From CNBC:
Housing Recovery Depends on Slashing Mortgage Debt
Rising home prices are the foundation of today’s housing recovery. They are drawing much-needed buyers back to the market. Prices would not be rising if the number of foreclosures wasn’t falling. They also wouldn’t be rising without underwater borrowers getting a break from their banks. Both of those are happening because banks are slashing the balances of thousands of mortgages and letting homeowners sell for less than the value of their loans rather than going to foreclosure.
That debt forgiveness is currently not taxable, thanks to a law passed five years ago which expires at the end of this year. There is bipartisan support to extend that law, but so far any action has been mired in stickier negotiations surrounding the so-called “fiscal cliff.”
“The prospect of being taxed on potentially tens or hundreds of thousands of dollars in additional income may motivate more distressed homeowners to forgo a short sale and allow the home to be foreclosed,” said RealtyTrac’s Daren Blomquist in a release. “Additionally, if the mortgage interest deduction is eliminated due to the fiscal cliff quagmire, it would give many underwater and otherwise distressed homeowners one less reason to hang on to their homes.”
Banks completed 13,351 principal reduction loan modifications in November alone, according to a monthly report from Amherst Securities Group. That’s a 62 percent jump from September. Much of it is thanks to the $25 billion mortgage servicing settlement signed by the nation’s five largest banks early this year over so-called “robo-signing” foreclosure practices.
Banks have already given borrowers $6.3 billion in mortgage principal relief under the settlement, according to a report from its monitor, Joseph A. Smith, released last month. Bank of America recently ramped-up its relief, reporting 30,000 customers were approved or had completed first-lien modifications through September 30 providing $4.75 billion in principal reduction. Borrowers received an average $150,000 slash in loan balances.
…
Principal reduction loan modifications help to stabilize home prices because they bring underwater borrowers into or closer to a positive equity position, drastically reducing the probability of a loan default and ultimate foreclosure. Principal reduction loan modifications have a far lower re-default rate than modifications that just extend the term of the loan or lower the interest rate.During a Senate Banking Committee hearing Thursday, Secretary of Housing and Urban Development Shaun Donovan told the panel that extending tax relief on debt forgiveness is “a high priority,” but could make no promises.
are homes going for $1 yet?
Will this limit inventory on higher end homes in NJ?
From MarketWatch:
Home values are up, but should you sell?
Many residential real estate markets finally seem to be getting better. In fact, some are getting a lot better. That means there are more people with hugely appreciated homes. If you fit into this category, please don’t sell without considering the heavy tax hit that would result.
Selling a Hugely Appreciated Home: The Basics
If you sell a hugely appreciated principal residence, your profit will likely exceed the federal home sale gain exclusion. That means part of the profit will be taxed as capital gain (unless you have offsetting capital losses). The maximum exclusion is $500,000 for married couples; $250,000 for singles.
If you sell a hugely appreciated home that’s not your principal residence, you get no gain exclusion break. So the entire profit will be taxed as capital gain (unless you have offsetting capital losses).
…
The Tax-Saving Solution: Hang on Until the Bitter End
The basic tax-saving strategy in the hugely appreciated home scenario is to do nothing. Hang on to the home. Don’t sell it! Here’s why. For federal income tax purposes, the tax basis for the portion of a personal residence that you own is stepped up to fair market value (FMV) as of (1) the date of your death or (2) six months after your death, if the executor of your estate so chooses. (Source: Internal Revenue Code Section 1014(a).)
…
Doing nothing is not usually a great tax-planning strategy, but the hugely appreciated home scenario is an exception. One more thing: If you think you can’t afford to hang on to your home until the bitter end, consider taking out a reverse mortgage to get the cash you need. The interest and transaction costs of a reverse mortgage could be a very small fraction of the tax cost you can avoid by hanging on to your home.
$1? Getting there.
218 Eastern Parkway in Irvington was on for $15,000, but it’s gone ARIP.
Likewise, the low price listing in Newark, 77 South 12th was on for $17,000, but ARIP as well.
