Korene's Blog

. . .YOU WILL GET WHAT YOU PURCHASE

Many of the things that has allowed America to become a world power, to become the champion of freedom, to be where you can have what you work to achieve without regard to who and what your family or parents had . . .  Those things have CHANGED.  From March, 2008 until November, 2008, Mr. Obama promised he would bring change to America.  Well America, you got what you asked for.  He has kept his promises.   You will pass along a debt load to your children and your grandchildren and their children that is unheard of in the civilized world.  We have Czars.  You will work more than 60% of the time to pay taxes and interest on the debt that just keeps climbing. 

The Largest Tax Hikes in History

In less than six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:

Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%

Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.

The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:

The Tanning Tax. This went into effect on July 1st of this year. It imposes a new, 10% excise tax on getting a tan at a tanning salon. There is no exemption for tanners making less than $250,000 per year.

The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Brand Name Drug Tax. Starting next year, there will be a multi-billion dollar tax assessment imposed on name-brand drug manufacturers. This tax, like all excise taxes, will raise the price of medicine, hurting everyone.

Economic Substance Doctrine. The IRS is now empowered to disallow perfectly-legal tax deductions and maneuvers merely because it judges that the deduction or action lacks “economic substance.” This is obviously an arbitrary empowerment of IRS agents.

Employer Reporting of Health Insurance Costs on a W-2. This will start for W-2s in the 2011 tax year. While not a tax increase in itself, it makes it very easy for Congress to tax employer-provided healthcare benefits later.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. These major items include:

The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.

You can read more at:

 http://atr.org/six-months-untilbr-largest-tax-hikes-a5171##ixzz0uiycomod

You can work to correct the "changes" that are destroying Armerica at the polls this summer and this fall by finding "citizen servants" to serve America and Americans.

WOW big news, OUTLOOK for BLACKBERRY this is what I have been looking for.

Follow the link.   http://www.xobni.com

Do you have an effective way to process and organize your e-mail so that you can get to an empty Inbox on a routine basis? If you have lots of e-mail in your Inbox—I receive as many as 7,000 to 15,000 messages daily depending on the calendar and events on going—you might want to rethink your processing methods. Really, it is possible to empty your Inbox. I use this method and empty my inbox almost every day.  The key is to evaluate how you are processing and organizing your e-mail and make some changes.

No doubt you have opened an e-mail and thought, "Hmmm, not sure what to do with this. I'll deal with it later!"—and promptly closed the message. If you do this over and over again, it doesn't take long to end up with several hundred (or thousand) messages in your Inbox.

Developing a new approach to processing your Inbox will help you to gain more control, improve your response time, and keep up with critical actions and due dates.

This article will cover 4 key factors that will help you process your e-mail more efficiently.

1. Set up a simple and effective e-mail reference system

The first step toward an organized Inbox is understanding the difference between reference information and action information.

• Reference information is information that is not required to complete an action; it is information that you want to keep in case you need it later.

• Action information is information you must have to complete an action.

Most people receive a considerable amount of reference information through e-mail. Sometimes as much as one-third of your e-mail is reference information. So it is essential to have a system that makes it easy to transfer messages from your Inbox into your e-mail reference system. An E-mail Reference System is a series of e-mail file folders where you store reference information to ensure you have easy access to it later. Learn more about setting up an E-mail Reference System. Once you take care of filing your reference information, you can use the next three steps to handle e-mail you have to do something with, your action information.

2. Schedule uninterrupted time to process and organize e-mail

How many interruptions do you get every each day? It's nearly impossible to complete anything when you allow constant interruptions from the phone, people stopping by your office, and instant messaging. So it's critical that you set aside uninterrupted time to process and organize your e-mail.

Many e-mail messages require you to make a decision. Good decisions require focus, and focus requires uninterrupted attention. You need to establish a regular time each day to process your e-mail so that you can empty your Inbox. Of course, you can scan your e-mail during the day for urgent messages or requests from your boss.

Book yourself a recurring appointment for an hour a day to process e-mail, and mark it as "busy." During this time don't answer the phone or take interruptions, and work only on processing your Inbox.

At first, keeping these appointments will take discipline, but over time the discipline becomes habit. And once you get to zero e-mail in your Inbox, you'll see the value of this one hour a day and you'll stick to it like glue.

3. Process one item at a time, starting at the top

When you sit down to process your e-mail, the first step is to sort it by the order in which you want to process it. For example, you can filter by date, subject, or who the e-mail is from. In Outlook, click the Arranged By: box at the top of your Inbox and click how you want to arrange your e-mail.

Filter your e-mail by a number of different options.

Tip:  If you use Outlook, enable the preview pane so that you can view your messages without having to open them. To enable the preview pane, on the View menu, click AutoPreview.

Resist the temptation to jump around in your Inbox in no particular order. Begin processing the message at the top of your Inbox and only move to the second one after you've handled the first. This can be hard at first when you might have thousands of messages in your Inbox. But as you reduce the number of messages over a few sessions, eventually you'll get to the point where you can process the 60-100 messages you get every day and get your Inbox down to zero every day.

4. Use the "Four D's for Decision Making" model

The "Four D's for Decision Making" model (4 D's) is a valuable tool for processing e-mail, helping you to quickly decide what action to take with each item and how to remove it from the Inbox.

Decide what to do with each and every message

How many times have you opened, reviewed, and closed the same e-mail message over and over? Some of those messages are getting lots of attention but very little action. It is better to handle each e-mail message only once before taking action—which means you have to make a decision as to what to do with it and where to put it. Under the 4 D's model, you have four choices:

1. Delete it

2. Do it

3. Delegate it

4. Defer it

DELETE IT

Generally you can delete about half of all the e-mail you get. But some of you shudder when you hear "delete." You're hesitant to delete messages for fear you might need them at some point. That's understandable, but ask yourself honestly: What percentage of information that you keep do you actually use?

If you do use a large percentage of what you keep, then what you're doing is working. But many of you are keeping a lot more than you use. Here are some questions to ask yourself to help you decide what to delete:

1. Does the message relate to a meaningful objective you're currently working on? If not, you can probably delete it. Why hang on to information that doesn't relate to your main focus?

2. Does the message contain information you can find elsewhere? If so, delete it.

3. Does the message contain information that you will refer to within the next six months? If not, delete it.

4. Does the message contain information that you're required to keep? If not, delete it.

DO IT (in less than two minutes)

If you can't DELETE IT, then decide, "What specific action do I need to take?" and "Can I DO IT in less than two minutes?" If you can, just DO IT.

There is no point in filing an e-mail or closing an e-mail if you can complete it in less than 2 minutes. Try it out?see how much mail you can process in less than 2 minutes. I think you will be extremely surprised and happy with the results. You could file the message, you could respond to the message, or you could make a phone call. You can probably handle about one third of your e-mail messages in less than two minutes.

DELEGATE IT

If you cannot DELETE IT or DO IT in two minutes or less, can you DELEGATE IT?

If you can delegate it, do it right away. You should be able to compose and send the delegating message in about two minutes. Once you delegate the action, delete the original message or move it into your e-mail reference system.

DEFER IT

If you cannot DELETE IT, DO IT in less than two minutes, or DELEGATE IT, then the action required is something that only you can accomplish and that will take more than two minutes. Because this is your dedicated e-mail processing time, you need to DEFER IT and deal with it after you are done processing your e-mail. You’ll probably find that about 10 percent of your e-mail messages have to be deferred.

There are two things you can do to defer a message: turn it into an actionable task or turn it into an appointment. When you're using Outlook, you can DEFER e-mails with actions by dragging the message onto your Task List to turn it into a task. Name the task to clearly state what action is required so that you don't have to reopen the e-mail message. The result is a clearly defined list of actions in your task list that you can prioritize and schedule to complete on your Calendar. Or you can turn the message into a meeting request by dragging it onto your Calendar.

Do it daily

Using the 4 D's model on a daily basis makes it easier to handle a large quantity of e-mail. Our experience shows that on average, people can process about 100 e-mail messages an hour. If you receive 40 to 100 messages per day, all you need is one hour of uninterrupted e-mail processing time to get through your Inbox. Our statistics show that of the e-mail you receive:

• 65 percent can be deleted or filed

• 20 percent can be delegated or completed in less than 2 minutes

• 15 percent can be deferred to your Task List or Calendar to complete later

Of course, if you have a backlog of hundreds of messages, it will take time to get to the point where your daily routine keeps you up to date. It's important to get that backlog down, so I would suggest setting chunks of time aside to work through it. Then you can really enjoy processing your messages every day using the 4 D's.

2010 is to be known as the year of the short sale stated by many in the know and is a great way to save you from foreclosure but be very aware of so called short sale investors who claim to be your friend. Many times they are just looking out for there best interests to make some $$$ on your property.

Here is how the scam works: You list your property with a realtor (friend of the investor) who says he has a investor who will buy your property for a low price after all the foreclosure act of 2007 says you can write off the amount the lender losses. WRONG! Please check with YOUR CPA or attorney. There are a lot of circumstances were this debt will noy be forgiven and you will owe taxes on the amount the lender lost.

In other words lets say you owe $250,000 on a property and you take a offer on your home from a investor for 150,000 and the lender takes 100,000 loss you could be taxed 100,000 as earned income in the right (wrong) circumstances.

If you sold the property to a regular client for 200,000k and the bank only lost 50,000 then you would be taxed on 50,0000 as earned income.

Many of these so called Real Estate Investors are broke, broke, broke did a mention they are broke!! They use a lenders money for 1 day called transactional funding and pay usually 1 or 2 points to the lender for the use of that money for a few hours to sell your home by doing what they call a A to B closing then B to C closing on the same day to a end investor ( a flip) usually putting large profits in there pocket and meanwhile leaving you with a large Tax Bill from uncle Sam.

That's not to say that all real estate investors are bad if your house needs a lot of repairs and the investor purchases it and does some work then sells it a few weeks or month later and makes a profit nothing wrong with that just be careful of the same day flips as you may find a hefty tax bill that you could have cut in half as many times another realtor is bringing that end buyer to your property .There are a lot of advantages to doing a short sale and always list your home with a quality realtor who can sell your home to the end investor without using one of these so called Real Estate Investors if your home is in great condition.

We are experts in mortgage banking and mortgages, short sales and there are many new procedures that came out in April dealing with short sales. If you or a friend is thinking about doing a short sale on your home contact us and we can help you with your decision by referring you to the best experts for your situation.

Taking your laptop on your next trip? Don't forget the extras! We're not just talking about the power cord, especially if you're headed overseas — computer accessories you may need to pack include converters, adapters, wireless Internet cards, Ethernet cables, surge protectors and, of course, a sturdy carrying case.

This list may seem overwhelming, but most of these laptop accessories serve one of two purposes: to provide a power supply for your computer or to connect it to the Internet. Which of these accessories will you need? Read on to find out.

1. Electrical converters and adapters
If you're traveling overseas, you'll need to consider international differences in voltage, and then deal with the different sizes and shapes of the plugs. The United States and Canada use 110-volt electricity, while most of the rest of the world runs 220 - 240 volts. While this is an issue for many appliances such as hair driers or camera chargers, most modern laptops are capable of running on both 110- and 220-volt currents. Check the label and/or owner's manual on your computer to be sure. If your computer only runs on 110 volts, you'll need to purchase a converter to prevent damage to your machine.

Even if you don't need a converter, you will most likely need an adapter to enable your plug to fit into the local outlet. Almost every country has one or more adapters that may be unique or that it shares with a few close neighbors. Magellan's, a traveler supplier, has a handy Electrical Connection Wizard that can help you find the right converters and adapters for the country you're visiting. For more information on converters and adapters, see our story on Electricity Conversion.

2. Connecting at your hotel: Wireless notebook cards to ethernet cables
Most hotels geared toward business travelers offer some form of Internet access, whether it's high-speed or wireless. Call ahead to determine what will be available so that you know what equipment you'll need to bring with you. Here's a rundown of the options:

Wireless Internet: Often called Wi-Fi, wireless Internet access is growing increasingly common around the world, especially in hotels that cater to business travelers. If you have a relatively new laptop, you may not need to bring any equipment at all — practically all modern machines have wireless network adapters already built in, so all you have to do is plug your computer in and it will search out the nearest wireless signal. (Most hotels will require a password to access their signal — ask at the front desk.)

If your laptop doesn't have an internal wireless network adapter, you can buy a wireless notebook card from any computer supplier, such as Best Buy or CompUSA.

High-Speed Internet: Some hotels require you to plug into their high-speed Internet connection using an Ethernet cable. We recommend bringing your own cable just in case, as the hotel may or may not able to supply one for you. To connect to a high-speed network, you'll need a network interface card (NIC), which most laptops have already installed. If yours doesn't, you can purchase one from your local computer supplier.

3. Connecting on the road: Mobile broadband card
If you're equipped for wireless Internet, you're in luck — you can find Wi-Fi hot spots in airports, coffee shops, libraries and many other facilities around the world. While you'll usually have to pay for this service, sometimes you'll luck out and find a free hot spot. For more information, read Tips for Better Wi-Fi on the Road.

If you're traveling within the U.S., you may be able to connect to the Internet through your cell phone provider's network — you just slide a mobile broadband card into your laptop and then you can surf the Web from anywhere your cell phone provider has service. There's usually a monthly charge, and you'll have to purchase the card from your cell phone provider. Plans are available from most major cell phone providers, including AT&T, Sprint, T-Mobile and Verizon.

4. Surge protection
You have a surge protection electrical strip on your desktop computer; you should have the same for your portable. In countries where electrical delivery is less reliable, this is all the more important. You'll need one for whichever voltage you'll be using; surge protectors for 110- and 220-volt currents are not interchangeable.

5. Carrying case
No matter how careful you are carrying your computer around, it's going to take a few hits while you scurry around airports, hop in and out of airport shuttle buses, pile stuff into overhead bins, or fall asleep slumped over your work on the plane. A sturdy padded carrying case can save you a lot of aggravation and even more money.

6. Optional extras
It's a good idea to bring along a device onto which you can back up your work, just in case your hard drive crashes while you're away. We like flash drives, which are smaller than a finger and plug directly into your USB port, but you can also back up your work onto CD's as long as your computer has a CD burner.

Many people like to pack a mouse and portable keyboard to make long-term work on a laptop more comfortable. It may also be worth packing an extra laptop battery just in case you find yourself away from a power source for a long period of time.

Where to get everything you'll need
Magellan's, mentioned above, is a respected, reputable source for a wide variety of travel accessories such as converters, adapters and computer carrying cases. However, you may need to go to a computer store such as Best Buy or CompUSA for more specialized equipment such as wireless notebook cards or Ethernet cables.

It’s no lie: The real-estate and financial markets are a mess right now. But that does not mean there are not people looking to buy and sell homes. If you are one of them, here are tips to help you weather current conditions.

We asked mortgage and real-estate experts for their advice to buyers and sellers caught in the market's downward spiral. Here are their top five tips for those navigating the mortgage crisis.

Data Show Federal Policy Triggered Mortgage Meltdown

Despite mortgage interest rates falling to near all-time lows, America’s homeowners are in a state of unease not seen since the Great Depression. In 2009, nearly 4 million foreclosure notices went out to homeowners unable to keep up with their payments, an increase of more than 20 percent from 2008. Many explanations lie behind this collapse, but arguably the most crucial, and underappreciated, has been excessive federal intervention in the housing market. Recent reports and articles from American Enterprise Institute (AEI) Senior Fellow Peter Wallison and AEI Visiting Fellow Charles Calomiris strongly suggest the pileup of bad mortgage paper has the words “Made in Washington” written all over it. In other words, rogue capitalism is partly to blame, but rogue government has played a central enabling role.

Our nation has over-invested in housing. To put the matter more simply, we’ve bought more housing than we can afford. According to the Irvine, Calif.-based RealtyTrac Inc., the number of U.S. homes seized by banks during First Quarter 2010 was 35 percent higher than for First Quarter 2009. And the number of owner-occupied homes in immediate danger of foreclosure was 16 percent higher than during the same three-month period a year earlier. “We’re right now on pace to see more than 1 million bank repossessions this year,” notes RealtyTrac Senior Vice President Rick Sharga. The Mortgage Bankers Association of America, meanwhile, estimates that during First Quarter 2010, 10.06 percent of all mortgage loans on 1-to-4-unit dwellings were delinquent and another 4.63 percent were in foreclosure. Thus, nearly 15 percent of all single-family dwelling homeowners with a mortgage are to some degree in danger of losing their home.

Want more evidence of a crisis? A report released late last year by First American CoreLogic, a real estate information company in Santa Ana, Calif., estimated that 23 percent of homeowners nationwide owe more on their mortgages than their properties are worth in the market, a condition popularly known as being “underwater.” And a new study by Barclays Capital estimates that about 30 percent of all home sales in 2010 will be foreclosure-related, as opposed to the typical figure of around 6 percent. Moreover, says Barclays, U.S. home prices will tumble 3 percent to 5 percent over the next couple of years – on top of the 30 percent decline occurring since 2006.

