUND, FOR RESIDENTIAL VULTURE INVESTORS TO HEED
So, I hear you’re scooping up all the cheap residences around the Valley and planning to toss the tenants who look like “questionable” renters, based on the condition they’re keeping the property in, right? Oops. The Protecting Tenants at Foreclosure Act of 2009 (PTFA), part of the Helping Families Save Their Homes Act of 2009 (Pub. L. 111-22, approved May 20, 2009), requires that tenants residing in foreclosed residential properties be provided notice to vacate at least 90 days in advance of the date on which you want to have the tenants vacate your new property. Except where the purchaser will occupy the property as his/her/their primary residence, the term of any bona fide lease also remains in effect for the balance of the term. Oops, some more - but read on.
With the unprecedented number of foreclosures, tenants often were caught unaware that the residential property in which they reside was being foreclosed and were given little notice of the need to vacate the property. The objective of these new protections is to ensure that tenants receive appropriate notice of foreclosure and are not abruptly displaced.
Sections 702 and 703 define the scope of PFTA's coverage over residential properties. The Section 702 requirements to provide tenants with at least 90 days' advance notice to vacate and to preserve the term of any bona fide lease apply to foreclosures on all Federally related mortgage loans or on any dwelling or residential real property. Section 703 makes conforming changes consistent with the Section 702 requirements to the Section 8 rental voucher assistance provisions of the United States Housing Act of 1937 (1937 Act). (All these provisions “sunset” on December 31, 2012, by the way.)
The American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5, approved February 17, 2009) (Recovery Act) contains similar protections under the heading "Community Development Fund" in Title XII of Division A, which applies to emergency assistance funding provided for the Neighborhood Stabilization Program, if you want to read more about that.
Let’s focus on the coverage of Section 702 in this post – that coverage is very broad. Section 702 applies, commencing after May 20, 2009, to "any foreclosure" on (1) a federally related mortgage loan, or (2) any dwelling or residential real property. Section 702 provides that "federally-related mortgage loan" has the same meaning as that provided in section 3 of the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. 2602).
The definition of federally-related mortgage loan is very broad in RESPA, but federally-related mortgage loans represent only part of Section 702's coverage. Section 702 further covers "any dwelling or residential property," and that extends the requirements to all residential property foreclosures, regardless of type or entity involved in the foreclosure, no matter whether the tenants receive any type of housing assistance.
The tenants to whom the notice must be provided must be bona-fide tenants, as this term is defined in Section 702(b). Section 702(b) defines “bona fide lease or tenancy,” and under this definition, bona fide tenants do not include the mortgagor or the child, spouse or parent of the mortgagor. (See 702(b)(1)) With respect to the lease, Section 702(b)(2) and (3) provide that a bona fide lease or tenancy must have been the result of an arms-length transaction, and the lease or tenancy requires the receipt of rent that is not “substantially less”(whatever that means these days) than fair market rent for the property or the unit's rent is reduced or subsidized due to a federal, state, or local subsidy. Section 702(a)(2)(B) clarifies that the protections provided by this new law are minimum protections and do not supersede any greater protections (longer advance notice or additional protections) provided by state or local law. California’s got a law on the books already, I understand.
So, here’s when the requirement of Section 702 to provide at least 90 days notice to tenants applies:
(1) The advance notice applies to tenants in any foreclosed dwelling or residential real property, regardless of the type of loan or other security interest on the property.
(2) An advance notice of 90 days is the minimum period of notification. A longer period may be provided, for example, if greater protections are provided by state or local law.
(3) Responsibility for providing the advance notice to tenants falls on the immediate successor in interest of the property, which usually is the purchaser.
(4) The notice must be given to anyone whom, as of the date of the notice of foreclosure, is a bona fide tenant, whether or not there is a lease.
In addition, Section 702 provides that a tenant under any bona fide lease entered into before the notice of foreclosure has the right to occupy the premises until the end of the remaining term of the lease. The only exception to preserving the remaining term of the lease is for a purchaser who will occupy the unit as a primary residence. Even under this exception, however, the tenant must still be provided with the 90-day advance notice to vacate.
Once again, the lease or tenancy must meet the following requirements to be "bona fide" for purposes of Section 702 applying:
(1) The tenant cannot be the mortgagor or the child, spouse, or parent of the mortgagor,
(2) The lease or tenancy must be the result of an arms-length transaction, and
(3) The rent required under the lease cannot be substantially less than “fair market rent” for the property or the rent is subsidized by a federal, state or local subsidy.
