Archive for the ‘Mortgage Consumer’ Category

Should A Borrower With An Underwater Mortgage Strategically Default?

Thursday, September 20th, 2012

By Evan Nemeroff at

Does a borrower whose mortgage is underwater have an obligation to continue paying their monthly loans if they have the ability to do so? The answer to this question is different whether you speak to an economist or a homeowner.

According to a Zillow home price expectations survey in which 114 responses were compiled by Pulsenomics LLC from a group of economists, real estate experts and investment and market strategists, 71% said they would not strategically default on their mortgage that is at least 40% more than the current value of their home.

In a separate national survey conducted by Ipsos on behalf of Zillow where 2,009 adults where asked if they would pursue a strategic default, 59% of homeowners said they would not utilize this strategy if they were underwater on their home by 40%.

Currently, out of the 31% (15.3 million) of U.S. homeowners who have a mortgage underwater—paying a mortgage that is higher than the value of their home—nearly three-quarters have properties that are 40% below their buying cost, Zillow’s second quarter negative equity report said. Regionally, high rates of negative equity have accumulated in states such as California, Florida, Nevada, Arizona, and Georgia, Zillow reported. On average, homeowners across the country owe $75,235, approximately 44%, more than what their house is worth.

When homeowners were asked in the survey why they would not choose to strategically default, 37% cited moral reasons, while 35% indicated it didn’t make sense since they intend to live in that house for an extended period of time.


Home ownership obstacles (3rd Qtr 2011)

Sunday, December 4th, 2011

Surveyed obstacles to home ownership

Source :

The beatings will continue until morale improves!

Monday, November 7th, 2011

“The U.S. Federal Reserve is tilting the playing field in favor of those attempting to get mortgages by keeping interest rates ultra-low. The Senate also has voted to tilt the playing field in their favor, by raising the limit of Freddie Mac and Fannie Mae guarantees back to $729,750 – an absurdly high amount for a program that was meant to help the middle class.

However, the banks themselves are being very cautious, restricting lending to those well within traditional parameters of no more than an 80% loan to value ratio and no more than 25% of income consumed by mortgage payments. That helps the rental market, by preventing well-qualified renters from buying homes, but it does nothing for housing market recovery.

Given the restrictions on mortgage availability and the continued overhang of foreclosures and pre-foreclosures . . . the pace of new home sales remains extremely depressed. Further, even when the housing market recovers it will do so first through the absorption of existing inventory, so the demand for new building will remain low.”

Source :

Banks get both sides of their bread buttered

Sunday, October 9th, 2011

Mortgage Fraud explained

I.R.S. view on tax trusts

Friday, June 4th, 2010

Abusive Trust Tax Evasion Schemes

Talking Points 

  • Trust/estate matters are the third highest area of growth among top CPA firms.


  • Domestic trusts filed 3.6 million Form 1041 returns in 2003; the third most frequently filed income tax return behind individual and corporate returns.


  • Since the mid-1970s the number of Form 1041 returns filed has doubled and there has been a proliferation of abusive trust schemes marketed to avoid or evade income taxes.
  • Facts about trusts :

o A trust is a legal entity formed under state law. To create a trust, legal title to property is conveyed to a trustee, who is then charged with the responsibility of using that property for the benefit of another person, called the beneficiary, who really has all the benefits of ownership, except for bare legal title.
o Legal trusts are used in such matters as estate planning; to facilitate the genuine charitable transfer of assets; and, to hold assets for minors and those unable to handle their financial affairs.
o A trustee is designated to hold legal title to the trust property, to exercise independent control over it, and to be responsible for its management.
o All trusts must comply with the tax laws as set forth by the Congress in the Internal Revenue Code, Sections 641-683.
o Trusts established to hide the true ownership of assets and income or to disguise the substance of financial transactions are considered fraudulent trusts.
o Taxpayers are responsible for payment of their taxes as set forth by Congress regardless of who prepares their return.