Reckless mortgage lending fueled this fire. The research of Wallison and Calomiris, based on data supplied by former Fannie Mae Chief Credit Officer Edward Pinto, indicated that in 2008 – the year the mortgage industry imploded – roughly 26 million of the 55 million outstanding first mortgages in this country were in the high-risk “sub-prime” or (nearly as high-risk) “Alt-A” categories. The federally-chartered secondary mortgage market giants Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) held or guaranteed a combined 10 million of these mortgages. The companies had bundled about 7.7 million of them into mortgage-backed securities (MBS) for issuance by brokerage houses. The party ended soon enough. Default rates rapidly rose during 2007 and 2008, triggering a flight by investors from the MBS market and ultimately from all asset-backed securities. Fannie Mae and Freddie Mac were exposed to a combined $1.6 trillion in subprime and Alt-A mortgages, about a fourth of which became effectively uncollectible. Bonds could not be sold except at distress-level prices. Bear Stearns, Lehman Brothers, and Merrill Lynch imploded, as did Fannie Mae and Freddie Mac. The nation, and the world, fell into recession.

But the question arises: Why did this recklessness happen? As Wallison and Calomiris note, the federal government for years had applied intense pressure to primary and secondary lenders to lower credit standards in mortgage underwriting. Lax standards meant more applicants approved for credit. And more borrowers would translate into a higher homeownership rate, something presumably in the national interest. House price appreciation would serve as collateral in the event of foreclosure. It was optimism gone wild.

Banks and other primary lenders, for their part, created and/or shifted loan portfolios to exotic financial instruments such as sub-prime and Alt-A mortgages. They also focused more heavily on adjustable-rate mortgages, especially for subprime borrowers, in which payments typically reset at a higher level after the first two years. Lenders also promoted “cash-out” (loans exceeding the purchase price) and “interest-only” mortgages. Toward these ends, many banks acquired non-bank mortgage companies through which they could increase their volume of subprime loans.

Fannie Mae and Freddie Mac, each officially a “Government-Sponsored Enterprise” (GSE), also found themselves on the receiving end of federal heat. Starting in 1993, pursuant to new federal statutes, Fannie Mae and Freddie Mac’s regulator, the U.S. Department of Housing and Urban Development’s Office of Federal Housing Enterprise Oversight (OFHEO), established new “affordable housing” goals. Each GSE now would have to expand their purchases of mortgages made to low- and moderate-income households, especially members of racial minority groups. Civil-rights leaders such as Jesse Jackson, nonprofit radical activist groups such as the Association of Community Organizations for Reform Now (ACORN), and congressional allies such as Rep. Barney Frank, D-Mass. (see photo), were adamant about using the Community Reinvestment Act of 1977 to punish primary and secondary lenders who allegedly “redlined” (unjustly denied credit) black and Hispanic neighborhoods. They found willing accomplices in the Clinton administration. In 1999, HUD Secretary Andrew Cuomo announced a historic “agreement”: Fannie Mae and Freddie Mac would buy $2.4 trillion in mortgages over the next 10 years to create affordable housing for 28.1 million low- and moderate-income households. At least 50 percent of all mortgages would have to meet affordability standards of such borrowers, up from 42 percent.

The Bush administration also coaxed Fannie Mae and Freddie Mac into operating as virtual adjuncts to HUD. President Bush, his top political adviser Karl Rove, and other key officials saw creating an “ownership society” as priority number one. In a June 18, 2002 speech, Bush made clear his intent:

The goal is, everybody who wants to own a home has got a shot at doing so. The problem is we have what we call a homeownership gap in America. Three-quarters of Anglos own homes, and yet less than 50 percent of African-Americans and Hispanics own homes…So I’ve set this goal for the country. We want 5.5 million more minority homeowners by 2010.

This statement unfortunately ignored the fact that creditworthiness long has varied by race as well as income, and that studies show blacks in particular have higher rates of default. By 2007 HUD stipulated that at least 55 percent of loans acquired by Fannie Mae and Freddie Mac had to meet low- and moderate-income affordability standards. The two GSEs complied rather than lose advantages contained in their respective congressional charters, such as exemption from state and local taxes and a $2.25 billion credit line from the Treasury Department. In addition, Congress and OFHEO (superseded in 2008 by the Federal Housing Finance Agency) allowed them to be undercapitalized. The GSE figure averaged about $1 in capital for every $20 in assets, whereas the commercial bank standard was $1 per $12. Safety and soundness took a back seat to raising the homeownership rate among minorities to the level of “Anglos.” And if the risk of failure was higher, the unwritten rule of “too big to fail” still applied. Washington would come to the rescue in a pinch.

And so it did. As the blitz of high-risk lending by banks, thrifts and mortgage companies of varying repute tailed off, the profitability of Fannie Mae and Freddie Mac, despite intense lobbying of and generous political contributions to Capitol Hill lawmakers, was now in jeopardy. Each company already recently had become embroiled in accounting fraud scandals. “Affordable” mortgages – more accurately, mortgages for people who can’t afford them – became a balance-sheet disaster for major investors as well as banks. With mortgage and capital markets interwoven, mounting defaults and foreclosures during the course of 2007 and 2008 were putting the economy in harm’s way. The inevitable collapse took place in mid September 2008. Bush Treasury Secretary Henry Paulson hurriedly placed the companies under conservatorship. Congress already in July had passed emergency legislation which, among other things, granted the Treasury Department an 18-month window of authority to raise indefinitely the Fannie Mae and Freddie Mac credit lines. Soon enough, the department raised the limits to $100 billion and then to $200 billion. In December 2009, Obama Treasury Secretary Timothy Geithner lifted them altogether. It was the logical culmination of years of social control over homeownership. As AEI’s Wallison puts it:

The fact is neither political party, and no Administration, is blameless; the honest answer is that government policy over many years caused this problem and we the American people embraced and allowed it by our votes at the polls. The regulators, in both the Clinton and Bush Administrations, were the enforcers of the reduced lending standards that were essential to the growth in homeownership, and ultimately, the housing bubble.

All this has cleared the decks for a rolling bailout. As of mid May, Fannie Mae and Freddie Mac had received a combined $145 billion in taxpayer-funded aid to cover their losses. And rest assured, more assistance will be needed. A few weeks ago Fannie Mae, the larger of the two companies, announced an $11.5 billion loss for First Quarter 2010 and asked for an extra $8.4 billion in assistance. Freddie Mac announced an $8 billion loss for the quarter and requested another $10.6 billion. The Congressional Budget Office projects the final cost of the Fannie Mae/Freddie Mac bailout (through the year 2020) at nearly $380 billion. Too big to fail, indeed.  We are putting at risk our beloved Republic of the UNited States of America and the freedoms and liberties we hold most precious.   WE MUST STOP THIS MADNESS now and at the polls in November when we vote AND DEMAND TIGHTER FISCAL CONTROL NOT MORE PRINTING OF MONEY WE DO NOT HAVE.

Yet this is small change compared to the value of mortgages held by the Federal Reserve System, pressed into service as the investor of the last resort. In a first-time-ever move, the Fed from January 2009 through March 2010 purchased $1.25 trillion in mortgage-backed securities in the hopes of eventually unloading them to well-capitalized investors. True, the purchases have kept interest rates down and maintained high rates of homeownership and property values. But they have done so at the risk of creating another overheated housing market and an even worse recession.

The financial services overhaul sponsored by Sen. Christopher Dodd, D-Conn., and passed by the Senate last Thursday (the House passed its own version in December) ostensibly would end the financial abuses that led to these and other bailouts (e.g., Troubled Asset Relief Program, or TARP). An amendment to the bill affirms its intent to “prohibit taxpayers from ever having to bail out the financial sector.” Yet lawmakers have refused to address the twin assumptions that caused the bailout: 1) homeownership is a right; and 2) government should subsidize lenders that lose money on loans to high-risk borrowers. As such, the legislation won’t extricate taxpayers from Fannie Mae, Freddie Mac and other fiscal sinkholes.

Neither will the government’s $75 billion Home Affordable Modification Program (HAMP). The program, part of the massive Obama White House stimulus plan enacted in February 2009, is intended to modify mortgage payments for qualifying troubled homeowners, first on a temporary and then on a permanent basis. Yet HAMP initiated less than 80,000 trial modifications this March, less than half the peak figure of last October. A growing number of loan modifications, moreover, are being cancelled, as many borrowers have proven unable to make scheduled payments even on more favorable terms; Goldman Sachs estimates about 68,000 cancellations of trial modifications took place in March.

The best way to ensure against future bailouts is to terminate the federal government’s too-big-to-fail guarantees. That’s right: End them, don’t mend them. So long as guarantees are in place, primary lenders, Fannie Mae, Freddie Mac and every other mortgage industry player will continue making loans to large numbers of people unable to pay them back. Risk must be driven by market rather than political forces. Writing on the mortgage meltdown, Barron’s columnist Gene Epstein recently noted, “Crony capitalists love to take foolish risks, dependent as they are on government’s rigged markets, often to the point that they would not be able to cope with free markets if they do.” This rigging inevitably moves credit allocation away from risk-based approval criteria, making future bailouts likely.

Many political leaders, under the guise of “reform,” prefer assigning to government the role of underwriter-in-chief. Frankly, it’s hard to imagine the federal government getting much more involved than it already is. During First Quarter 2010, Fannie Mae, Freddie Mac and various mortgage insurance agencies (e.g., the Federal Housing Administration, itself beset with rising default rates) owned or guaranteed a combined 96.5 percent of all new home loans. This compares with about 40 percent for each of 2005 and 2006; 60 percent for 2007; 80 percent for 2008; and 85 percent for 2009. The government can’t walk away from these commitments without severely compromising investor confidence. Even if the bill included an overdue privatization plan for Fannie Mae and Freddie Mac, we’re locked in for a long time.

The persons instrumental in creating this crisis seem to have learned nothing. Example: Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, stated back in 2003: “These two entities – Fannie Mae and Freddie Mac – are not facing any kind of financial crisis.” Unable to make that claim anymore, he wants the two GSEs to continue taking on high levels of risk. In June 2009 he and Rep. Anthony Weiner, D-N.Y., sent a letter to the CEOs of Fannie Mae and Freddie Mac, urging them to reverse the firms’ recently tightened standards for condominium mortgages. Early this year, Rep. Frank called for “a whole new system of housing finance” to replace Fannie/Freddie. Given his long track record of misguided advocacy, whatever “reform” bill emerges from his committee is almost certain to involve far more federal control. In the era of the bailout, being wrong means never having to say you’re sorry. All to the comfort of today that our children, grandchildren, great grandchildren and many, many generations YET to come will pay the price of our greed, lack of discipline, lack of restraint, and lack of sound fiscal management.  Oh how foolish we are to make others pay so great a price.  We put at risk that which we should cherish the most, the soundness of our liberty, our freedom, and our right to OWN our lives and future for the lack of the leadership and common sense.

Seven WHATs Are the Determination of YOU!

Not your background, not your resume or history, not your wealth or poverty...Your 7 WHATs...
WHAT...
1) do you believe?
2) do you dream or envision?
3) do you strive for?
4) do you cry about or for?
5) do you settle for?
6) do you want?
7) do you need?

Top Ten Credit Repair Strategies

#1 is to Dispute the Accuracy of Accounts that have late payments

A recent 30 day late payment is much worse than an Old bankruptcy. To dispute late payments you need to write a letter that states three things.

First, "name of creditor and number of account you are disputing"

Second, the reason for the dispute.

And third, what you want them to do.

What should you "dispute?"

That's the key question. Most people state that specific credit report accounts "are not theirs" or "inaccurate" - but you have a better chance of removing the credit report item if you give some details. Look at every tiny piece of data on your credit report for each account.there are lots of things to dispute to increase your score..

Force the Credit Bureaus to confirm data on your credit score like - Date of late payment, current balance, High limit, name of creditor, date account opened and other missing or erroneous information with the original creditor. The credit bureaus probably won't do this correctly within the 30 day period required by law, and then you can demand removal.

Make sure that your credit report dispute letter includes your name, address, and social security number - and that you send only one letter per line item/account per Credit Bureau. If you lump all the credit report accounts you are disputing in one letter, the Credit Bureaus may be able to disregard your dispute as "frivolous."

#3 - Reduce Your Balances to Under 30% of Credit Limit Ratio

Pay down any credit cards you have and keep the balance under 30% of your available credit limit. When you use 40% of the credit limit on a card you lose points with the credit bureaus. As you use more of your available credit limit.50%, 60%, 80%, 100% your credit score goes down.

Always keep the balance around 30%.

Here's something that you can do right now.

Get rid of your Capital One Credit Cards!

Capital One always reports to the Credit Bureaus that you have used 100% of your credit limit. Under oath their executives have admitted that they do this to deliberately lower your score so you can't get credit from anyone else.

#4 - Only have credit accounts with Reputable Companies.

Companies like Capital One, Providian - those that you see advertised on late night TV and those that have teaser rates will suppress your credit score.

Why?

Because the Credit Bureaus know that people with these accounts are more risky. If these types of accounts are on your credit report your credit score will suffer, and you'll pay higher interest rates for everything.

Only get accounts with reputable financial institutions.

Make sure to pay them in full every month, on time and only use about 30% of the credit limit. That's a great way to increase your credit score.

Creditors generally have the same responsibility under the law to maintain accurate information..and just like the Credit Bureaus, they often fail to do so.

So first, go ahead and dispute the negative line items on your credit score with the Credit Bureaus. Just because they send you a letter saying that the credit report account is accurate, doesn't mean that the creditor has actually provided proof of this to the Credit Bureau. By law the Creditor and Credit Bureau can only prove the account is accurate with a signed written contract by you or other original documentation. If the Creditor has not followed the law ..you may be able to File a legal Action against them.

Many people simply sue in Small Claims Court which costs between $35 and $100 depending where you live.

Don't worry, it's easy.

Provide proof to the court - including the letters you sent - how the creditors have not proved or removed the account. Write about how their actions have hurt you financially and created mental anguish and hardship. You don't even have to ask for money unless this is required and then ask for $1,000.

Just make sure you ask for complete deletion of the negative account on your credit report with all Credit Bureaus.

Do you think they'll want to send the President of their company to your county to appear in Court. Nope. If they just ignore you and don't show up in court that's ok too. Either way, you win..and the account gets deleted..permanently.

#6 -  Get Good Credit Added to Your Account

Get added as an "authorized user" on an account of someone like your husband or wife who has a great credit history with a company. (Note that the Credit Bureaus often mix up negative information from other people on your account.)

Often, that account will be reported to the Bureaus as yours too!

Now, the Credit Bureaus claim they are cracking down to preven people from improving their scores this way. However, remember that Credit Scores are created "on the fly" by the credit bureaus and what your credit score is - depends on the scoring model used.

So, this positive history from someone else is probably only NOT counted when you are applying for a mortgage if your lender is using the FICO NextGen Model.

Make sure your lender is using the FICO Classic scoring model. More than 80% of lenders DO use the FICO Classic so you'll probably be in luck!

Many different names make you look risky and lower your score. Many different names also make it a lot more likely that someone else's name will match a few letters of yours and their negative information may be reported on your credit report.

A simple letter stating that these are NOT your names and requesting deletion should do just fine. Make sure to include your full name, address, and social security number in the letter so the credit bureau can identify you properly.

#8.- Dispute, Correct, or Remove Address Changes

Different addresses indicate less stability and lower your score.

If the profile of people in your neighborhood have lower scores or economic profiles, your score will be lowered as well. That's especially bad news for people in low income areas and who live in Senior citizen communities.

Is that discriminatory?

Do you think that is fair?

What if you are in the Military?

What if you're a salesman or get promoted a lot and have to move around the country?

You can challenge the addresses on your report as not accurate.for lots of different reasons.

PO Boxes, Mail Drop boxes indicate higher credit risk. You look less stable and will have a lower credit score with the credit bureas if you have a PO box rather than a physical street address. Of course, people who are NOT credit risks have PO Boxes and Mail Drop boxes for legitimate reasons like protecting their privacy and themselves from identity theft.but the credit bureaus don't care.

If you think getting a box at Mail Boxes Etc which has a physical address.can get around this, you'd be wrong. The Bureaus have a list of almost every single Mail box drop location in the country.

They will flag you as more credit risky and your credit score will be lower on all three credit reports from the major credit bureaus!

#10 -  Dispute, Correct, or Remove your Employment Record  Change Your Job Title

If you own a Business and/or have CEO or Owner in your title the Credit Bureaus view you as a more credit risky entrepreneur. Making yourself CEO or President is a perk of owning your own company, but you should change your title to General Manager or Chief Financial Officer and report this to the credit bureaus. Salaried positions are viewed more favorably.

So to improve your credit score, change your job title and dispute the accuracy of any title or employment position that isn't yours.

This process is how many people remove Bankruptcies from their credit score.

Don’t Apply For New Credit BEFORE Your Mortgage Closes

Do NOT apply for new credit between the time you apply for a home loan and the day the mortgage closes. The price of ignoring this advice: You could be turned down for the loan while you're sitting at the closing table.

