80 Years After Black Tuesday
Posted: October 30, 2009 8:29AM by Katie Adams
Eighty years ago, the stock market experienced the most significant day of its infamous 1929 crash. Dubbed "Black Tuesday," 16 million shares were traded on the New York Stock Exchange. The ticker tape was running more than three hours behind. When the market bell rang at 7:45pm, the losses were tallied and the one-day slide totaled nearly a $14 billion loss in value. The Dow Jones Industrial Average lost just over 30 points in one day, which represented a nearly 12% loss. America has endured approximately 13 recessions including our present economic slump since that dark day, but what else has occurred during those eight decades? (Learn about the series of events that triggered the Great Depression, in The Crash Of 1929 - Could It Happen Again?)
Automobiles and Domestic Production
U.S. automobile production reached a peak of 4 million in 1929 and quickly dropped off, not to see that same point again until well after World War II. Today, the beleaguered auto industry is expected to produce just 8.7 million cars, off from a previous high of 17.4 million in 2000. However, the increase in the price of a barrel of crude oil has exponentially outpaced auto production – from 65 cents eight decades ago to approximately $78 today.
In 1929, the gross domestic product stood at $103.1 billion. Today, our country's GDP is approximately $14.3 trillion, an increase of 13,492% (not adjusted for inflation) in 80 years, or approximately 1,687% per decade since 1929.
Education
In 1929, fewer than one in five Americans (19% of the U.S. population) had completed high school, and only 3.9% of Americans completed four or more years of college. In 2009 more than 85% of Americans are projected to complete high school and nearly 29% will earn at least a Bachelor's degree.
Employment and Wages
The U.S. unemployment rate stood at just over 3% in 1929. There were just over 88 million Americans and a labor force of just 49.4 million, of which only 1.5 million were unemployed. Today, the U.S. Bureau of Labor Statistics reports a labor force of 153 million and a national unemployment rate of approximately 9.8%.
In 1929, there were 553,000 paid civilian employees of the federal government. Today more than 1.8 million civilian employees work for the federal government (not including the post office), making it the nation's largest employer.
Before the 1929 stock market crash, there was no national minimum wage standard. That was established in 1938 through the Fair Labor Standards Act. At its inception, the minimum wage was 25 cents per hour; it is $7.25 today. In 1929, the average annual salary was $1,236, and according to the U.S. Census Bureau, in 2009 the U.S. real median household income is $50,303.
Home Ownership
Home ownership steadily grew from 49% in 1929 to just over 67% today. The home ownership rate hit its high (of a little more than 69%) in 2005. In response to massive losses during the Great Depression, the government created a secondary mortgage market in 1938. The first government-sponsored enterprise (GSE) – Fannie Mae – was given $1 billion in purchasing power from its federal creator to buy loans from banks and increase liquidity. Before Fannie Mae (and its twin, Freddie Mac) were seized by the federal government in September, 2008, they held or guaranteed more than $5 trillion in debt.
Inventions
It would be nearly impossible to list all of the inventions that have been introduced since October, 1929, but some of the most significant ones for American consumers, investors and corporations include:
the integrated circuit, microchip, computer, modem, microprocessors, the internet
ballpoint pens, scotch tape, fax machines, photocopiers
helicopters, jet engines
radar, transistors, optic fiber, lasers
color television, mobile phones, microwave ovens
atomic and hydrogen bombs
bar codes, credit cards, ATMs
penicillin, MRIs, the artificial heart, oral contraceptives
Life Expectancy
The average American born in 1929 could expect to live just 59.1 years, whereas a baby born in 2009 can look forward to living, on average, 80 years.
New York Stock Exchange (NYSE)
The New York Stock Exchange (NYSE) has rapidly evolved since Black Tuesday. The NYSE volume reached the 10 million daily share volume mark in 1929, and its highest single volume day since then was 7.3 billion on October 10, 2008. Notable NYSE changes since 1929 include:
1943 - Women traders allowed onto the floor
1953 - Automated quotes introduced
1966 - Real-time ticker arrived
1977 - Foreign brokers admitted
1978 - Intermarket trading system (ITS) established
1997 - Wireless data system used
2000 - First NYSE global index launched
2001 - Trading switched from fractions to decimals
2007 - NYSE Euronext, the first global marketplace, established
Population Growth
The world's population has burgeoned from to 1.8 billion to 6.8 billion, and the U.S. population has jumped from 121 million to more than 307 million. There have been seven national census undertakings in the U.S. since 1929. The 23rd is slated for 2010. (See how people's movements, ages, deaths and buying patterns affect portfolios worldwide, in Demographic Trends And The Implications For Investment.)
U.S. National Debt
The national debt currently stands at more than $11.9 trillion, representing a 74,275% increase (not adjusted for inflation) from its level of $16.9 billion in 1929.
War
The U.S. has fought in six major wars since 1929: World War II, The Korean War, Vietnam, Desert Storm, Enduring Freedom and Iraqi Freedom. (Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common! Find out more in War's Influence On Wall Street.)
Conclusion
While this is by no means an exhaustive list, it begins to give you an idea of the scope of change we've experienced as a nation since that ominous day on Wall Street 80 years ago today. Without doubt, the next 80 years will usher in another unforetold number of changes.
http://financialedge.investopedia.com/financial-edge/1009/Eighty-Years-After-Black-Tuesday.aspx?partner=basics10
Saturday, October 31, 2009
Thursday, October 29, 2009
What Happens When You Stop Paying Your Mortgage?
