December 1, 2010
Changes to mortgage interest deduction would hurt economy, prolong housing downturn, C.A.R. says
LOS ANGELES (Dec. 1) – In response to recommendations in the Deficit Reduction Commission report released today, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said it strongly opposes any changes that would modify or reduce the mortgage interest deduction.
“Few issues are more important to homeownership than the mortgage interest deduction (MID),” said C.A.R. President Beth L. Peerce. “As the housing market continues to recover from the worst financial crisis in recent history, any change that reduces the ability of the market to heal is misguided and must be rejected,” said Peerce.
According to a recent survey commissioned by the NATIONAL ASSOCIATION OF REALTORS® (NAR), nearly 75 percent of homeowners and more than half of renters surveyed said the MID was “extremely” or “very important” to them. The proposal from the Deficit Reduction Commission will negatively impact the housing market, further erode opportunities for homeownership across the country, and will contribute to further price declines and diminished equity for homeowners by as much as 15 percent.
C.A.R. and NAR will remain vigilant in opposing any plan that modifies or excludes the deductibility of mortgage interest and make certain that the real estate industry’s opposition to this proposal is heard and its far-reaching implications understood.
Mortgage Interest Deduction Background
• The MID has been part of the federal tax code since it was first enacted in 1913.
• People with both low and middle incomes use the MID. According the most recent IRS tax return data available, 63 percent of the families who claim the MID earn between $50,000 and $200,000 per year.
• While in any particular year only about one-third of taxpayers itemize, of the taxpayers who itemize deductions, more than 81 percent take the MID.
• Current law permits deductions of the interest paid on mortgage debt of up to $1 million on a primary residence and one additional residence. In addition, the interest paid on home equity loans of up to $100,000 may be deducted.
Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
Thursday, December 2, 2010
Thursday, November 11, 2010
$600B Fed Stimulus: A Boost, but Inflation Lurks
By Robert Freedman, Senior Editor, REALTOR® Magazine
The Federal Reserve’s move to boost the economy with $600 billion in U.S. Treasury bond purchases earlier this week helped ignite the stock market and could also help real estate in the short term if businesses follow suit by adding jobs.
NAR Chief Economist Lawrence Yun told REALTORS® at the 2010 Conference & Expo today that job growth is key to getting home sales back up to where they should be based on historic norms. Although housing markets are steadily improving and prices are stabilizing, home sales remain at levels last seen in 2000, when the U.S. had 30 million fewer people.
Yun says weak consunmer confidence, which is a function of continuing high unemployment (about 9.6 percent currently), is behind the lag, so anything that can boost job growth could help home sales.
But the latest Fed stimulus could come with a cost, says Federal Reserve Governor Thomas Koening. Joining Yun at the REALTORS® conference to talk about the residential housing market, Koening said continued efforts to stimulate the economy could spark inflation, particularly with the federal budget deficit already at historically high levels. Koening was the only Fed governor to vote against the new stimulus.
Although inflation remains quiescent, and indeed some economists are even talking about the risks of the U.S. moving into a period of Japanese-styled deflation, there are worrisome signs of inflationary pressures building, says Yun.
If you focus on the consumer price index (CPI), which is up only 1.1 percent from a year ago, then inflationary signs are absent, he said. But Yun thinks the housing component of CPI, which is up only 0.2 percent in the last year, is what’s keeping inflation in check.
When you focus on producer prices, which are up 4 percent for finished products and more than 20 percent for crude products (products in the earliest stages of production) and commodities, the picture looks very different.
With nothing to change these trend lines, these price increases are likely to show up in consumer prices at some point in the future. And once they do, the increases will be hard to reverse. “Inflation is like toothpaste,” Yun said. “Once it’s out of the tube, it’s hard to put back in.”
Bottom line: The latest Fed stimulus could in fact spur job growth and therefore give home sales a boost. But will the cost be higher inflation down the road? If so, that can put home buying out of reach to households who have to contend with higher interest rates.
The Federal Reserve’s move to boost the economy with $600 billion in U.S. Treasury bond purchases earlier this week helped ignite the stock market and could also help real estate in the short term if businesses follow suit by adding jobs.
NAR Chief Economist Lawrence Yun told REALTORS® at the 2010 Conference & Expo today that job growth is key to getting home sales back up to where they should be based on historic norms. Although housing markets are steadily improving and prices are stabilizing, home sales remain at levels last seen in 2000, when the U.S. had 30 million fewer people.
Yun says weak consunmer confidence, which is a function of continuing high unemployment (about 9.6 percent currently), is behind the lag, so anything that can boost job growth could help home sales.
But the latest Fed stimulus could come with a cost, says Federal Reserve Governor Thomas Koening. Joining Yun at the REALTORS® conference to talk about the residential housing market, Koening said continued efforts to stimulate the economy could spark inflation, particularly with the federal budget deficit already at historically high levels. Koening was the only Fed governor to vote against the new stimulus.