Fannie Mae has a new rule that goes into effect June 1. It requires lenders to check your credit report right before closing. A lot of lenders are going to interpret that as "the day of closing." And if you took on a new credit obligation, the lender has to recalculate your debt-to-income ratios. You could be turned down for the mortgage at the last hour if your debt-to-income ratio exceeds Fannie's guidelines.

Say you got a Home Depot charge card a week before closing, and bought a lawn mower. And you got a new Sears card and bought a washer and dryer and a refrigerator. You know, the necessities. Buying those things on credit could torpedo the mortgage.

According to a Fannie bulletin issued in March, Fannie Mae "directs the lender to review and evaluate the 'inquiries' section of the borrower's credit report to determine if the borrower has received additional credit that is not reflected in the credit report or disclosed on the loan application. If additional credit was obtained, a verification of that debt must be provided and the borrower must be qualified with the monthly payment."

For years, mortgage lenders have pleaded with borrowers to refrain from getting car loans or applying for store charge cards or credit cards between the time they apply for a mortgage and the day they are approved. Now lenders are begging borrowers to wait beyond loan approval and all the way until closing day.

Appreciate your Mother.  It is a blessing that has been proven time after time, if your Mother never had children...you won't either.

Happy Mother's Day!  Make sure you buy her candy, some nice flowers, a beautiful card, and take her to a nice dinner. By the way, take your Dad along, your mom had help raising you.

Appreciate your Mother and let her know it while you can.  Some day you will not be able to.  I LOVE You , Mom!  Happy Mother's Day! 

I have heard a great deal of rhetoric before and since the election of November of 2008 regarding CHANGE. Change for the sake of change is ill-advised, ill-conceived, and destined for total destruction.

All change should have:

(1) A Dream and a Purpose of Greater Good

(2) A Plan with a Firm Foundation

(3) A Strong and Lasting Structure

(4) A Purpose To Serve More Than Just The Chosen Few BUT NEVER Forgetting the Few

(5) A Budget That Can Be Afforded, Measured, Disclosed, and the Cost is Fully Managed.

We have elected a man that no one really knows anything about, who has never run so much as a Dairy Queen, let alone a town as big as Wasilla, Alaska. All of his associations and alliances are with real radicals in their chosen fields of employment, and everything we learn about him, drip by drip, is unsettling if not downright scary (Surely you have heard him speak about his idea to create and fund a mandatory civilian defense force stronger than our military for use inside our borders? No? Oh, of course. The media would never play that for you over and over and then demand he answer it. Sarah Palin's pregnant daughter and $150,000 wardrobe were more important.) I have never been so afraid for my country and for our future and the future of our children as I am now.

Mr. Obama's winning platform can be boiled down to one word: Change. Why? This man campaigned on bringing people together, something he has never, ever done in his professional life. In my assessment, Obama is dividing us along philosophical lines, push us apart, and then try to realign the pieces into a new and different power structure. Change is indeed happening. IF we as a nation of “WE THE PEOPLE, do not stand up within our local neighborhoods, communities, towns, cities, and states and say THIS CHANGE IS TOO MUCH AND IT MUST STOP IMMEDIATELY; Our NATION as we know it, love it, revere it, support it, and defend it, will never again be ONE NATION again.

And that is only the beginning.

In the late summer of 2006, people all over America began to hear over and over again the sensational news of an economy in turmoil and heard the cry “the is sky falling, the sky is falling”. Fueled by people wanting to be seen and perceived as the coming savior of the American way, the talk was all the trashing of our existing President, the imploring of people to throw out every principle and standard America was built on, and to abandon what made us GREAT as a Nation and GREAT as a PEOPLE and TO TOTALLY CHANGE.

We all saw the drowning men’s reactions to the economy when congress passed and our President signed into law the first stimulus package. America was sold a bill of goods. The stimulus package was to stimulate the economy. That was and is GARBAGE! We demand and then codify into law the requirement that our banks make massive loans to people we know they could never pay back? Why?

Something of historic proportions is happening. I can sense it because I know how it feels, smells, what it looks like, and how people react to it. Yes, a perfect storm may be brewing, but there is something happening within our country that has been evolving since 1977 and esculated during years of 1992 through 2000 with a quicken pace during 2007 and 2008 and total free fall since October 2008. We have spent three decades intentionally de-industrializing our economy and exporting more and more of our workers jobs overseas. Why?

We learned just days ago that the Federal Reserve, which has little or no real oversight by anyone, has "loaned" two trillion dollars (that is $2,000,000,000,000) over the past few months, but will not tell us to whom or why or disclose the terms. That is our money. Yours and mine. And that is three times the $700 billion we all argued about so strenuously just this past September. Who has this money? Why do they have it? Why are the terms unavailable to us? Who asked for it? Who authorized it? I thought this was a government of "we the people," who loaned our powers to our elected leaders. Apparently not.

We have not held our public officials to higher standards. We have in fact lowered the standards for them. We have given them exclusive benefits and priviledges and then total them they are not going to be held accountable for their actions, their promises, their professional and personal conduct either in or out of office. WHY?

The first stimulus package was a setup and knee jerk reaction by opening up the smallest flood gates to bail out and cover up the mis-management, scandals, political corruption, and self-fulfilling mis-managed acts in HUD and other governmental departments and agencies with such acts and laws as:

The Community Reinvestment Act of 1977
Urban Development Actions Grants 1977
Housing and Urban-Recovery Act of 1983
Low Income Housing Tax Credit of 1986
McKinney Homeless Assistance Act of 1987
National Affordable Housing Act of 1990
Supplemental Housing Authorization Act of 1977 (91 Stat. 55)
Title II establishes the National Energy Conservation Policy Act (92 Stat. 3206)
Housing and Community Development Amendments of 1981

We have intentionally ignored or changed our history, no longer teach our founding documents, teach or explain why we are exceptional as a nation and a people united, and why we are worth preserving as a nation. We have so “dumbed down” our schools that students by and large are not taught, encouraged, praised, or expected to write, think critically, read, or articulate their thoughts. I do not see or hear of parents revolting or teachers picketing while we allow even support school boards as they continue to back mediocrity. I heard a young teenager say, I don’t need to learn this or that. We have computers. Besides, I want to be . . . so why should I care about what some politican says or does if it doesn’t bother me? This child is not alone in his/her thinking. Our education system is worse than a joke. Why?

We have now established the precedent of protesting every close election (violently in California over a proposition that is so controversial that it simply wants marriage to remain defined as between one man and one woman. Did you ever think such a thing possible just a decade ago?) We have corrupted our sacred political process by allowing unelected judges to write laws that radically change our way of life, and then mainstream Marxist groups like ACORN and others to turn our voting system into a banana republic. To what purpose?

Now our mortgage industry is collapsing, housing prices are in free fall, major industries are failing, our banking system is on the verge of collapse, and social security is nearly bankrupt, as is Medicare and our entire government. (I teach college and I know precisely what I am talking about) - the list is staggering in its length, breadth, and depth. It is potentially 1929 x ten...And we are at war with an enemy we cannot even name for fear of offending people of the same religion, who, in turn, cannot wait to slit the throats of your children if they have the opportunity to do so.

And finally,

As a serious student of history, I thought I would never come to experience what the ordinary, moral German must have felt in the mid-1930s in those times, the "savior" was a former charismatic, smooth-talking rabble-rouser from the streets, about whom the average German knew next to nothing. What they should have known was that he was associated with groups that shouted, shoved, and pushed around people with whom they disagreed; he edged his way onto the political stage through great oratory. Conservative "losers" read it right now.

And there were the promises. Economic times were tough, people were losing jobs, and he was a great speaker. And he smiled and frowned and waved a lot. And people, even newspapers, were afraid to speak out for fear that his "brown shirts" would bully and beat them into submission. Which they did regularly. And then, he was duly elected to office, while a full-throttled economic crisis bloomed at hand - the Great Depression. Slowly, but surely he seized the controls of government power, person by person, department by department, bureaucracy by bureaucracy. The children of German citizens were at first, encouraged to join a Youth Movement in his name where they were taught exactly what to think. Later, they were required to do so. No Jews of course.

How did he get people on his side? He did it by promising jobs to the jobless, money to the money-less, and rewards for the military-industrial
complex. He did it by indoctrinating the children, advocating gun control, health care for all, better wages, better jobs, and promising to re-instill pride once again in the country, across Europe, and across the world. He did it with a compliant media - did you know that? And he did this all in
the name of justice and ....... change. And the people surely got what they voted for.

If you think I am exaggerating, look it up. It's all there in the history books.

So read your history books. Many people of conscience objected in 1933 and were shouted down, called names, laughed at, and ridiculed. When Winston Churchill pointed out the obvious in the late 1930s while seated in the House of Lords in England (he was not yet Prime Minister), he was booed into his seat and called a crazy troublemaker. He was right, though. And the world came to regret that he was not listened to.

Do not forget that Germany was the most educated the most cultured country in Europe. It was full of music, art, museums, hospitals, laboratories, and Universities. And yet, in less than six years (a shorter time span than just two terms of the U. S. presidency) it was rounding up its own citizens, killing others, abrogating its laws, turning children against parents, and neighbors against neighbors. All with the best of intentions, of course. The road to Hell is paved with them.

As a practical thinker, one not overly prone to emotional decisions, I have a choice: I can either believe what the objective pieces of evidence tell me (even if they make me cringe with disgust); I can believe what history is shouting to me from across the chasm of seven decades; or I can hope I am wrong by closing my eyes, having another latte, and ignoring what is transpiring around me.

I choose to believe the evidence. No doubt some people will scoff at me; others laugh, or think I am foolish, naive, or both. To some degree, perhaps I am. But I have never been afraid to look people in the eye and tell them exactly what I believe-and why I believe it.

I pray I am wrong. I do not think I am. Perhaps the only hope is our vote in the next elections.

David Kaiser is a respected historian whose published works have covered a broad range of topics, from European Warfare to American League Baseball. Born in 1947, the son of a diplomat, Kaiser spent his childhood in three capital cities: Washington D.C., Albany, New York, and Dakar, Senegal. He attended Harvard University, graduating there in 1969 with a B.A. in history. He then spent several years more at Harvard, gaining a PhD in History, which he obtained in 1976. He served in the Army Reserve from 1970to 1976.

He is a professor in the Strategy and Policy Department of the United States Naval War College. He has previously taught at Carnegie Mellon, Williams College and Harvard University. Kaiser's latest book, The Road to Dallas, about the Kennedy assassination, was just published by Harvard University Press.

Dr. David Kaiser

History Unfolding

I am a student of history. Professionally, I have written 15 books on history that have been published in six languages, and I have studied history all my life. I have come to think there is something monumentally large afoot, and I do not believe it is simply a banking crisis, or a mortgage crisis, or a credit crisis. Yes these exist, but they are merely single facets on a very large gemstone that is only now coming into a sharper focus.

David Kaiser
Jamestown, Rhode Island
United States

HUD Scandals

by Tad DeHaven

June 2009

Overview
The Pierce Years, 1981-1989
The Cisneros Years, 1993-1997
The Cuomo Years, 1997-2001
The Jackson Years, 2001-2009
Conclusion

Overview

The $65 billion Department of Housing and Urban Development has been plagued by mismanagement and scandal in recent decades. Numerous HUD secretaries have used their power to enrich themselves or to confer special benefits on people with political and financial connections. This essay looks at HUD mismanagement during the tenures of four HUD secretaries under three recent presidents:

· Samuel Pierce, 1981-1989, Ronald Reagan's only HUD secretary

· Henry Cisneros, 1993-1997, Bill Clinton's first HUD secretary

· Andrew Cuomo, 1997-2001, Bill Clinton's second HUD secretary

· Alphonso Jackson, 2003-2009, George W. Bush's second HUD secretary

A root cause of HUD scandals is that the department has a large number of costly subsidy programs, and each involves a tangled web of stakeholders. Many HUD programs divide responsibilities between federal, state, and local policymakers, and they involve private interests such as developers and financial companies. The multiplicity of interests and the complexity of the programs create opportunities for people in the public and private sectors to take personal advantage of programs.

The recent meltdown in the U.S. housing and financial markets makes it crucially important to understand the distortions created by HUD's programs and the political drivers of its decisionmaking. HUD policies played an important role in the meltdown, and this essay sheds light on why some of HUD's bad policies were put in place.

Federal housing policies illustrate some broader realities of federal intervention. When making decisions, policymakers usually have political and self-interested ends in mind, not the broad general interest of the public. Also, lofty interventionist visions—such as using the government to boost home ownership—often fail because of the imbalances they create in private markets. Housing was traditionally a private and local concern without federal involvement. The scandals and policy errors discussed here provide good reasons to start dismantling HUD and ending the housing subsidies that have caused so much damage.

The Pierce Years, 1981–1989

For proponents of public housing, the Reagan years are considered dark days. The Reagan administration sought to reduce traditional subsidies for public housing and to focus on providing more flexible housing benefits to tenants. But HUD reform was a low priority of the Reagan administration, and that disregard contributed to the major scandals that enveloped the department in 1980s.

Those scandals owe a lot to the mismanagement and corruption of Samuel Pierce, Reagan's only HUD secretary. A major review undertaken by Pierce's successor as secretary, Jack Kemp, uncovered "significant problems" of fraud, theft, mismanagement, and influence-peddling in 94 percent of HUD's budget.1 Estimated losses from this abuse ranged from $2 billion to $6 billion.2

Pierce took a disinterested approach to HUD—often watching soap operas with younger aides during work hours—and allowed HUD to become a "dumping ground" for political appointees who used their positions for personal gain.3 He assigned a HUD staffer to work full-time on a book to be called "The Pierce Years," which ended up as an 87-page glossy pamphlet printed at taxpayer expense.4 Pierce enjoyed the perks of office—for example, taking five taxpayer-funded trade junkets to the Soviet Union, which resulted in very little business being generated.5

When Pierce did make hands-on management decisions, it often resulted in friends and politically connected business persons getting favorable HUD treatment, as these examples illustrate:

· Pierce backed a $4.5 million HUD grant to convert an aircraft carrier into a museum, a project that was championed by his former law firm clients. The grant was approved shortly after Pierce's former client, Larry Fisher, met with Pierce to solicit his help.6 Fisher was a wealthy real-estate developer and a large Republican donor.

· Pierce overrode the recommendations of the department's top civil servants to push through a project in Durham, North Carolina, that was sought by Charles Markham, the mayor of the city and a former law-firm associate of Pierce.7 The deal included a $2.3 million grant, $11.8 million in rent subsidies, and HUD-backed mortgage insurance.8

· Pierce helped his friend and Republican Party supporter, jazz musician Lionel Hampton, obtain a 20-year, $21 million rent subsidy for a housing project in Newark, New Jersey.9

However, those sorts of personal favors were small potatoes compared to the systematic abuses engineered by Pierce and his top assistants. One of the costliest scandals involved HUD's section 223(f) coinsurance program, which was kicked off in 1983 and aimed at rehabilitating multifamily housing units. The program was lucrative for favored mortgage lenders—such as the Washington, DC firm DRG—but it put taxpayers on the hook for 85 percent of the value of any losses on mortgage loans. The program put mortgage lenders in charge of overseeing the entire process—from underwriting to foreclosure and disposition—and it allowed them to collect excessively high fees.

The end result of the program was that participating lenders overmortgaged projects in order to collect the high fees. In his book, HUD Scandals, former HUD official Irving Westfield writes:

By the middle of 1988, five years after the program was inaugurated, participating lenders had coinsured 846 loans. The amount of the mortgages was $4.8 billion. By 1998, led by the highest-flying firm in the business, DRG, the program went off course—106 loans, having an outstanding principle and accrued interest amount of $700 million, were in default. The largest coinsurer in the program, DRG, which had 272 coinsured mortgages, contributed 79 defaults and a half billion dollars in losses. The program was in free-fall descent—65 of DRG defaults had occurred in 1988. By March of 1990 the dollar volume of defaults had reached $1.6 billion, and HUD was rushing to shut the program down.10

A year after the 223(f) coinsurance program was initiated, a mid-level HUD official warned in a memo: "This is the most fraud-prone system ever spawned by HUD, but we have been overruled so many times in matters of compliance that I have given up registering protests."11 Two years later, a regional HUD administrator wrote to his superiors in Washington that he was "convinced that financial problems of national proportions are inevitable unless something is done."12 However, the department's political overseers were not interested in such naysaying.

In 1984, after HUD investigators determined that DRG was inflating appraisal values of properties in order to collect higher fees, the firm's activities were restricted. DRG promptly hired a particularly powerful lobbyist to get the restrictions lifted: former HUD secretary under Gerald Ford, Carla Hills, who would later serve as U.S. Trade Representative under George H. W. Bush. In May 1985, a few weeks after meeting with Hills and her team, Pierce lifted the restrictions on DRG.

Another appalling scandal at HUD during Pierce's tenure involved the Section 8 moderate rehabilitation program. "Mod-rehab" was launched in 1979 as a modest program to finance repairs to housing units for rent to low-income tenants. The program originally contained a "fair-share" provision, which meant that funding was awarded to state and local public housing authorities on the basis of population and demographics.