What happens if you don’t pay the mortgage?
FORT LAUDERDALE, Fla. – Oct. 29, 2009 – We all talk about what if's. One big “what if” that many homeowners have today has to do with mortgages.
About one-third of South Florida mortgages are underwater, meaning the homeowners owe more than the home is worth at today’s depressed prices, according to First American CoreLogic. Some homeowners are certainly wondering why they’re sending in the payment on, say, a $300,000 mortgage, when the house today would sell for only $210,000.
Your options: Keep paying or try to change your loan’s terms.
But some people wonder, what if I just stop paying the mortgage? It may be a tempting idea, but it quickly leads to trouble.
Here’s what could happen if you don’t pay the mortgage.
Report to the credit bureau
If your payment does not arrive, your lender or servicer will report this late payment to the credit bureau by the first day of the next month. This can happen in as little as two weeks from due date and put a negative mark on your credit report. Your credit score drops.
The late payment report whacks your credit rating. Your credit score starts to drop, by up to 200 points, if this is your only late or missed payment.
Cards are closed, rates rise
In the next 30 days, you can expect your other creditors to take note of the late payment and to take action. They can raise your interest rates, shut off your credit card entirely, or lower your credit limit. You also could face other changes in your financial life, because auto insurance, student loans and other forms of credit are pegged to your credit score.
Tightening of credit lowers your score
Credit scores feed on themselves. If your credit card limits are lowered and you are carrying a balance, you are then using more of your available credit, something known as your utilization rate. When that goes up, it lowers your score some more.
The negative mark stays on your credit report for seven years. But the impact on your credit score lessens over time. The biggest impact is for the first two years.
Lender response
The phone will start ringing. Your lender will try to contact you, try to persuade you to go into a loan modification of some kind.
But after 90 days, you cannot just start making payments again. The lender may actually send your payment back, if you send it this late and have not been in contact.
What happens next
After four months of not paying your mortgage, you will likely be served with a foreclosure notice.
If you don’t respond within 20 days, then the lender, in the following 60 days, will ask a court to issue a judgment against you.
A county sale will be arranged 50 to 120 days after the judgment. Next, 120 days after the sale, the sheriff will be at the door. Ten days after that, you’ll be thrown out of your home.
(Tip: This schedule is a general one. Courts are facing a backlog of foreclosure cases and could take longer to go through these steps. If you hire a lawyer and fight the foreclosure, you may be able to delay the sale for many months or avoid it altogether.)
Sources used for this column included: John Ulzheimer, president of consumer education for Credit.com; Barry Paperno, consumer operations manager at FICO; Attorney Roy Oppenheim of Weston, whose practice centers on foreclosure defense; and Jessica Cecere, president of the Consumer Credit Counseling Service of Palm Beach.
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225965
© 2009 Sun Sentinel Distributed by McClatchy-Tribune News Service, Harriet Johnson Brackey.
FORT LAUDERDALE, Fla. – Oct. 29, 2009 – We all talk about what if's. One big “what if” that many homeowners have today has to do with mortgages.
About one-third of South Florida mortgages are underwater, meaning the homeowners owe more than the home is worth at today’s depressed prices, according to First American CoreLogic. Some homeowners are certainly wondering why they’re sending in the payment on, say, a $300,000 mortgage, when the house today would sell for only $210,000.
Your options: Keep paying or try to change your loan’s terms.
But some people wonder, what if I just stop paying the mortgage? It may be a tempting idea, but it quickly leads to trouble.
Here’s what could happen if you don’t pay the mortgage.
Report to the credit bureau
If your payment does not arrive, your lender or servicer will report this late payment to the credit bureau by the first day of the next month. This can happen in as little as two weeks from due date and put a negative mark on your credit report. Your credit score drops.
The late payment report whacks your credit rating. Your credit score starts to drop, by up to 200 points, if this is your only late or missed payment.
Cards are closed, rates rise
In the next 30 days, you can expect your other creditors to take note of the late payment and to take action. They can raise your interest rates, shut off your credit card entirely, or lower your credit limit. You also could face other changes in your financial life, because auto insurance, student loans and other forms of credit are pegged to your credit score.
Tightening of credit lowers your score
Credit scores feed on themselves. If your credit card limits are lowered and you are carrying a balance, you are then using more of your available credit, something known as your utilization rate. When that goes up, it lowers your score some more.
The negative mark stays on your credit report for seven years. But the impact on your credit score lessens over time. The biggest impact is for the first two years.
Lender response
The phone will start ringing. Your lender will try to contact you, try to persuade you to go into a loan modification of some kind.
But after 90 days, you cannot just start making payments again. The lender may actually send your payment back, if you send it this late and have not been in contact.
What happens next
After four months of not paying your mortgage, you will likely be served with a foreclosure notice.
If you don’t respond within 20 days, then the lender, in the following 60 days, will ask a court to issue a judgment against you.
A county sale will be arranged 50 to 120 days after the judgment. Next, 120 days after the sale, the sheriff will be at the door. Ten days after that, you’ll be thrown out of your home.