Although inflation remains quiescent, and indeed some economists are even talking about the risks of the U.S. moving into a period of Japanese-styled deflation, there are worrisome signs of inflationary pressures building, says Yun.
If you focus on the consumer price index (CPI), which is up only 1.1 percent from a year ago, then inflationary signs are absent, he said. But Yun thinks the housing component of CPI, which is up only 0.2 percent in the last year, is what’s keeping inflation in check.
When you focus on producer prices, which are up 4 percent for finished products and more than 20 percent for crude products (products in the earliest stages of production) and commodities, the picture looks very different.
With nothing to change these trend lines, these price increases are likely to show up in consumer prices at some point in the future. And once they do, the increases will be hard to reverse. “Inflation is like toothpaste,” Yun said. “Once it’s out of the tube, it’s hard to put back in.”
Bottom line: The latest Fed stimulus could in fact spur job growth and therefore give home sales a boost. But will the cost be higher inflation down the road? If so, that can put home buying out of reach to households who have to contend with higher interest rates.
Tuesday, October 5, 2010
Foreclosures are being stopped...for now.
By Steve Beede.
For many months, we’ve been hearing of Courts throwing out lender lawsuits for judicial foreclosure based upon falsified declarations. Now many States are jumping in and suspending certain foreclosures. Here’s the background in what is going on and what to expect in the future.
Each State has its own laws for handling defaulted home loans. For example, California allows both Judicial foreclosures (lawsuit in the courts) and non-judicial foreclosures (non-court Trustee Sale). Each method has its pros and cons for lenders, but because of the speed and lower cost of Trustee Sales, that is generally used for home foreclosures. However, in California if a lender does do a Trustee Sale, they give up any right to recover a deficiency judgment on the unpaid balance. It’s different in other States. 23 States only allow Judicial Foreclosure so their foreclosures are always Court supervised. The remaining States allow a choice of either method but only a few bar deficiency judgments after Trustee Sale. So there are two issues arising in a foreclosure: 1) loss of home; and 2) deficiency judgment risk.
The problem for lenders first arose in the judicial foreclosure States. As part of their legal filing, the lenders were required to provide a sworn statement as to the truth of the facts claimed in their lawsuit such as that they owned the loan and that the procedures for foreclosure were properly followed. However, it was discovered that attorneys for the lenders were falsifying the sworn statements and in many cases simply having someone sign the form without any actual knowledge of the facts, so called “robo-signers”. Presumably the lenders and their attorneys filing thousands of such lawsuits believed that no one would pick up on this and they hoped they could get quick results. They were wrong. Attorneys for some defendants challenged the lawsuits and the false statements and the Courts have responded by throwing out the lawsuits.
While lawsuits get challenged all the time and typically are corrected, the extent of these falsified Complaints indicated a systemic policy of lenders committing this fraud. Faced with potentially damning publicity and possible legal sanctions, lenders stated damage control. Last month, GMAC admitted that their employees had falsified foreclosure documents. Recently, Chase and BofA admitted the same. Each has stated that they are suspending foreclosures until the problem is fixed. Meanwhile, the States have started to act. on Friday, Connecticut suspended all foreclosures for 60 days. California’s attorney general has ordered Chase to stop foreclosures or prove the validity of its process. More are expected to follow as further evidence comes out showing the corruption in the foreclosure process. However, other lenders such as Wells Fargo have not made any suspension and have recently indicated its intent to increase the pace of foeclosures. This is surprising given indications that Wells Fargo has also filed lawsuits against borrowers without legal merit.
These foreclosure suspensions will give affected upside-down owners some more time but they will not result in loan foregiveness. The lenders will fix the problem and defaulted loans will eventually be foreclosed unless an alternate resolution is reached. This means that impacted lenders will likely be much more receptive to a loan modification or short sale without deficiency recourse. The one step that we do not expect to see is Congress or State legislatures coming to the rescue of homeowners. They have shown no willingness to date to do anything other than bailout lenders without recourse for the terrible lending practices that drove us into this Recession.
So, if you or your clients are upside down on a loan and facing foreclosure, this is a time to act to seek that modification or complete that short sale. If you are facing a lender lawsuit, get representation and put up a challenge. The lenders’ hope with these fraudulent lawsuits was that they would win without challenge. I’s up to you to stop them and the Courts may be willing to help.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advise in your State immediately so that you can determine your best options.
For many months, we’ve been hearing of Courts throwing out lender lawsuits for judicial foreclosure based upon falsified declarations. Now many States are jumping in and suspending certain foreclosures. Here’s the background in what is going on and what to expect in the future.
