From the Christian Science Monitor:
Foreclosure’s shadow falls across diverse set of US homeowners
Victor Castro bought his home four years ago, expecting the move would bring stability. The Massachusetts janitor thought he would no longer move from rental to rental.
Music teacher Al Ynigues bought his home in Minnesota with a similar plan: He expected to be living and teaching there for years to come.
In Michigan, Mary Beyer arranged to refinance her home loan in a bid to bring order to her finances. She was having trouble getting by on her fixed income of disability payments.
Now each faces the possibility of foreclosure. They share a common American dream of homeownership, but what’s equally notable is their diversity. Their cases hint at the wide range of people who make up the group called “subprime” borrowers, who are now being hit hardest by a nationwide real estate slump.
They are white as well as black, old as well as young, and middle-income as well as low-income. As the name subprime implies, these loans aren’t for the Rockefellers, but for people with rocky credit records. Yet this category of loans saw an unprecedented wave of expansion since 2002, encompassing millions of Americans.
The explanation lies partly in the housing boom itself. As land values pushed toward record highs, many borrowers stretched against their credit limits to afford a home. Lenders, often charging lucrative fees, stood ready to help them.
By the time the housing boom peaked in 2005, fully 20 percent of new mortgage loans were subprime, four times the share a decade earlier.
…
The town, near Grand Rapids, is the place Mary Beyer has called home for 20 years. Her home is modest. But now she is paying dearly for every one of its 900 square feet. Divorced and living on a fixed income, she saw refinancing as a way to bring her budget into balance four years ago.Although the “refi” deal provided some cash up front, it depleted her equity in the house. Her monthly payments went up. Her troubles deepening, Beyer called her mortgage broker for help. The result: another refi. Then another with a different lender. Then another.
“If I could go back … ,” she muses, recalling the $600 monthly payments she owed in 2002. After four refis in four years, Beyer says she is left with no home equity and a monthly payment that outweighs her whole income. She feels duped by the lenders and is filing a lawsuit with help from Legal Aid of Western Michigan.
From the NY Daily News:
In over their heads
Tens of thousands of New Yorkers who are in over their heads with homes they can’t afford are awakening to a harsh reality.
As the housing market boomed, some mortgage lenders relaxed their requirements, making loans to buyers with poor credit, little savings and scant proof of their income.
Many of these buyers, known in the financial services industry as subprime borrowers, were steered toward adjustable rate mortgages because they have interest rates that start low – making the monthly payments seem, at least initially, very affordable.
But after a short period, sometimes as soon as several months, the monthly payments jump.
For homebuyers who did not fully understand the agreements they signed on closing day, or believe they were misled, they’ll “be spending 80% to 90% of their disposable income on their mortgage, and it’s a recipe for foreclosure,” said Josh Nassar of the Center for Responsible Lending.
Critics of the lending industry charge that the rush to sell as many mortgages as possible during the recent housing boom led it to push riskier loans on clearly unqualified buyers.
From Delaware Online:
Philadelphians burned by subprime loans
One in 30 homeowners in Philadelphia has been hurt by predatory lenders who target people who live in moderate-income neighborhoods and whose homes are often their only asset, according to study by a community-development group in the city.
The study illustrates a problem that’s captured the attention of federal and local legislators throughout the country.
The study by the Reinvestment Fund analyzed the sales and mortgage histories of 15,500 Philadelphia properties to discern patterns of predatory lending practices, which generally involve excessive or unnecessary rates and fees, often on unwitting borrowers, many of them minorities. The study was released last week.
“The same kind of lending practices have taken place in many different parts of the country,” said Mark Zandi, chief economist at Moody’s Economy.com, who has reviewed the Philadelphia study.
The fund found that the likelihood of becoming victimized by predatory lenders is one in seven for borrowers who have refinanced their homes multiple times. Any mortgage creates a public paper trail that documents a borrower’s financial situation.
Like Vegas and Reno, casinos will come to the Meadowlands..
N.J. racetracks fear losing out to gambling
“It is no secret racing is facing tough competition from neighboring states that have added gaming operations to their racing venues,” said Karyn Malinowski, director of the Rutgers Equine Science Center. “Any further erosion of racing in New Jersey could have disastrous consequences for the state economy and the rest of the equine industry.”
Bergen County lawmakers introduced a proposal to add video lottery terminals to the Meadowlands Racetrack to compete with gambling in places such as Mohegan Downs outside of Wilkes-Barre, Pa.
But South Jersey legislators vowed to fight the proposal, fearing that it would hurt Atlantic City casinos.
In Success of ‘Smart Growth,’ New Jersey Town Feels Strain
NYTimes
http://www.nytimes.com/2007/04/09/nyregion/09smart.html
That project, the 400-acre Washington Town Center — designed according to state planning goals as a remedy to suburban sprawl — has become a victim of its own success, town officials and residents said. So many families have flocked to Washington Township, eight miles east of Trenton in Mercer County, in the nine years since construction began that the schools are overflowing, property taxes are skyrocketing and the main streets are clogged.
Overwhelmed, town officials have turned trailers into classrooms, eliminated a separate fire district to save $900,000 and lent their construction manager to Asbury Park for a $150,000 fee. Last month, they sued the state Department of Education for money they claim was unfairly cut off when Washington Township was deemed too wealthy to receive what is known as “core curriculum aid,” about $2 million a year.
“Washington Township did everything right for smart growth, but families want to live there so bad, their numbers have gone through the roof,” said George Hawkins, executive director of New Jersey Future, a nonprofit group that supports smart growth. “We’re going to undercut ourselves if we make it more expensive for people to do the right thing.”
Now Mayor David Fried is considering a drastic remedy: using eminent domain to seize undeveloped tracts and prevent developers from building hundreds of more homes, lest more young families move in.
“The last thing you want to do is turn kids into liabilities,” Mr. Fried said. “But we were slated for another 500 homes, and if we did that, it would be catastrophic because I can’t even handle the kids we have already.”