(Tip: This schedule is a general one. Courts are facing a backlog of foreclosure cases and could take longer to go through these steps. If you hire a lawyer and fight the foreclosure, you may be able to delay the sale for many months or avoid it altogether.)
Sources used for this column included: John Ulzheimer, president of consumer education for Credit.com; Barry Paperno, consumer operations manager at FICO; Attorney Roy Oppenheim of Weston, whose practice centers on foreclosure defense; and Jessica Cecere, president of the Consumer Credit Counseling Service of Palm Beach.
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225965
© 2009 Sun Sentinel Distributed by McClatchy-Tribune News Service, Harriet Johnson Brackey.
Monday, October 26, 2009
Strategic Foreclosure - Knowing When to Fold
Florida homeowners walking away from underwater mortgages
MIAMI – Oct. 26, 2009 – Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.
And so, faced with the prospect of being underwater on his mortgage – owing more than the unit is worth – for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.
He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure.
“I was able to pay off all my credit cards,” said Duque, who is biding his time in the condo, waiting until they come and evict him. “In a way, it was the best thing that happened to me because all my income is not being consumed by this freaking monster of a debt.”
Duque’s game plan is known as a strategic default – when borrowers walk away from loans, even if they can afford the payments. Here is a look at the benefits, the risks and the ethics of such a move.
As property values have plummeted by an average of 50 percent, such strategic defaults now make up a sizable chunk of South Florida’s foreclosures. In the fourth quarter of last year, they accounted for an estimated 28 percent of all defaults in Miami-Dade and Broward counties, according to recent research from the credit bureau Experian and Oliver Wyman, a New York-based international consulting firm.
That’s up from 8 percent in the same quarter two years ago. With property values down even further now, researchers are certain the numbers have risen even more.
With the social stigma of foreclosure eroding, experts say it is becoming easier for discouraged borrowers to justify throwing in the towel.
“People are saying, ‘Everyone is doing this, and I do not feel any compunction in fashioning my own bailout,’” said Roy Oppenheim, a Weston real-estate and foreclosure defense attorney who conducts weekly seminars that discuss strategic defaults and other financial options for distressed borrowers.
South Florida is already a veritable Atlantis of underwater borrowers. In September, homeowners here collectively owed $62.7 billion more than their homes were worth, according to an analysis by First American CoreLogic. The analysis found that about half of all outstanding mortgages in Miami-Dade and Broward are underwater.
Among those who bought in Broward in 2006, the median negative equity was $75,000 as of March. In Miami-Dade, the figure was $63,000, the Web-based real-estate service firm Zillow.com reports. Negative equity refers to the difference between a loan balance and the market value of a home.
“I wouldn’t blame borrowers who knew they were facing significant losses even if they could afford to stay,” said Andrea Heuson, a finance professor at the University of Miami. “Every day you wake up, you are reminded how much you paid for something, and then you read every day in the newspaper how much prices have fallen.”
The many consequences
Walking away, however, is fraught with financial, legal and ethical dilemmas. Lenders, government and the credit industry are starting to pay more attention to how strategic defaulters think and behave – in an effort to convince them to tough it out.
“It’s a huge problem, and it doesn’t get addressed in the process right now,” said Ron Kaniuk, a Boca Raton foreclosure and bankruptcy attorney. He said lenders are encouraging the trend by primarily offering loan modifications only to those who have fallen behind or are seriously at risk of foreclosure.
Duque, in fact, said he shunned a modification because it didn’t reduce his balance.
“It’s really a social change in the way debtors think, and it’s taking creditors some time to absorb that,” said Mark King, an attorney with the Miami office of Jones Walker who represents banks in commercial foreclosures. Commercial property owners also have started walking away.
William Hardin, a real-estate professor at Florida International University, said people have a moral obligation to honor their mortgages when they can.
“The vast majority knew what they were doing and were taking a risk, and the fact of the matter is [the mortgage] is a contract. We live in a world where contracts have to be honored. It’s the way our economy works.”
High default rates have already meant higher loan costs and tougher underwriting standards for all borrowers.
Tracking strategic defaults is an inexact science. Experian researchers identified possible strategic defaulters as homeowners who have gone straight from current on their payments to not paying at all, but remained in good standing on other credit obligations. Nationally, Experian estimated 588,000 borrowers defaulted on purpose in 2008.
Also fueling the phenomenon has been a shift from viewing a home as a place to live to an investment, valued insofar as its potential resale price goes up.
Frustration with the tax-funded bailout of banks and Wall Street may have also emboldened depressed borrowers to default out of anger and a desire to stick it to the banks. Duque’s resolve, for example, hardened after watching Michael Moore’s movie Capitalism: A Love Story. In the movie, Moore makes a case that corporations preying on consumers led to the housing crisis and recession.
“In the movie, there were Congress people telling the American public to stay in their homes, to squat and do what you have to do to fight. A lot of it struck home in many, many, many ways, and I am going to stay here until [my bank] comes to get me out,” Duque said.
Aside from the new philosophical justification for stopping his payments, Duque said his decision was fundamentally an economic one. “My mortgage was killing me, even before things went to hell. I was being choked by the property,” said Duque, who works at the Mondrian Hotel in Miami Beach.
Most strategic defaulters find themselves weighing whether the hit to their credit scores is easier to bear than paying underwater mortgages for years to come.