In 1984, Congress allowed HUD to waive the fair-share provision and make allocations subjectively by means of a panel consisting of Pierce's executive assistant, the assistant secretary of housing, and the undersecretary of the department. But as Pierce's executive assistant, Deborah Dean, later told the Wall Street Journal, "[Mod-rehab] was set up and designed to be a political program … I would have to say we ran it in a political manner."13 Dean was at the center of the abuse, and she was initially sentenced to 21 months in prison on 12 counts of corruption, bribery, and perjury in 1994.14 Five of the counts were later reversed on appeal, and her sentence was eventually reduced to three years of probation, including six months of home confinement.15

Under the program, "a trove of rent subsidies, tax credits and consulting fees, totaling millions of dollars on each housing project, flowed to GOP faithful and their associates."16 HUD became a sort of graduate school for ethics-challenged officials to master the complexities of housing programs such as mod-rehab, and then join the private sector and use their connections at HUD to cash in.17

Using congressional testimony, HUD documents, and interviews, the New York Times compiled a lengthy list of those benefiting from their political connections to HUD in the 1980s. Some earned substantial consulting fees for persuading Pierce and his top aides to approve federal subsidies, while others used their connections to secure HUD subsidies for their own projects. The following is just a sampling:18

· Philip Winn, assistant secretary at HUD: a cofounder of the Winn Group, which secured HUD backing for a housing rehabilitation project in Colorado. The Winn Group received $133 million in federal rent subsidies and $29 million in federal tax credits.

· Philip Abrams, undersecretary at HUD: a cofounder of the Winn Group, he also earned $100,000 in consulting fees from HUD.

· Lance Wilson, executive assistant to Pierce: a member of the Winn Group, involved in five projects that secured $92 million in HUD subsidies. Vice president at the PaineWebber Group, Wilson became an adviser to HUD on bond sales. He was convicted on one felony count in 1993.19

· Maurice Barksdale, assistant secretary at HUD: received $300,000 in consulting fees for helping with securing HUD approval of eight or nine projects.

· Michael Karem, deputy assistant secretary at HUD: received $360,000 for consulting on three subsidized projects.

· James Watt, secretary of the interior: received $420,000 for helping clients secure subsidies for three HUD-related projects.

· Joseph Strauss, special assistant to Pierce: received $1.7 million in consulting fees for helping win HUD subsidies for various projects. He worked with James Watt.

· Gerald Carmen, head of General Services Administration: earned $2.3 million in the sale of tax credits for a subsidized project.

· Frederick M. Bush, leading fund-raiser in the George H.W. Bush presidential campaign: received $600,000 for consulting on a dozen subsidized projects.

· Edward Brooke, former senator from Massachusetts: received $183,000 for consulting and legal work on two housing projects.

In 1990, a report adopted unanimously by the House Government Operations Committee concluded, "At best, Secretary Pierce was less than honest and misled the subcommittee about his involvement in abuses and favoritism in HUD funding decisions. At worst, Secretary Pierce knowingly lied and committed perjury during his testimony."2 An independent counsel investigation into HUD activities under Pierce's watch was instituted in 1990 and wrapped up in 1996. Pierce himself was not indicted based on his agreement to admit that "he created an atmosphere at HUD that allowed influence-peddling to go on."21 In all, the independent counsel investigation into HUD corruption on Pierce's watch yielded 17 convictions, including convictions of three former HUD assistant secretaries.

Reflecting on Pierce's tenure, Irving Westfield writes, "Integrity of public processes was replaced by partisan favoritism and the fragile bond of trust between the electorate and appointed officials was shattered."22 In reality, the "bond of trust" with federal policymakers is often an illusion. Many HUD programs—and programs in other agencies—are often just tools that officials use for personal and political gain.

The Cisneros Years, 1993–1997

In the Clinton administration, a primary mission of HUD was to increase home ownership rates, especially among minorities and low-income families. That mission was carried out through HUD subsidy programs and through the two government-connected mortgage finance giants, Fannie Mae and Freddie Mac. In 1992, HUD was given regulatory authority over these government-sponsored enterprises, and it began pushing the two firms into the subprime lending business. We now know that these political decisions on housing that were made in the 1990s helped fuel the housing bubble and subsequent crash in the early 21st century, so it is worth looking into the leadership of HUD during those years.

Henry Cisneros served as President Bill Clinton's HUD secretary from 1993 to 1997, when he resigned to deal with allegations that he lied to the FBI about payments he made to a former mistress. Cisneros plead guilty in 1999 and was fined $10,000, avoiding a possible prison sentence.

Cisneros oversaw a politicized HUD that mobilized to help fend off the Republicans, who gained a congressional majority in the 1994 election. The resurgent GOP initially sought to eliminate HUD as part of a plan to rein in federal spending and reduce budget deficits. HUD was one of the Republican targets, and department officials fought back in numerous ways to ward off proposed reforms.

HUD held a series of "standing up for communities" rallies, financed by taxpayers, which encouraged local officials and special interest groups to lobby against Republican budget cuts. One piece of propaganda distributed by HUD's New York office warned that the budget cuts "would dramatically expand America's underclass" and that "thousands of families, many with children, would end up homeless."23 HUD also sponsored a National Tenants Organization convention in Puerto Rico to defend the department. But that event was so political that even a HUD translator refused to take part and walked out of the proceedings in protest.24 According to HUD's inspector general, an NTO official responded that "he really didn't care whether HUD translated or not because the point was to get rid of Newt Gingrich."25

When Cisneros left HUD, he was lauded for the increase in homeownership rates that occurred on his watch. Part of his apparently winning strategy, Cisneros noted, was HUD's "ability to convince lenders, builders and real estate agents that there was money to be made in selling housing to low- and moderate-income individuals."26 Part of this "convincing" involved HUD-initiated legal action against mortgage lenders who declined higher percentages of loans for minorities than whites. As a result of such political pressure, lenders begin lowering their lending standards, which was another contributing factor to the housing meltdown in the 2000s.27

A key weapon in the Cisneros arsenal was the Clinton administration's changes to the Community Reinvestment Act. The CRA was passed in 1977 and updated in 1995 to pressure lenders into making more loans to moderate-income borrowers by allowing regulators to deny merger approvals for banks with low CRA ratings. Even complaints brought by activists, such as the leftist group ACORN, were now counted against a bank's CRA rating. The result was that banks began issuing more loans to otherwise uncreditworthy borrowers while purchasing more CRA mortgage-backed securities.28 As housing finance expert Peter Wallison noted, "The most important fact associated with the CRA is the effort to reduce underwriting standards. … Once those standards were relaxed … they spread rapidly to the prime market and to subprime markets where loans were made by lenders other than insured banks."29

The Clinton administration's National Homeownership Strategy, prepared under Cisneros's direction, brought together public and private housing market participants to coordinate plans to achieve record homeownership. This plan advocated "financing strategies, fueled by creativity and resources of the public and private sectors, to help homebuyers that lack cash to buy a home or income to make the payments."30 This is an important point to underline: the Clinton administration pursued a range of policies to put people who could not afford them into homes. Interestingly, HUD removed this Strategy document from its website in 2007 after the housing bubble burst.

Writing about the Clinton plan in 2008, financial expert Joseph R. Mason noted:

The Strategy certainly helped some renters achieve the dream of homeownership. But the Strategy was also fundamentally misused to extend more credit to prime borrowers, fueling home price inflation. That home price inflation led builders to build ever more developments, using creative financing to leverage their bets on home price appreciation in the bubble environment, ultimately resulting in record foreclosures in the present marketplace.31

Cisneros planted another seed for the housing bubble and its subsequent burst by putting Fannie Mae and Freddie Mac under constant pressure to facilitate more lending to "underserved" markets.32 While Cisneros's own HUD administration acknowledged that mortgages financed by Fannie and Freddie in "underserved" areas have a higher risk of default, it did not see that "there need be any safety and soundness impediment" to the policy.33 It was under Cisneros's direction that HUD agreed to allow Fannie and Freddie credit toward its "affordable housing" targets by buying subprime mortgages.34

After eight years of introducing economic distortions into housing markets, Henry Cisneros spent most of his post-HUD career making money in housing markets, as many ex-HUD officials do. In 2000, Cisneros formed a housing development company in partnership with KB Homes, and he became a KB director. The KB board also included the former CEO of Fannie Mae, James Johnson. The New York Times noted that "it made for a cozy network."35 Indeed, Fannie Mae bought or backed many of the mortgages that were in the developments of KB Homes.

In 2001, Cisneros joined the board of Fannie Mae's biggest client: the now notorious Countrywide Financial, the company that was center stage in the subprime lending scandals of recent years. When the housing bubble was inflating, Countrywide and KB took full advantage of the liberalized lending standards fueled by Cisneros's HUD. In addition to the money he received as a KB director, Cisneros's company, in which he held a 65 percent stake, received $1.24 million in consulting fees from KB in 2002.36

When Cisneros stepped down from Countrywide's board in 2007, he called it a "well-managed company" and said that he had "enormous confidence" in its leadership.37 Clearly, those statements were baloney—Cisneros was trying to escape before the crash. Just days before his resignation, Countrywide announced a $1.2 billion loss, and reported that a third of its borrowers were late on mortgage payments.38 According to SEC records, Cisneros's position at Countrywide had earned him a $360,000 salary in 2006 and $5 million in stock sales since 2001.39

The Cuomo Years, 1997-2001

Andrew Cuomo joined the Clinton administration as an assistant secretary of HUD in 1993. He replaced Cisneros as secretary in 1997, where he remained until the end of Clinton's second term. Cuomo's housing policies followed the same approach as his predecessor—seeking personal publicity while pandering to special interest groups by encouraging those who were not suited for home ownership to nonetheless move into homes.

Cuomo began cultivating his self-promotion at HUD as assistant secretary. In 1993, he organized a lavish conference costing taxpayers $235,360 to announce a new anti-poverty program, and he flooded attendees with sloganeered shopping bags, HUD buttons, and glossy brochures. One observer called it a "rah-rah rally for Andrew Cuomo."40 Cuomo doubled the number of top-level staff members under him, and in one of his years as assistant secretary, he spent almost a $1 million on travel. According to the Wall Street Journal, the lavish spending on "image-making … strained HUD budgets so much that officials have devised plans to pay some bills by diverting money from projects intended to help people."41

Being assistant secretary was a good job, but Cuomo wanted the top spot. He got his chance when Cisneros announced his intention to resign shortly after Clinton was reelected in 1996. Seattle Mayor Norm Rice was thought to be Clinton's first choice to replace Cisneros, but he was knocked out when HUD launched an investigation into his possible misuse of a federal loan. The investigation, which was launched a week after the 1996 election, had been approved by Cuomo's office. The result was that Clinton went with Cuomo as secretary. Rice was later cleared, but the timing of the investigation and a leak to the press suggested involvement by Cuomo.42

A HUD employee characterized Cuomo's tenure "as all show and very self-promoting. He always was a politician."43 In 2000, Cuomo's HUD administration issued 302 press releases in 331 working days. Most of these releases contained headlines touting Cuomo, not the president. In a move reminiscent of Samuel Pierce, Cuomo spent $900,000 in taxpayer money on a brochure detailing his own accomplishments.44

When it became apparent Cuomo would run for governor of New York, he made 25 official HUD visits to the state—21 more than any other state. In his final year as HUD secretary he also announced $170 million in HUD money for economic development along the Erie Canal. Another former HUD employee noted, "It was about me, me, me, me. If he didn't get a headline out of it, he didn't want to hear about it."45

One thing Cuomo didn't like to see were criticisms of HUD by the department's inspector general, Susan Gaffney. Gaffney, who had a very good reputation, was subject to a smear campaign by Cuomo's staff that aimed to undermine her and force her out.46 Cuomo was reported to be angry with Gaffney over some of her audit reports that reflected poorly on him. One audit suggested that HUD's determination of which cities were designated "empowerment zones" under a billion-dollar program were subject to political manipulation.47 An aide to Cuomo told a reporter, "That was his baby—when the audit report came out, he went crazy."48 Another report by Gaffney's office found widespread mismanagement in billions of dollars of HUD contracts.49

Like Cisneros, Cuomo's main policy legacy was to promote federal subsidies and regulations that distorted housing markets, particularly in the direction of weakening safeguards against excessive risk. For example, Cuomo successfully advocated that Congress raise the ceiling on Federal Housing Administration–insured mortgages while lowering down-payment requirements.50 Those moves help set the stage for higher FHA-insured mortgage default rates in later years.

Cuomo also supported efforts to have home sellers funnel money to nonprofit groups to help pay for buyers' down payments and closing costs. These "down payment assistance" loans ended up having default rates twice that of standard FHA-insured mortgages.51 Cuomo portrayed his efforts as helping to increase homeownership rates for minorities, but he also had an interest in not upsetting mortgage industry officials who would later help finance his gubernatorial campaign. He also worked hard to receive support from leftist housing advocate groups, such as ACORN.52

During the Cuomo years, mortgage industry officials and housing advocates wanted Fannie Mae and Freddie Mac to purchase higher volumes of riskier loans that were offered to less credit-worthy borrowers. Cuomo's HUD continued to pressure Fannie and Freddie to increase the portion of their portfolios consisting of loans to moderate-income borrowers. Cuomo applied pressure by having HUD publicly "investigate" whether Fannie and Freddie were sufficiently in compliance with government fair-lending standards designed to prevent discrimination.53

We know now that Fannie and Freddie's expansion into low-quality mortgages was a huge mistake. A decade ago, numerous financial analysts saw the problems coming, but policymakers ignored their concerns and did not change their policy course. Here is a prescient observation by a New York Times reporter in 1999:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s.54

Unfortunately, the housing and financial debacles of 2008 and 2009 were far larger than the savings and loan mess. But with Cuomo, fiscally prudent policies took a backseat to his political aspirations.

The Alphonso Jackson Years, 2001–2009

The Bush administration's HUD combined some of the Reagan era's internal corruption with some of the Clinton era's politicized push for increased homeownership rates. The Bush administration proposed tighter oversight of Fannie and Freddie, but it did little to end the mortgage giants' subsidies or implicit taxpayer backing. The housing bubble expanded and then burst on its watch, and Bush's HUD deserves a share of the blame.

Alphonso Jackson was named a deputy secretary at HUD a few months into President George W. Bush's first term. He became the acting secretary in late 2003, and permanent secretary in April 2004. He replaced Mel Martinez, who resigned to run for an open Senate seat in Florida. Jackson resigned in April 2008 in the midst of allegations that he had used his official power to benefit friends and Republican Party loyalists. He remains under federal investigation.

Jackson's troubles began in 2006 when he told an audience that he killed a potential HUD contract after the contractor told Jackson he didn't like President Bush. Jackson later claimed to have made the story up. A HUD inspector general's report found that Jackson did instruct staff to favor friends of the president when awarding HUD contracts, but it did not find concrete evidence that his orders were followed.55

A Washington Post investigation of HUD contracting under Jackson found that "the proportion of contracts awarded to small black- and Hispanic-owned businesses … rose from 6 percent to nearly 35 percent. The proportion of contracts open to full competition decreased from 71 percent to 33 percent."56 The practice of awarding HUD contracts to Republican-friendly minority firms was common under Jackson, and the Post story provided numerous examples.

A number of examples of apparent cronyism at HUD have caught the eye of investigators. Major contracting work from the department was apparently given to friends of Jackson. In one instance, a no-bid contract was given to Jackson friend, Michael Hollis, to run the Virgin Islands Housing Authority. Hollis earned $1 million as the executive administrator of the housing authority, plus an undetermined amount from serving as an advisor to Smith Real Estate Services, which received $3.5 million from HUD for work at the VIHA. Anonymous HUD officials told a National Journal reporter "there was no indication that Hollis had any experience running a public housing agency before arriving in the Virgin Islands."57

Investigators are also looking into Jackson's role in getting his golfing buddy, William Hairston, $485,000 in contract work with the troubled Housing Authority of New Orleans, which had been taken over by HUD in 2002. Another aspect of this investigation is that HANO awarded a $127 million redevelopment contract to an Atlanta firm, Columbia Residential, which owed Jackson between $250,000 and $500,000 for "past services" as a "partner/consultant."58 In other words, it appears that Jackson might have been looking to receive payment for helping to steer a HANO contract to Columbia Residential.

When Jackson resigned in 2008, he was in the midst of another controversy regarding sweetheart deals for friends, this time involving the Philadelphia Housing Authority. PHA Executive Director Carl Greene sued HUD, claiming that it tried to punish PHA by withholding funds after PHA refused to sell land to Jackson's friend, music mogul Kenny Gamble, at "rock-bottom prices."59

Then in June 2008, Conde Nast Portfolio reported that influential members of Congress and other government officials had received very favorable mortgage loans from Countrywide Financial.60 Countrywide had a special VIP program that sought to influence important housing officials in the federal government and Fannie Mae by offering them mortgages with reduced fees and other perks. The list of beneficiaries included Alphonso Jackson, who was on a select list known as "Friends of Angelo" or "FOA," named after Countrywide Chairman and CEO Angelo Mozilo.

