New Fed Plan and Bank Program to Help Homeowners
 Both will help reduce mortgage balances and foreclosures.
Two late March developments should help reduce the
swelling ranks of homeowners who are seriously delinquent on
their mortgages but have yet to lose their homes. With up to
1/4 of homeowners owing more on their mortgage than their
home is worth, the threat of a new wave of foreclosures
could reverse nascent signs of stabilization in many housing
markets. Compounding the risk are signs that more homeowners
who are deeply underwater are preparing to walk away from
their home and their mortgage obligations.
According to a third quarter 2009 TransUnion study of 27
million anonymous consumer records, more homeowners are
paying down their credit card debt, at the same time as more
are also becoming delinquent on their mortgage. In cases
where both are occurring in the same household, it could be
a sign of a planned “strategic default.” In some states, a
mortgage lender’s only recourse is to reclaim the property.
In any case the homeowners’ long term credit damage, and the
time it would take to rebuild their credit, would be
mitigated if they keep up with their credit card payments
and all of their other credit responsibilities.
President Obama’s plan would require lenders to reduce or
eliminate monthly mortgage payments for three to six months
for many borrowers who are unemployed. With unemployment now
over 10%, job loss has recently become the major cause of
mortgage defaults. Monthly mortgage payments could be no
more than 31 percent of the homeowner’s income. The
temporary forbearance will give unemployed homeowners time
to find new jobs, although some who aren’t successful will
ultimately lose their homes.
It would also provide financial incentives to lenders to
cut the mortgage loan balances if the amount is 15 percent
more than their home is worth. If the homeowner keeps up
with their payments for three years thereafter, the amount
set aside would be forgiven. The existing Home Affordable
Modification Program (HAMP) also provides incentives to
lenders to reduce homeowners’ monthly payments, but lenders
have reduced those payments by temporarily reducing interest
rates rather than reducing mortgage balances in almost all
cases.
The HAMP program has not been strongly supported by
mortgage lenders and hasn’t been very successful in
preventing re-defaults either. Many economists believe that
the re-defaults were frequent because the revised payments
were still higher than homeowners with reduced incomes could
afford. Another possible explanation is that many of those
homeowners subsequently realized that it would take many
years before they could regain any equity in their home, so
there was little incentive to keep up with the new payments
anyway. The new Administration plan will be funded out of
$50 billion previously approved for foreclosure relief, so
fortunately no new Congressional funding will be needed.
The new program will also increase the amount the
government will contribute to help modify second mortgages.
Second mortgages, such as piggyback or home equity loans,
are a problem because first mortgages have priority for
repayment, and many second mortgage holders currently have
little or no equity in the home. As a result, many second
mortgage holders have been unwilling to support mortgage
restructuring. The program will also provide incentives for
mortgage lenders to support more “short sales.” In a short
sale the lender agrees to accept less than they are owed to
satisfy the outstanding mortgage balance. This makes it
possible for many distressed homeowners to sell their homes,
since many would otherwise have had to come up with cash
they don’t have to make up the difference. In addition, the
Federal Housing Administration will help those underwater
borrowers who have kept up their mortgage payments refinance
into more affordable loans.
In a separate development, Bank of America Corp.
announced that it will reduce mortgages by up to 30% for
troubled homeowners beginning in May. An estimated 45,000
homeowners may have their mortgage balances reduced by an
average of $62,000.This is the first instance of the
nation’s largest mortgage lender cutting mortgage balances
on a widespread basis. A few other lenders have previously
cut mortgage balances on a case-by-case basis. Bank of
America’s decision was made under pressure by Massachusetts
Attorney General's office, which had been threatening a
lawsuit against Countrywide Financial for its lending
practices (Bank of America Corp. acquired Countrywide in
mid-2008). Still, it is an important recognition by a major
mortgage lender that mortgage balance reduction is a wise
and necessary step in many cases in order to prevent
foreclosures and greater losses. It will hopefully presage
similar programs by other lenders.
To qualify, borrowers must have received their original
loan through Countrywide. Their mortgage balance must be
more than 120% of their home’s market value, they must be
two months or more overdue, and they must demonstrate that
they cannot afford their current payments. The amount
forgiven would be prorated over a three to five year period
if the homeowner makes their payments in a timely manner,
and the process would halt if the home appreciates to where
the homeowner regains equity.