The most optimistic analysts say it could be three years before prices begin to appreciate. Others say prices have another 30 percent-plus to fall before flat-lining.
Prepared for the worst, Duque has been surprised by the seemingly minimal consequences so far. His credit limits on two cards were slashed by a few thousand dollars, but they were not canceled.
“I went to BrandsMart and applied for a card, and they denied me, so my credit score must be pretty low,” he said. “That’s fine with me, as long as I have a couple of credit cards.”
Surprisingly, strategic defaulters with good credit scores who remain current on their other credit lines can quickly rehabilitate their credit scores after foreclosure – faster than many realize, according to Sarah Davies, a senior vice president at VantageScore, a credit scoring and consumer analytics firm owned jointly by the nation’s three major credit reporting agencies. “You can pull yourself out of any major impact from foreclosure in 24 months,” she said.
And five years down the road?
“A foreclosure is going to be very easy to explain, seeing there are thousands of others who have also defaulted. So, there is a safety-in-numbers issue there,” Heuson said, referring to a possible borrower rationale.
Consumers are essentially putting a price on their credit score, said Piyush Tantia, a partner in the retail and business banking practice of Oliver Wyman.
But there are other risks.
Foreclosure defense attorneys warn of the growing threat that lenders will obtain deficiency judgments against borrowers. Such judgments allow them to collect the difference between the loan balance and the market value of the properties. They also allow lenders to garnish wages and seize assets.
While the risk is not great now statistically, Marc Ben Ezra, a Fort Lauderdale attorney who files foreclosures for banks, said it’s possible that lenders may begin pursuing legal rights to collect.
Jim Angleton, senior vice president of Miami-based Republic Federal Bank, estimated lenders are going after borrowers 15 percent of the time. “You know they are not being forthright with you about their assets when they are keeping their credit cards, their very fine cars and other assets current.”
Oppenheim recommends homeowners bulletproof themselves by hiring a lawyer and perhaps an accountant to explore the possible consequences.
Other real-estate experts say walking away may not be worth it in the short term, when you factor in the cost of finding new shelter and the increased consumer interest rates that stem from any foreclosure.
Tactic not for everyone
Defaulting, though, is not for everybody whose mortgage is underwater, and plenty of people stick with their homes out of a sense of financial responsibility, integrity and faith that prices will recover eventually. There are also people who forked over tens of thousands of dollars in down payments and face a real financial loss by walking away.
Analia Vence, who is renting her underwater town house in Homestead to a tenant for less than the monthly mortgage payment, said she has no intention of walking away. She paid $170,000 in 2006, and now nearby foreclosed homes are selling for $80,000.
“We bought the property as an investment, and we never thought to sell it immediately. We’re only paying $200 or $300 for the mortgage, so it doesn’t make sense to hurt our credit for that much,” Vence said.
Copyright © 2009 The Miami Herald, Monica Hatcher. Distributed by McClatchy-Tribune Information Services.
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225799
MIAMI – Oct. 26, 2009 – Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.
And so, faced with the prospect of being underwater on his mortgage – owing more than the unit is worth – for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.
He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure.
“I was able to pay off all my credit cards,” said Duque, who is biding his time in the condo, waiting until they come and evict him. “In a way, it was the best thing that happened to me because all my income is not being consumed by this freaking monster of a debt.”
Duque’s game plan is known as a strategic default – when borrowers walk away from loans, even if they can afford the payments. Here is a look at the benefits, the risks and the ethics of such a move.
As property values have plummeted by an average of 50 percent, such strategic defaults now make up a sizable chunk of South Florida’s foreclosures. In the fourth quarter of last year, they accounted for an estimated 28 percent of all defaults in Miami-Dade and Broward counties, according to recent research from the credit bureau Experian and Oliver Wyman, a New York-based international consulting firm.
That’s up from 8 percent in the same quarter two years ago. With property values down even further now, researchers are certain the numbers have risen even more.
With the social stigma of foreclosure eroding, experts say it is becoming easier for discouraged borrowers to justify throwing in the towel.
“People are saying, ‘Everyone is doing this, and I do not feel any compunction in fashioning my own bailout,’” said Roy Oppenheim, a Weston real-estate and foreclosure defense attorney who conducts weekly seminars that discuss strategic defaults and other financial options for distressed borrowers.
South Florida is already a veritable Atlantis of underwater borrowers. In September, homeowners here collectively owed $62.7 billion more than their homes were worth, according to an analysis by First American CoreLogic. The analysis found that about half of all outstanding mortgages in Miami-Dade and Broward are underwater.
Among those who bought in Broward in 2006, the median negative equity was $75,000 as of March. In Miami-Dade, the figure was $63,000, the Web-based real-estate service firm Zillow.com reports. Negative equity refers to the difference between a loan balance and the market value of a home.
“I wouldn’t blame borrowers who knew they were facing significant losses even if they could afford to stay,” said Andrea Heuson, a finance professor at the University of Miami. “Every day you wake up, you are reminded how much you paid for something, and then you read every day in the newspaper how much prices have fallen.”
The many consequences
Walking away, however, is fraught with financial, legal and ethical dilemmas. Lenders, government and the credit industry are starting to pay more attention to how strategic defaulters think and behave – in an effort to convince them to tough it out.