So, cagey residential investor, scoop away, but don’t salivate over the forthcoming “rent bumps” until you check your compliance obligations under these federal statutes and any that Arizona may pass that are even more stringent.
-MNW
With the unprecedented number of foreclosures, tenants often were caught unaware that the residential property in which they reside was being foreclosed and were given little notice of the need to vacate the property. The objective of these new protections is to ensure that tenants receive appropriate notice of foreclosure and are not abruptly displaced.
Sections 702 and 703 define the scope of PFTA's coverage over residential properties. The Section 702 requirements to provide tenants with at least 90 days' advance notice to vacate and to preserve the term of any bona fide lease apply to foreclosures on all Federally related mortgage loans or on any dwelling or residential real property. Section 703 makes conforming changes consistent with the Section 702 requirements to the Section 8 rental voucher assistance provisions of the United States Housing Act of 1937 (1937 Act). (All these provisions “sunset” on December 31, 2012, by the way.)
The American Recovery and Reinvestment Act of 2009 (Pub. L. 111-5, approved February 17, 2009) (Recovery Act) contains similar protections under the heading "Community Development Fund" in Title XII of Division A, which applies to emergency assistance funding provided for the Neighborhood Stabilization Program, if you want to read more about that.
Let’s focus on the coverage of Section 702 in this post – that coverage is very broad. Section 702 applies, commencing after May 20, 2009, to "any foreclosure" on (1) a federally related mortgage loan, or (2) any dwelling or residential real property. Section 702 provides that "federally-related mortgage loan" has the same meaning as that provided in section 3 of the Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. 2602).
The definition of federally-related mortgage loan is very broad in RESPA, but federally-related mortgage loans represent only part of Section 702's coverage. Section 702 further covers "any dwelling or residential property," and that extends the requirements to all residential property foreclosures, regardless of type or entity involved in the foreclosure, no matter whether the tenants receive any type of housing assistance.
The tenants to whom the notice must be provided must be bona-fide tenants, as this term is defined in Section 702(b). Section 702(b) defines “bona fide lease or tenancy,” and under this definition, bona fide tenants do not include the mortgagor or the child, spouse or parent of the mortgagor. (See 702(b)(1)) With respect to the lease, Section 702(b)(2) and (3) provide that a bona fide lease or tenancy must have been the result of an arms-length transaction, and the lease or tenancy requires the receipt of rent that is not “substantially less”(whatever that means these days) than fair market rent for the property or the unit's rent is reduced or subsidized due to a federal, state, or local subsidy. Section 702(a)(2)(B) clarifies that the protections provided by this new law are minimum protections and do not supersede any greater protections (longer advance notice or additional protections) provided by state or local law. California’s got a law on the books already, I understand.
So, here’s when the requirement of Section 702 to provide at least 90 days notice to tenants applies:
(1) The advance notice applies to tenants in any foreclosed dwelling or residential real property, regardless of the type of loan or other security interest on the property.
(2) An advance notice of 90 days is the minimum period of notification. A longer period may be provided, for example, if greater protections are provided by state or local law.
(3) Responsibility for providing the advance notice to tenants falls on the immediate successor in interest of the property, which usually is the purchaser.
(4) The notice must be given to anyone whom, as of the date of the notice of foreclosure, is a bona fide tenant, whether or not there is a lease.
In addition, Section 702 provides that a tenant under any bona fide lease entered into before the notice of foreclosure has the right to occupy the premises until the end of the remaining term of the lease. The only exception to preserving the remaining term of the lease is for a purchaser who will occupy the unit as a primary residence. Even under this exception, however, the tenant must still be provided with the 90-day advance notice to vacate.
Once again, the lease or tenancy must meet the following requirements to be "bona fide" for purposes of Section 702 applying:
(1) The tenant cannot be the mortgagor or the child, spouse, or parent of the mortgagor,
(2) The lease or tenancy must be the result of an arms-length transaction, and
(3) The rent required under the lease cannot be substantially less than “fair market rent” for the property or the rent is subsidized by a federal, state or local subsidy.
So, cagey residential investor, scoop away, but don’t salivate over the forthcoming “rent bumps” until you check your compliance obligations under these federal statutes and any that Arizona may pass that are even more stringent.
-MNW
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