Although both of these programs are positive
developments, they are temporary and there is no way to
gauge in advance how effective they will be. Separately,
members of the House of Representatives are urging Treasury
Secretary Timothy F. Geithner to support the creation of a
new federal mortgage lending entity similar to President
Franklin D. Roosevelt’s Home Owners' Loan Corporation, which
was created to refinance homes during the New Deal. With the
future of Fannie Mae and Freddie Mac in doubt, and no
legislation currently in place to prevent another mortgage
crisis from occurring, some steps along that line are in
order.
top
Spring Home Buying and
Selling Tips
Tiz the season for real estate transactions –
make yours successful.
Buying or selling a home is a complex and time
consuming transaction, and both entail considerable
risks. There are time honored and wise steps that
you should always take (see the American Homeowners
Foundation’s
Top Ten Home Buyers Tips
and
Top Ten Home
Sellers Tips). Because of
current market conditions and recent changes in the
residential real estate market there are additional
factors home buyers and sellers should also take
into account.
Both should be aware of a new study that shows
that the vast majority of home buyers and sellers
were dissatisfied with their real estate agents. A
recent study by the California Association of
Realtors reported that in 2009 only 22% of
respondents would use the same agent again. In 2004,
79% said would use the same agent again. According
to the study, 64% of sellers said “the house took
too long to sell” and 51% said “we didn’t get the
price we wanted.” No doubt part of the problem is
related to recent market conditions, but that alone
doesn’t seem enough to explain such a dramatic
reversal in consumer perceptions.
On the buyers side, continuing disputes over the
practice of dual agency, where one agent and broker
represents both the buyer and seller simultaneously,
almost certainly also contributed to the
dissatisfaction. Some buyers also likely blame their
agents for referring them to mortgage brokers or
lenders that gave them loans that later caused
financial problems. In both cases the dramatic
change in public perception underscores the
importance of careful and methodical selection of
real estate brokers and agents.
In many areas of the country there are more and
better opportunities for buyers than ever before.
There is an oversupply of homes and buyers have a
better chance of getting what they want at an
attractive price. The Internet has also made the
buying process much easier and convenient, and it is
now used by 90% of home buyers according to some
studies. Prescreening homes on real estate websites
makes it easier to weed out homes that aren’t a good
fit, and applications like Google’s street view maps
let you drive through entire neighborhoods online
from the comfort of your home or office. Online
mortgage rate information and mortgage rate
calculators simplify that part of the process as
well.
Smart-phone applications that provide information
to mobile home buyers are also expanding rapidly.
The apps' functions often combine global-positioning
technology, enabling home buyers to get information
on nearby current homes for sale, recent sales, open
house locations, neighborhood crime statistics and
other important information on the fly. All of these
technology developments leave home buyers less
tethered to real estate agents, saving both of them
time. Some buyers are also saving money as growing
numbers of buyers agents are willing to rebate part
of their commissions back to the home buyers. This
is a reflection of their reduced workload and the
scarcity of buyers in many areas. State real estate
associations have managed to outlaw such rebates in
some states, but the tide may be turning. New Jersey
repealed its anti-rebate law earlier this year, and
others will hopefully follow.
The current market conditions are presenting new
challenges for sellers, particularly in areas with
an oversupply of homes. With more choices, the
majority of buyers see less reason to buy a home
that needs a lot of work to meet their expectations.
This doesn’t mean sellers have to bring their home
completely up to neighborhood home standards, but it
does mean that beyond some point their home will be
of interest to only a very small segment of an
already limited population, even if they price the
home accordingly.
For that reason it is more important than ever
that sellers make sure their home does not have so
many negatives that it is a nonstarter to most
buyers. However, it is also important not to spend
any more than necessary to bring it up to snuff,
because many improvements cost more than they return
in the form of a higher selling price. Don't try to
create a design showpiece because most buyers will
want to make some changes no matter what the sellers
do. Some improvements may be necessary to correct
defects, like a broken window or an appliance that
doesn’t work, even though they won’t add to their
home’s value.