“It’s a huge problem, and it doesn’t get addressed in the process right now,” said Ron Kaniuk, a Boca Raton foreclosure and bankruptcy attorney. He said lenders are encouraging the trend by primarily offering loan modifications only to those who have fallen behind or are seriously at risk of foreclosure.
Duque, in fact, said he shunned a modification because it didn’t reduce his balance.
“It’s really a social change in the way debtors think, and it’s taking creditors some time to absorb that,” said Mark King, an attorney with the Miami office of Jones Walker who represents banks in commercial foreclosures. Commercial property owners also have started walking away.
William Hardin, a real-estate professor at Florida International University, said people have a moral obligation to honor their mortgages when they can.
“The vast majority knew what they were doing and were taking a risk, and the fact of the matter is [the mortgage] is a contract. We live in a world where contracts have to be honored. It’s the way our economy works.”
High default rates have already meant higher loan costs and tougher underwriting standards for all borrowers.
Tracking strategic defaults is an inexact science. Experian researchers identified possible strategic defaulters as homeowners who have gone straight from current on their payments to not paying at all, but remained in good standing on other credit obligations. Nationally, Experian estimated 588,000 borrowers defaulted on purpose in 2008.
Also fueling the phenomenon has been a shift from viewing a home as a place to live to an investment, valued insofar as its potential resale price goes up.
Frustration with the tax-funded bailout of banks and Wall Street may have also emboldened depressed borrowers to default out of anger and a desire to stick it to the banks. Duque’s resolve, for example, hardened after watching Michael Moore’s movie Capitalism: A Love Story. In the movie, Moore makes a case that corporations preying on consumers led to the housing crisis and recession.
“In the movie, there were Congress people telling the American public to stay in their homes, to squat and do what you have to do to fight. A lot of it struck home in many, many, many ways, and I am going to stay here until [my bank] comes to get me out,” Duque said.
Aside from the new philosophical justification for stopping his payments, Duque said his decision was fundamentally an economic one. “My mortgage was killing me, even before things went to hell. I was being choked by the property,” said Duque, who works at the Mondrian Hotel in Miami Beach.
Most strategic defaulters find themselves weighing whether the hit to their credit scores is easier to bear than paying underwater mortgages for years to come.
The most optimistic analysts say it could be three years before prices begin to appreciate. Others say prices have another 30 percent-plus to fall before flat-lining.
Prepared for the worst, Duque has been surprised by the seemingly minimal consequences so far. His credit limits on two cards were slashed by a few thousand dollars, but they were not canceled.
“I went to BrandsMart and applied for a card, and they denied me, so my credit score must be pretty low,” he said. “That’s fine with me, as long as I have a couple of credit cards.”
Surprisingly, strategic defaulters with good credit scores who remain current on their other credit lines can quickly rehabilitate their credit scores after foreclosure – faster than many realize, according to Sarah Davies, a senior vice president at VantageScore, a credit scoring and consumer analytics firm owned jointly by the nation’s three major credit reporting agencies. “You can pull yourself out of any major impact from foreclosure in 24 months,” she said.
And five years down the road?
“A foreclosure is going to be very easy to explain, seeing there are thousands of others who have also defaulted. So, there is a safety-in-numbers issue there,” Heuson said, referring to a possible borrower rationale.
Consumers are essentially putting a price on their credit score, said Piyush Tantia, a partner in the retail and business banking practice of Oliver Wyman.
But there are other risks.
Foreclosure defense attorneys warn of the growing threat that lenders will obtain deficiency judgments against borrowers. Such judgments allow them to collect the difference between the loan balance and the market value of the properties. They also allow lenders to garnish wages and seize assets.
While the risk is not great now statistically, Marc Ben Ezra, a Fort Lauderdale attorney who files foreclosures for banks, said it’s possible that lenders may begin pursuing legal rights to collect.
Jim Angleton, senior vice president of Miami-based Republic Federal Bank, estimated lenders are going after borrowers 15 percent of the time. “You know they are not being forthright with you about their assets when they are keeping their credit cards, their very fine cars and other assets current.”
Oppenheim recommends homeowners bulletproof themselves by hiring a lawyer and perhaps an accountant to explore the possible consequences.
Other real-estate experts say walking away may not be worth it in the short term, when you factor in the cost of finding new shelter and the increased consumer interest rates that stem from any foreclosure.
Tactic not for everyone
Defaulting, though, is not for everybody whose mortgage is underwater, and plenty of people stick with their homes out of a sense of financial responsibility, integrity and faith that prices will recover eventually. There are also people who forked over tens of thousands of dollars in down payments and face a real financial loss by walking away.
Analia Vence, who is renting her underwater town house in Homestead to a tenant for less than the monthly mortgage payment, said she has no intention of walking away. She paid $170,000 in 2006, and now nearby foreclosed homes are selling for $80,000.
“We bought the property as an investment, and we never thought to sell it immediately. We’re only paying $200 or $300 for the mortgage, so it doesn’t make sense to hurt our credit for that much,” Vence said.
Copyright © 2009 The Miami Herald, Monica Hatcher. Distributed by McClatchy-Tribune Information Services.
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225799
Wednesday, October 21, 2009
First-Time Homebuyer $8,000 Credit -Fraud already?
