The New MBAs

I read an interesting article today in BW regarding how the Class of 2009 of the new crop of MBAs is doing and the situation was not pretty. Even the ones who graduated from top schools are finding it hard to locate Jobs. This is because most of them use to go the financial sector. But thanks to this recession two of the investment banks are gone for good, one has been acquired by another Bank and the remaining two are now bank holding Companies.

So the prospective MBAs are jockeying for jobs.

When I graduated from my Business School in the early 1990s, U.S. use to produce almost 60,000 MBAs per year. But now the figure has jumped to more than 140,000.

As anybody with even a minimum knowledge of Economics knows that the more of one thing makes it value goes down and this is what is happening in the MBA world too.

One question now which enters my mind is are we really producing more MBAs than we need?. MBAs were supposed to be the cream of the crop back a few years but now with the economic crisis and new criticism of how these Business schools have been focusing too literally on the theoretical side of the market and not enough on the humanistic side, we really need to evaluate the number of MBAs we are churning out.

I have another question as everybody knows the doctors study their ass off to become doctors studying for almost 10 years after High School to become one but their pay is so far less than the MBAs. I mean with so much education and so less pay as compared to the MBAs. I believe now that we should make it a bit harder for students to enter the Business school. To be sure I am not saying this just because I have an MBA (mind you I working towards my second undergraduate degree) but this may increase the value of the MBA in the eyes of the employer. More school does not mean more pay but just to make it a level playing field. Like the lawyers who spend three years in Law School and the doctors who study almost 10 years, we should at least make it a bit harder for people to attend business school by making it a three year school with a mandatory working experience of 1 year in between so that the future MBAs have an appreciation of what they are getting after they graduate.

The housing market crisis (collapse):-4

So my recommendation for the correction of the housing market and avoiding the next housing bubble will be as follows:

1.Have a minimum of 10 percent down payment for all federally backed loans and for Jumbo loans at least 20 percent down payment.

2. Have funds in the account equal to at least one (1) year of the mortgages payment for the federally backed loans and at least two(2) for the Jumbo loans.

3. Have complete documentation of all the funds they have and expenses they have occur for the last three years for the federally backed loans and for the last five years for the Jumbo loans.

4. Put a Ban on the exotic mortgages that have plagued the system like the one mentioned in my previous posts (LIAR, NINJA, interest payment only, adjustable rate optional interest rates etc)

5. Stick with the conventional 30 years and 15 years mortgages and only the adjustable rate mortgages with the same requirement of the down payments and documentation requirements (as mentioned above).
6. Credit Scores of at least 700 should be the criteria for the federally backed loans and at least 730 for the Jumbo Loans.

7. Borrowers should be asked to furnish the health of their finances every year for the federally backed loans and every six months for the Jumbo loans.

Although the above mentioned list is not all exhaustive but it can be start. Although I am absolutely positively 100 percent people will state that it is draconian but if people have vested interest in their houses they will be prudent enough to think twice before leaving defaulting on the payments even if it is not their fault.

These criteria can be modified for different borrowers. But the lenders should not be absolved from their responsibilities either. They should have the following rules to follows: (although it should be up to them if they mess things up):

1. They should make every due diligence effort to make sure that they are lending according to the above rules and following proper procedures.

2. There should be a requirement that every lender should have a dedicated 1-800 toll free numbers just to be dedicated to the problems of the mortgage holders (although I believe it is now also) like if they are going to fall behind on their payments or they are financially strapped to call the bank to let them know how to avoid falling behind.

3. The banks should on their part also require that the borrower should furnish every year their financial cushion for the mortgages payments for the federally backed loans and every six months for the Jumbo Loans.

4. They should be required to explain in plain layman terms what the borrower is signing and how much they should be expected to pay (although it is still done but I guess it is getting lost in the communication) in closing and monthly payments and should be given ample time (not more than 7 days) to examine if they should go ahead and sign on to the terms.

Again I am certain that not all the above rules will be followed since the excitement of owning your own place (Borrower) and making commission on it (lender) will be too much but at least if followed there will be less lawsuit claiming fraud. Thus the onus or burden of dealing with the house and mortgages will lie with both of the borrower and seller.

The housing market crisis (collapse):-3

When I bought my house I was also asked what kind of mortgage I was seeking, I said I will stick with the 30 year fixed-no ifs, buts, ands or maybes. Simple and Straight 30 year fixed rate. I don’t know what people were thinking when they went overboard with buying the houses they could have ill afford in the first place. If you need help even in scraping up a simple 5 or 10 percent down payment and closing costs, then it is better to rent and leave all the hassle of owning(mortgaging) the house to other people.

When you have the money and the will to accept that responsibility then you could go ahead and visit this American dream.

Since this housing crisis, lending for housing has gotten much tighter with myriad requirements and many hassles. Well it was bound to happen when you get drunk and get a hangover you get a big headache and try to correct what you have done during that state of mind. So now this hangover will last a lot while longer than many economists and experts are saying. Remember these were the same experts who were saying that housing prices historically has not gone down in the past so what ever time frame these experts tell you or say it, just be prepared to add at least 2 years to it. Since in the future you don’t know if you would be alive to bask in the glory of your prediction or bow your head down in shame for have that awfully wrongful prediction, so just keep in the mind that instead of following blindly the path of Financial experts, try to spend sometime looking at your expenses and figure out if you are likely to be a home owner in the future. It is not that hard, I believe everybody has a mind and a brain to think and budget their expenses and see what is good for them. Remember, every time the real estate agent sells or the broker or deal buys on behalf of you or sells on behalf of you, there is their commission also. So you better be prepared to look after your interests since nobody is best capable to look after you than you yourself.

The housing market crisis (collapse):-2

It first started with the subprime mess-the people who were supposed (I believe) not to have the house in the first place. You see people just see that they can just scrap together the down payment, closing costs, get the mortgage and the house is there. Well folks, the real deal start afterwards, the maintenance of the house the utilities bill, the furnishing, the different mortgages amount each year when the property taxes change. All these factors are not taken into account before buying the house. You see even if your mortgage rate is fixed at 30 years, your monthly payment amounts can change (either increase or decrease) depending on where you live based on the property taxes (it has happened to me). When we were done with the subprime mess –the people with poor credit. Now people with high credit are getting hit just because they are losing their jobs.

So the credit score can be predictor for how well you managed yourself fiscally in the past but can not be used as predictor of how well you will do in the future, since you don’t know what will happen in the future-there are so many unknown.

The way Wall Street came up with dizzying arrays of how the mortgages should be packaged is amazing and sad. LIAR loans (where you don’t have to specify your income or lie about it) NINJA (no income, no job, no asset) payment option loans, interest only loans and the like. It was like they (Wall Street and the assortments ) just wanted to put as many people in the houses as possible.Quite a few of them did made a lot of money but this party was going to coming to an end and everybody knew it, they just chose to ignore it.

Many people did get very rich but most of them ruined their credit scores in the process. I regret not getting in the game since I believe in the 30 year fixed conventional mortgage (old fashioned you can call me). I see so many heart wrenching stories regarding the foreclosures and the people who have lost their houses that it just scares the hell out of me. It also seems very mind boggling to me that most of people are now saying that they were duped by these financial people into buying what they could not afford. The excuse is that if they knew we could not afford it why did they shove it down our throats.
Well (correct me if I am wrong). If I know that I am not able to afford to buy a house why would have that kind of stress on myself and my family to buy something which I would have to give back in foreclosure of short sale or in bankruptcy later on. I don’t get it folks.