I despise this arguments. We can’t afford kids so let them live in Rental houses in far away towns. I read somewhere the authorities charge about $80K in permits for house building, why can’t they use that money to build schools. This is just a big BS.
“She feels duped by the lenders and is filing a lawsuit with help from Legal Aid of Western Michigan.”
Cash out once a year for 4 years. This RE thing is pretty good. The keg runs dry and now you claim that you were duped?
You better talk to your lender and work something out. If you decide to walk or if your lender accepts a short sale, they will write off the loss and send the IRS a 1099 for the deficiency.
The IRS will treat the shortfall as income so the borrower will not only be out of a house, but will owe income taxes on the difference between the mortgages and the sales price. I think [accountants??]it is taxed at the ordinary income rate, not the typically lower capital gains rate.
Talk about a double whammy.
American Home Mortgage, an Alt-A lender, is taking a beating in pre-market this morning.
Ahead of the Bell: AHM Investment Slides
Shares of American Home Mortgage Investment Corp. slid sharply in Monday premarket trading, after the company offered further evidence that the troubles plaguing subprime mortgage lenders have spread to higher rungs on the credit ladder.
The Melville, N.Y.-based home lender said Friday conditions in the markets for mortgage loans and securities backed by mortgages have “changed sharply.” When American Home Mortgage Investment tried to sell pools of its mortgage loans in March, the company met far fewer buyers offering materially lower prices, the company said.
…
The investors who buy American Home Mortgage’s Alt-A loans have been sending them back after borrowers miss payments, the company said. The lender said it stopped making the types of Alt-A loans that have led to defaults.
American Home Mortgage Investment was the 20th-largest Alt-A lender last year with $5.2 billion in Alt-A loans, or about 9 percent of originations, according to Inside Mortgage Finance.
A host of Wall Street analysts downgraded American Home Mortgage Investment and slashed their price targets on the lender’s stock. Friedman Billings Ramsey analyst Paul J. Miller said profit margins from selling Alt-A loans are under pressure as investors seek safer investments, leading to a “severe contraction in market appetite” for Alt-A loans.
Democrats clamoring easier lending requirements to help the less fortunate. Republicans boasting higher home ownership.
I wonder who’s going to take the blame for the increase in foreclosure.
FYI: Bloomberg television has a 2 hour “In Focus” special on the subprime crisis today at 12 PM EST.
From the Home News Tribune:
Katz paid low price for condo
State workers’ union boss Carla Katz, whose romantic history with Gov. Jon Corzine has caused him political headaches and shadowed recent contract talks, enjoyed a beneficial deal when she purchased a condominium four months ago in the same riverfront building where the governor resides.
So rare were the terms of Katz’s $1.1 million purchase that only one other buyer of condominium units in the Hudson Tea Building got a better price in all of 2006, in terms of the ratio of the purchase price to a unit’s assessed value.
And that buyer was a limited liability corporation consisting of three men whose names are listed as executives in the company that owns the building and is selling its condominiums — Toll Brothers of Horsham, Pa., a suburb north of Philadelphia.
…
Toll Brothers started selling Hudson Tea Building units in September 2005. With residents offered an introductory price to keep their apartment units, the average sale price in those first two months was 2.5 times assessed value. All but three of the 53 units sold for less than three times assessed value.
By 2006, however, those sale prices turned around. Prices were triple or more the units’ assessed values in 31 of 38 sales last year. Perhaps new residents, rather than established renters, were buying the units. Toll Brothers wouldn’t say.
Katz, property records show, paid $1,107,515 — apparently in cash, as there’s no mortgage apparent for her Neruda Hoboken LLC — in December 2006 for a two-bedroom condominium assessed at $418,100, or 2.65 times the assessed value.
The lone buyer that got a better rate in 2006 was Hoboken Land I LLC, whose officers as listed by state incorporation filings are Zvi Barzilay, Michael Snyder and Richard Hartman, all of a shared address — 250 Gibraltar Road in Horsham, Pa.
Toll Brothers, headquartered at that address, lists Barzilay as its president, Snyder as secretary and Hartman as vice president.
Hudson County records show they paid $836,990 last April 27 for a two-bedroom condo assessed at $395,300, for a ratio of 2.12 times the assessment.
Barzilay did not respond to repeated calls to his office. Kevin Wilson, who said he was in charge of Toll Brothers marketing at the Hudson Tea Building, said, “We have no comment on individual units,” then added, “I just want to end this conversation.”
Off topic…
I’m finally a dad. It’s a girl. My wife and I are both exhausted. It really is overwhelming, but we couldn’t be happier.
Congrats!
Renting,
Congrats!! Just don’t name her Carla.
Congratulations! Is that reason enough for another get together?
SG (post 4)
It’s not an argument, it’s a realistic assessment of the situation. What is happening in Washington Twp. is the direct result of the structure in place to fund schools in NJ.
There are almost no circumstances (Millstone in Monmouth County maybe an exception) where the taxes paid on a typical individual home are high enough to cover the cost of mandatory K-12 education.* As long as that’s the case, an increase in residential development means higher taxes. Also, because of the land use laws, during a boom, residential construction will always outstrip the production of the infrastructure improvements needed to accommodate the new residents.
Also, the elimination of fire districts is always a good idea.
*At the margins, a single home can add more to tax revenue than it uses in services, but there’s no way to prevent the house that is going to push a community outside the margins, i.e. force a school district to add classrooms and hire more teachers, from being built and increasing expenses.
I’m pretty sure I’m the biggest advocate for affordable housing on this site, but until we change the way schools are funded, municipal officials who have some brains are going to look at what development is costing their town and try to find a way to fight it, unless they are getting something from the developers.
Time to quote Lou Reed:
“It’s the beginning of the great adventure…”
Congratulations and good luck Renting.