IRS investigates home tax credit claims
WASHINGTON (AP) – Oct. 21, 2009 – Key congressional leaders want to extend the tax credit for first-time homebuyers beyond its scheduled end-of-November expiration despite complaints of fraud and Obama administration concerns about the costs.
Housing and Urban Development Secretary Shaun Donovan says the administration is not sold on the idea. For the past several weeks, Obama administration officials have been talking about possibly extending the credit to help spur the economy and create jobs. But at a congressional hearing Tuesday, Donovan said the administration needs better cost estimates.
“To truly understand the costs, we will not know that until Americans have filed their tax returns,” Donovan told the Senate Banking Committee. “We believe it’s critical to have the information necessary to make a fully informed decision about the costs.”
Tax filing season doesn’t start until next year. But Donovan said he expects to get cost data in the next few weeks. “We understand the urgency of this situation,” Donovan said.
The Internal Revenue Service has opened 107,000 examinations of questionable claims and identified 167 criminal schemes involving the tax credit since it was expanded as part of the economic stimulus package enacted in February.
But lawmakers understand the program is popular and has helped the struggling housing industry recover.
Lawmakers said they might add protections to help prevent fraud. But there is a growing consensus among congressional leaders that the housing market is still fragile enough to justify extending the program.
House Majority Leader Steny Hoyer, D-Md., said he favors extending the existing credit through the end of the year as lawmakers work to “find out about how ethically and how honestly this policy is being pursued.”
Senate Banking Committee Chairman Chris Dodd said, “We still need to use every tool at our disposal” to help the housing market. Dodd, D-Conn., has joined Sen. Johnny Isakson, R-Ga., in sponsoring a bill that would extend the credit until June 30 and expand it to people who already own homes.
It would cost about $1 billion a month to extend the existing credit, according to congressional estimates. The bill sponsored by Dodd and Isakson is estimated to cost $16.7 billion.
The existing credit allows qualified first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000. Homes purchased after Jan. 1 are eligible. The full credit is limited to single filers making less than $75,000 a year and joint filers making less than $150,000.
About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
“The housing market would not have moved without this tax credit,” said Lucien Salvant, spokesman for the National Association of Realtors. “It’s a fragile recovery, which is why we think it should be extended.”
The IRS began special screening procedures for tax returns claiming the credit after it was enacted, said IRS spokesman Frank Keith. For example, taxpayers who previously claimed the mortgage interest deduction would warrant a second look if they claimed the first-time homebuyers credit, he said.
Processing claims presented special challenges for the IRS during the spring tax filing season because homebuyers were eligible for different credits, depending on when they purchased their homes.
First-time homebuyers who purchased homes in 2008 were eligible for only $7,500 in tax credits, and the credits had to be repaid over the following 15 years. Those who bought homes in 2009 were eligible for up to $8,000, and there was no requirement to repay the money. Also, people who bought homes in 2009 were allowed to claim the credit on their 2008 tax returns.
An audit by the agency’s inspector general found that 93 percent of the returns claiming credits for homes bought in 2009 were coded incorrectly, meaning those taxpayers could be incorrectly identified as liable for repaying the credit. The audit was released in September by the Treasury Inspector General for Tax Administration. It reviewed 47,276 electronically filed returns.
The IRS, in a response to the audit, said it plans to track the returns and confirm that taxpayers are liable to repay the credit before pursuing them.
Copyright 2009 The Associated Press, Stephen Ohlemacher, Associated Press writer.
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225590
WASHINGTON (AP) – Oct. 21, 2009 – Key congressional leaders want to extend the tax credit for first-time homebuyers beyond its scheduled end-of-November expiration despite complaints of fraud and Obama administration concerns about the costs.
Housing and Urban Development Secretary Shaun Donovan says the administration is not sold on the idea. For the past several weeks, Obama administration officials have been talking about possibly extending the credit to help spur the economy and create jobs. But at a congressional hearing Tuesday, Donovan said the administration needs better cost estimates.
“To truly understand the costs, we will not know that until Americans have filed their tax returns,” Donovan told the Senate Banking Committee. “We believe it’s critical to have the information necessary to make a fully informed decision about the costs.”
Tax filing season doesn’t start until next year. But Donovan said he expects to get cost data in the next few weeks. “We understand the urgency of this situation,” Donovan said.
The Internal Revenue Service has opened 107,000 examinations of questionable claims and identified 167 criminal schemes involving the tax credit since it was expanded as part of the economic stimulus package enacted in February.
But lawmakers understand the program is popular and has helped the struggling housing industry recover.
Lawmakers said they might add protections to help prevent fraud. But there is a growing consensus among congressional leaders that the housing market is still fragile enough to justify extending the program.
House Majority Leader Steny Hoyer, D-Md., said he favors extending the existing credit through the end of the year as lawmakers work to “find out about how ethically and how honestly this policy is being pursued.”
Senate Banking Committee Chairman Chris Dodd said, “We still need to use every tool at our disposal” to help the housing market. Dodd, D-Conn., has joined Sen. Johnny Isakson, R-Ga., in sponsoring a bill that would extend the credit until June 30 and expand it to people who already own homes.
It would cost about $1 billion a month to extend the existing credit, according to congressional estimates. The bill sponsored by Dodd and Isakson is estimated to cost $16.7 billion.