In December 2003, while he was acting secretary of HUD, Jackson applied to Countrywide for a $308,000 mortgage to buy a vacation home in Hilton Head, South Carolina. Jackson's loan came through a week before President Bush named him HUD secretary. Even before that, Jackson had refinanced a mortgage with Countrywide through the VIP program. Former Countrywide loan officer, Robert Feinberg, says that both of Jackson's loans came with special discounts.61

When asked if he received breaks on the loans, Jackson said, "Not to my knowledge. If I did, it certainly wasn't discussed with me."62 However, a March 2009 report by the Republican staff of the House Committee on Oversight and Government Reform concluded that Countrywide made VIP borrowers aware of the preferential treatment. The report noted "At times, Friends of Angelo used their preferred status to refer friends or family members to the VIP department. Sometimes the Friends of Angelo expected their friends and family to receive the same preferential treatment."63

The same month Jackson sought the VIP mortgage for his vacation house, his daughter, Annette Watkins, had a mortgage processed through the same special program. According to the House report, "Jimmie Williams [Countrywide's Washington lobbyist] contacted Countrywide Senior Vice President Perry on Watkin's behalf because ‘Jackson suggested his daughter talk with Countrywide.'"64

In 1999, Countrywide, which had become the nation's largest residential housing lender, reached an exclusive agreement to sell Fannie Mae billions of dollars in mortgages in exchange for lower "guarantee" fees that Fannie charged originators when it bought their loans. The success, and then failure, of both entities became intertwined as Fannie purchased large amounts of subprime loans and securities, which allowed subprime lenders like Countrywide to grow their businesses. When the subprime market collapsed in 2007, Countrywide collapsed as well. It was bought at a fire sale price by the Bank of America, while a broken Fannie Mae was taken over by the federal government.

This point is crucial. Many commentators put the blame for the subprime meltdown on the shady or overly aggressive mortgage originators, such as Countrywide. But it was ultimately Fannie and Freddie that drove the system. First, as the GSEs purchased more loans from mortgage lenders, the lenders were able to originate more and more loans. Second, the GSEs' increasing purchases of subprime loans brought them into competition with private-label issuers that traditionally specialized in these loans. According to Peter Wallison:

The increased demand from the GSEs and the competition with private-label issuers drove up the value of subprime and Alt-A mortgages, reducing the risk premium that had previously suppressed originations. As a result, many more marginally qualified or unqualified applicants for mortgages were accepted, and these loans joined the flood of junk loans that flowed to both the GSEs and the private-label issuers beginning in late 2004.65

It was under Secretary Jackson that HUD decided in 2004 to increase Fannie and Freddie's "affordable" housing goals while allowing the financial giants to continue the Clinton-era policy of counting subprime mortgages as credit toward meeting that goal. Despite Fannie's 81-percent increase in lending to minority families in 2003, Jackson chastised the organization for its "failure to lead."66 Jackson's pressure on the GSEs came despite the fact that regulators were growing increasingly concerned with subprime lending. The Washington Post found that "housing experts and some congressional leaders now view those decisions as mistakes that contributed to an escalation of subprime lending that is roiling the U.S. economy."67

Another indication that risky lending got out of control under Jackson is that default rates on loans insured by HUD's Federal Housing Administration hit record highs and continued to worsen as of early 2009.68 At the height of the housing bubble, Jackson advocated reducing the down-payment requirements on FHA-insured loans to zero. With private subprime lenders having reduced FHA's share of the housing market to 3.3 percent in 2004, Jackson stated that he was "absolutely emphatic about winning back our share of the market."69 The bubble burst, and FHA is now picking up the subprime slack—and currently insures one in three new mortgages—a precarious situation for taxpayers going forward.70

Alas, like previous secretaries, Jackson was too busy enjoying the perks of office to worry about taxpayers' exposure to a possible housing downturn. Jackson had a taxpayer-provided chef and full-time security detail. In his tenure, $7 million was spent on a new auditorium and cafeteria at HUD's headquarters, and his personal office spent $100,000 to obtain oil portraits of Jackson and four previous HUD secretaries.71

Conclusion

During much of the 20th century, the "public interest theory of government" held sway. The idea was that policymakers—particularly federal policymakers—acted with the best interests of the general public in mind. However, America's experience with a large and scandal-plagued federal government in recent decades has shown that the public interest theory has little real-world explanatory power. Ill-conceived laws get enacted all the time, and government officials often put career advancement, turf protection, and other personal factors ahead of the public interest.

HUD's history of scandal and corruption fits this pattern. While government officials and advocates for housing subsidies usually paint a romanticized portrait of HUD's programs, the truth is that federal housing intervention has often done far more damage than good. The housing and financial meltdowns of recent years can be partly traced to the distortions injected into markets by federal housing regulations and subsidies through HUD and other agencies. We have learned that when the government intervenes in the housing industry, politically driven decisions lead to corruption and economic distortion, not efficient public policies. The federal government should begin withdrawing from housing markets, including dismantling the Department of Housing and Urban Development.

1 "Still Rising: the HUD Bill, and Smell," New York Times, July 13, 1989, p. A22.

2 "Still Rising: the HUD Bill, and Smell," New York Times, July 13, 1989, p. A22.

3 Steven V. Roberts, Joseph P. Shapiro, and Ronald A. Taylor, "The Undoing of Silent Sam Pierce," U.S. News & World Report, September 18, 1989, p. 29.

4 Edward T. Pound and Jill Abramson, "Mishandling HUD: Pierce May Have Kept Hands Off, but Projects of Pals Sailed Through," Wall Street Journal, July 12, 1989, p. 1.

5 Edward T. Pound and Jill Abramson, "Mishandling HUD: Pierce May Have Kept Hands Off, but Projects of Pals Sailed Through," Wall Street Journal, July 12, 1989, p. 1.

6 Edward T. Pound, "HUD Provided $4.5 Million for Project Backed by Pierce's Old Firm, Ex-Clients," Wall Street Journal, August 7, 1989, p. 1.

7 Steven Waldman, "The HUD Ripoff," Newsweek, August 7, 1989, p. 16.

8 Edward T. Pound and Jill Abramson, "Mishandling HUD: Pierce May Have Kept Hands Off, but Projects of Pals Sailed Through," Wall Street Journal, July 12, 1989, p. 1.

9 Edward T. Pound and Jill Abramson, "Mishandling HUD: Pierce May Have Kept Hands Off, but Projects of Pals Sailed Through," Wall Street Journal, July 12, 1989, p. 1.

10 Irving Westfield, HUD Scandals: Howling Headlines and Silent Fiascoes, (New Brunswick, NJ: Transaction Publishers, 1992), p. 78.

11 Edward T. Pound and Jill Abramson, "HUD Officials Had Warnings of Plan's Losses," Wall Street Journal, July 17, 1989, p. 1.

12 Edward T. Pound and Jill Abramson, "HUD Officials Had Warnings of Plan's Losses," Wall Street Journal, July 17, 1989, p. 1.

13 Edward T. Pound and Kenneth H. Bacon, "Favored Friends: Housing Subsidy Plan for the Poor Helped Contributors to GOP," Wall Street Journal, May 25, 1989, p. 1.

14 "Former Official Sentenced, Fined for HUD Corruption," Wall Street Journal, February 28, 1994, p. C15.

15 See James P. Scanlan, Attorney at Law, http://jpscanlan.com/prosecutorialmisconduct.html.

16 Edward T. Pound and Kenneth H. Bacon, "Favored Friends: Housing Subsidy Plan for the Poor Helped Contributors to GOP," Wall Street Journal, May 25, 1989, p. 1.

17 See Irving Westfield, HUD Scandals: Howling Headlines and Silent Fiascoes, (New Brunswick, NJ: Transaction Publishers, 1992), pp. 92-95.

18 "The Nation: The Many Paths of the HUD Investigation," Week in Review, New York Times, August 13, 1989, p. 3.

19 Joe Davidson, "Former HUD Aide, 2 Others Convicted of Giving Gratuities to U.S. Official," Wall Street Journal, "January 6, 1993, p. A12.

20 Kenneth J. Cooper, "Pierce Misled Hill, Panel Concludes," Washington Post, November 2, 1990, p. A23.

21 Toni Locy, "Watt Pleads to Misdemeanor in HUD Case," Washington Post, January 3, 1996, p. A1.

22 Irving Westfield, HUD Scandals: Howling Headlines and Silent Fiascoes, (New Brunswick, NJ: Transaction Publishers, 1992), p. 75.

23 Ruth Larson, "HUD Rallies Criticized as Illegal Lobbying Efforts," Washington Times, April 7, 1995, p. A4.

24 Susan Gaffney, Inspector General, Department of Housing and Urban Development, Testimony before the Subcommittee on Human Resources and Intergovernmental Relations of the House Committee on Government Reform and Oversight, February 29, 1996, p. 15.

25 Susan Gaffney, Inspector General, Department of Housing and Urban Development, Testimony before the Subcommittee on Human Resources and Intergovernmental Relations of the House Committee on Government Reform and Oversight, February 29, 1996, p. 15.

26 Judith Evans, "HUD's Cisneros to Leave a Legacy of Public Housing Reform," Washington Post, November 30, 1996, p. E1.

27 Lawrence H. White, "How Did We Get into This Financial Mess?" Cato Institute Briefing Paper no. 110, November 18, 2008, p. 6.

28 Lawrence H. White, "How Did We Get into This Financial Mess?" Cato Institute Briefing Paper no. 110, November 18, 2008, pp. 5-6.

29 Peter J. Wallison, "Cause and Effect: Government Policies and the Financial Crisis," American Enterprise Institute Financial Services Outlook, November 2008, p. 3.

30 Quoted in Joseph R. Mason, "A National Homeownership Strategy for the New Millennium," Criterion Economics, LLC Market Commentary, February 26, 2008, p. 2.

31 Joseph R. Mason, "A National Homeownership Strategy for the New Millennium," Criterion Economics, LLC Market Commentary, February 26, 2008, p. 3.

32 See John Connor, "HUD to Review Mortgage Rules for Racial Bias," Wall Street Journal, April 14, 1994, p. A6.

33 "Housing-Aid Goals in Underserved Areas Proposed by HUD," Wall Street Journal, June 20, 1995, p. A5.

34 Carol D. Leonnig, "How HUD Mortgage Policy Fed the Crisis," Washington Post, June 10, 2008, p. A1.

35 David Streitfeld and Gretchen Morgenson, "Building Flawed American Dreams," New York Times, October 19, 2008, p. A1.

36 David Streitfeld and Gretchen Morgenson, "Building Flawed American Dreams," New York Times, October 19, 2008, p. A1.

37 "Cisneros Resigns from Countrywide," Los Angeles Times, October 25, 2007, p. C6.

38 Gary Martin, "Cisneros Builds on Helping Hispanic Homeowners Avoid Foreclosure," San Antonio Express-News, "February 25, 2009, p. A10.

39 Christopher Cooper and Amy Chozick, "Campaign '08: As Clinton Rips Countrywide Cisneros Isn't Mentioned," Wall Street Journal, February 29, 2008, p. A6.

40 Byron York, "Andrew Cuomo, Big Spender," Wall Street Journal, August 17, 1994, p. A12.

41 Byron York, "Andrew Cuomo, Big Spender," Wall Street Journal, August 17, 1994, p. A12.

42 Brian Blomquist, "Cuomo Engineered His High Rise—Used Loan Probe to KO Rival for Fed Housing Job," New York Post, May 21, 2002, p. 6.

43 Brian Blomquist, "Any Was Part of Me Generation: Colleagues," New York Post, May 21, 2002, p. 6.

44 Brian Blomquist, "Cuomo Engineered His High Rise—Used Loan Probe to KO Rival for Fed Housing Job," New York Post, May 21, 2002, p. 6.

45 Brian Blomquist, "Any Was Part of Me Generation: Colleagues," New York Post, May 21, 2002, p. 6.

46 Rochelle Sharpe, "Housing Agency Inspector General Says Cuomo Uses ‘Dirty Tricks' Against Her," Wall Street Journal, September 10, 1998, p. A24. And see Judith Havemann, "Housing Officials Drop Complaint Against IG," Washington Post, September 15, 1997, p. A21.

47 U.S. Department of Housing and Urban Development Inspector General, "Audit of Empowerment Zone, Enterprise Community and Economic Development Initiative Grant Selection Processes," Audit Case No. 95-HQ-154-0002, August 31, 1995.

48 George Archibald, "HUD Inspector General Survives Bid to Oust Her," Washington Times, September 19, 1997, p. A4.

49 U.S. Department of Housing and Urban Development Inspector General, "HUD Contracting Activity," Audit Case No. 97-PH-163-0001, September 30, 1997.

50 Wayne Barrett, "Andrew Cuomo and Fannie and Freddie," Village Voice, August 5, 2008, online edition.

51 John Berlau, "The Subprime FHA," Wall Street Journal, October 15, 2007, p. A23.

52 Wayne Barrett, "Andrew Cuomo and Fannie and Freddie," The Village Voice, August 5, 2008, online edition.

53 "Fannie Mae Data Scrutinized for Bias," Atlanta Journal Constitution, February 24, 2000, p. 6F.

54 Steven A. Holmes, "Fannie Mae Eases Credit to Aid Mortgage Lending," New York Times, September 30, 1999.

55 Elizabeth Williamson, "Probe Finds Jackson Urged Favoritism in HUD Contracts," Washington Post, September 22, 2006, p. A15.

56 Carol D. Leonnig, "HUD Repeatedly Dismissed Staff Concerns About Contracts," Washington Post, May 18, 2008, p. A10.

57 Edward T. Pound, "A Helping Hand," National Journal, November 17, 2007, pp. 46–49.

58 Edward T. Pound, "HUD Probe Heats Up," National Journal, December 15, 2007, pp. 45–47.

59 Inga Saffron, "After a Big Bang, HUD Dustup Lingers," Philadelphia Inquirer, March 31, 2008, p. A1.

60 Daniel Golden, "Angelo's Many ‘Friends'," Conde Nast Portfolio, August 2008.

61 Daniel Golden, "Angelo's Many ‘Friends'," Conde Nast Portfolio, August 2008.

62 Daniel Golden, "Angelo's Many ‘Friends'," Conde Nast Portfolio, August 2008.

63 "Friends of Angelo: Countrywide's Systemic and Successful Effort to Buy Influence and Block Reform," staff report for Darrell Issa, ranking member, House Committee on Oversight and Government Reform, March 19, 2009, p. 49.

64 "Friends of Angelo: Countrywide's Systemic and Successful Effort to Buy Influence and Block Reform," staff report for Darrell Issa, ranking member, House Committee on Oversight and Government Reform, March 19, 2009, p. 31.

65 Peter J. Wallison, "Cause and Effect: Government Policies and the Financial Crisis," American Enterprise Institute Financial Services Outlook, November 2008, p. 6.

66 David S. Hilzenrath, "HUD Chief Criticizes Fannie Mae, Washington Post, July 2, 2004, p. E2.

67 Carol D. Leonnig, "How HUD Mortgage Policy Fed the Crisis," Washington Post, June 10, 2008, p. A1.

68 Department of Housing and Urban Development, Office of Policy Development and Information, U.S. Housing Market Conditions, February 2009, p. 78.

69 Kenneth R. Harney, "FHA Alternatives to Subprime Loans," Washington Post, May 14, 2005, p. F1.

70 "The Next Housing Bust," Wall Street Journal, May 5, 2009, p. A13.

71 Carol D. Leonnig, "HUD Chief Inattentive to Crisis, Critics Say," Washington Post, April 13, 2008, p. A1.

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Along with your current success moving REO properties, this should be another great option to utilize in your marketing efforts, and we will be happy to partner up to assist your buyers with the financing. See below the details on this offering.

Fannie Mae announced on Tuesday, April 27th it is extending its buyer incentive program beyond the original expiration date at the end of this month. The program is available to borrowers who purchase a Fannie Mae owned HomePath property and intend to owner-occupy. Homes for sale include single-family houses, condominiums and town houses that have been taken over by Fannie Mae as delinquencies and foreclosures rose.

The program, which will now expire on June 30, 2010, offers buyers of Fannie Mae owned properties listed on the HomePath.com website who close by that date a rebate of 3.5 percent of the purchase price of the house. The rebate can be used toward closing costs, a choice of selected Whirlpool appliances, or a combination of the two at the discretion of the buyer. The incentives were initiated in January and were advertised as a complement to the federal homebuyer tax credits available to both first-time and move-up homebuyers. The availability of the federal homebuyer tax credits program expire at the end of April although buyers have until June 30 to complete their purchases but the California tax credit program is still available.

"We are happy with the results of the program, which has helped us to sell properties quickly, thereby stabilizing neighborhoods and property values," said Terry Edwards, Executive Vice President of Credit Portfolio Management.

The HomePath website lists Fannie Mae-owned homes for sale nationwide, and a quick visit to the site demonstrates why the corporation is offering incentives; it has a huge backload of properties. Some 62,000 properties are listed on the site including single-family residences, condominiums, and town-homes. There are, for example: 8,595 in California. Reuters reported that Fannie Mae recently stated that it had over 86,000 homes in its portfolio.

Many of the HomePath properties are also eligible for HomePath mortgage financing or renovation financing. The renovation mortgages offer the same benefits but will provide additional financing for "light renovation" and are available to owner occupants only.