Slowly, the media is just starting to understand the impact of this housing mania… i believe they are, however, missing a real component of this story… and that is… According to the MBA 9% of homeowners with subprime are first-time buyers… and that number, according to the Center for Responsible Lending, is 11%… meaning that it’s possible that a very large percentage of subprimers are Refiers… who ripped cash-out… and just didn’t qualify for anything else because… there debt to income level was just too huge… so… i believe that this subprime meltdown is not just about people with low or middle income with spotty credit history but also about hi-level income who took on too much debt… this is not about income level but debt and terms of the loan…
Congrats RentingInNJ!!!!
———-
From The Record (a weekly piece):
Key move was dropping price
The listing: Two-bedroom, 2½-bath town house.
Location: Washington Township.
Listed by: Kelly Ann Vivona of McBride Agency, Franklin Lakes
On the market: More than a year.
Asking price: $570,000, later reduced to $489,900.
The game plan: The town house was listed with another real estate agency in January 2006 at $570,000. Even after the asking price was reduced to $510,000 as the market slowed last year, the property did not sell.
The seller relisted with Vivona in February, at $489,900. She marketed the property by putting it in the Multiple Listing Service and advertising it on the Internet. The most important move, Vivona said, was dropping the price: “If you don’t price it right, it’s going to sit.”
The result: Vivona had a buyer who was interested in the property and offered $455,000, which the seller accepted. A second buyer stepped forward and offered $475,000, but the seller stuck with the first offer, and the house sold for $455,000.
Who’s the mascot for this bust? We need a pets.com dog type of mascot.
A David-Leareah handpupper? Alan Greenspan on a stick?
If it sings the song “what goes up, must come down” it’ll be a real hit.
-Richie
Nice lowball! Twenty percent off and in the paper to boot!
jb
Someone needs to do a YouTube of Greenspan, Bernanke, and the Pets.com dog. G&B should be played by muppets characters Bunsen and Beaker respectively.
Meep!
jb
http://www.starstore.com/acatalog/BunsenBeaker.jpg
Renting,
Congratulation.
Just don’t name her Sally. :)
Congrats Renting! Sally or Carla? Whatever, don’t name her Suzanne!
# 16
I’m flattered. Believe it or not, but I was the one who bought this townhouse at Washington Township. It is on rental listing in case of anyone is interested.
$2,750? Good luck.
jb
BC Bob
#5
Cancellation of debt (COD) income is taxed at ordinary income rates and is therefore taxed at your highest marginal rate. The IRS views COD income as the equivalent of an individual receiving cash to pay off debt (constructive receipt).
Richie [17],
My vote, Sir Alan. It all starts at the top. If the # 1 man of finance is manufacturing the s*it, can we really blame the pigs for getting dirty in it. The below, just a little more than two years ago.
“Federal Reserve Chairman Alan Greenspan said that Americans’ preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.”
“He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs. Those savings would not have been realized, however, had interest rates shot up.”
“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage,” Greenspan said.”
“The Mortgage Bankers Association said the average rate for a 30-year fixed mortgage in the week ended Feb. 13 was 5.46%, compared with 3.27% for a one-year ARM. Mark Zandi of Economy.com says that although Greenspan is technically correct, for some borrowers, including those with high debt, fixed-rate mortgages may be a better bet.”
http://www.usatoday.com/money/economy/fed/2004-02-23-greenspan-debt_x.htm
Ron [25],
Thanks. Ouch.
“Email Received from Lennar Employee – I just voluntary terminated my employment of 6 years with Lennar. I worked on the US Home side for the first half of my employment and Lennar for the second half. This is the worst company to work for! I was discriminated against for my age and because I have a child and over the course of my years there, they “hired” for at least 4 positions that were not publicly advertised. Equal Opportunity Employer? I don’t think so! I can’t even begin to express how badly they treat their employees, and as mentioned several times before, their poor treatment carries into the quality of homes built as well. No matter what they say, they ARE building cookie cutter homes, and badly I might add! A few of us in my division made up a new slogan- SNAFU Homes- We Build It Right Because We Build It Twice!! Twice being the Customer Care side of course.
http://www.lennar-homes.info/employees
Congrats RentinginNJ. With a baby now and less free time (picture diaper changes, feeding/burping and plenty of stroller-walking), renting will seem an even bigger plus, since your schedule will revolve around Jr.!
congratulations on your bubble baby ;)
Scams are every where
Federal and state regulators say it’s one of the fastest-spreading new scams in the mortgage market: Internet-based companies that artificially raise loan applicants’ FICO scores by 50 to 200 points by implanting credit accounts of consumers with outstanding payment histories into the credit files of borrowers with low scores and bad payment
http://realtytimes.com/rtcpages/20070409_creditboosting.htm
That piece was interesting.
I knew that adding someone as a “joint cardholder” on an account with a good payment history would give the low-FICO cardholder the benefit of the higher-FICO payment history.
However, I didn’t realize that adding “authorized users” impacted the FICO of the new user in the same way.
jb
I have a question:
was Cozine’s Property Tax relieve bill ever signed??
Today I got a letter from Town School board asking voter to increase Taxes next year by 6.78% and by additional 1.5% for what they are calling a question 2 – extra additions.
So total increase is 8.3% if approved by voters. As I am a renter I am tempted to go and vote for the bill….
ON more serious note – does anyone believe that 8.3% tax increase/year are sustainable??? How long, untill even people with no mortgage will be paying more than their monthly salary??
I do not believe we are seeing salary increases of 8.3%….
And lastly: at what point Taxes will start to negativelly affect RE prices??
I know NJ is expensive plce to live, if you can not afford it move out and such…. And I will probably do just that in the future. However – you can not have only rich people living in NJ.
Someone have to wash dishes in the Restaurants/cut people hair/clean after sick people/do the landscaping – or is it going to be:
Keep bringing illegal immigrants to NJ make them live in ghettos, surrounded by barb-wired fences, and drive them to work and back in buses???