316 Elizabeth in Orange is still on for $18,900 though.
haha were getting there grim
aplogies if posted already…
wsj opinion
the underworked public employee
http://online.wsj.com/article/SB10000872396390443854204578058660248073962.html?mod=hp_opinion
Lowest price sale this year was 26 Eaton in East Orange, $9,900. 5 Bedroom!
Good Morning New Jersey
Good Country America! Bank of America recently ramped-up its relief, reporting 30,000 customers were approved or had completed first-lien modifications through September 30 providing $4.75 billion in principal reduction. Borrowers received an average $150,000 slash in loan balances.
will this negatively affect the quality of their product?
grim says:
December 6, 2012 at 8:25 am
Apple bringing one of the Mac assembly lines back to the US? Good show Tim!
Ax [8];
will this negatively affect the quality of their product?
That depends. Will the new plant be in Washington, Colorado, or California*? Will the right to toke up be declared by courts an “inalienable right” (unlike free speech, right to bear arms, etc.) and employers in those states be severely punished for trying to protect themselves from Cheech and Chong on the production line?
Lots of variables, but my magic 8-ball says “Outlook Not So Good”.
* We all know the ‘medical necessity’ is a f*ing joke, right?
You familiar with this story?
http://en.wikipedia.org/wiki/Bell_System_divestiture
Also…thank you I am one of the people you below describe….you have nice holidays too. Ever consider that we deal in facts, and those “hardworkers”…..would run the place into the ground despite being savants……
December 7, 2012 at 1:25 am
The soul-less bean-counting blood suckers (“financial experts”, “restructuring experts”, or Little Romneys) destroyed most of Bell Labs. They were even stupid…
cobbler says:
December 6, 2012 at 9:40 pm
Chi:
I didn’t work at AT&T; I fully believe there were many overpaid and underworked people in the corporate structure. I am sure there was a lot of waste and operational inefficiency. By the way, based on your age I don’t think you’d ever worked for the pre-broken up AT&T.
I am friends with several people who used to work for the Bell Labs. One of them (now a chaired professor at Harvard, member of NAS, etc.) had revolutionized his field of science. His research would have done much more for America’s people and industry had he been allowed to continue at the Labs.
cobbler & mcdullard: to simplify…..today you can Skype someone in Albania for free when 30 years ago it cost $100. End of story……
Bear in mind, where my practice is located, and my experience. I know many of these people. They are exactly as you describe.
As a frame of reference, this “magical” place you describe from the past is the equivalent of Microsoft in 2012, except they do not execute as well.
What you are advocating is having to pay $5 to call NYC for 30 mintues, so a bunch of guys can tinker down Jersey Shore in a building….put your money where your mouth is…..
Question for the group – do I need a lawyer at closing for commercial property in New Jersey. Bank insists that I don’t need a lawyer to close because this is commercial. I can close with the title company and save on the lawyer fees. I haven’t told the lawyer what the bank said because I already know his answer.
Timber
http://www.zillow.com/homedetails/Bay-Ave-Toms-River-NJ/2117141226_zpid/
Whatever the worst possible outcomes can be, that’s where we’re headed.
One day closer to death.
Bill Gross tweet on jobs number today:
Gross: Equity market rallies b/c 200,000+ workers stop looking for jobs & the U-Rate hits 7.7%. Be careful, Europe in recession, US slowing.
Ahh, the cars of our youth. They really had style then.
Welcome to the GM Tunnel of Love in Detroit. Even the public and the media aren’t allowed in this building. Very few people know it exists.
http://www.youtube.com/watch_popup?feature=endscreen&=R=1&v=RvVmDsWnMOk
Smith & Wesson down 4.3%
Everyone got their guns?
Whatever will we do when GM & Chrysler go bankrupt again?
chi,
I was talking about the second split in mid ’90s. They were doing pretty good stuff, but somehow the management randomly started sacking intermediate to longer term projects. Bell Labs was doing much more than POTS — wireless, fiber, materials, systems, a lot of stuff.