Sellers should be wary of real estate agent
recommendations for extensive and expensive
improvements. Although well intentioned, agents may
spend unnecessary amounts of the seller’s money to
make their job easier. Agents can give you a good
sense of how much an improvement will help
saleability and how much it might add to the selling
price. They aren’t contractors however, and you need
to compare the costs to how much they will add to
the home’s value. Remodeling Magazine has online
data on how much you’ll recoup from various types of
remodeling investments. If the buyer might want a
couple of improvements consistent with current
neighborhood standards that you decided to forgo,
you can deal with that in the negotiating process.
If sellers do as much of the work as possible to
get the home ready for resale they will save money
and come out ahead in many cases. Every home should
be cleaned thoroughly and decluttered before it is
put on the market, so have your yard sale before you
list your home. Painting and deck staining will
greatly enhance curb appeal if your home needs them,
and will yield a positive payback if you can do the
work yourself. You usually won’t get all your money
back on a kitchen or bath remodel, but if either is
very dated or in poor condition you can hire a
contractor and still get most of it back if you
don’t go overboard. It can make the difference
between a sale and no sale, and if you can do some
of the work yourself you will have a good chance of
breaking even. Landscaping a barren yard will also
enhance curb appeal and provide a positive return if
you do some of the work yourself.
When you do use a contractor, make sure you check
their references carefully and also use a
comprehensive contract. Disputes with remodeling
contractors are very common and you need to protect
your interests (we have an inexpensive contract form
at www.AmericanHomeowners.org ).
top
 Now You Can Calculate
the Benefits/Costs of the New Health Care Law
Now you can run the numbers to see how it will
impact you personally.
When President Obama signed the health-care
reform bill, few really understood how it would
impact them personally. During its development it
was an ongoing work in progress and it was difficult
for even the most diligent consumer to keep up with
its changing content. Many proponents and opponents
exaggerated extensively in describing its potential
impact, and much of the rhetoric labeled it either
the end or the salvation of modern society. Adding
to the confusion, much of the independent reporting
on the legislation in the final weeks focused on the
politics of its passage or defeat rather than on its
actual contents. By a ratio of nearly three-to-one,
stories involving the politics and strategy of the
reform effort exceeded stories about what was
actually in the bills, according to Pew Research
Center's Project for Excellence in Journalism.
Given these facts it is curious how some of the
most vocal critics and proponents of the measure
could be so sure that their assessments were
correct. It’s not surprising that many of the rest
of us may be wondering, now that it is the law,
exactly how the health-care reform bill will affect
our specific situations. The Kaiser Family
Foundation has posted a good summary of the major
provisions of the new health-care law at
http://www.kff.org/healthreform/upload/8060.pdf and
there is already at least one useful interactive
tool to help you figure out how the new law will
apply to your own health care situation. Created by
the Washington Post, this tool looks at what your
health coverage and taxes will be, based on your
income, family size and current insurance status. To
plug in your own information, go to: http://www.washingtonpost.com/wp-srv/special/politics/what-health-bill-means-for-you/?wpisrc=nl_persfin
There are many benefits for all, such as the
elimination of pre-existing condition insurance
restrictions. Most would also agree that the
extension of healthcare insurance availability could
benefit some of their family members and friends, if
not themselves in the future. However, some may pay
more, and some of the long term effects of the
legislation on the economy have yet to be
determined.
The Concord Coalition, a nonpartisan, grassroots
organization dedicated to balanced federal budgets
and generationally responsible fiscal policy, notes
that expanding medical coverage without curbing
costs is a recipe for fiscal disaster. While the
legislation promises significant savings through
future reductions in Medicare provider payments, it
also plants the seeds of many cost control
strategies with pilot programs and demonstration
projects. These may bear fruit at some future point
but success is far from certain. It will require
concerted and cooperative efforts by state and
federal officials, hospitals, doctors, insurance
companies and millions of patients. It will also
require the political will to make the savings stick
when they begin to pinch.
An example is the new tax on high-cost insurance
plans, which many analysts believe is the single
most important cost control measure in the
legislation. Under political pressure, the effective
date of this tax was also pushed out from 2013 to
2018 late in the debate. While the long-term savings
would be improved by expanding the likely reach of
the tax to more plans, this depends on a future
Congress and President allowing the change to take
effect as planned. There is reason to be skeptical.
Opponents are already pointing out that they will
have plenty of opportunities to kill, or further
dilute, the tax before then.