I’ve gotten good advise from this site – primarily, my house isn’t sold until the check is in my hand. I decided not to put an offer on a house until I have it. With that said, does anyone have any advise on short-term rental places or furniture storage?
Follow up to # 6,
“American Home Mortgage Investment Corp. shares fell as much as 19 percent after the company’s loans attracted few bids from investors, fueling concern that losses at subprime lenders are spreading to higher-rated credits.”
“There’s no question the credit problems we’ve seen in subprime are blending into Alt-A,” said Fox-Pitt Kelton Inc. analyst Matthew Howlett in an interview. “It’s reflective of the poor underwriting that has gone on in this sector.”
“Poor lending standards have crossed this magical 660 FICO band,” Howlett said, referring to the scoring system that lenders use to judge a person’s credit record. Scores higher than 660 have been considered strong. “We’re going to see more Alt-A loans perform badly because they’re not traditional Alt-A loans. They’re subprime.”
“In early March, Wall Street firms including Bear Stearns Cos. and Goldman Sachs Group curtailed purchases of Alt-A mortgages with down payments of less than 5 percent. The firms package mortgages into bonds, and investors that buy the securities were demanding more yield to offset the risks.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aciLr5IR.NbU&refer=home
Jersey4Life Says:
April 9th, 2007 at 12:10 pm
I’ve gotten good advise from this site – primarily, my house isn’t sold until the check is in my hand. I decided not to put an offer on a house until I have it. With that said, does anyone have any advise on short-term rental places or furniture storage?
Many apartments complexes offer garage rentals with renting an apartment. For me it was the best solution. A lot more storage space than in, for example, “Public Storage” for literally fraction of cost.
Might not work if you have expensive furniture which you are aftraid to get damaged by variable temperature/humidity. In this case go with one of the climate controlled storage spaces. Better yet – stay in your current house untill next bubble -about 10 years from now.
After that sell it for 30000 millions (next bubble will be bigger than this one).
I am curious about the effects of AMT on home owners in the NJ area. When people choose the standard deduction in their tax return, in effect only annual interest and property tax payments in excess of the standard deduction is being deducted on the tax return.
Is the double whammy of rising property taxes and being snared by AMT being considered when high income earners buy in this area? Just wondering…… any thoughts?
Thanks everyone.
Don’t worry, no Sally or Suzanne!
Jersey4Life – I know you are looking in USR, I currently live there, so would be happy to answer any questions you may have. I moved in to town about 7 years ago, probably couldn’t afford it now!
dreamtheaterr Says:
April 9th, 2007 at 12:31 pm
Is the double whammy of rising property taxes and being snared by AMT being considered when high income earners buy in this area?
Yan: Not until they file and realize that the back-of-the envelope calc done at purchase of their McMansion now goes out the window. A lot of bellyaching or else just cluelessness and the eyes glaze over……
Al Says:
April 9th, 2007 at 12:05 pm
I have a question:
I know NJ is expensive plce to live, if you can not afford it move out and such…. And I will probably do just that in the future. However – you can not have only rich people living in NJ.
Al: As you know, eventually “the middle” of the state will get hollowed out. Also of note, you can tax the heck out of the rich, but ultimately, you really need the middle income masses for tax revenue.
I have an REO question. Can you negotiate on an REO price listed or do you have to pay asking to get that property?
Thanks all!
Negotiable
First, Ricky_nu at post 40 delivered one of my favorite lines:
…probably couldn’t afford it now.”
This is something I hear everyday, but few people realize that it connects directly with the unsustainable nature of home prices in NJ.
I too live in a house I couldn’t buy at the price I am told I can ask today (and I’m a reasonable guy who understands that I can’t go by last year’s comps), and so do most of my friends.
Which ties into Chifi at 42, and by extension Al.
NJ’s affordable housing program is really more about the middle class than the poor at this point. From Ocean County north, the income ceilings for participation in the state’s affordable housing program are very much what most would consider middle class. Even in the southern part of the state a family of four can qualify for the state’s affordable housing program with an income that is nearly $10K higher than the national median income nationwide.
There will be an addition to this post.
I’ve been coming to this site for a while. It’s a great resource.
My wife and I own a townhouse in Montgomery Twp. We would like to purchase a SFH in roughly the same area but we’re putting it off in hope that prices drop a bit more. Of course, in this case, the price will have to drop on our current home also.
Based on the sales of similar models, we think the townhouse we owe now could be sold for $400,000 and we’re looking to spend in the $600,000 range for the SFH. The assumption we’re making is that the price drop on our home will be less than the price drop on the house we want to buy. Is this assumption correct?
Hey BC-
Ready, AEM, fire!
#46 Paul I do nto think so. I assume the townhosue is a condo,and in past real estate declines condos and co-ops fell even more than single family houses, especially co-ops.
Keep in mind that a potential buyer’s only alternative at one point might have been a condo.
Now wtih prices falling, they potentially would be able to skip the condo, and go straight to the SFH.
Adding to post 45:
I just wanted to give an example so here it is:
Take a look at Renting’s situation for a moment. If he wants to buy a house in Hunterdon, Somerset or Middlesex County he would be eligible to purchase a home through the state’s affordable housing program as long as his household income was under $68,976. If his wife had just had twins, he could get into the program with an income up to $76,640.
Clearly, these programs are as much geared to young professionals as janitors and fry cooks. Actually, they are even geared more toward young professionals because few towns look to build “low income” (up to $43,110 for a family of three in the three counties named) housing prefering to aim for the moderate sector when they actually get around to building any.
To make my point I chose the region with the highest possible income level, but the other region’s really aren’t all that far behind. If you want to know what the income levels for affordable housing in every part of the state are, go to this page and download the pdf:
http://www.state.nj.us/dca/coah/
on the lefthand side third from the top is the link for Regional Income Limits 2006.
#40 ricky_nu
Thanks. I will take you up on the offer in the near future.