Each State has its own laws for handling defaulted home loans. For example, California allows both Judicial foreclosures (lawsuit in the courts) and non-judicial foreclosures (non-court Trustee Sale). Each method has its pros and cons for lenders, but because of the speed and lower cost of Trustee Sales, that is generally used for home foreclosures. However, in California if a lender does do a Trustee Sale, they give up any right to recover a deficiency judgment on the unpaid balance. It’s different in other States. 23 States only allow Judicial Foreclosure so their foreclosures are always Court supervised. The remaining States allow a choice of either method but only a few bar deficiency judgments after Trustee Sale. So there are two issues arising in a foreclosure: 1) loss of home; and 2) deficiency judgment risk.
The problem for lenders first arose in the judicial foreclosure States. As part of their legal filing, the lenders were required to provide a sworn statement as to the truth of the facts claimed in their lawsuit such as that they owned the loan and that the procedures for foreclosure were properly followed. However, it was discovered that attorneys for the lenders were falsifying the sworn statements and in many cases simply having someone sign the form without any actual knowledge of the facts, so called “robo-signers”. Presumably the lenders and their attorneys filing thousands of such lawsuits believed that no one would pick up on this and they hoped they could get quick results. They were wrong. Attorneys for some defendants challenged the lawsuits and the false statements and the Courts have responded by throwing out the lawsuits.
While lawsuits get challenged all the time and typically are corrected, the extent of these falsified Complaints indicated a systemic policy of lenders committing this fraud. Faced with potentially damning publicity and possible legal sanctions, lenders stated damage control. Last month, GMAC admitted that their employees had falsified foreclosure documents. Recently, Chase and BofA admitted the same. Each has stated that they are suspending foreclosures until the problem is fixed. Meanwhile, the States have started to act. on Friday, Connecticut suspended all foreclosures for 60 days. California’s attorney general has ordered Chase to stop foreclosures or prove the validity of its process. More are expected to follow as further evidence comes out showing the corruption in the foreclosure process. However, other lenders such as Wells Fargo have not made any suspension and have recently indicated its intent to increase the pace of foeclosures. This is surprising given indications that Wells Fargo has also filed lawsuits against borrowers without legal merit.
These foreclosure suspensions will give affected upside-down owners some more time but they will not result in loan foregiveness. The lenders will fix the problem and defaulted loans will eventually be foreclosed unless an alternate resolution is reached. This means that impacted lenders will likely be much more receptive to a loan modification or short sale without deficiency recourse. The one step that we do not expect to see is Congress or State legislatures coming to the rescue of homeowners. They have shown no willingness to date to do anything other than bailout lenders without recourse for the terrible lending practices that drove us into this Recession.
So, if you or your clients are upside down on a loan and facing foreclosure, this is a time to act to seek that modification or complete that short sale. If you are facing a lender lawsuit, get representation and put up a challenge. The lenders’ hope with these fraudulent lawsuits was that they would win without challenge. I’s up to you to stop them and the Courts may be willing to help.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are upside-down on your loan(s), especially if you’re facing a lender lawsuit, get competent legal advise in your State immediately so that you can determine your best options.
Wednesday, September 15, 2010
Get The Forgiven Debts Off Your Credit Report
By Steve Beede
Over the past several years, we’ve assisted thousands of property owners in coping with upside down loans. Although very few have gotten actual modifications that made their homes affordable (the lenders and our government won’t go that far), most have used short sales to avoid judgments against their credit that would follow them for years. Even most people who have gone through foreclosure have avoided the lenders’ deficiency recourse. But now, many are shocked to discover that, although the lender has no judgment against them, the debt still appears on their credit reports as an unpaid debt. This can block future credit and could possibly used by a collection agency to force a payment that is no longer owed.
When a property is sold in a short sale, agreements are generally made with the lenders in which the unpaid balance is forgiven, ie: there is no deficiency recourse. Similarly, in California at least, most foreclosures are done through a Trustee Sale process through which the foreclosing lender has no recourse against the debtor for any unpaid balance. These unpaid amounts are considered “forgiven debt” and the debtor may be taxed on this amount unless they have an exemption such as the 2007 Federal Debt Forgiveness Relief Act, or their accountant determines that they are otherwise exempt: purchase money debt, insolvency, etc. When this occurs, the debtor’s credit report should show the loan as “settled”; or “paid less than full” or some similar reference… not that anything further is due. So what do you do if this happens.
First, get your records together to show that the loan deficiency was actually resolved. This may be the short sale closing documents, particularly the lenders’ short sale consent letters addressing the deficiency (or removing any deficiency language). For a foreclosure, the type of foreclosure used will provide guidenance. In either case, the debtor should receive a 1099 form from each lender. A 1099C indicates that the debt is forgiven but sometimes the lenders use the wrong one.