On the spending side, it will take considerable
efficiency improvements and discipline to meet the
new reimbursement standard for Medicare provider
payments. Then there are the politically challenging
provisions that would ratchet back the growth rate
of subsidies for the purchase of insurance starting
in 2019.
Attempts may also be made to further weaken the
Independent Medical Advisory Board (IPAB), which has
been established as a constant watchdog over growing
costs. As for the pilots and demonstrations, there
is no guarantee that they will work or that Congress
will give them broader application if they do
work.
Although the robust deficit reduction projections
from the Congressional Budget Office offer some
reassurance about ultimate costs of the legislation,
there is a great deal of downside risk that these
projections will prove to be optimistic.
top
Financial Services Regulation Moves Forward
Legislation seeks to prevent future mortgage meltdowns.
The Senate Banking Committee approved sweeping financial
reform legislation in late March on a party line vote, and
Senate Democrats hope to pass the bill before the Memorial
Day recess. Republicans offered no amendments, saving their
ammunition for a fight on the Senate floor. Senate Banking
Chairman Chris Dodd had been working for many months with
various Republican committee members in the hopes of
reaching a compromise, but in the end decided to go forward
in order to keep the process moving. Still, Senator Dodd and
several Republican committee members still hope that a
compromise may be possible. Senator Richard Shelby of
Alabama, the top Republican on the banking committee, said
that “We’re not going to the floor polarized. We’re going to
the floor right now in a spirit of trying to work a
consensus bill, a meaningful substantive bill that I’ve said
all along is what we need.” Republican support will be
critical because of the powerful influence of the financial
services sector.
The bill replaces an original Obama Administration
proposal to create a Consumer Financial Protection Agency (CFPA).
The Dodd proposal would create an office at the Federal
Reserve with broad discretion to create and enforce rules on
the financial services industry, including banks and
non-banks with at least $10 billion in assets. The bill
would also restrict the multitrillion-dollar financial
derivatives market that was a major factor in the financial
crisis. The rules could be overridden by a two-thirds vote
of a new council created to oversee risks to the financial
system.
The legislation would create a $50 billion
industry-financed fund that the Federal Deposit Insurance
Corporation (FDIC) could use to support the liquidation of a
failing financial firm. This provision is intended to avoid
the “too big to fail” dilemma in the future.
Dodd’s bill directs regulators to devise rules
prohibiting proprietary securities trading at banks. This
was a significant factor in the overall meltdown of the
financial services sector. Because of federal guarantees,
risky trading practices expose taxpayers to their losses.
This prohibition was originally suggested by former Fed
chairman and Presidential advisor Paul Volcker, and is a
reinstatement of regulations passed after the Great
Depression. Interestingly, many of President Obama’s other
senior appointees from the financial services sector
initially opposed Volker’s concept strongly.
In an effort to prevent huge bonuses to senior management of
failing financial firms, the legislation gives shareholders
a “say on pay” through a non-binding vote on executive pay.
This is not intended to prevent performance-based
incentives, but will hopefully skew them to a greater
dependency on long term company performance rather than on
risky short term profit strategies. The Securities and
Exchange Commission (SEC) could also give shareholders
“proxy access” to nominate directors.
“The legislation would go a long ways towards preventing
the risky practices that lead to the subprime lending crisis
and the subsequent meltdown of housing values. The American
Homeowners Grassroots Alliance strongly supports its
passage,” said AHGA President Bruce Hahn.
top
Internet Commerce: 10 Ways to Protect Your Money
 Internet commerce is fast and convenient, but you should
take precautions.
American consumers lost more than $550 million in 2009
due to Internet fraud, an amount that was more than twice
that reported in 2008, according to the
Internet Crime Complaint
Center, a partnership of the
FBI and the privately funded
National White Collar
Crime Center. The forms of
fraud varied greatly, and include failure to deliver
merchandise ordered through Web sites and "advance-fee
scams," in which victims were persuaded to make small
payments to receive windfalls that never arrived. A popular
financial services fraud is an email claiming to from your
bank or credit card company, asking you to update your
account information. The fraudsters strip logos and other
graphics from legitimate institutions, and redirect you to
their own fake website where they collect private financial
information online. Text messages on cell phones are also
becoming an increasingly common form of communication for
the fraudsters.