Paul,
It’s unlikely that you’ll simultaneously be able to sell your townhouse high, and buy the SFH low. Both transactions are going to be impacted by similar market factors. If prices fall on that SFH, they are going to be falling on your townhouse as well. The only way to make that kind of bet is to sit out of the market, a difficult endeavor and a risky bet.
Be careful that you don’t find yourself in a position where you are liable for two mortgages.
jb
ricky_nu
The future is sooner than I thought (just had the wife ask me a couple)…
1. Any pre-after school care programs in USR or near by? Do you know what it runs a month?
2. Septic Tanks – don’t know anything about the costs of cleaning them out or how frequently they need to be clean out.
3. Do you know what the going monthly insurance rate would be on a standard 4 BR 2 Bath house in USR? Would probably factor in one fireplace, but no pool.
Thanks,
Jersey4Life
#48 Thanks for the reply, bergenbubbleburst, even though it’s not what I wanted to hear.
One thing is our townhouse is not a condo or co-op. It’s also in a pretty nice development that is fully occupied.
We were hoping the price drops would be close to a given percentage across all price ranges. Then assuming a 10% drop, for example, our townhouse would drop $40,000 while a $650,000 house would drop $65,000. Oh, well.
From Marketwatch:
Subprime crisis shines light on mortgage brokers
The subprime mortgage crisis has re-ignited scrutiny of the industry and people who broker home loans, with some critics arguing that hidden fees and other dubious practices have contributed to the surge in delinquencies.
The main problem is that, counter to common perception, mortgage brokers do not represent the borrowers who pay them for advice. Instead, they are more like independent salespeople who are often paid as much by the lenders offering loans as the borrowers.
…
As the housing market boomed, mortgage brokers’ influence grew as they became involved in arranging the majority of home loans. Now the broking business should bare some of the blame for the ensuing crisis, say critics, including some who are brokers themselves.
“We all have some culpability,” said Steve Heideman, a mortgage broker who heads an organization dedicated to improving disclosure in the business. “The problems and abuses are happening because brokers see it as their right to make as much money as they can on a loan.”
There’s a basic problem with mortgage brokers being paid by lenders as well as borrowers and “very few” people know this happens, he added.
“It’s a dirty little secret of this business,” he said. “It shows a lack of confidence on the part of a mortgage broker to not tell the client what they’re making on the back side.”
#51 “It’s unlikely that you’ll simultaneously be able to sell your townhouse high, and buy the SFH low.”
This would be nice, but I’m not greedy. Like I said above, I just hope that prices drop as a fixed percentage across the prices ranges I’m concerned about. From what bergenbubbleburst said, this may not even be the case.
“Be careful that you don’t find yourself in a position where you are liable for two mortgages.”
I’m conservative when it comes to personal finances. This would create an unacceptably high level of anxiety.
dream
#38
You are half way there. When taxpayers itemize, they are entitled to claim mortgage interest related to both the loan balance of up to 1MM (I believe) and a home equity loan/line of credit of up to 100k, state income taxes and local property taxes paid with respect to a principal residence. Esentially, it would be the excess over the standard deduction as you mentioned.
Under the AMT you may lose all or a portion of your state and local tax deductions. These items are referred to as AMT preference items if you would like to research this further.
To answer your question, I doubt many homeowners outside the finance or tax world would make the connection let alone work this into their financial plans or homebuying decisions.
#41 Chifi, #56 Ron
Thanks for your insight. As a renter, I was trying to get a feel for the different lines of reasoning one should go through when deciding to buy a house. I would not buy a house just for the tax break, nor stretch my mortgage amount due to the potential tax break. The potency of the tax break is not as much as it seems on the surface.
On another note re mortgage financing, I am concerned over the the closing costs included in the loan, and the interest rate being jacked up, and buyers clueless. The mortgage brokers (previously used car salesmen) aka (future) Macys perfume squirters are laughing all the way to the bank… is there any unbiased educational literature out there (Mortgage Professor comes to mind) on how to navigate the mortgage hunting process?
Which always brings me to back to the saying…there is no free lunch (maybe some free dessert though, after a paid lunch).
RentingInNJ – congratulations!
I got a little surprise today when I filed my 2006 returns using H&R Block. I usually do the taxes myself(turbotax online) but considering I had rental income, stock transactions, moving expenses, etc., I decided upon using a pro.
The cost of filing: $550! ouch!!!
The worst part is they cannot tell ahead of time what it costs, because the ‘software’ calculates what the final cost of filing is.
Just curious what others are typically paying to do their taxes.
Renting
Congratulations! Your life has just changed forever ( for the good ) !
Rentlord,
I use taxexact online software it is 7.95 to file online irs state 7.95 also 14.95 total. The software is the easiiest, asks the questions you give the answers, best part is if you use the software and find it hard or you don’t think it is asking the right questions, you don’t pay – you dont pay until you print or efile, so you can do them at no cost. I have tried others this is the most userfriendly.
KL
dream
#57
Start your research at The Motley Fool and Bankrate. Both are great free sites.
Disclaimer: I have no affiliation with either site.
I used Turbotax online, cost $90 for fed, and 2 state filings.
They need to test their software more… it gets to be quite cumbersome navigation-wise. At least the calculations are correct (or at least I think they were till the IRS comes knocking at my door).
Thanks KL,
That’s what I normally used – web-based tax filing and it was reasonable. This time I wanted to use a professional.. and it turned out expensive.
Ofcourse I do understand everyones tax situation is different. My guess-timate was about $300 max.
I didn’t mind using a professional.. but I wish she could tell ahead of time what it would cost.
Rentlord
#58
It’s hard to say whether you paid too much. It sounds like your return is more complex than the average bear and therefore more work is involved. You get what you pay for when it comes to professional tax prep services.
Does the fee include audit protection?
I got a little surprise today when I filed my 2006 returns using H&R Block. I usually do the taxes myself(turbotax online) but considering I had rental income, stock transactions, moving expenses, etc., I decided upon using a pro.
The cost of filing: $550! ouch!!!