Second, send a dispute letter to each of the credit bureaus - Experian, TransUnion, and Equifax - and challenge the debt reference. Send this my Certified Mail Return Receipt and keep all your records. Once the credit reporting agency has received your dispute letter, they are obligated to investigate. According to the Fair Credit Reporting Act, the credit bureaus must take the following steps:
•The credit reporting agencies must resolve consumers’ disputes within 30 days limit, unless you have used the services of annualcreditreport.com, then the bureaus can take up to 45 days.
•In response to consumers’ complaints that documentation in support of their disputes was disregarded, the credit bureaus have to consider and transmit to the furnisher all relevant evidence submitted by the consumer the first time.
•Consumers will receive written notice of the results of the investigation within five days of its completion, including a copy of the amended credit file if it changed based on the dispute.
•Once information is deleted from a credit file, the credit bureaus can not reinsert it unless the entity supplying the information certifies that the item is complete and accurate and the credit bureau notifies the consumer within five days.
All of the big-three agencies are working on making sure that all disputes are handled within 30 days. See http://www.creditinfocenter.com/repair/Repair.shtml#4 for more specific details.
If a lender fails to respond to the credit bureau’s investigation, they may delete the refeence themselves. If not, or if the lender actually refuses to remove the derogatory credit reference, then you may need to initiate legal action against the lender. Reporting a false debt on the debt reporting system is slander and you could have a legal claim against the lender and the reporting credit bureau to both remove the reference and recover damages.
Are these strategies for you? Every person’s situation is different. The information presented in this Article is not to be taken as legal advice. If you are facing false credit reports which claim you still owe a forgiven debt, get competent legal advise in your State immediately so that you can determine your best options.
Over the past several years, we’ve assisted thousands of property owners in coping with upside down loans. Although very few have gotten actual modifications that made their homes affordable (the lenders and our government won’t go that far), most have used short sales to avoid judgments against their credit that would follow them for years. Even most people who have gone through foreclosure have avoided the lenders’ deficiency recourse. But now, many are shocked to discover that, although the lender has no judgment against them, the debt still appears on their credit reports as an unpaid debt. This can block future credit and could possibly used by a collection agency to force a payment that is no longer owed.
When a property is sold in a short sale, agreements are generally made with the lenders in which the unpaid balance is forgiven, ie: there is no deficiency recourse. Similarly, in California at least, most foreclosures are done through a Trustee Sale process through which the foreclosing lender has no recourse against the debtor for any unpaid balance. These unpaid amounts are considered “forgiven debt” and the debtor may be taxed on this amount unless they have an exemption such as the 2007 Federal Debt Forgiveness Relief Act, or their accountant determines that they are otherwise exempt: purchase money debt, insolvency, etc. When this occurs, the debtor’s credit report should show the loan as “settled”; or “paid less than full” or some similar reference… not that anything further is due. So what do you do if this happens.
First, get your records together to show that the loan deficiency was actually resolved. This may be the short sale closing documents, particularly the lenders’ short sale consent letters addressing the deficiency (or removing any deficiency language). For a foreclosure, the type of foreclosure used will provide guidenance. In either case, the debtor should receive a 1099 form from each lender. A 1099C indicates that the debt is forgiven but sometimes the lenders use the wrong one.
Second, send a dispute letter to each of the credit bureaus - Experian, TransUnion, and Equifax - and challenge the debt reference. Send this my Certified Mail Return Receipt and keep all your records. Once the credit reporting agency has received your dispute letter, they are obligated to investigate. According to the Fair Credit Reporting Act, the credit bureaus must take the following steps:
•The credit reporting agencies must resolve consumers’ disputes within 30 days limit, unless you have used the services of annualcreditreport.com, then the bureaus can take up to 45 days.
•In response to consumers’ complaints that documentation in support of their disputes was disregarded, the credit bureaus have to consider and transmit to the furnisher all relevant evidence submitted by the consumer the first time.
•Consumers will receive written notice of the results of the investigation within five days of its completion, including a copy of the amended credit file if it changed based on the dispute.
•Once information is deleted from a credit file, the credit bureaus can not reinsert it unless the entity supplying the information certifies that the item is complete and accurate and the credit bureau notifies the consumer within five days.
All of the big-three agencies are working on making sure that all disputes are handled within 30 days. See http://www.creditinfocenter.com/repair/Repair.shtml#4 for more specific details.
If a lender fails to respond to the credit bureau’s investigation, they may delete the refeence themselves. If not, or if the lender actually refuses to remove the derogatory credit reference, then you may need to initiate legal action against the lender. Reporting a false debt on the debt reporting system is slander and you could have a legal claim against the lender and the reporting credit bureau to both remove the reference and recover damages.
Are these strategies for you? Every person’s situation is different. The information presented in this Article is not to be taken as legal advice. If you are facing false credit reports which claim you still owe a forgiven debt, get competent legal advise in your State immediately so that you can determine your best options.
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