That said, your comparison with MSFT in 2012 is fairly accurate. They are doing some solid research in speech, among many other things, and are seeing drag on their main cash cow — OS and Apps. The labs cannot exist on their own — and need some “hard money” coming in. So, when a bean counter gets there (vs a financial visionary that can see the long-term picture), the labs will get cut quickly.
I am biased towards longer term. Even in the case of free cell phones, I view it at the potential positive effect it will have — it can make a big difference in a fraction of people that may go on to do big things in life (even if it is the case where it makes a real difference in 5% of cases, and simply gives a freebie for the 95% — a portfolio of one 100 bagger stock and 10 bankrupt companies still does a 10x return, right?)
[12] I have no specific knowledge related to your question.
That said, my gut instinct is that you don’t “need” a lawyer, but if you expect an adverse party to be throwing tons of papers at you and telling you to sign, and you don’t expect to have the time or understanding to read all of them, then I would suggest you bring along your lawyer.
If you can get an advanced copy of everything you will be signing, have time to review it (or take it to your lawyer to check it over) and then you show up at the closing and sign nothing else, that would seem a safe way to go as well.
Just my opinion, as a janitor who has no idea what the right answer to your question might be.
[2] What effing drivel. The premise is that you have appreciation beyond $500K married or $250K single, right? How can this idiot offer a blanket solution without once ever mentioning:
1. The amount of appreciation over the federal limits.
2. The fact that you can take that $500K or $250K exemption over and over and over again as long as you occupy for what, something like two out of the last 3 years?
3. TAXES!!!!!!!!!!!!!!!!!!!!!!!!
I know someone who lives in BC and bought his house for about $550K in ’94 or so. Kids are grown and he’s newly retired. Should he and his wife sit there and pay $30K in taxes (this year) in their BC train town until they die to save from declaring $50K in capital gains on his $1.1 million dollar house and having an extra $1 million plus dollars of disposable income to buy whatever they want, wherever they want? I bet the 39 year old Mr. Bischoff who wrote that stupid article isn’t in a similar position and probably never will be, but he certainly tell you that the right thing to do to save taxes is sit there and pay taxes until you die. He probably lives in his parent’s mansion and couldn’t even afford to pay the utilities so he’s urging them to stay.
What my friend should really do is avoid the mansion tax and sell the house for $990,00 plus a Bentley Continental Flying Spur.
The Tax-Saving Solution: Hang on Until the Bitter End
The basic tax-saving strategy in the hugely appreciated home scenario is to do nothing. Hang on to the home. Don’t sell it! Here’s why. For federal income tax purposes, the tax basis for the portion of a personal residence that you own is stepped up to fair market value (FMV) as of (1) the date of your death or (2) six months after your death, if the executor of your estate so chooses. (Source: Internal Revenue Code Section 1014(a).)
…
Doing nothing is not usually a great tax-planning strategy, but the hugely appreciated home scenario is an exception. One more thing: If you think you can’t afford to hang on to your home until the bitter end, consider taking out a reverse mortgage to get the cash you need. The interest and transaction costs of a reverse mortgage could be a very small fraction of the tax cost you can avoid by hanging on to your home.
Do the math, next year in NYS selling a property that has greatly appreciated for a well off person is as follows
20% cap gain
7% NYS state tax
3.9& obama care
Total is 30.9%
Today it is
15% cap gain
7% NYS tax
23% total.
Plenty of high end units bought in the 90s for one million are now worth 2-3 million.
The Original NJ ExPat says:
decmber 7, 2012 at 11:39 am
gryf- Don’t they say that anyone who acts as their own lawyer has an idiot for a client? You can do anything you want for yourself without a lawyer. I’ve gone to court pro se counter-suing a landlord. I’m sure grim could close on a property without a lawyer. In MA we’re over-lawyered at closings. Buyer, Seller, and Lender are each usually represented by counsel. Rub-a-dub-dub, 3 shylocks in a tub.