The worst part is they cannot tell ahead of time what it costs, because the ’software’ calculates what the final cost of filing is.
Just curious what others are typically paying to do their taxes.
I use a personal accountant. A personal accountant will give you a bit more attention then a big-shop would. Doing it yourself is indeed cheaper, but you might be missing out on some key deductions, and you don’t know the tax laws as much as someone who does this for a living.
My accountant charged $110 for our personal return (husband/wife). Pretty standard return, income, stock trades, interest income, child in the past year, deductions, etc. $550 seems kinda steep; unless you have a large amount of rental properties and your documents are all over the place.
-R
Ron, yes HRBlock offered two audit protection options.
Standard – free – which would help with any IRS questions (but no attorney representation)
and
Premium for $29.90 – an attorney to represent you in case of an audit.
I choose standard.
Can someone post this on the http://www.kannekt.com message board. It keeps getting pulled.
BY TOM BALDWIN
GANNETT STATE BUREAU
HOBOKEN — State workers’ union boss Carla Katz, whose romantic history with Gov. Jon Corzine has caused him political headaches and shadowed recent contract talks, enjoyed a beneficial deal when she purchased a condominium four months ago in the same riverfront building where the governor resides.
So rare were the terms of Katz’s $1.1 million purchase that only one other buyer of condominium units in the Hudson Tea Building got a better price in all of 2006, in terms of the ratio of the purchase price to a unit’s assessed value.
And that buyer was a limited liability corporation consisting of three men whose names are listed as executives in the company that owns the building and is selling its condominiums — Toll Brothers of Horsham, Pa., a suburb north of Philadelphia.
Katz declined a request for an interview about her condo purchase, adding this to other questions about the extent of the relationship, financial or otherwise, between Corzine and the woman for whom Corzine forgave a $470,000 loan and who heads a union against which the Corzine administration must bargain over taxpayers’ money.
carla , shes got the goods.
what a girl…
I believe I read that it was a cash deal. Where did Carla get the cash?
jb
Onew would have to ponder on where Carla
got the Cash.
Perhaps she has a rich friend.
or her parents, oh wait, maybe she learned
how to trade oil futures.
Grim (66)-
Love to see the income statement/balance sheet/cash flow of your garden-variety top-dollar ho.
From the Boston Herald:
Deputy works to keep the peace during home foreclosures
Deputy Jon Shokes knows a few things about you by the time he shows up on your doorstep.
He knows whether you or anyone who lived at your home has ever been to jail. He knows if police have ever been called to the house.
And, with his roll of industrial-strength tape and an eviction notice in hand, Shokes also knows that you haven’t made your mortgage payments.
I guess we really don’t have it that bad in NJ
http://images.businessweek.com/ss/07/01/0124_suburbs/index_01.htm?chan=rss_topSlideShows_ssi_5
Hot off the wires from the Realtors(tm):
NAR Urges HUD to Revamp FHA Program to Help People Stay in Their Homes
In light of the many families being
affected by negative subprime mortgages, the National Association of
Realtors(R) encouraged the Department of Housing and Urban Development to
act quickly to change the FHA mortgage insurance program to enable more
homeowners and their families to keep their homes.
In a letter sent to HUD Secretary Alphonso Jackson, NAR President Pat
Vredevoogd Combs strongly urged action by HUD to change FHA rules and waive
the requirement that a homeowner’s mortgage be “current” in order to
refinance into an FHA loan product.
“Many homeowners who were able to make timely payments under the
original terms of their loan are finding it difficult to make payments
after rate adjustments,” said Combs. “We believe FHA can design a mechanism
where credit worthy borrowers could refinance subject to prudent
guidelines, and therefore avoid losing their homes.”
#72 BARF!!!
Perhaps Carla enjoys an occasional cigar?
Sorry the BARF!!! was for 71
question for JB and the other “experts”…
we aren’t really looking to move but a broker we know called us about a house in a neighboring “desirable” town…in any case, the town recently had a re-valuation done which pegged the house at $1.1M (outside of our price range). the house has very good bones, is generally in good shape, w/ some cosmetic fixer-uppers (figure we’d have to spend about $100K, as that involves some kitchen and bathroom work). in any case we have spoken directly to the current owners (who have owned the house for a good amount of time). in any case, we have not made a formal offer yet, but the inclination we got from them was that they would accept a little above $800K (nearly $300K less than the appraisal).
Two questions:
1. Anyone have any idea if showing the municipality a purchase price of $300K less than the very very recent revaluation (i.e., completed w/in the last few months) would have any impace on reducing taxes, and
2. assuming the company that performed the appraisal did everything in good faith, is anyone else concerned that they would take so much less than the appraised value?
thanks for the insight.
i have my own thoughts on this, just wanted to see what other RE followers thought
#75 what bubble: I am starting to hera more of this talk from cooling perma housing Bulls, whoa re now starting to reluctantly anknowledge that the market is how shall we say not what it once was.
In other words I know people who are now saying well if my house is worth less than the assessed value, then I am going to the town and having the taxes lowered.
Anyhow keep in mind that towns may look at reevaluating the assessed value in isolated instances, if homewoners start doing it in mass, they will simply change the property tax rate.
A town has to collect X $ amount a year, that will not change (unless expenses are cut), If everybody now has the value of their house lowered, the town still needs to collect that same $ amount.
So they appraise the houses lower, but increase the tax rate to collect the same $ amount. They have got you either way.
bergen…understand all that, but we are talking about a reassessment that occurred not even 3 months ago…
for example, homeowners have a right to fight the assessment if something is wrong w/o having to go to court b/c it is soo soon after the valuation…my question is if we show them the market value (via a purchase price) would that be the same as saying “hey you gave us too many bathrooms”…or something like that
what bubble: I do not know, perhaps JB or Clot could shed some light on this.
RentL0rd Says:
April 9th, 2007 at 2:55 pm
I got a little surprise today when I filed my 2006 returns using H&R Block.
