Me Myself N My Mortgage Theories

The financial meltdown (2007-2009) has indeed taught us a few things that perhaps we never wanted to learn. So far, we’ve believed that “Home prices never go down”, “Our 401k Plan is one thing we can depend upon at retirement”, “Buying a house is a long term savings strategy” and so on… But the financial meltdown seems to have proved us wrong. Here are the 3 things we’ve learned from the financial crunch that crippled our personal finance and the financial market as a whole.

1. Buying a home may not be ideal to build up long term savings

It’s been a common practice for home-buyers to take out equity loans on their homes in order to pay off debt, save for college expenses as required by their children or raise their retirement savings. Any investment relying on borrowed money is a bit risky. Prior to the financial crunch, more and more homeowners got lured by the easy lending criteria of home equity loans. They applied for such loans as they wanted to use their home as a source of investment.

However, with the financial meltdown getting deeper and home prices going down each day, borrowers with equity loans owed more on their mortgage than their homes were worth. Not only did they lose their savings but also they couldn’t sell their homes without paying a lump sum towards clearing the mortgage debt.

2. Housing prices may go down sometimes

The Great depression of the 1930s did prove how far home prices can slide down. Even the downturn in the housing market in 1990 wasn’t enough for us to take steps to avoid getting into mortgage/housing problems. So, when the real estate market did pretty well in 2005, everyone had the belief that as long as our incomes went up, we could surely afford bigger homes.

However, our incomes didn’t go up keeping pace with home prices after the recession in 2001. Moreover, several borrowers were approved without checking whether they had the financial strength to pay back the loans completely. Appraisers were under the pressure to provide inflated appraisals and underwriters got too casual when it came to determining the risk in offering home loans.
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Hi all,

Here’s a rundown of the top 4 finance news this week.

1. Home affordable Refinance has helped 60,000 borrowers: An US government data release on 13th August, 2009 reveals that so far 60,000 borrowers have been able to refinance their mortgages under the Home Affordable Refinance program.

The refinance program is limited to mortgages backed by government sponsored agencies - Fannie Mae and Freddie Mac. Borrowers could take advantage of this program provided their mortgages didn’t exceed 105% of the current home value.

2. Mortgage clinic for homeowners: The Neighborhood Assistance Corporation of America along with Bank of America and Citigroup organized mortgage clinics to modify loans for homeowners. They have traveled across the South and Midwest negotiating with lenders on behalf of homeowners in order to slash mortgage costs and have their interest rates reduced to as low as 2%. There were 300 counselors to review financial statements of homeowners and calculate a mortgage payment they can afford. Know more…

3. Mortgage rates go up: 30 year fixed mortgages rates have gone up this week, thereby bringing down the number of loan applications. According to a survey conducted by the National Mortgage Bankers Association, national average weekly rates on 30 year mortgages have increased to 5.38%, up from 5.17% last week. Average rates on 15 year fixed mortgages have climbed to 4.17%, up from 4.60% last week. Due to rising rates, loan applications have reduced by 3.5% as compared to the previous week.

4.Credit card rules to change from next week: Some of the new credit card rules, which were scheduled to take effect from July, 2010, would actually be followed from next week. The rules taking effect from next week are:

*Credit card issuers will have to provide a 45 days’ notice to debtors prior to raising their interest rates or changing the terms and conditions of the contract.

*Card issuers should send bills to customers 21 days ahead of the payment due date.

President Obama has drafted a consumer protection bill that would create a Consumer Financial Protection Agency. The purpose of this agency is to ensure that consumers are protected from unscrupulous lending practices. Moreover, the agency would make sure that consumers get a better understanding of financial products and services.

What the new Bill aims to do…

It is expected that the new Bill would bring about more transparency in financial transactions, simplify financial documents for consumers, and improve the operations of unregulated financial services. The aim here is to create a platform where banks and companies would be subject to a single set of rules and laws being enforced.

The Consumer Protection Agency will be regulating transactions related to mortgages, credit cards, payday lending, overdraft fees and make the rules consistent among different types of products. Besides, efforts will be taken to minimize the number of disclosures required in home buying/mortgage transactions.

What the industry has to say about the new Bill…

The industry is a bit skeptical as to whether the new Bill will be effective in protecting consumers. Some lawmakers are of the opinion that the Consumer Protection Agency may pose a threat to economic liberty.

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It’s the tax filing season and you must be busy filing out the paperwork…..

Well, just in case you’re not aware, I’d like to share it with you that the IRS has set a date, that is, March 15 when it intends to hold its Super Saturday. This is when the IRS employees will help prepare the basic 2008 tax returns for those who qualify for the income tax credit or those who earn less than $42000 a year.

It’s a free service and a much needed one at that especially in these times of economic crisis. Even if you’re unable to pay the tax bills, you’ll be allowed to visit the centers and discuss your chances of getting a payment plan to pay off your taxes.

What else you can get on Super Saturday…

Well as a taxpayer, you can expect to get copies of your tax returns and any kind of help with letters, levies on your wages or bank. You’ll find the IRS assistance offices from their official website (irs.gov) or, you may just call them at 800-906-9887 for the free assistance centers. The assistance centers will remain open from 9a.m to 2p.m.