Question for the group – do I need a lawyer at closing for commercial property in New Jersey. Bank insists that I don’t need a lawyer to close because this is commercial. I can close with the title company and save on the lawyer fees. I haven’t told the lawyer what the bank said because I already know his answer.
Let’s kill all the lawyers.
Except for mine.
I was told when I closed on my house in south jrersey,if you are closing in north jersey the bank requires you to have a lawyer not in south jersey
chi[11]
I underappreciate the importance of being able to call Albania for free to someone in your financial situation, and willingness to see the long-term industrial R&D in this country destroyed to achieve this goal. Obviously, when Ph.D physicists are unable to find a professional job after 3 post-doc stints, and go to Wall Street to design swaps, it not only brings them big $$, but helps the future of the U.S., right?
yo (26)-
False.
I’ll refrain from further criticism of cobbler, as it’s obvious he’s suffered repeated blows to the head.
Thank god I am irreplaceable.
Absolutely.
Post of the day.
JJ’s B.Se says:
December 7, 2012 at 12:35 pm
Thank god I am irreplaceable.
cobbler, the long distance prices were pretty bad… international was worse. Now, we can do video conferences for free.
They could have done a good job handling the unix side (e.g. opening it up more) or made it easier for PCs. R&D needs money, but that money doesn’t need to be from unsustainable stuff. They could have done a decent job running the business side like a business and R&D side like the top notch lab it was. They ran the business side like the DMV and the R&D side like a service business.
While I think R&D is great and cool, there should be safeguards to prevent an entitlement philosophy. Gardner’s quote is appropriate here: “The society which scorns excellence in plumbing as a humble activity and tolerates shoddiness in philosophy because it is an exalted activity will have neither good plumbing nor good philosophy: neither its pipes nor its theories will hold water.”
I think when minor internal discords are not addressed (e.g. between business and R&D parts, or between progressive and conservative philosophies), external forces can come in and wreak havoc (external restructuring experts, foreign lobby groups with money, televangelists, or foreign sociopath media moguls).
Yeah JJ: 15+7=23….
You know what would be good and productive entitlement program? Let’s use government money to pay unemployed college graduates to capture and hold hostage either a politician or a banker in their mother’s basement. We could call it section 9 housing or some such thing.
McDullard,
As a corporate manager, you can never justify spending any appreciable money on long-term R&D (that is, with the uncertain payback more than 5-10 years away) to the shareholders like hedge funds only concerned about the next quarter and maybe next year earnings. As soon as AT&T stopped being a regulated monopoly, the days of the Bell Labs as an industrial equivalent of Brookhaven or LANL, etc. had been numbered. I agree that with the better management vision they could have tried to repurpose themselves into something like what MSFT and GOOG are running these days – but serious hard science requires much more capex and multi-year project commitment than what these companies have at their labs.
pat (34)-
If you imprison them, you have to feed them. Just hire people to whack ’em.
“The Minnesota Vikings’ season will be on the line Sunday against the Chicago Bears. As such, linebacker Chad Greenway has asked fans to get “super-duper drunk” in order to boost the Vikings’ home-field advantage at the Metrodome.
‘We have to play accordingly and our fans have to show up accordingly, which we know they will. Hopefully, they’re super-duper drunk. … So drink liquor, not beer,’ he said after Minnesota’s loss to Green Bay last Sunday, according to the Star Tribune.”
http://espn.go.com/chicago/nfl/story/_/id/8720790/chad-greenway-minnesota-vikings-wants-metrodome-fans-super-duper-drunk
Look, I know it’s terribly cruel of me, but principal reduction or an uncollectible deficiency judgment should be taxable events. Enough of patching up the IRC as special “temporary” breaks to address this or that. If you borrow money and don’t pay it back, it’s income.
Pay your taxes, deadbeats.
P.S. Cancel the mortgage interest deduction.
P.P.S. Want to solve the AMT problem permanently? Let the Bush tax cuts expire.