The scams have been perpetrated through spam email, and
also through many legitimate e-commerce sites, including
eBay, Amazon, and Craigslist. Many of the spam email offers
originate outside of the U.S., in countries in Africa, Asia,
and Eastern Europe. Some of the nonexistent products and
services include steeply discounted vacation offers and
automobiles, but almost anything could be subject to a
fraudulent offer. Ways to reduce Internet Commerce fraud
risk include using only reputable payment vehicles, such as
credit cards or PayPal, to make purchases online, ignoring
unsolicited e-mails and pop-up ads, and installing effective
firewalls on your computer.
The Federal Deposit Insurance Corporation, offers the
following collection of top tips to avoid Internet fraud:
1. If you bank online, frequently check your deposit
accounts and lines of credit to spot and report errors or
fraudulent transactions, just as you should with traditional
banking. "Your ability to monitor your accounts online has
gotten easier, faster and more convenient now that banking
by cell phone is starting to mature alongside banking
online," said Michael Jackson, Associate Director of the
FDIC's Technology Supervision Branch. "This is important,
because the sooner you can detect a problem with a
transaction, the easier it should be to fix."
Nelson suggested checking your accounts online about once
or twice a week, but he also noted that "more and more banks
are making it easier for their customers to keep an eye on
their accounts electronically. For example, many banks offer
e-mail or text message alerts when your balance falls below
a certain level or when there is a transaction over a
certain amount."
Federal laws generally limit your liability for
unauthorized electronic funds transfers, especially if you
report the problem to your financial institution within
specified time periods, which will vary depending on the
circumstances. A good rule of thumb is to check your
statements promptly and report unauthorized transactions to
your bank as soon as possible.
2. Never give your Social Security number, credit or
debit card numbers, personal identification numbers (PINs)
or any other confidential information in response to an
unsolicited e-mail, text message or phone call, no matter
who the source supposedly is. Chances are an "urgent" e-mail
or phone call appearing to be from a government agency (such
as the IRS or the FDIC), a bank, merchant or other
well-known organization may be a scam attempting to trick
consumers into divulging personal and account information.
It's called "phishing," a high-tech variation of the concept
of "fishing" for personal information.
Also watch out for phishing scams that involve bogus text
messages sent to cell phones claiming that a bank account
has been "blocked" and the recipient must call a certain
number to fix the problem. If you make that call, you likely
will be asked to enter your account number and PIN. The
criminals can use this information to make counterfeit debit
cards and drain your account.
"Real bankers and government officials don't contact
people asking for this kind of information," said Benardo.
"Your bank will already have your account numbers and only
you should know your log-in credentials, and a government
agency won't have a need for this information."
3. Don't open attachments or click on links in
unsolicited e-mails from anyone you don't know or you
otherwise aren't sure about. Sometimes these attachments or
links can infect your computer with "spyware" that can
change your security settings and record your keystrokes.
"Spyware can secretly steal your passwords, bank or credit
card numbers, and your answers to security questions like
your mother's maiden name or your high school," Benardo
advised. "Online thieves can use this information to log
into your account, make changes and transfer money, leaving
your bank account empty."
In one recent example, criminals sent out fake IRS
e-mails warning recipients that they were being investigated
for unreported income and asking them to click on an
attachment for more information. The file launched a program
that allowed hackers to install spyware and other unwanted
programs on personal computers (PCs) to access bank
accounts.
4. Watch out for sudden pop-up windows asking for
personal information or warning of a virus. This is called
"scareware" because it frightens people into providing
information, downloading malicious software or paying for
removal. If you get an e-mail or pop-up window saying your
computer has a virus and it offers a program to clean your
PC — and the warning window won't go away — your first step
is to use the computer's "task manager" function and click
"end task" or "force quit" to shut down the pop-up window.
Scareware can be a nuisance to clean off your computer, so
call your anti-virus software company if you need help.
5. Use a mix of security tools and procedures. "Staying
safe online is like protecting your home with lighting,
locks, alarms and fire extinguishers," explained Nelson.
"You can't rely on just one layer of defense to protect you
from all online threats."
At the top of the list of security tools to use — and
keep updated — are anti-virus software to detect and block
spyware and other malicious attacks, and a "firewall" to
stop hackers from accessing your computer.