While retail loan officers were initially the only group of originators able to write this loan product, mortgage bankers and brokers are now finding more investors willing to participate. Again this program applies to Fannie Mae HomePath properties only.

HomePath® Mortgage Financing

This special financing is available on Fannie Mae homes with the following logo:

The benefits include:

Ø Available only on homes you make your primary residence and offers these benefits:

Ø Financing to fund both your purchase and light renovation

Ø Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)

Ø Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer

Ø No mortgage insurance*

Ø HomePath Renovation Mortgage financing is available today

Ø Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)

Ø Qualify even if credit is less than perfect

Ø Available to both owner occupiers and investors

Ø Down payment (at least 3 percent) can be funded by purchaser’s your own savings; a gift; a grant; or a loan from a nonprofit organization, employer or state or local government

Ø No mortgage insurance

Ø No appraisal fees

HomePath® Renovation Mortgage Financing is available.

If you are an investor interested in renovating a property, you may qualify for financing under our HomeStyle® Renovation Mortgage product.

For more information, contact your preferred lender, Korene Clopine-Seaman for cost details on both Financing Programs

This special financing is available on Fannie Mae homes with the HomePath logo:

You may also search for eligible properties on the HomePath website following this link: http://www.homepath.com/

I look forward to working with you on these programs or any other mortgage program you or your clients may need.

Korene Clopine-Seaman, CMPS, LMB
Senior Mortgage Banker

PMAC Lending Services, Inc.

License: AZ BK #0906675
2159 McCulloch Blvd. #4
Lake Havasu, AZ 86403

T (623) 340-0934 | F (623) 218-1807 |
korene@pmac.com | http://www.pmac.com
Mortgage website: www.klcsloanteam.com

Helping you make a house YOUR Home

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:

What is Cancellation of Debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

Is Cancellation of Debt income always taxable?
Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.

Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.

Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.

Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.

These exceptions are discussed in detail in Publication 4681.

What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.

What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.

Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.

How long is this special relief in effect?
It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.

Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.

If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and this form must be attached to your tax return.

Do I have to complete the entire Form 982?
No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

Where can I get this form?
If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.

How do I know or find out how much debt was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982. 

Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.

If part of the forgiven debt doesn't qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent.  You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.

I lost money on the foreclosure of my home. Can I claim a loss on my tax return?
No.  Losses from the sale or foreclosure of personal property are not deductible. 

If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?
Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case.  An exclusion is also available for the cancellation of certain nonbusiness debts of a qualified individual as a result of a disaster in a Midwestern disaster area.  See Form 982 for details.

If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence? 
Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

Will I receive notification of cancellation of debt from my lender?
Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.

What if I disagree with the amount in box 2?
Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.

How do I report the forgiveness of debt that is excluded from gross income?
(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2.  Any remaining canceled debt must be included as income on your tax return.

(2) File Form 982 with your tax return.

My student loan was cancelled; will this result in taxable income?
In some cases, yes. Your student loan cancellation will not result in taxable income if you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation.

Are there other conditions I should know about to exclude the cancellation of student debt?
Yes, your student loan must have been made by:

(a) the federal government, or a state or local government or subdivision;

(b) a tax-exempt public benefit corporation which has control of a state, county or municipal hospital where the employees are considered public employees; or

(c) a school which has a program to encourage students to work in underserved occupations or areas, and has an agreement with one of the above to fund the program, under the direction of a governmental unit or a charitable or educational organization.

Can I exclude cancellation of credit card debt?
In some cases, yes. Nonbusiness credit card debt cancellation can be excluded from income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See the examples in Publication 4681.

How do I know if I was insolvent?
You are insolvent when your total debts exceed the total fair market value of all of your assets.  Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts.

How should I report the information and items needed to prove insolvency?
Use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you were insolvent immediately before the cancellation.  You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation.

To claim this exclusion, you must attach Form 982 to your federal income tax return.  Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately prior to the cancellation.  You must also reduce your tax attributes in Part II of Form 982.

My car was repossessed and I received a 1099-C; can I exclude this amount on my tax return?
Only if the cancellation happened in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See Publication 4681 for examples.

Are there any publications I can read for more information?
Yes.
(1) Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals) is new and addresses in a single document the tax consequences of cancellation of debt issues.

(2) See the IRS news release IR-2008-17 with additional questions and answers on IRS.gov.

I strongly suggest you get professional experienced assistance if you have an issue that MAY be a taxable event.

 

Don’t let the media influence your real estate decisions! If you have questions, ask a professional realtor or mortgage banker!

Let us just get one thing straight: the media has been a bit "over-dramatic" about the current real estate market!

CLEARLY our market is not as robust as it was 3 or 4 years back, but if you compare the market to the market in the late 70s and early 80s even the FHA/VA foreclosures bubble in the 90s our current situation is not a "sky is falling" scenario either unless we head for the hills and start living in a cave.

Presently, our problem is that we have to deal with over credit extension bringing about too many homes on the market, with timidity on the part of buyers. In the 70s/80s buyers were dealing with 17%-20% interest rates. Buyers could not afford the cost of borrowing money. Our interest rates today are very attractive----in fact we are seeing 30-year fixed loans at aroung 5.00% now----and with a large supply of inventory which actually makes for an ideal buying environment for consumers.

But, thanks to the news media, it doesn’t matter if it is an ideal time to purchase a home----buyers watch the news and hear all the doom and gloom and are to afraid to start looking!

Eureka is no exception; our market in 2007 has outperformed 2006 in 6 out of 11 months:                

	2006	2007
January	15	24
February	19	22
March	50	43
April	40	33
May	48	59
June	67	54
July	43	40
August	42	38
September	17	37
October	25	30
November	29	33

If you are a buyer who plans on actually living in the home for the next 5-10 years then it is a great time to buy. Most of the homes are going for less then the rebuild cost and if the market has not bottomed out as of yet, at least you are in a position to where you can see your home appreciate in value again and it is a home that you really wanted.

A recent study shows a direct link between car ownership in a given neighborhood and mortgage foreclosure rates.

The Natural Resources Defense Council conducted the study, "Location Efficiency and Mortgage Default," by comparing 40,000 mortgages in Chicago, San Francisco, and Jacksonville, Fla., along with U.S. Census data on neighborhood conditions, incomes, and car ownership.

The study found that, as the average number of vehicles per household in a neighborhood rises, so does the probability of foreclosure, after controlling for income.

"Add urban sprawl to the list of sources for our current financial mess," said David Goldstein, co-director of the nonprofit public health and environmental advocacy organization's Energy Program.

"It was not just predatory lending or lax standards. The connection between transportation costs and mortgage default cannot be ignored. The sooner we address it in our lending and development practices, the sooner we will start to see a more stable real estate sector."

The council defines location efficiency as a measure of the transportation costs in a given area. Transportation costs accounted for 17 percent of Americans' average annual household expenditures in 2008, according to the U.S. Bureau of Labor Statistics. Those without cars or with fewer cars would save money on vehicle lease or purchase costs, maintenance, gas, insurance and parking, the council said.

Due to higher energy costs, homebuyers are increasingly factoring in commuting costs and energy efficiency when purchasing a home, according to the National Association of Realtors. Commuting costs and heating and cooling costs were at least "somewhat important" to 78 percent and 88 percent of homebuyers, respectively, according to the association's 2009 Profile of Home Buyers and Sellers.

The real cost of housing should be calculated as a combination of mortgage and transportation costs, the council said. The rate of vehicle ownership, which reflects neighborhood compactness, walkability and access to public transit, is "key to predicting mortgage performance," and both urban planners and mortgage underwriters should change their policies accordingly, the council said.

"In all three cities, the results were the same -- if your only choice is to drive, you have much less economic flexibility -- flexibility that can protect you from foreclosure in tough times," said Jennifer Henry, real estate sector manager in the council's Center for Market Innovation.

"Knowing that now, aggressive investment in public transportation and walkable communities makes even more sense. And investing in transit will not just improve our economy by avoiding future foreclosures -- but create jobs to get things humming right now."

If mortgage lenders take into account a location's transportation costs, they would more accurately be able to gauge the borrower's ability to afford the home, the council said.

It gave the example of two hypothetical borrowers in Chicago: Both have credit scores of 680, a total debt-to-income ratio of 41 percent, and a home-to-value ratio of 80 percent. But one borrower lives in a neighborhood where the median vehicle ownership per household is one car per $33,000 of household income and the other lives in a neighborhood where that ratio is one car per $58,000 of household income.

The first has a 9.9 percent risk of foreclosure; the second, a 7.2 percent chance. That means that even if the second borrower has a debt-to-income ratio up to 62.5 percent, changing nothing else, that borrower's risk of foreclosure will be the same as the second borrower.

Location efficiency also helps maintain home values, the study said, pointing to an August 2009 study that showed that homes in neighborhoods where goods, services and fun things to do are located within walking distance can command a price premium of $4,000 to $34,000 over otherwise similar homes in less walkable areas (see story).

Based on the results of its study, in addition to changes in mortgage underwriting, the council recommended that land-use planners put "smart growth" policies in place that encourage more compact urban development, invest in areas that have already been developed and preserve open space, and improve public transit systems as well as bicycle- and pedestrian-friendly infrastructure.

Policies to reduce dependence on automobiles would also provide great benefits to the environment, including land conservation, a reduction in watershed pollution, and lower carbon dioxide emissions, the council said.

The Home Energy Saver online service is designed to help consumers identify the best ways to save energy in their homes, and find the resources to make the savings happen.

The Home Energy Saver was the first Internet-based tool for calculating energy use in residential buildings. The project has been sponsored by the U.S. Department of Energy (DOE), as part of the national ENERGY STAR Program for improving energy efficiency in homes, the U.S. Environmental Protection Agency (EPA), the US Department of Housing and Urban Development's PATH program, the California Air Resources Board, the California Energy Commission's Public Interest Energy Research (PIER) program, and Touchstone Electric Cooperatives.

The Home Energy Saver quickly computes a home's energy use on-line based on methods developed at Lawrence Berkeley National Laboratory. Users can estimate how much energy and money can be saved and how much emissions can be reduced by implementing energy-efficiency improvements. All end uses (heating, cooling, major appliances, lighting, and miscellaneous uses) are included. A detailed description of underlying calculation methods and data is provided a comprehensive report. The Home Energy Saver's Energy Advisor calculates energy use and savings opportunities, based on a detailed description of the home provided by the user. Users can begin the process by simply entering their zip code, and in turn receive instant initial estimates. By providing more information about the home the user will receive increasingly customized results along with energy-saving upgrade recommendations.

CLICK HERE TO START YOUR ONLINE ENERGY AUDIT

The recession has led to new tax credits and deductions.

The changes along with increases in the standard deduction, personal exemption, alternative minimum tax exemption, and a  few others may bring a little extra cash to some people during these economic hard times OR NOT.

Lawmakers tried to aid the ailing auto industry by producing a new deduction for sales and excise taxes incurred in the purchase of a new car. That's on top of the Cash for Clunkers program, which brought hundreds of thousands of people into auto showrooms around the country.

The first-time homebuyers credit was expanded to allow for a reduced credit for long-time homeowners who buy and move to another residence. The National Association of Realtors estimated that about 4.4 million people already have or will claim the credits before they expire.

And to put a little more money in consumers' wallets, the Making Work Pay tax credit kicked in last spring. Tax withholding tables were revised downward to give individuals up to $400 and couples up to $800. The result: more take-home pay for about 95 percent of working families.

There's a catch, though.

People with more than one job, couples in which both spouses work and some Social Security recipients may have received too much of a credit because of the way the program was set up. "It may wind up that they owe taxes or the big refund they expected might not be as big as they thought," said Barbara Weltman, author of J.K. Lasser's "1001 Deductions and Tax Breaks 2010" and "Small Business Taxes 2010."

Taxpayers have a new form, Schedule M, to claim the credit. However, like other changes to tax-rate brackets and personal exemptions, most workers already are seeing its benefits in their take-home pay. Weltman said the form isn't that complicated. "The shock is going to be whether you owe more than you think," she said.

The Treasury Department's inspector general for tax administration estimated that more than 15 million people could be affected. The extra tax bill could be up to $400 for individuals or couples or $250 for Social Security recipients.

So why give people the money in the form of lower withholding if there's a chance the government will take it back?

I think at the time lawmakers were just more concerned about getting the money into the hands of Americans and giving the impression of helping the American voter than they were with the long term economic effects this generated.

By the same token, the Internal Revenue Service says some taxpayers whose withholding was at or near zero may not have benefited from the credit during 2009. These people are predominantly low- or moderate-income workers.

It is important that people review their withholdings for 2010 because the tax credit will still be in effect.

Schedule M isn't the only new form for the 2009 tax year.

People who don't itemize their deductions are entitled to take a standard deduction. For 2009, it's $11,400 for married couples filing jointly, $5,700 for individuals and $8,350 for heads of households. As in the past, the standard deduction is bigger for people who are blind or 65 or older. If that's all you're claiming for your standard deduction, there are no extra forms to file. The IRS predicts that the majority of those claiming the standard deduction will fall into this category.

The standard deduction is not standard any more. Tax law changes passed by Congress in 2009 allow some taxpayers to increase their standard deduction even more, by adding to it the property taxes they paid, their sales or excise taxes on the purchase of a new car, or net federal disaster losses.

Taxpayers will have to file the new Schedule L to claim the higher standard deduction.

You have a full-page schedule that you have to figure out for your standard deduction.  If you are not using a computer program like TurboTax or somethig similar you are coming to be lost.  Even tax practioners and tqax experts have no idea with so many changes.

Homeowners can increase their standard deduction by a maximum $1,000 for joint filers or $500 for individuals if they paid state or local real estate taxes. The home has to be used for personal use. Business or investment properties do not qualify.

Think of all the people who bought a new car, truck, motorcycle or motor home after Feb. 16, 2009.  They can add the sales or excise tax they paid to the standard deduction, provided that the vehicle cost less than $49,500. The deduction begins phasing out for individuals with incomes above $125,000 or joint filers earning more than $250,000. The deduction only applies to new vehicle purchases so if you bought a used car or leased a car, you are out of luck. Those who itemize deductions also may qualify for the motor vehicle sales tax deduction — provided they meet the income limitations.

The sales tax deduction is separate from Cash for Clunkers, which gave people rebates if they traded in cars for more fuel-efficient ones. The government estimated that nearly 700,000 people turned in gas guzzlers under the program in exchange for rebates of $3,500 or $4,500. If you did get a rebate, it is not taxable income.  If you bought a car under the Cash for Clunkers program you can also deduct the sales tax.

When you add to motor vehicle sales tax deduction, Cash for Clunkers, the credit for certain hybrid models you may find that 2009 was a great time to buy a new car.

Let us not forget the homebuyer tax credits that have helped raise sales of new and existing homes.

There actually are three versions of the homebuyer tax credits. If you were a first-time homebuyer in 2008, the credit actually was a long-term loan that has to be repaid over 15 years. For first-time home buyers in 2009, the credit was a true credit; it doesn't have to be repaid. And long-time homeowners who purchased a home on or after Nov. 6, 2009 are eligible for a smaller credit.

The credits expire April 30, 2010 but as long as you have a binding contract by that date you can still get the credit if you close by June 30, 2010.

Because of the  the IRS is putting in place new systems to verify claims to the homebuyers credit because of fraud potential. The IRS expects to begin processing tax returns claiming the credit in mid-February, after testing is completed. Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks according to the IRS.

Congress also created the American opportunity education credit. The credit of up to $2,500 for college expenses is an expanded version of the Hope credit, available to students for the first four years of college instead of just the first two. Although the credit still phases out at higher incomes, those limits are higher than under Hope. Students must be enrolled at least half-time.

Hiring help
OK, not just any help. But if you need to pay for child care because you are donating time to a nonprofit organization or you are doing charitable work you can deduct that fee from your 1040 form. That's right — if you pay someone to babysit because you're working for someone for no pay, you can write it off. Admirable to be sure, but it seems like a long way to go around the bend to save a little on your tax bill.

Medically necessary massages
Since this deduction was originally written into the tax code in 1962, accountants and tax lawyers have made sure their clients are keeping all their doctor's notes. The rule states that anything that your doctor prescribes as "medically necessary" can be deducted from your taxes.

That means that if your doctor tells you to get therapeutic massages you can keep the receipts and knock that expense off as deductible. The same goes for aqua therapy (backyard pool installation and maintenance anyone?) and restrictive diets (make that call to Jenny Craig).

However be aware that the IRS combs through medical deductions very carefully so don't try to get creative or it could end up costing you much, much more.

Shipping Fido
So FedEx won't really overnight your family's pooch — but you can deduct the expenses associated with moving any of your personal effects due to a job-related relocation. And, as a personal effect, your favorite animal's transportation can be written off your personal taxes.

Attorney fees for illegal activity
It's true. While you are required to pay taxes on any income earned through illegal activity such as theft, bribery or drug-dealing, if you are unfortunate enough to get caught, the good news is you can write off the cost of hiring an attorney to defend you during your trial.