The existing credit allows qualified first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000. Homes purchased after Jan. 1 are eligible. The full credit is limited to single filers making less than $75,000 a year and joint filers making less than $150,000.
About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
“The housing market would not have moved without this tax credit,” said Lucien Salvant, spokesman for the National Association of Realtors. “It’s a fragile recovery, which is why we think it should be extended.”
The IRS began special screening procedures for tax returns claiming the credit after it was enacted, said IRS spokesman Frank Keith. For example, taxpayers who previously claimed the mortgage interest deduction would warrant a second look if they claimed the first-time homebuyers credit, he said.
Processing claims presented special challenges for the IRS during the spring tax filing season because homebuyers were eligible for different credits, depending on when they purchased their homes.
First-time homebuyers who purchased homes in 2008 were eligible for only $7,500 in tax credits, and the credits had to be repaid over the following 15 years. Those who bought homes in 2009 were eligible for up to $8,000, and there was no requirement to repay the money. Also, people who bought homes in 2009 were allowed to claim the credit on their 2008 tax returns.
An audit by the agency’s inspector general found that 93 percent of the returns claiming credits for homes bought in 2009 were coded incorrectly, meaning those taxpayers could be incorrectly identified as liable for repaying the credit. The audit was released in September by the Treasury Inspector General for Tax Administration. It reviewed 47,276 electronically filed returns.
The IRS, in a response to the audit, said it plans to track the returns and confirm that taxpayers are liable to repay the credit before pursuing them.
Copyright 2009 The Associated Press, Stephen Ohlemacher, Associated Press writer.
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225590
Tuesday, October 20, 2009
Even Celebrities Aren't Immune to Foreclosure
Foreclosures of Rich and Famous People
Published on Tuesday, September 22, 2009, 8:16 PM Last Update: 18 hour(s) ago by Kimbrough Gray
Category: All Articles » Economy and Politics
Although the rich and famous are rich and famous, it doesn't mean that they are impervious to the popping of the real estate bubble. Many have succumbed to real estate woes as of late.
Ed McMahon had tabloids a talking when his real estate troubles became front page news last year. The now deceased celebrity attributed his dollar difficulties to alimony paid out to ex-wives and the economic downturn.
Aretha Franklin set the record straight about her exclusive Detroit suburban home. It went into foreclosure due to non-payment of property tax. She could have lost her $400,000 home to foreclosure due to $445 in back property taxes that accumulated into $20,000, since 2005. She said it was an oversight by her attorney. Once alerted of the situation, the Queen of Soul satisfied the debt.
Amber Frey, infamous ex-mistress of convicted murderer Scott Peterson lost her home northern California home to foreclosure. At auction, the asking price was over $200,000 less than the original purchase price. No one snatched up the deal at a low $305,000. She ended up surrendering the property to the bank.
Fantasia of American Idol fame came close to losing her home in Charlotte, North Carolina. The R&B singer settled with her Florida lender just days before the auction was scheduled to sell her pond-front home.
Extreme Makeover scandal hit the Harper family home in Atlanta, Georga when it went into foreclosure and would have been sold had it not been for ... even more ... generous donations. The most expansive Extreme Makeover ever seen was completed with much dedication, sweat and effort by volunteers, along with a deluge of donated dollars. Taking out a $400,000+ loan for a construction business that went belly up put the Harper's home in harm's way.
Laura Richardson, California Congresswoman, fell behind on property tax and mortgage payments in 2008. To the disdain of Sharon Helmar who sold it to her, the Long Beach home went into foreclosure and was sold. Neighbors noted that she did not keep up the lawn or take out her garbage.
Sports figures are not unfamiliar with foreclosure, either. Latrell "Spree" Sprewell, former NBA guard known for choking his then Coach P. J. Carlesimo, lost his 70-foot yacht and his Milwaukee home to foreclosure. Assessed at a mere $668,000, the home's value was nowhere near what most other sports professionals in his pay range own.
Jose Conseco experienced women woes, which caused him to lose his expansive 7,300 square foot Encino, California mansion. At least, that's his story. He said he lost $7 to $8 million on his two divorces that left him hard up for cash and was unable to pay his mortgage.
Not to anyone's surprise, Michael Vick's home was in foreclosure, since he was in prison and no longer could come up with the cash. Once NFL's highest paid player, the dog-fight diva was convicted and was to serve 23 months in prison. He was released earlier this year to serve out the rest of his sentence in home confinement.
Evander Holyfield, famous for his fight with Mike "I'll Bite Your Ear Off" Tyson, had his Fairburn, Georgia home in foreclosure. He was also behind on child support payments to a mother of one of his eleven children, and being sued for not paying $550,000 he loaned he owed to a consulting company.
Michael Jackson (King of Pop), MC Hammer (Hammertime fame), Veronica Hearst (Randolph Hearst widow), Scott Storch (previous hip-hop producer), Damon Dash (hip-hop mogul), Doug E. Fresh (rap icon), Vin Baker (former NBA star), Wyclef Jean (Fugees' frontman) and other famous actors, performers and sports professionals have all experienced foreclosure.