Even if your computer seems fine, Nelson said, schedule
an automatic anti-virus scan to run at least once a week but
preferably every day. Call or e-mail your anti-virus vendor
right away if you get a warning message and you don't know
what to do next.
Also consider these extra precautions as you use the
Internet:
● Don't log into your bank account while using public
computers, such as at a library, or free wireless
connections at coffee shops and similar places.
Criminals often try to intercept Internet traffic, including
passwords, from these locations.
●
Pay attention to the toolbars at the top of your
screen. Current versions of the most popular Internet
browsers and search engines often will indicate if you are
visiting a suspicious Web site.
●
Choose "strong" user IDs and passwords that will be
easy for you to remember but hard for hackers to guess.
The strongest ones have a combination of letters, numbers
and other characters, and are at least 10 characters long.
For your online banking, choose IDs and passwords that are
not the same as those you use for e-mails or social
networking sites, just in case they get into the wrong
hands. Also change your online banking password about every
90 days. And if you remove a computer virus from your PC,
immediately change your password.
●
Have each person in your household bank and shop
online and send e-mail through his or her own "standard user
account." Not conducting these online activities through
the computer's "administrator account" — the one that makes
changes affecting all users — reduces the likelihood that a
hacker can install unwanted programs on your PC. Limit the
use of the administrator account to special tasks needed for
your computer, such as adding or removing software and
installing updates to your operating system.
●
Consider using a separate computer solely for online
banking or shopping. A growing number of people are
purchasing basic PCs and using them only for banking online
and not Web browsing, e-mailing, social networking, playing
games or other activities that increase the chances of
downloading malicious software. You can also consider using
an old PC for this limited purpose, but you should uninstall
any software you no longer need and follow up with a scan of
the entire PC to check for malicious software.
●
Only use security products from reputable companies.
Nelson said one way to check out these products is by
reading reviews from computer and consumer publications.
"Look for a product that has high ratings for detecting
problems and for providing tech support if your computer
becomes infected," he said.
Kathryn Weatherby, a fraud specialist at the FDIC, also
cautioned that banks normally don't ask their customers to
download software updates. "If you get an unsolicited
request to update your banking software," she said,
"independently verify it by calling your bank using a phone
number from your bank statement, not the phone number that
appears in the request, which could connect you to a scam
operation instead of your bank."
6. Beware of check scams. With unemployment high, con
artists are preying on people who need cash. One common
check scam involves attractive offers — usually originating
in e-mails or online job postings — involving part-time work
from home. As the new "employee," you will be sent a check
to deposit (which will be counterfeit) and told to forward
cash from your own account (to the crooks). Another scam
involves "mystery shopper" programs where the new hire is
given fake money orders or checks and asked to wire funds to
the criminals. And unlike electronic transfers that are
covered by consumer protection laws, fraudulent check scams
often leave consumers suffering the loss.
7. When shopping online, deal with reputable merchants
and be wary of unbelievably low prices. "There is no
guaranteed way to ensure that an online merchant you're
unfamiliar with is reputable, but there are ways to avoid
doing business with an unreliable one," cautioned Jeff
Kopchik, an FDIC Senior Policy Analyst specializing in
technology matters.
First, he said, ask your friends and family if they've
had good experiences with a merchant you're considering
using. "If people you know have used and can recommend an
online merchant, that's a strong indicator," he added.
Second, you may already know and like some online merchants
from their retail outlets, mail order catalogues or other
services. They are likely to be a safer bet than an
unfamiliar merchant that doesn't list a physical address or
a phone number on its Web site.
If you are uncertain about an online merchant, check with
the Better Business Bureau Online ( www.bbbonline.com).
You can also search online for complaints about the
business. Similarly, if you have a problem with an online
merchant, file a report with the Better Business Bureau. The
Bureau will notify the merchant about your concern and ask
you if the issue was resolved. A legitimate merchant will
attempt to fix the problem, while a crooked company may have
many unresolved issues.
8. Using a credit card generally offers more purchase
protection than a debit card or other electronic forms of
online payment. "Unlike paying with a debit card and the
money being immediately transferred out of your account,
with a credit card you generally have weeks to pay your
bill," Kopchik said. "So if the merchant does not deliver as
promised, you have time to dispute the transaction and even
enlist the help of your credit card company." He also noted
that federal law gives you certain rights, in areas such as
dispute resolution, when buying with a credit card.