To ride the wind
Concerned about the environment? Not worried about what your neighbors think? Consider installing a wind energy system and you could get a tax write-off. Put up one of those attractive wind turbines that dot the plains and Uncle Sam will repay your environmental kindness with a nice little break on your tax return.

Houseboat ahoy!
Most of us know that you can deduct the interest you pay on your mortgage but we typically tend to envision a neat single-family home surrounded by a white picket fence. However if you got a loan to finance a houseboat that you call home (provided it has sleeping, cooking and "toilet facilities"), you can write that interest expense off as well. I wonder if the Captain, Gilligan and his crew split the write-off?

If you are a small business owner the list of potential tax breaks can sound just downright strange.

Anything that is can be demonstrated to be a legitimate "ordinary and necessary" business expense can be deducted.

So that means you might be able to deduct the following:

Jetting off to Jamaica
If you decide to reward your employees with a company retreat in Bob Marley's home country, or to plan your company's next strategy meeting in sunny Barbados the tax man will allow you to write it off. In fact any business meetings held in some of the most beautiful places in this hemisphere including Barbados, Costa Rica, Dominica, the Dominican Republic, Grenada, Guyana, Honduras, Jamaica, Saint Lucia and Trinidad and Tobago — not to mention Canada, Mexico and any U.S. state or territory — can be claimed as a legitimate, and deductible, expense.

Captain Ahab would approve
To help Native American Eskimos in his home state preserve their cultural heritage and custom of whale-hunting, former Senator Ted Stevens was able to insert a $10,000 deduction for qualified whale-hunting expenses in the American Jobs Creation Act of 2004.

So if you're a whaling captain recognized by the Alaska Eskimo Whaling Commission you can write off money that you shell out for whale-related work expenses like repairing your boat or buying food for your crew.

Shipping sheep
If you are a farmer and you need to pay for sheep — or any other qualified form of livestock including "fur-bearing animals" — to be shipped to your ranch, you can write if off on your taxes.

Remember this is my blog!  It is not tax advice but food for thought.  You need to consult your own tax practitioner to get the legal and proper advice that applies to you.

Death is seldom a topic we want to deal with.  Death and dying are subjects we seldom talk about because most of us do not want to think of telling our family members, friends, or those we work closely with goodbye.  If we ignore the legal, business, and financial sides of death or dying, we hope it will not happen until we are much older or more ready to deal with it. 

As baby boomers get older, so do their parents. Yet many adult children know little about their parents' assets. In fact, only 30 percent of adult children have an ongoing dialog with their parents about financial issues, according to a survey by the American Association of Retired Persons (AARP). We have all heard stories of families torn apart by bickering over assets. Here's a checklist to help avoid that nightmare.

Despite the lack of discussion, it's likely that at some point, your parents' affairs will become your responsibility.   Be prepared because your siblings' or even your adult children's affairs will become your responsibility.

Even if everyone in your family gets along, tensions and unforeseen misunderstandings can arise if you don't have the necessary information. In addition, lengthy legal processes await those without a well thought-out estate plan.

The following checklist provides the documents a family needs to know about:

In addition, there are three basic documents you should be able to easily locate:

Even with all the right documents, estate planning isn't a do-it-yourself project. Consult your financial adviser or lawyer to guarantee that your family's intentions become reality.

Being prepared and informed is not morbid or intrusive.  It is intelligent, thoughtful, and necessary. 

Flooding is the most common natural disaster in the country. It's a phenomenon that people have come to associate with states along the Gulf Coast, since year after year we see images of beachfront homes battered by storms. As bad as those images are, some of the most damaging floods that follow hurricanes occur hundreds of miles inland. And well north of the Gulf Coast region, residents of Massachusetts,

Each year, the U.S. suffers $2 billion in property damages from flooding.      If you live in a high-risk area, your home stands a 26 percent chance of flood damage over the course of a 30-year mortgage.      Roughly one quarter of all claims paid out by the National Flood Insurance Program (NFIP)are from homes located in low-to-moderate risk areas.       All 50 states are subject to floods and flash floods. Flash floods combine the destructive powers of water with frightening and unpredictable speed and often bring 10 to 20 foot walls of water rushing down on unsuspecting areas.       If you are unsure what your flood risk is, go to the NFIP Web site and use the calculator. It can help you determine your need for coverage based on the likelihood of natural disasters.       Keep in mind that even homes in low risk areas are vulnerable to flood damage from non-natural sources like faulty plumbing or new development projects where the ground isn't properly graded.       Click here for tips from FEMA to help secure your property. And you can find information about evacuating pets here.

One More Risk     Finally, in addition to the damage water can cause, don't forget that a flooded home can provide ideal conditions for the growth of dangerous mold spores. Damage from mold or mildew resulting from the after-effects of a flood is covered by flood insurance, but each case is evaluated on an individual basis.

New Hampshire and southern Maine were hit with record-breaking rainfall in 2006, resulting in the state's worst floods since the 1930s, closing schools and businesses and making homes inhabitable.

Still, not all water-related disasters can be blamed on nature. A flood doesn't always mean heavy rainfall and overflowing rivers rushing through the streets and into homes. New land development projects sometimes lead to flooding if the construction alters the natural runoff pattern, making it hard for the ground to absorb water. In other words, floods can happen almost anywhere, to anyone.

In spite of the common occurrence, a typical homeowner's policy does not include coverage for flood damage. That's why it's wise to get additional federally backed insurance coverage. In fact, if your mortgage is backed by the federal government, or if your home is located in a high-risk zone, you are probably required to have flood insurance.

Certainly, anyone whose home includes plumbing is vulnerable to water damage and should consider flood insurance. In fact, the Federal Emergency Management Agency (FEMA) warns that everyone can suffer losses from floods.

The need for flood insurance is even more real for homeowners who live in flood plains without failsafe controls, such as dams. Many people mistakenly believe they will be covered by federal aid in the event of a flood caused by nature. That's only true if the area is declared a federal disaster area by the President, which is a condition that occurs in less than 10 percent of all weather emergencies. The good news is, a presidential declaration is not required in order for a flood policy to pay off - making coverage invaluable.

Even if you do receive federal money to repair damage to your home, you should know these funds are generally a loan, not a grant, and have to be paid back with interest.

Here's an example of the difference insurance can make: A $50,000 FEMA loan at four percent for 30 years will result in a payment of around $240 per month, or $2,880 per year. On the other hand, a flood insurance policy that provides $100,000 in protection may cost you only $33 per month, or roughly $400 per year. The bottom line is, if you want to be sure you can recover financially after a flood, you need to provide your own protection.

Like any policy, you can purchase various levels of coverage. But a standard flood policy includes: structural damage; furnace, water heater, and air conditioner; flood debris clean up; and flooring, such as tile and carpeting. You can also step-up a policy to cover the contents of your home, such as furniture, jewelry, and clothing.

Where Can You Buy Coverage?

Not all homes qualify for coverage. For instance, flood insurance for beachfront or ocean-side property may not be available for the obvious reasons.

FEMA reports that more than 19,000 communities have agreed to tighter zoning and building measures to control floods. That means residents of these communities can buy coverage from the National Flood Insurance Program (NFIP), which currently protects the interests of 4.4 million flood policyholders nationwide.

More than 200 private-sector insurance companies write and service flood insurance policies, under the umbrella of the NFIP, which is backed by the federal government and overseen by FEMA. The funds to support these policies are not taxpayer dollars, but paid for by the premiums collected from flood insurance customers. Check the NFIP Web site to learn whether your community is a participant.

How Expensive is Flood Insurance?

Premiums for flood insurance vary widely, depending on individual risk. In determining price, flood insurance underwriters consider several factors including the property's elevation, proximity to bodies of water, and whether the dwelling has a basement. The average flood insurance policy premium costs around $500 per year, according to FEMA, with deductibles ranging from $500 to $5,000. For homes in a low-to-moderate risk area, an annual premium may be as low as $112.

Cities may participate in a Community Rating System in order to secure discounted flood insurance rates for residents. This involves a voluntary program that encourages floodplain management activities that reduce the likelihood of losses, increase awareness of flood insurance, and facilitate accurate rating of the area. Ask your agent if your community is a Community Rating System participant. Here is a list of other questions to ask:

Questions to Ask Your Flood Insurance Agent (Source: FloodSmart.gov)	Answer
Does my community participate in the National Flood Insurance Program?
Which flood zone do I live in?
Does my community participate in a Community Rating System?
If so, what is my community's CRS rating and do I qualify for a CRS rating discount?
What exactly will be covered in case of flood damage?
How much will it cost to purchase coverage for my building and contents and how do I determine which level to choose, appropriate to my risk?
How will my premium cost change if I choose a higher or lower deductible?
Are there any hidden expenses I should be aware of?

A TAXING TIME OF YEAR

It's that time again...time to start gathering all of that dreaded documentation to send to good old Uncle Sam! Recent stats say the IRS audited 1 out of every 97 returns last year, so it pays to be careful. And even though this may seem like a very painful process, taking just a few simple steps right now will make your tax filing far easier and more accurate.

Keep it together. Make a quick list of all the documents or statements that were needed to complete your return last year - or call your tax planning professional for a checklist. Use this as a checklist to make sure you have a good start on the documents you may need this year. As you receive tax documents in the mail, grab your checklist, and mark the item as received. Then, keep all of the tax documents together in a large file or envelope marked "2007 TAXES."

Do the math. According to the IRS, the most common mistake on tax returns is bad math—from transposed numbers to downright incorrect data. And with one form leading to the other, those errors can make a huge impact. So even if you use tax software, you're not off the hook--since they only add the info YOU put in. Double-check entries carefully.

Every last cent. The IRS receives copies of your Form 1099 earnings each tax season. So, they know how much you make in interest and dividend income, and they will use that info to double-check your filing information. Make sure you collect all your earnings statements and document them on your return.

Sign on the line. It sounds almost silly, but forgetting to sign a return is actually a fairly common oversight. And the IRS won't process a return that doesn't have a signature. So, make sure you sign to avoid resubmitting your paperwork and possibly paying late-filing fees.

Remember, there isn't a lot of room for error when you're dealing with the IRS. A slight miscalculation could mean the difference between getting a return and writing a check--or worse, paying a penalty. It pays to work with a tax professional. If you need a referral, contact me - I'm happy to help!

DID YOU KNOW...THAT THE FED AUDITS 1.03% OF PERSONAL RETURNS? AND IF YOUR INCOME IS IN THE RANGE OF $100K TO $1 MILLION - THAT PERCENTAGE GOES UP TO 1.77%?

Following Your Dream or Living a Vision

The fourth step is for you to make a list of everything you could possibly think of that you will have to do to achieve your goal. The more comprehensive your list, the more motivated you will become, the more intense will be your desire and the more you will believe it possible.

One of the things that hold people back is even if they get to the point of a written goal; they do not take the time to lay out a list of all the little things they will have to do to get there. And with additional experience, you will add new items to your list until it finally becomes complete.

The fifth step of goal setting is for you to take your list and organize it into a plan. A plan is really quite simple. It is a list organized by priority and importance. You decide what you will do first and what you will do later. You decide what is more important and what is less important. And most of all, you decide upon the one thing that is more important than anything else that you can do immediately to begin moving more rapidly towards your goal.

Step number six is for you to “take action!” This is the big killer for most people. They are procrastinators. They have great ideas combined with great hopes and dreams. They may even get to the point of writing down their goals. But when it comes to taking action, they always have a reason or excuse to procrastinate to put it off until a later time. However, as the Bible says, “Faith without deeds is dead.”

It is when you launch toward your goal that you begin to feel the desire and power that goes along with goal setting. And once you have launched toward your goal, it is much easier for you to continue moving in that direction.

Step number seven is for you to do something every day to move you toward your major goal. Never let a day go by without you engaging in some action that helps you move another step in the direction of what you really, really want in life.

Remember, you can’t hit a target that you can’t see. And if you don’t know where you are going, any road will get you there. The simple seven step act of deciding exactly what you want, writing it down, setting a deadline, making a list, organizing the list into a plan, taking action on the most important item on your list and then doing something every day towards your goal will change your life and your future in ways that you cannot even dream of today.

May I suggest you help your friends and family by recommending them to me and my website to your friends and family whether they are looking to buy, refinance, have debt, want to be financially responsible, or want to build a sound financial base?

www.klcsloanteam.com

Korene Clopine-Seaman, CMPS, CMA 
Senior Mortgage Advisor
Pacific Coast Mortgage, Inc
6991 E. Camelback Rd, Suite C-250
Scottsdale, AZ 85251
#BK 0905081
Direct Phone: 623-340-0934
Direct Fax: 623-218-1807
Email: korene@klcsloanteam.com
website: www.klcsloanteam.com

We hear stories every week of the year regarding business, the economy, natural disaster, finances, health, child care, religion, faith, politics, scandal, violence, and crime.  It can make you numb to the needs and hurts of others.

Some weeks ago we have heard of the major earthquakes in the South Pacific and the following tsunami waves, the loss of lives, families, homes, and businesses. We heard of the murders at Fort Hood in Texas and the family murders in Georgia and Florida.

Just after Thanksgiving we heard of another financial failure this time in Dubai and of more banks and businesses collapsing.  A number of national and international businesses, hugh financial institutions, and even a number of our own industries said "So  Long" in 2007, 2008, and 2009 then closed the doors.

A few weeks ago we heard the President's plan for the direction the war effort would be taken and the desired outcome of his hopes and plans.

We hear lots of news and stories of pain, suffering, grief, loss, and failure.  We hear too few stories or news related to joy, laughter, relief, or rejoicing. 

BUT do we realise that like fingers on your hands or pieces of a puzzle they all are related and have cause and effect to each other?

In my work as a mortgage banker and loan originator I meet new people almost every day.  I hear conversation threads that most people don't hear a lot of.  In more and more conversations I am hearing from people what they have done or are doing to help how they can. 

I spoke to one family whose children are in college.  They went through their garage and attic to find all the children's toys, athletic gear, and electronic toys they could find.  They have had "Repair and Building Parties" with neighbors and friends because they want to have gifts for children at Christmas, for donations to schools, churches, daycares, shelters, etc.

I found in my own home it was better for me and for others to stop storing and start sharing and caring.  It may be called alot of things but for me it was called "Doing What I Can" or "Pay Things Forward".

Another family went through their garage and attic and found furniture, lamps, wall decorations, clothing, bedding, dishes, and electronic items like games, recorders, televisions, etc to repaid, cleanup, mend, or make useful and made donations to the Salvation Army, Goodwill, and other similar useful helpful organizations.

The amount of donations received by various organizations is down the last couple of years thus they are unable to help so many people who are hurting and in such dire need.  In a nation where we have to park our cars outside because the garage is full of storage or when we have to pay $150 to $1000 per month to store our "out of season, out of size, out of use, don't you think it is time to "Doing What I Can" or "Pay Things Forward"?

I found I could help someone else while cleaning spaces and decreasing my household hazards, lower my potential for fire damage all while helping someone else. 

My Grandpa was a very practical man with a big heart, a lot of common sense, and the kind of man who lead his family by example.  He and my Grandma would donate used clothing, bedding, dishes, furniture, books, etc on a regular basis to help others and to pay it forward.

You will NEVER miss what you share with others and you will always reap a harvest of good will by sharing, caring, and "Paying It Forward".

Let's ALL make 2010 a better year by making this world a better place for all of us.

Korene Clopine-Seaman
Senior Mortgage Advisor
Pacific Coast Mortgage, Inc.
6991 East Camelback Road, Suite C250
Scottsdale, AZ  85251
AZ BK # 0905081
Direct Phone: 623-340-0934
Fax:  623-218-1807
korene@klcsloanteam.com
www.klcsloanteam.com
Listings Of Referral Partners: www.klcsreferralpartners.xpresslistings.com  

There's No Place Like Home for the Holidays is a phrase that stirs deep emotions. The very idea of spending the most precious time of the year in a warm safe place surrounded by friends and family is the very essence of the perfect Christmas.

People will travel half way around the world to be with the people who matter most to them.

That is what I wish for you and your family, and it tears at my heart that for one reason or another more than a few of us will not have a perfect Christmas. As we gather with our loved ones, let us keep those less fortunate in our thoughts and prayers.

With prolonged wars, the collapse of the faux economy, political and business corruption on too many fronts and too much scandal to keep track of, there’s plenty for us to be concerned about.

In looking for someone to blame, many people have been looked for scape goats while others are quick to believe that American families are responsible for their own problems, while in reality there is more than enough blame to go around.  To understand this better, see my blog at: http://www.klcsloanteam.com/blog  of August 7, 2009 "Who Should We Blame?"  and November 16, 2009  "When the Housing Bubble Burst Hits Home"

I mention how the blame has been deflected unto the middle class because so many of the comments to articles about loan modification and foreclosure I read are, shall we say, uncompassionate. Or, the guilty rantings of someone not yet touched by the looting of the economy. This isn’t just any Christmas; it is one following a year in which an extraordinary number of people had their hopes and dreams crushed.

And, it comes at a time when our communities’ resources to help the less fortunate are being slashed due to local and state budget shortfalls.