Wells Fargo and BoA at least give lip service to working with HAMP

Thursday, March 18th, 2010

In the news :  Wells Fargo joins Bank of America participating in a government program to modify second mortgages if the home owner has already modified their first mortgage.

The program is part of the  government’s Home Affordable Modification Program (HAMP) that aims at reducing monthly payments to help customers stay in their homes.

HAMP offers lenders who made “piggyback” loans — second mortgages that allowed consumers to make a small or no down payment in recent years — incentives to lower payments or eliminate the loans entirely.   As usual, it remains to be seen if these incentives will be passed thru to second mortgage holders.

Customers of Wells Fargo or Bank of America  who have already modified their first mortgage through the HAMP modification program  can also apply to modify their second mortgage.  All first-lien HAMP customers with second-lien mortgages should received mailed notices to make them aware of the new payment relief option … but maybe you heard about it first here.

A Matter Of Trust … or is it ?

Tuesday, March 9th, 2010

More a consumer warning, I digress a bit here on a topic indirectly related to home ownership … the matter of trust(s) …. (thank you Billy Joel).

There are a goodly number of snake oil vendors catering to everyone’s fantasy that you can lower or eliminate your tax bill putting your home in a legal Trust of some kind.

No surprise when it involves an attorney, establishing a Trust is expensive, depending on the complexity of your situation and what you’re trying to achieve.   One or two thousand dollars or more is not uncommon.   But as usual, Buyer Beware, and make sure you retain a lawyer that will back up their work and not just tell you what you want to hear while they’re collecting on their invoice.

Not that it’s encased in concrete, the following is the IRS take on Trusts as a tax avoidance strategy (notice that they use the word “evasion”).   As always, do your own due diligence and also retain good legal counsel.   Establishing a Trust that will withstand the scrutiny of IRS will need more than a boilerplate form bought on eBay.

IRS View on Trust Tax Evasion Schemes  (source :

  • Trust/estate matters are the third highest area of growth among top CPA firms.
  • Domestic trusts filed 3.6 million Form 1041 returns in 2003; the third most frequently filed income tax return behind individual and corporate returns.
  • Since the mid-1970s the number of Form 1041 returns filed has doubled and there has been a proliferation of abusive trust schemes marketed to avoid or evade income taxes.



How to Look Before You Leap?

Tuesday, January 19th, 2010

I don’t have an answer for this rhetorical question, so this is more a buyer-refinancer beware comment :  how to get an honest early on answer from your Lender as to whether your refinance is do-able or not.

Assuming your credit and employment documentation are good or better, there appear to be two main factors influencing refinancing your home in the current mortgage market :  market values and foreclosure activity in your community.


Highlights of 2008 Tax Law Changes: Tax Breaks Renewed, Recovery Rebate Credit, Homeowner Relief

Friday, January 16th, 2009

Source: Internal Revenue Service,
Tue Jan 6, 2009

AMT exemptions rise; several expiring deductions and credits get a new lease on life; a new standard property tax deduction and a special first-time homebuyer credit are available to some homeowners; and retirement savings incentives expand. These are among the changes taxpayers will find when they fill out their 2008 tax returns. More information about these and other changes, summarized below, can be found on and in various IRS documents, including the Instructions for Form 1040.

Economic Stimulus Payments Tax Free

Economic stimulus payments are not taxable, and they are not reported on 2008 tax returns. However, the stimulus payment does affect whether a taxpayer can claim the Recovery Rebate Credit and how much credit he or she can get. The credit is figured like last year’s economic stimulus payment except that the amounts are based on tax year 2008 instead of 2007. A taxpayer may qualify for the Recovery Rebate Credit if, for example, she did not get an economic-stimulus payment or had a child in 2008. See Fact Sheet 2009-3 for details. In most cases, the IRS can figure the credit. The instructions for Forms 1040, 1040A and 1040EZ have more information.