However, watch your budget when using your credit card to
shop online. Kopchik said studies have shown that people
spend more when they use a credit card instead of cash, a
gift card or a debit card.
9. Be on guard against scams hiding behind online coupon
offers. Web sites for legitimate coupons will only ask
consumers to provide an e-mail address in order to use their
service to search for online specials and discounts. Beware
of any coupon site that asks for personal, financial or
payment information, which can be misused by criminals.
10. Be careful if you download banking software onto a
cell phone. Many cell phones called "smart phones" allow
consumers to add computer-like features ranging from video
games to "mobile" banking. But cell phone users need to be
aware of an emerging threat from criminals selling malicious
software for mobile banking, some even falsely displaying
bank logos. "These applications may contain spyware, and
downloading them could be giving a hacker access to your
bank account or payment card information," reported Nelson.
His advice? "Only download mobile banking applications
from a safe site, such as your wireless provider, phone
manufacturer or your bank." When in doubt, he added,
"contact your bank before downloading any banking
applications to your cell phone."
To learn more, see
Depositing Paper Checks
Over the Internet and
For More About Internet
Commerce.
top
IRS Announces New 2009 Tax Reporting Rules
New IRS regulations will require many amended returns and
confuse taxpayers.
Legislation passed in February of this year to extend tax
provisions which had expired at the end of 2009 will impact
homeowners and other taxpayers. That legislation also
retroactively modified some individual income tax laws
affecting the 2009 tax liability of individual taxpayers.
The IRS has been working on the regulations to implement the
retroactive changes to 2009 tax laws since the legislation
was signed by President Obama in February. The new
regulations were announced by IRS on April 1.
Unfortunately the IRS had long since printed as well as
published online its 2009 1040 individual income tax forms
and Schedule A (itemized deductions), both of which are
affected by the law. Many individual taxpayers have already
filed their 2009 federal taxes, further complicating
matters.
Rather than publishing new 2009 tax forms this close to
the April 15, 2010 filing deadline for 2009 taxes, IRS has
decided to allow taxpayers to continue to use the existing
2009 1040 tax forms and related schedules. IRS has issued
supplemental instructions to enable taxpayers to go back and
incorporate the new tax law changes after they have filled
out the currently available 2009 tax forms. Unfortunately
this means that taxpayers who have already filed their
individual income 2009 tax forms will also have to recompute
their 2009 taxes and refile the forms. Taxpayers who need
additional copies of the existing 2009 tax forms for that
purpose can download them at IRS.gov.
While the new IRS regulations will complicate tax
calculations, the extra work will be worth it for many. Most
of the changes will reduce homeowner’s 2009 tax liability,
in some cases substantially. However at least one change
will increase the tax liability of some homeowners. The IRS
has determined that the total amount of 2009 first-time home
buyer tax credits claimed has exceeded the 2009 ceiling on
the amount Congress had authorized for the credit. As a
result, one of the new regulations will limit the amount of
the credit in some instances.
The addendum to your 2009 individual income tax filing
instructions, provided by the IRS, is below.
IRS Supplemental 2009 Individual Taxpayer Filing
Instructions
April 1, 2010
To comply with the retroactive changes in 2009 tax laws
affecting individual taxpayers, please first complete your
2009 1040 (U.S. Individual Income Tax Return) and Schedule A
(Itemized Deductions), following the instructions provided
with current printed forms and online. Then follow these
instructions to incorporate the new tax law changes and
complete your 2009 1040 and Schedule A.
Changes to Form 1040 (U.S. Individual Income Tax Return)
1. For dependents
(line 6c) list all children under the age of 18 if
they are dependant but not living at home, or living
at home but not dependant, or dependant and living
at home but hardly ever there, or if they are
unemployed “boomerang” children, AND you are not
claiming an agricultural income exemption for the
production of ethanol. Pets exceeding 40 lbs. in
weight may also be deducted.
2. For ordinary
dividends (line 9a) list dividends from companies
with ordinary sounding names. If the name of the
company sounds foreign, list the dividends under
line 9b, weird dividends.