R: In my professional experience, I cannot condone use of H&R Block. The typical tax return prepared by my firm for two individual returns [i.e. IRS & NJ] generally ranges from $300-$600 [based on 2-4 hours at $150/hour].
Disclaimer: My opinion of H&R Block should not be used as criteria for making a choice of tax preparers or tax advisors. You should rely on your own research and due diligence from a realiable and objective source.
Oh good ol’ Carla Katz. I remember sitting in Lua when she and the then Senator Corzine walked in and my then wife whispering in my ear, “who is the hooker with Corzine”. Makes me want to shed a tear. Carla must know where all the secrets are buried: $470K loans, mysterious payments for million dollar condos, full scholarship to Seton Hall Law School. What will be next??
r Says:
April 9th, 2007 at 3:32 pm
Can someone post this on the http://www.kannekt.com message board. It keeps getting pulled.
BY TOM BALDWIN
GANNETT STATE BUREAU
HOBOKEN — State workers’ union boss Carla Katz, whose romantic history with Gov. Jon Corzine has caused him political headaches and shadowed recent contract talks, enjoyed a beneficial deal when she purchased a condominium four months ago in the same riverfront building where the governor resides.
R: The guy who runs kannekt is rumored to take money from Toll, and any negative or disparaging posts relating to Toll are removed as soon as they are noticed. I would think this post would qualify for such treatment.
Supposedly Carla is being a disruptive influence in HTB with her oversized dog. I have no idea what our ponytailed jacka55 of a property manager is doing about it.
Re #71. Sure! Let the government, aka the taxpayer, bail the industry out. It seems to me that this proposal is yet another form of the “please bail us out” plea. What happens when these now government-financed/guaranteed loans go into default? Oh, that’s right! We the taxpayers foot the bill.
No thanks!
And the NAR’s slimyness is so transparent. They don’t care about the homeowners facing foreclosure. All they care about is keeping their commissions high.
Rentlord,
$550 isn’t bad for a first-time tax return with a lot of complexities.
I pay $360 – self-employed so an accountant is a necessity.
I’ve had the same accountant for 20 years. By now I know the drill in terms of the data he needs and how to get everything organized in a memo.
#78 What Bubble?
You should probably ask the town assessor.
I asked – I’m not sure I understand the answer, but I think in my town the assessment has to be off by more than 15%.
There are also some other rules: “All evidence for a tax appeal should precede the October 1st assessment date, especially property sales used for comparison.”
If they didn’t just reassess, then they use some other standard called “Common Level Range”
It’s more complicated than I thought it would be. When I am ready to buy, I am going to ask the assessor specifically about my situation.
Are real estate agents doing any buisness? I would think with so many forclosures going on that no one would bother using a Realtor.
Assesment: back in the day, late 80’s, our 130 unit Rivermill West complex used Saul Wolfe to sue for reval. Eventually we had our assesment cut by 50%. However we were informed of the 15% rule, and for most that is a pretty wide span.
LSDTrip (84)-
Not that I agree with instituting relaxed FHA-refi standards to rescue owners tapped out by mortgage resets (I don’t), but to suggest that this proposal is a smokescreen hiding our alleged agenda of preserving “high commissions”, I fail to see the connection. There’s also not a lot of “high commission” for Realtors in the world of refinance.
If you are going to set up an easily-refuted straw man argument, at least make some feeble attempt to root it in reality.
#75
Definitely talk to the tax assessor. I don’t know if he can do an assessor’s appeal for you or if you have to go to the county tax office yourself to do the appeal. If you pay at least 15% less than the assessed value, then you appeal to get your purchase price as the assessed value.
I know someone who did this after the last bubble – she bought a house for considerably less than the assessed value, appealed the assessment and it was reduced to her purchase price.
You can also get an attorney to handle this for you. I know someone who paid $1,000 to an attorney to represent her in getting her assessment lowered (this was right after a reval – not the 15%) and the appeal was successful and worth the money spent.
Mooresville (87)-
You’d think that…but you’d be wrong.
Selling homes that are on the track to foreclosure is a tricky process and almost always requires a skilled intermediary to assure the lender that any agreements that arise between buyers and sellers are not collusionary, fraudulent or otherwise unduly punitive to the lender. And, buyers and sellers benefit from having a third party assure the sale…from confirming honest market value, to creating a window of opportunity in which a sale can move to closing without being preempted by a Sheriff Sale.
Prepping short sale packages, providing BPOs, negotiating with junior lienholders and managing the sale process are the primary skills that must be exercised in the sale of homes subject to foreclosure.
Clot,
He’s working an angle. Click on his “name”.
The Lehigh Valley area in PA is getting hit by foreclosures hard. The local paper, the morning call is so on the side of local realtors they are not reporting it. Between Lehigh & Northmpton county foreclosures are up 30% this year already. It seems locally, they are holding onto their last thread. Our prices have already dropped about 20% although the paper won’t report it. How crazy is that, almost every house has a big red “PRICE REDUCED” sign on them. Houses are sitting for 6 months to 1 year and not sellig. Never has our inventory been higher than now, never! The rentals are even worse, people that can’t sell are screwed. The are trying to rent just to cover their loans and not foreclose (but it’s destiny). We have more 1k – 2k rentals than you would need in Charlotte. These are the folks that are about to be foreclosed or it’s currently happening. I can’t wait until next year when the paper can’t avoid it. They will be saying “WE NEVER SAW IT COMING”, while thousands of people will be bankrupt.
Rich (92)-
Duh.
Thanks for the tip…it always pays to click on those names!
JB, my post #61 is awaiting moderation…..
There’s a house in my town; MLS #2370470.
Flipper developer bought the tear-down for $525,000 in August of 2005. Work like hell starting in November of 2005 to tear it down and rebuild it as a McMansion. I’ve never seen a house go up quicker then this one did. By Easter of 2006, it was done and listed for $1,250,000. It’s been sitting for over a year now. It’s already been staged (furniture, pictures and all), an open house every month, and price reductions from $1.25mil to currently $999,900 which is still overpriced.