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We’re all aware of the fact that the Social Security benefits are protected from assignment, levy and garnishment. However, there are 5 cases wherein you cannot protect the benefits.

1. Unpaid federal taxes: If you’ve not paid the federal taxes in time, as per Section 6334(c) of the IRS Code, your benefits can be levied for collecting the taxes.

2. Income tax for current year: Beneficiaries can have a percentage of their benefits withheld and paid to the IRS in order to fulfill their income tax liability for the current year.

3. Payment of non-tax debt: As per the debt Collection Act of 1996, your benefits can be withheld and paid to a federal agency to which you owe the non-tax debt.

4. Child Support/alimony: The Social security benefits can be garnished to provide child support or alimony obligations.

5. Overdue tax debt: The IRS has the right to collect overdue federal tax debt of beneficiaries by levying up to 15% of each monthly payment until the debt is repaid. This is in accordance with the Tax Payer Relief Act of 1997.

Technorati Tags: protect social security, exceptions to social security protection, garnish social security

President Bush has approved an Economic Stimulus package worth $160-170 billion with the aim to save the economy from an upcoming recession.

What does the Economic Stimulus package include?

The package includes tax rebates for all taxpayers including children too. Taxpayers who file individually will be getting tax rebate checks worth $600 whereas those filing jointly will receive double the amount.

In order to avail this rebate, individual taxpayers should be earning less than $75000 in adjusted gross income. But for married couple, the limit is $150,000. Besides taxpayers, every child will receive $300 in tax credit. The package also includes tax benefits for equipments purchased by businesses and payments to seniors and disabled veterans.

Can it help avoid recession?

It is expected that the Economic stimulus will put $120 billion into the hands of Americans so that they are able to spend it thereby boosting the economy.

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Investment Postcards from Cape Town is Dr Prieur du Plessis’s international investment blog. It consists of a wide range of topics dealing with the macro outlook for stock markets, bonds, currencies and commodities (including gold). This is a great site that is a storehouse of information. The posts are illustrated with graphs that make the whole presentation extremely comprehensible. Features also include index tickers, stock market polls, a translator and video clips.

Du Plessis is chairman of the Plexus group of companies that he founded in 1995, and with his 25 years’ experience in the investment industry is a renowned investment professional. He has had more than 1 000 articles published and also published a book “Financial Basics: Investment” in 2002.

The site has a delightful humor section with entertaining photographs and hilarious sketches reflecting issues across the world.

Hi all,

Hope you’ve had a great Christmas!

Well, some of you may be enjoying your vacations and planning for some fun and excitement in the New Year eve. But here’s something that you shouldn’t avoid – how to save your hard earned money from going to the IRS, I mean how to increase your tax savings.

It may be a bit tough for you to actually sit down and start calculating the figures ..but this is something that can help you save thousands of dollars that you’ve earned through hard work. So, while you run the figures, take a look at the deductions/credits you can avail being a taxpayer.

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If you are the one looking for a happy and stress-free retirement life with no monetary problems or health hazards, then there are 12 financial solutions that you may watch out for.

1. Social Security Income:

This is a benefit which the Federal government offers to those who have paid taxes into Social Security. But to avail this benefit, you need to apply for a Social Security card and get a Social security Number even. Just browse through the Rules of getting Social Security.

2. Medicaid and Medicare:

These are health care programs offered to people so that they can pay for their health-care costs. The eligibility criteria for both the programs are slightly different. However, Medicaid caters to long-term care while Medicare offers assistance mostly for short-term care.

3. Reverse Mortgages:

This is an excellent tool for seniors wherein you don’t pay for the loan but the loan pays you. And, you can use it to serve a variety of purposes – be it paying off your debts, making a big purchase or consolidating your medical bills and the like. Know more…

Interested to get an overview on other financial solutions? Just have a look here.

Technorati Tags: senior financial solutions, reverse mortgage, stress-free retirement

Its tax time guys and by now most of you must have approached insurance companies so that you can deduct the premiums from the taxes.

Let me share with you my knowledge on tax deductible insurance premiums.

Private health insurance and dental plan premiums are deductible as a part of the itemized deduction for medical expenses. But you can only avail this deduction if you itemize and if the cost of the insurance policy is restricted to 7.5% of your income.

However, those who are self-employed can deduct health insurance premiums as an adjustment to their income without having to itemize. Until and unless the tax payer is not involved into some kind of group plan, 100% premiums are deductible.

If you use a car for business purposes, you can deduct your auto insurance. The deduction for business use of the car should be reported in Form 2106 if you are an employee. But if you are self-employed, then you need to report the deduction in Schedule C.

There is another type of insurance available in the market - homeowners’ insurance policy. Premiums on such a policy cannot be deducted on your primary residence. But you cannot deduct such premiums for your rental property. Those who work from home can also deduct a certain part of their insurance as a part of the home office deduction.

You can look forward to your liability insurance and professional insurance policies for tax deduction benefits. If you are an employee, you need to report these expenses as itemized deductions whereas you need to use Schedule C if you are a self-employed tax payer.

Technorati tags:tax deductible insurance, itemized deduction, auto insurance, homeowners insurance