3. For business
income or losses (line 12) please explain on form
897549 if you did not have a loss.
4. For pensions and
annuities (line 16a) list all 401k, Roth or Regular
IRA assets. Subtract any sums transferred to a Roth
IRA from a regular IRA, and divide the remainder by
your 2009 stock market losses.
5. For farm income
(line 18) you do not need to make an entry, since
farmers always lose money.
6. For other income
(line 21) list all royalties, air miles, and money
found in the back of your sofa. Annual bonuses must
also be entered here. If you are employed in the
financial services sector and your bonus exceeded
$50,000, the amount of the bonus exceeding $50,000
will be taxed at a rate of 97.405%. Bonuses
exceeding $500,000 will be taxed at a rate of
121.094%.
7. For moving
expenses (line 26), list any moving expenses
resulting from the foreclosure of your home. Send an
invoice in that amount to the Bank of America.
Include a copy of the invoice with your tax return,
marked to the attention of T. Geithner, IRS bailout
recovery section.
8. For adjusted
gross income (line 37), incomes are deemed gross if
they exceed $500,000. Amounts above $500,000 will be
taxed at a rate of 97.405%.
9. For the
first-time home buyer tax credit (line 69), you may
only take this credit if your last name begins with
the letters A – M.
Changes to Schedule A (Itemized Deductions)
1. For medical
expenses (line 1) you can in some cases deduct
amounts spent on contacting federal legislators or
the federal executive branch in advocating the
support or opposition of federal healthcare
legislation. To determine if this amount is
deductible, fill out form 329837, “Test on
provisions of the federal healthcare legislation”.
If you answer at least 50% of the questions
correctly, you may take the deduction. (Note:
members of the U.S. Congress do not have to fill out
form 329837).
2. For real estate
taxes (line 6), deduct 2009 real estate taxes on
your home if they were less than the 2008 real
estate taxes on your home. If the 2009 real estate
taxes on your home were more than the 2008 real
estate taxes on your home, contact your real estate
taxing authority and ask for an explanation of how
that happened.
3. For home
mortgage interest and points (line 10), homeowners
who were foreclosed in 2009 may now deduct interest
that they owed, but did not pay, prior to their
foreclosure. Foreclosed homeowners may deduct 1
point (1% of the original mortgage amount) if they
had a subprime mortgage, 1 point if they reside in a
state where home values have declined at least 30%
since 12/31/2006, and 1 point if their mortgage
broker and/or real estate agent was a moron.
4. For investment
expenses (line 23), you may 2009 deduct alcoholic
beverage expenses that were used in conjunction with
portfolio review and planning.
5. For other
miscellaneous deductions (line 28), you may deduct
certain expenses associated with the sale of your
home in 2009. These include expenses for
advertising, repairs, upgrades, landscaping and
other related costs such as hot tubs or block
parties. Real estate sales commissions are now also
deductible, but only if your real estate broker does
not practice dual agency.
If you have any questions regarding these new regulations
please call the IRS hotline between the hours of 2 PM and
2:30 PM on Tuesdays or Thursdays. Staffing for the hotline
has recently been expanded, so the waiting time to speak to
an agent should be less than 17 hours in most cases.
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Please take the time to contact your legislators and express your
views on pending policy issues covered in this
month’s Home Base. It's easy - you can reach your
legislators by email in a couple of mouse clicks,
and you can use the content in Home Base and
elsewhere on our website to help you develop your
message.
To look up the phone number, email, and/or postal address of your
U.S. Representative or your two U.S. Senators, (or
your state representative or state senator)
click here. You can also look up which
legislators represent your zip code if you don’t
recall their names.
A personal meeting is a particularly effective way
to get their attention and reinforce your message.
Many legislators are also happy to meet personally
with their constituents when they are back home on
weekends or when Congress is not in session.
Please consider also requesting a follow up
face-to-face meeting in their home state or home
district offices near you when you contact their
Washington DC offices on policy issues.
Is there a policy issue that is particularly
important to you which significantly impacts
homeowners or home ownership? Any member may propose
a position on a policy issue, so please check the
American Homeowners Grassroots Alliance's 2010 Issue
Guide.
If it isn't on the list, we invite you to send us an
email and tell us why you think the American
Homeowners Grassroots Alliance should take a
position and work on it.
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