38 Thank You
cobbler: Just because I disagree with your opinion as a whole does not mean that I do not appreciate the merits of what you are arguing. I think a great extreme example of your point is what is currently occuring at Hewlett-Packard. Mark Hurd (before he was deposed) was lauded for slashing and burning the company a la Chainsaw Al Dunlap. Granted the dysfunctional board hired Apotheker to incinerate $10B. However, the cuts to R&D are only now being felt full bore…..
cobbler says:
December 7, 2012 at 12:17 pm
chi[11]
I underappreciate the importance of being able to call Albania for free to someone in your financial situation, and willingness to see the long-term industrial R&D in this country destroyed to achieve this goal. Obviously, when Ph.D physicists are unable to find a professional job after 3 post-doc stints, and go to Wall Street to design swaps, it not only brings them big $$, but helps the future of the U.S., right?
If you have a greatly appreciated house at the shore ….wait till the next hurricane to sell
Punch [39];
Want to solve the AMT problem permanently? Let the Bush tax cuts expire.
Then what? A combination of lack of AMT indexing plus inflation means that anyone who pays taxes is necessarily subject to AMT? I’m all for a flat tax, though I’m not sure the AMT where it is now is the right level, if that’s where we’re going I can get on board.
P.P.P.S. – How are they the “Bush Tax Cuts” if they were extended in the first Obama administration, and we’re still talking about them long after Bush has retired to his ranch and the lecture circuit?
[36] Meat – That’s what I was originally going to write, but then when I thought about merely randomly imprisoning bankers and politicians without any infrastructure costs it evolved from a joke into a plausible pilot program. I think if you merely imprisoned a critical mass of bankers and politicians long enough to show a positive trend in economic and social conditions everyone would see the brilliance of simply eliminating their old jobs and then we could just release them into the wild.
pat (34)-
If you imprison them, you have to feed them. Just hire people to whack ‘em.
Bush lecturing?? Ha, that’s a really good one..
“As soon as AT&T stopped being a regulated monopoly, the days of the Bell Labs as an industrial equivalent of Brookhaven or LANL, etc. had been numbered”
Don’t count out American research companies. I’m pretty sure that these guys are the remnants of Bell Labs and continue to do world class research. They might be forbidden by the divestiture to use the label AT&T or even Bell Labs but that doesn’t mean they don’t exist.
http://www.appcomsci.com/
Is Sh1ts and Giggles a bad name for a frozen yogurt place?
Thanks for the lawyer opinions. The lawyer I have is pretty confident my deal is not going to close by the end of the year. The bank insists it will. The seller has a clause that if I don’t close by the end of this year, I get to pay an extra $20K next year to cover Obama taxes and capital gains.
Flood insurance on my little shack is going to cost me $2800 a year. We got some water in the basement during Irene mainly because the current owner has the gutters all pointing to the basement, but gubmint has us in a flood zone so no way around that. I can’t believe homeowners in the areas that actually flood pay that amount. That is a lot of money for the average household.
Lean times ahead for me.
expat (44)-
I’d “release them into the wild” with a two-minute head start on packs of cannibals who have been fed nothing but habanero peppers for a week.
#12 “do I need a lawyer at closing for commercial property in New Jersey”
Yikes! Yes, you do.
There are many pitfalls, here’s just one – if the proper notification of the sale isn’t given to the State, YOU, are on the hook for your seller’s NJ Tax liabilities.
Moose [43],
A combination of lack of AMT indexing plus inflation means that anyone who pays taxes is necessarily subject to AMT?
So index the exemption from 1986 when it started, which amounts to something like a $75k for couples, and set it to adjust via CPI-U in perpetuity. Set the rate at something reasonable (and flat) like 20%. No other deductions. None. Not mortgage, not kids, not age, not blindness, not state or local taxes, not donations, not muni bonds, not 401k, not nothing. No pandering to anyone who cries about the unfairness of it all. This is the deal. You make $100k, you will pay at least $5k. You make $200k, you will pay at least $25k. If you’re Mitt Romney or A-Rod and make $20M, you will pay $4M.
That’s a permanent fix and it makes sense. This is not rocket science.