What can we do? Work on our gratitude and our charity.  It is amazing how much we have in storage that we do not need or use that IF we could donate it to a non-profit or charity or a family in need, we would help someone in need, pay it forward anonomously, and get rid of our stoarage problems.

Let’s remember our brave young men and women in the armed forces stationed around the world placing themselves in harms way in service to their homeland. May our gratitude and our prayers bring them safely home to raise their families in homes of their own. They are not immune to many of the statistics represent many families this year.

For the families of those who are away doing their duty, they will feel the absence of their loved ones like no other time of the year.Don't forget their families who must sacrifice so much for our benefit and comfort.

Remember to our emergency respondersm while able to spend part of the holidays with their families, will be at work just as though Christmas was any other Friday. Many other workers will be on duty including, but not limited to, lowly paid security guards who are the ground level eyes and ears of security, protection, and law enforcement; doctors, nurses and other hospital personnel; utilities and maintenance workers, and more. We should take a moment to respect and be grateful for what they do.

There are those who are altogether homeless. Some have chronic issues, but the majority are simply victims of the economy, an illness, or an accident. The average age of a homeless person is nine.

There was a time, not that long ago, when we helped each other. Neighbors may have been a significant distance away, and yet, we were closer as people than we are today. We have become conditioned, indifferent, and judgmental of each other in a way that is very un-Christmas.

A hundred years ago, America was feeling the hangover from the investment boom associated with the construction of a cross national railroad and the building of factories. The workers who came to the cities were no longer needed and the economy contracted.

William Sydney Porter was a short story writer of the era. Under the pen name “O. Henry”, he wrote a tale that demonstrates what the essence of real giving is.

The Gift of the Magi was written in 1906.

A young couple, Della and Jim, have been impacted by a downturn in the economy, (sound familiar?). With Christmas the next day, neither has money for a gift for the other.

Each, has a treasure that they prize above all else; Della, her knee length hair, and Jim, a pocket watch given to him by his father.

Jim returns home on Christmas Eve to a hairless Della holding a platinum chain for his watch. Surprise! Jim sold the watch to buy Della a set of tortoise shell combs for her now departed hair.

It isn’t what you get, it’s what you give. I’m not talking about fancy wrapped presents or money, I’m talking about really giving, starting with a grateful and charitable attitude. If you are home for the holidays, you have much for which to be grateful.

Who Should We Blame?

A very good friend of mine and I were engaged in a discussion regarding a news item we had both heard while we shared a meal and some time together this last week.

The topic of conversation was regarding alot of promises a person of prominence had made and appeared to be making everytime he spoke or was being quoted by members of the various news organizations and the press corps.  That conversation led to a another matter until we were talking about the economy, the housing market, unemployment, and people who were in a state of real dispair and pain.

Like so many other  conversations, this conversation came back to the subject of "Who should we blame for one of the worst financial collapses in world history?  Now, I talk to people who are doing "A-OK" and everyone else is just greedy, foolish, or worse according to some folks.

I remember writing a paper when I was in college on the "Great Depression".   At the time, we did not have the internet (Al Gore hadn't invented it yet), or personal computers (Bill Gates was still in high school), or fax machines (we did have tele-type machines but they were real expensive), oh but we did have cars, telephones, color television, and talking movies...So, one evening when I got a bit homesick for my Grandfather's voice, I called him and visited abit then asked him about his thoughts and recollections of the "Great Depression".  I do not remember a great deal of what he said but one thing he said remained with me.  What he said was this, "Mostly, it seems that everyone was buying and selling.  What they were buying and selling was just paper or an idea written on paper and then they went looking for someone who would pay more for the paper than they had paid for it."

I remember thinking that was really foolish and I would make sure I never did anything that foolish.  OH YEAH!  Most of us who bought and sold any of the following in  the late 1990 through the early 2005-2007 did just that.  Did you buy and sell real estate ( not that you would use but you hoped someone else would buy it from you at a higher price or would agree to pay your mortgage and give you a profit for nothing down and nothing into it), vehicles or toys (that depreciate as soon as the title is transferred to your name), stocks and bonds (that were backed not by real hard value but by someone else buying the paper from you), or something else that you did not want to impress someone you did not care about, for something you had not real or solid use for with money you did not have, and in the end could not afford unless someone else bailed you out or everything continued to get more of the same so you could pond it off on someone else?

I did! Most of us did.  In fact most all of us bought into the Madison Avenue lie that the Winner in the Game of Life is He or She Who Has the Most Toys in the End.  That statement is so false.  Our current economy and situation today is the price of our foolishness.  We spent, spent, and spent some more.  We are still spending.  It is totally rediculous to believe we can spend our way out of this economic mess.  Our children, grandchildren, and great grandchildren will not rise up and call us blessed or the Greatest Generation.  They are going to call us foolish.  We have learned nothing from history and we are not paying attention to those around us who are crying in despair.

Here in Phoenix, this week, we see such a tragic example of one family in such pain.  If you watched the news channels or read the newspaper, you probably saw the same story I did.  It reached into my inner soul and just tore the heart and soul right out of me.

The story was of a young family that consisted of a father, mother, and two young children who had all the trapping of success and the American Dream.  They had a home in one of the more upscale Scottsdale neighborhoods.  They were well liked, friendly, outgoing, and moving upward.  They had all the toys and the symbols of happiness and success.

The story was not in the toys or the symbols.  Their story was of murder and suicide because the house of cards was crumbling, then how alone and defeated someone felt.  This is the same or similar story we will hear all too often.  Maybe not to the depths and permanence of this story but I hear of families breaking up, friendships being thrown away, or people giving up because the things that used to be the measure of who and what they were/are really are worthless or worth little.

Family, friends, neighbors, casual acquintences are important.  One human life is worth more than all the bailouts and all the toys.  It costs us little in the long scheme of things to reach out a hand and lift someone up.

How does all of this matter to me and my family and our situation, you may ask?  We are like pieces of small bamboo.  By ourselves, we break easily.  When we knit and ban together we become strong and can stand against the tides as they beat against us.  Unless we as people and we as Americans start caring and helping and banding together, we will sink into the mire that so many other countries have done in the past.  Two hundred plus years is not a long time in the time clock of world history.  Our short life span is not much in the terms of the suffering of mankind.  BUT if each one of us, we spread a little kindness, reach out and positively help our fellowman, regardless of what we get back, we as individuals and collectively, we as a nation, will be better, stronger, and thrive together not just survive.

What is most important is not what you do for or to me or about me but what I know about, can say, and will build on the person we each see everyday in the mirror.  Have a Great Week!

May I suggest you help your friends and family by recommending them to me and my website to your friends and family whether they are looking to buy, refinance, have debt, want to be financially responsible, or want to build a sound financial base?                 www.klcsloanteam.com

My full contact information is shown in the signature area of this blog and on my website at www.klcsloanteam.com. My telephone number is (623) 340-0934.

I thank you and they will too!

Sincerely,

Korene L. Clopine-Seaman
CMPS, CMA, RRDS, LMB
Senior Mortgage Advisor
Pacific Coast Mortgage, Inc
6991 E. Camelback Rd, Suite C-250
Scottsdale, AZ 85251
#BK 090581
Direct Phone: 623-340-0934
Direct Fax: 623-218-1807
Email: korene@klcsloanteam.com
website: www.klcsloanteam.com

You will want to reference or include a "Bookmark This Site" or "Favorites" to my website www.klcsloanteam.com

We are approved to act as a mortgage bank and / or broker in the following states for HUD, FHA, VA, USDA, Reverse, and Conventional loans:

Arizona License #AZ BK 090581, California License #CA CFL 6039961, Colorado License #CO 20061159979 Florida #FL 528512 Hawaii, Missouri New Mexico License #NM 00329, Nevada License #NV 426 and we are currently expanding our licenses in other states.

A growing number of homeowners around the country are using a foreclosure defense that may help them retain their homes. It’s called “Produce the Note” and we want you to know this is not a mere technicality that should be treated lightly by the lender or by the Court.

Everyone needs to understand the importance of this issue. When a lender can’t produce the original note, allowing a foreclosure to proceed puts the homeowner at risk of owing that debt again to another party in the future. Therefore, great caution must be taken before a judge can allow someone who can’t produce the original note to cash in on your home.

What if Your Lender CAN’T Produce the Note?

So, what happens when the lender tells the Court it can’t produce the original note, because it is lost? Let’s start with the basics. If a lender wants to foreclose on a property, it has to be able to show that it is, in fact, the appropriate person to whom the money is owed. That right to foreclose belongs ONLY to the person who has legitimate POSSESSION OF THE ORIGINAL NOTE - not a copy, not an electronic entry, but the original note itself with the original signature of the person(s) who allegedly owes the money along with appropriate raised notary seal and signature. So, if you are faced with a foreclosure, you have every right to demand that the person or entity trying to take your property, first prove to the Court that they have the legal right do to so in the first place by proving they have legal possession of the original promissory note.

In my opinion, an original mortgage note is much like legal tender and should be guarded and protected as such by the person holding such an asset. Loosing an original mortgage note is like loosing a $100 bill or a gift card or a lottery ticket. What if I scratched that million dollar ticket and just stuck it somewhere and misplaced it? Do you think I could just show up at lottery headquarters and claim my prize without having the winning ticket? The same principle applies to the person or entity claiming to be the legal holder of an original mortgage note. He who holds the note holds the key.

What the Lender Must Do

What often happens, however, is that the lender claims it doesn’t have the original note, because that note has been lost or destroyed. If the lender is making such a claim, the law requires the lender to prove all of the following under the “Uniform Commercial Code”, which is a set of laws governing commercial transactions that many states have adopted. It contains a specific provision on this subject (Section 3-309) which states that a person can enforce a promissory note without having the original, BUT only under certain limited circumstances.

1. The person or entity has to swear and attest that it no longer has the original note;
2. The person or entity has to prove that it was properly in possession of the note and was entitled to enforce it WHEN it lost possession of the note;
3. The person or entity has to prove it didn’t “lose” possession simply because it transferred the note to someone else (i.e., it’s not really lost); and
4. The person or entity has to prove that it cannot produce the original note because the instrument was destroyed or its whereabouts cannot be determined or it was stolen by someone who had no right to it.

All of these matters have to be definitively proven by the person or entity trying to foreclose on the property. It is not the obligation of the borrower to prove or disprove any of this. The borrower can challenge the right of the person or entity trying to foreclose and demand proof.

The Court’s Important Role

It is up to the Court to determine whether the lender has satisfactorily proven why it no longer can produce the original note. The Court also has to be satisfied that when the original note was lost, the person trying to foreclose on the property had possession of the note at the time it was lost. Until the Court has been satisfied of all of this, the foreclosure cannot proceed.

It is also important for the Court itself to understand that this issue is not merely a “technicality” and the judge should not be satisfied with anything less than full proof of this issue. The Court itself needs to appreciate the fact that if it should agree that an original note has been legitimately lost (and allows the foreclosure to proceed) it is the borrower who is still at risk.

Why? Because incredibly, even if a Court has found that the original note is lost and the foreclosure sale is finalized, if someone later turns up with the original note and proves that it is the proper holder of the note, and not the person who foreclosed on the property, the original borrower is STILL LIABLE.

That’s right. Someone took your home and the Court allowed it because it believed that the lender proved that the note was lost and it was the proper party. Then someone legitimate shows up in the future with the actual note and you still owe that person the money even though your property was taken with the blessing of the Court. Trust me, this is a very serious issue regarding post foreclosures and post pre-foreclosure short-sales. It has happened to three of our own clients! These homeowners had the need to sell their property by means of a negotiated short-sale (so they could avoid a foreclosure) only to find out that the entity claiming to have the legal right and authority to enter into such negotiations and accept such settlements sold their note to another entity and weren’t even aware of it. Several months later, the newly assigned lenders (now claiming to be the rightful owners of our client’s original notes) have since come forward and have also filed suite seeking to recover their entire outstanding principle balances owed to them (prior to the homeowners closing their short-sale transactions with the wrong note holders).

How fair is that? It’s not! That is why homeowners need to start fighting back when someone is trying to take their home by foreclosure, especially since an overwhelming percentage of mortgages granted over the last 3 to 5 years have been packaged into securities and re-sold and re-assigned numerous times since the inception of the borrower's original note and mortgage. In some states, homeowners have better than a 50/50 chance of being successful in defending themselves against a completed foreclosure. Why wouldn’t anyone who owns a home do everything in their power to protect and defend it?

Korene Clopine-Seaman, CMPS, CMA
Senior Mortgage Banker
Pacific Coast Mortgage, Inc
6991 East Camelback Road Suite C-250
Scottsdale, AZ 85251
Direct Phone 623-340-0934
Fax 623-218-1807
korene@klcsloanteam.com
www.klcsloanteam.com

When you’re out shopping this holiday season, you may wonder if the price of the item you’re holding in your hand is really a good deal. Here are five ways to use your smartphone to find out if you can buy that item cheaper online or somewhere else.

1. If you have an iPhone, download and install the free ShopSavvy App from the App Store. When you are in a store looking at a product, open up the app, point the red line of the barcode scanner at the barcode of the item and wait for the app to beep to confirm that the code was recognized. Allow the app to use your location so you can see how much the item is selling for at nearby stores and online.

2. If you have a phone that runs the Android operating system, such as the Droid from Verizon, myTouch 3G or G1 from T-Mobile or the HTC Hero from Sprint, you can download the ShopSavvy app for free from the Android Market.

3. If you have a BlackBerry, you can download a free bar code scanning app called “edocrab.” Be aware that the app may be not available for all BlackBerrys. To download it, visit appworld.blackberry.com/webstore/content/3196 on your computer and click “Get it Today.”

4. If your phone can’t access the Internet or run apps, you can get prices for an item on Amazon by text message. To see how much something costs, send a text message to 262966 (AMAZON), with the name of the item you want to buy (i.e. ” Nikon D90?). You’ll get a text message back with the price of the item on Amazon as well as instructions for buying the item from your phone.

5. In addition to the barcode scanning apps, there’s also a free Amazon app for iPhone, Android phones and BlackBerrys, which makes it easier to search for items, order them and access your wish lists and other account information. You can get the app in the iPhone App Store and the Andorid Market, and BlackBerry users can download it by visiting amazon.com/bb on their BlackBerry web browser.

Most of all when you are out shopping, remember this, "Long after the presents are opened, the toys played with, the clothing worn, the trips taken, etc., it is not the money you spent but the thoughts and love that remain and are the MOST IMPORTANT when choosing that gift."

Wishing you and yours the very best of the Christmas season of peace, joy, love, and happiness.

Korene L. Clopine-Seaman
Senior Mortgage Advisor
Pacific Coast Mortgage, Inc
6991 East Camelback Rduite C-250
Scottsdale, AZ  85251
AZ BK# 090581

Lowering Your Electric Bill

With Christmas decorations, family gatherings, seasonal parties, and all the cooking, football games, etc, we all need to save some money.  For many people, the monthly cost of the electric bill represents one good place to cut down on expenses, especially in homes that use it for heating. Fortunately, you don't have to live in the dark or freeze to cut your monthly bill by as much as 20-30%. That can add up to hundreds saved over the course of a year, money that can be used for something else.

For electrically heated (or air-conditioned) homes, the savings is largest. An average electric wall heater consumes 1500 watts or 1.5 kilowatts (KW). In a home that is heated or cooled by electricity, space heating accounts for nearly half the total electricity consumed. The next largest percentage is water heating, about 14%.

Those two items alone represent low-hanging fruit to pluck if you're after savings on your electric bill.

Lowering the temperature on your home water heater, a safe and easy exercise for all modern models, makes it simple to reduce the amount of electricity you use. Most water heaters are set several degrees higher than necessary to keep scalding-temperature water in the tank at all times.

They're set that way to provide hot water as quickly as possible. But you can trade off a few extra seconds of waiting time at the sink, by lowering that temperature by 5-10 degrees Fahrenheit. That also makes your faucet water safer, since the maximum temperature water it will produce is below the level that will burn. That's especially important with children around who sometimes aren't as careful or experienced with the hot/cold water controls.

Lowering the amount of electricity used for space heating (or cooling) is equally easy, and you don't have to suffer by conserving here and there.

In most homes, there are several rooms that rarely get occupied during the day, alternating with others that don't get used at night. At night - with everyone in bedrooms - the home office, living room, kitchen, and (if you have one) laundry room are typically unoccupied.

Just lower the thermostat for these to around 50F in winter and you'll find that it takes less electricity to heat them up in the morning than it does to keep them heated all night. If you have a programmable thermostat, you can set it to go on automatically a half hour before waking and you will never know the difference.

Keeping the doors on bedrooms closed will help isolate the two parts of the house at the two different times. Keeping them closed (or nearly so) at night keeps the heat from the bedroom from leaking out, and vice versa during the day. Keep the laundry room and any spare bedrooms closed all the time except for the short periods they're in use.

The same ideas apply to cooling your home as to heating. If you use an air conditioner, close off ducts to rooms when they're not in use and keep doors mostly closed.

Naturally, ensuring that your home is well insulated is a must for long term savings. But replacing or improving it can be very expensive and the payoff (while real) accumulates over years. For short-term, high-return savings look to the things you can control around the home.