$15k taxes. Last summer I saw someone cutting the lawn with a WEEDWACKER, talk about being cheap!
It’s a nice looking house, although way out of place. On one of the busier streets in town, 200 feet away from the Pequannock High School, across the street from a hospital, and the neighbor houses are small bilevels. One of them has a garage with Winnie the Pooh painted on it. There are tons of homes in the surrounding areas and towns at much less of a cost, with a better location (ie: not next to a high school).
I’d have to say the developer is nearing making no $$ at all on this thing. The next tax bill is due May 1st. I’m sure he’s hating the $3400 payment.
-R
Still no shortage of dummies – a 3 bedroom Cape Cod in Madison just closed at $900K:
MLS 2379769
41 East Lane
Madison, NJ 07940
Feb 26, 2007 – Listed @ $899,000
March 2, 2007 – Under Contract
April 5, 2007 – Closed @ $899,000
http://newmls.gsmls.com/media/getImage.do?mlnum=2379769&num=0&res=highres&imgcnt=10
A cute house — for about $550K.
Chatham shoebox (MLS 2373059, 20 Hedges Ave) — listed $719,900 Feb 14th, closed $700,000 Apr 2nd. 8 days on market.
Tiny Chatham colonial (MLS 2373001, 160 North Passaic Ave) — listed $779,000 Feb 16th, closed $785,000 March 20th. 9 days on market.
And like lemmings they head off the cliff, and I continue to watch in amazement.
Clot (#91), I should never post when my ire is up. Didn’t mean to come across as disparaging as I did up there. My apologies. Still, it’s hard to see the NAR’s move as anything but self-serving; I can’t believe that they want congress to expand FHA/help keep people in their homes just out of the kindness in their hearts.
I don’t have a high opinion of the real estate profession (as was evident) and that is based on my reading of this and other blogs as well as my own personal experience with realtors. However, your contributions here, and those of RhymingRealtor, have helped me see that I just need to look harder for the right realtor, someone like you or KL.
And for the record, for better or for worse, I have never taken LSD! :-)
Rent.
I sometimes file online. When I was in sales I used a personal accountant specializing in salespeople who charged $150. Now with a new business and lots of right offs and complexities I went back to him, $350 for both the personal and business stuff. Pretty reasonable and sales/self-employed is his area of expertise.
I had a horrible time with H&R Block the first year I was in the country, I would never use them again.
Rentlord,
Funny you should ask this question today. I had posted on friday that a tax return for a friend was filled out incorrectly by a private CPA, and asked people what their input was on how to handle the situation. She paid $250 but after reviewing the forms for her over the weekend, there were a total of 4 mistakes that would have potentially could cost her over $700-$800. When told about the mistakes, the guy said that he was not interested in correcting the returns, so she stopped payment on her check and she will complete the forms herself.
I used H& R block one year and was not happy with either the service or the fee. Since then, I decided to do my own returns.
It seems to me like with everything, putting some time into the process of finding a reliable CPA, maybe even in Jan and interviewing a few CPAs before choosing one makes the most sense. By April, everyone is so harried that no one has time to do quality work with a new client that they don’t have a relationship with. Maybe a lesson to be learned when retaining a real estate agent too.
Caveat emptor.
afe
Hopefully, James will post a link to this story in today’s (4/10/07) Washington Post –> http://www.washingtonpost.com/wp-dyn/content/article/2007/04/09/AR2007040901463.html?hpid=topnews. It is a fascinating look at mortgage fraud in Atlanta.
[sarcasm]Of course, we know that THIS sort of thing could NEVER happen here in New Jersey, right? [/sarcasm]
“Still no shortage of dummies – a 3 bedroom Cape Cod in Madison just closed at $900K”
One’s trash is someone else’s treasure!
afe Says:
April 10th, 2007 at 1:04 am
Rentlord,
It seems to me like with everything, putting some time into the process of finding a reliable CPA, maybe even in Jan and interviewing a few CPAs before choosing one makes the most sense. By April, everyone is so harried that no one has time to do quality work with a new client that they don’t have a relationship with. afe
afe: I would spend the time searching for CPA in November/December. By late January, things are already heated up. Also, they can provide you with year-end tax guidance. Once the tax year closes, you are handcuffed to change your fate with just a couple of exceptions.
No matter how you slice that, it is not a treasure, and only a fool would commit that kind of money to that house. Lets call it what it is;foolish.
And yes sadly there are still some cluless people out there making soem poor decesions, but hey, that is the way it goes.
Yeah, and about the CPA thing. Don’t expect a miracle worker for three hundred bucks.
Keep your receipts. I was sitting there at the table, drinking my coffee yesterday, reading this blog, and feeling guilty about waiting ’til the last minute. So I pull out the calculator and start going into all the old musty places where the receipts are supposed to be. Top of the fridge. Basket on the counter. Receipts? What receipts?
I HAVE NO RECEIPTS. 8(
By 3:00 pm I was thinking about which miracle worker I was going to call and how much I would have to bribe them.
Then my husband came home and I thought up Plan B.
“Honey! Guess what? We ONLY OWE XXXX!!! Isn’t that great? Didn’t I do a great job?”
Hah. Worked.
Pat Says:
April 10th, 2007 at 12:11 pm
By 3:00 pm I was thinking about which miracle worker I was going to call and how much I would have to bribe them.
Pat: any tax preparer worth their salt will not commit to your business now for a 4/17 filing. they will file an extention for you, and work with you after the dust settles
CF- I’ve been thinking about the extension, for sure. I’ve never done that, and can’t stand the defeatist feeling of not being able to get it in, done.
I’m going on “hunt and revise” extravaganza for the next few days. ;) When I finally mail it, I’ll feel better.
remember – even if you extend…pay your best guess of the tax you might owe now – extending does not get you off the hook for interest or potential penalties