Ki graduated from UT with a CS degree. Now he works with Austin real estate. He has a website allowing buyers to search Austin MLS listings. He also keeps an updated blog on Austin Texas real estate.
http://www.brokeragentsocial.com/article/530/foreclosures-of-rich-and-famous-people
Published on Tuesday, September 22, 2009, 8:16 PM Last Update: 18 hour(s) ago by Kimbrough Gray
Category: All Articles » Economy and Politics
Although the rich and famous are rich and famous, it doesn't mean that they are impervious to the popping of the real estate bubble. Many have succumbed to real estate woes as of late.
Ed McMahon had tabloids a talking when his real estate troubles became front page news last year. The now deceased celebrity attributed his dollar difficulties to alimony paid out to ex-wives and the economic downturn.
Aretha Franklin set the record straight about her exclusive Detroit suburban home. It went into foreclosure due to non-payment of property tax. She could have lost her $400,000 home to foreclosure due to $445 in back property taxes that accumulated into $20,000, since 2005. She said it was an oversight by her attorney. Once alerted of the situation, the Queen of Soul satisfied the debt.
Amber Frey, infamous ex-mistress of convicted murderer Scott Peterson lost her home northern California home to foreclosure. At auction, the asking price was over $200,000 less than the original purchase price. No one snatched up the deal at a low $305,000. She ended up surrendering the property to the bank.
Fantasia of American Idol fame came close to losing her home in Charlotte, North Carolina. The R&B singer settled with her Florida lender just days before the auction was scheduled to sell her pond-front home.
Extreme Makeover scandal hit the Harper family home in Atlanta, Georga when it went into foreclosure and would have been sold had it not been for ... even more ... generous donations. The most expansive Extreme Makeover ever seen was completed with much dedication, sweat and effort by volunteers, along with a deluge of donated dollars. Taking out a $400,000+ loan for a construction business that went belly up put the Harper's home in harm's way.
Laura Richardson, California Congresswoman, fell behind on property tax and mortgage payments in 2008. To the disdain of Sharon Helmar who sold it to her, the Long Beach home went into foreclosure and was sold. Neighbors noted that she did not keep up the lawn or take out her garbage.
Sports figures are not unfamiliar with foreclosure, either. Latrell "Spree" Sprewell, former NBA guard known for choking his then Coach P. J. Carlesimo, lost his 70-foot yacht and his Milwaukee home to foreclosure. Assessed at a mere $668,000, the home's value was nowhere near what most other sports professionals in his pay range own.
Jose Conseco experienced women woes, which caused him to lose his expansive 7,300 square foot Encino, California mansion. At least, that's his story. He said he lost $7 to $8 million on his two divorces that left him hard up for cash and was unable to pay his mortgage.
Not to anyone's surprise, Michael Vick's home was in foreclosure, since he was in prison and no longer could come up with the cash. Once NFL's highest paid player, the dog-fight diva was convicted and was to serve 23 months in prison. He was released earlier this year to serve out the rest of his sentence in home confinement.
Evander Holyfield, famous for his fight with Mike "I'll Bite Your Ear Off" Tyson, had his Fairburn, Georgia home in foreclosure. He was also behind on child support payments to a mother of one of his eleven children, and being sued for not paying $550,000 he loaned he owed to a consulting company.
Michael Jackson (King of Pop), MC Hammer (Hammertime fame), Veronica Hearst (Randolph Hearst widow), Scott Storch (previous hip-hop producer), Damon Dash (hip-hop mogul), Doug E. Fresh (rap icon), Vin Baker (former NBA star), Wyclef Jean (Fugees' frontman) and other famous actors, performers and sports professionals have all experienced foreclosure.
Ki graduated from UT with a CS degree. Now he works with Austin real estate. He has a website allowing buyers to search Austin MLS listings. He also keeps an updated blog on Austin Texas real estate.
http://www.brokeragentsocial.com/article/530/foreclosures-of-rich-and-famous-people
Tuesday, October 13, 2009
FHA Lenders Offer Cash for Keys (Deed in Lieu of Foreclosure)
FHA lenders offer cash for keys
WASHINGTON – Oct. 13, 2009 – The Federal Housing Administration (FHA) is giving struggling borrowers an opportunity to deed their property over to the lender in exchange for up to $2,000.
Under the Cash for Keys program, borrowers with FHA-backed loans who agree to a deed-in-lieu-of-foreclosure do not have to repay the mortgage.
To qualify, owners must face long-term financial hardship, put the house on the market at a fair price for at least 90 days, face no additional claims or liens other than the first mortgage on the house, and leave the property clean and in good condition.
Source: Sarasota Herald-Tribune (FL) (10/12/09) P. D12; Bayles, Tom
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225149
© Copyright 2009 INFORMATION, INC. Bethesda, MD
WASHINGTON – Oct. 13, 2009 – The Federal Housing Administration (FHA) is giving struggling borrowers an opportunity to deed their property over to the lender in exchange for up to $2,000.
Under the Cash for Keys program, borrowers with FHA-backed loans who agree to a deed-in-lieu-of-foreclosure do not have to repay the mortgage.
To qualify, owners must face long-term financial hardship, put the house on the market at a fair price for at least 90 days, face no additional claims or liens other than the first mortgage on the house, and leave the property clean and in good condition.
Source: Sarasota Herald-Tribune (FL) (10/12/09) P. D12; Bayles, Tom
http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=225149
© Copyright 2009 INFORMATION, INC. Bethesda, MD
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