Bush tax cuts … Obama extensions
I think it should be pretty clear to everyone at this point that on tax issues it matters not who is in office. Every elected official understands that as long as we can play the game of spending twice as much as is raised in revenue, with the balance covered by compliant lenders and/or printing money, the game will continue.
51
Punch,
Coming up with solutions is not difficult. Those in power whether in office or the ‘well-connected’ like the status quo. It’s that simple.
A ticking bomb for commercial real estate in lower Manhattan.
http://www.nytimes.com/2012/12/07/nyregion/empty-offices-seem-poised-to-remain-so-in-lower-manhattan.html
I bought flood insurance two weeks ago. A mandatory requirement since FEMA gave me some chicken feed towards my repairs.
Anyhow I am paying for 250K home and 100K contents $480 a year.
I say why so little, I was told because I am in an actual flood zone. If they charge too much most folk wont get it and then that is an issue. If my area was not a bad flood zone they would charge more as it wont matter that much if folks dont get it.
I am not in a MANDATORY Flood Insurance zone. Everyone with a mortgage needs it and everyone without a mortgage who took any fema money by law has to have it. Widows and orphans cant pay $2,800 a year. But then again rich folk in less flood prone areas certainly can afford to pay $2,800.
You get pricing like this when the govt controls prems.
gryffindor says:
December 7, 2012 at 4:16 pm
Thanks for the lawyer opinions. The lawyer I have is pretty confident my deal is not going to close by the end of the year. The bank insists it will. The seller has a clause that if I don’t close by the end of this year, I get to pay an extra $20K next year to cover Obama taxes and capital gains.
Flood insurance on my little shack is going to cost me $2800 a year. We got some water in the basement during Irene mainly because the current owner has the gutters all pointing to the basement, but gubmint has us in a flood zone so no way around that. I can’t believe homeowners in the areas that actually flood pay that amount. That is a lot of money for the average household.
Lean times ahead for me.
Obama won so I am excited to be part of the 47%. Anywhere I can find peter lugar vouchers?
gryff [48];
I can’t believe homeowners in the areas that actually flood pay [$2,800/yr]. That is a lot of money for the average household.
Considering they get their house rebuilt on government tab every year, I’d say its cheap. :-/
JJ [54];
JJ en fuego!
#54 & #56 – I see. The rich like me get to subsidize those who actually live in a flood zone. I’m going back to driving the rusted Civic so no one mistakes me for being rich.
grain (50)-
Are you kidding? A title company or an individual is perfectly capable of recording a deed.
Punch [51];
Flat 20%, with a modest subsustance living exemption? Sign me up!
Problem being, even if we get the 47% looters to agree to pull their weight, the obstacle becomes the political class (legislators, staff, lobyists). Selling tax exemptions is their stock and trade.
Gryff [58];
I was right there with you, brother! Paying through the nose before I got with the Obama program post election. Bring home the bacon! http://youtu.be/yS30up_rTIM
Now waiting for my FEMA check. I drive a busted out Saturn (even Government Motors couldn’t keep that division alive!) with holes in the plastic fenders! No money to get from me!
JJ you are a part of the 47% now, make sure you keep your reciepts more cash is coming.
Congressional aides: Obama asks $60.4B Sandy aid
“The measure blends aid for homeowners, businesses, and state and local government walloped by Sandy and comes with just a few weeks to go before Congress adjourns. Whether it passes this month or gets delayed in whole or part until next year is unclear. Most of the money — $47.4 billion — is for immediate help for victims and other recovery and rebuilding efforts. There’s another $13 billion for mitigation efforts to protect against future storms.”
http://news.yahoo.com/congressional-aides-obama-asks-60-4b-sandy-aid-215612425.html
” $17 billion for community development block grants, much of which would help homeowners repair or replace their homes. ”
Wonder what the criteria will be for a grant?
63 juice
“Wonder what the criteria will be for a grant?”
A pulse. Or a body with a still firing pacemaker that mimics a pulse.
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