Sunday, May 16, 2010
No Income Tax Owed on the Deficiency
After a Short Sale you will not owe income tax on the deficiency... the amount forgiven. Click on the youtube link to learn the facts from Suzy Orman. http://www.youtube.com/watch?v=OboT-c0QNtA
Thursday, May 13, 2010
STRATEGIC DEFAULT-- FREDDIE MAC- ARE YOU FOR REAL??
Strategic Default with a home mortgage is when the owner makes a business decision to not continue to pay on spiraling mortgage and instead decides to cut loose from the mortgage with a short sale or a foreclosure. The owner makes a conscious decision to "cut their losses" and stop paying the mortgage and apply for a short sale or worse, let's the house foreclose.
In Arizona, where many homeowners owe more than double of what their home is now worth, strategic default may be necessary for future economic survival. What is the point on continuing to pay on a 30 year loan for a product that may only appreciate in value to the amount owed (break even point) in 20+ years? Many people in Arizona purchased homes two years ago for $300,000 only to find that today that same house is worth $150,000 and experts are predicting that it may take up to 20+ years to recover and get the value back to $300,000.
Donald Bisenius, a VP of Freddie Mac's Single Family Credit Business, stated today in the Wall Street Journal that he felt that strategic default for a single family homeowner is bad for the neighborhood because it drives down all of our values. His definition of strategic default is when a homeowner has the financial means to make the monthly payments, but chooses to purposely default on his loan. Obviously the man has never been to AZ lately. He goes on to say that the homeowner's strategic default is bad social policy.
Homeowners are not sipping margaritas by the resort pool's while deciding that it is better to cut their losses on their biggest investment....their family home. They are choosing between buying another bag of Top Ramen at Fry's or making the the mortgage payment. Most families I see choosing to short sale are really struggling. Many have lost their jobs or have a significant cut in pay. Many are relocating to other states so that they can maintain their income....but then are faced with making the mortgage payment on the AZ house and trying to pay rent in the new city. Coupled with medical issues and divorce, etc., these people are going under and no one is throwing them a lifeline.
Freddie Mac's officials are trying to fog the mirror by placing all the blame for the neighborhood economic downfall on the little people....the homeowners. What about the strategic default of Morgan Stanley 2 months ago when they defaulted on hundreds of millions of dollars in loans in just one swoop? How about the banks that are going bankrupt? Does their single action cause a lot more devastation to our economy than one tiny homeowner defaulting because they are choosing the survival of their family?
How about if Freddie Mac looks back in the foggy mirror and suggests that more lenders and investors should begin to REALLY modify loans....with modifications that would actually benefit the homeowners...not just tacking on mortgage payments to drag out the life of the loan. How about suggesting modifications that would help the multitudes in AZ that are 50% under water?
Let's face it. America is out of money. Greece is out of money. The world's financial picture is bleak. Why continue to pay on an inflated product? Good business is good business. Strategic default makes excellent sense for many homeowners and can be a very wise financial decision.
In Arizona, where many homeowners owe more than double of what their home is now worth, strategic default may be necessary for future economic survival. What is the point on continuing to pay on a 30 year loan for a product that may only appreciate in value to the amount owed (break even point) in 20+ years? Many people in Arizona purchased homes two years ago for $300,000 only to find that today that same house is worth $150,000 and experts are predicting that it may take up to 20+ years to recover and get the value back to $300,000.
Donald Bisenius, a VP of Freddie Mac's Single Family Credit Business, stated today in the Wall Street Journal that he felt that strategic default for a single family homeowner is bad for the neighborhood because it drives down all of our values. His definition of strategic default is when a homeowner has the financial means to make the monthly payments, but chooses to purposely default on his loan. Obviously the man has never been to AZ lately. He goes on to say that the homeowner's strategic default is bad social policy.
Homeowners are not sipping margaritas by the resort pool's while deciding that it is better to cut their losses on their biggest investment....their family home. They are choosing between buying another bag of Top Ramen at Fry's or making the the mortgage payment. Most families I see choosing to short sale are really struggling. Many have lost their jobs or have a significant cut in pay. Many are relocating to other states so that they can maintain their income....but then are faced with making the mortgage payment on the AZ house and trying to pay rent in the new city. Coupled with medical issues and divorce, etc., these people are going under and no one is throwing them a lifeline.
Freddie Mac's officials are trying to fog the mirror by placing all the blame for the neighborhood economic downfall on the little people....the homeowners. What about the strategic default of Morgan Stanley 2 months ago when they defaulted on hundreds of millions of dollars in loans in just one swoop? How about the banks that are going bankrupt? Does their single action cause a lot more devastation to our economy than one tiny homeowner defaulting because they are choosing the survival of their family?
How about if Freddie Mac looks back in the foggy mirror and suggests that more lenders and investors should begin to REALLY modify loans....with modifications that would actually benefit the homeowners...not just tacking on mortgage payments to drag out the life of the loan. How about suggesting modifications that would help the multitudes in AZ that are 50% under water?
Let's face it. America is out of money. Greece is out of money. The world's financial picture is bleak. Why continue to pay on an inflated product? Good business is good business. Strategic default makes excellent sense for many homeowners and can be a very wise financial decision.
Monday, May 10, 2010
Your HOA and Short Sales
When the monthly budget gets tight, it is tempting to not pay your HOA bill because you may feel you will still receive the benefits of the HOA even if you don't pay your bill. The HOA will still cut the community grass and maintain the parks, etc. even if you don't personally pay your bill.
In a short sale, however, it is VERY important to keep up on your HOA payments. Why? Because many lenders refuse to pay the HOA liens on a house. Therefore, if the dues go unpaid, you may be accumulating late fees and legal fees which can add up to thousands of dollars. When a short sale is officially sold to a new buyer, there can be no liens on the property. This includes HOA liens. So, it is wise to keep up on the monthly, quarterly or semi-annual HOA dues so that you do not accrue additional fines. Because "You can pay me now, or you can pay me more later."
Want to know who is the current property management for your HOA?? Visit http://www.aznb.com and click on your community's name for the latest news.
In a short sale, however, it is VERY important to keep up on your HOA payments. Why? Because many lenders refuse to pay the HOA liens on a house. Therefore, if the dues go unpaid, you may be accumulating late fees and legal fees which can add up to thousands of dollars. When a short sale is officially sold to a new buyer, there can be no liens on the property. This includes HOA liens. So, it is wise to keep up on the monthly, quarterly or semi-annual HOA dues so that you do not accrue additional fines. Because "You can pay me now, or you can pay me more later."
Want to know who is the current property management for your HOA?? Visit http://www.aznb.com and click on your community's name for the latest news.
Sunday, May 2, 2010
AZ Getting a Bad Rap
For all you who have been reading the papers and watching the news, Arizonans are sorry that we have had to go to such extreme measures to finally get the Federal Government's attention regarding our borders. Az has more illegal immigrants than any other state and consequently, we have taken on most of the nation's financial burden. As a result, soon we will be voting on a 1 cent increase in our sales tax.
As we stand today, our neighborhoods have a glut of foreclosures and short sales. How did this happen? Because of our temperatures and our open borders more and more people moved to AZ, so we built more and more houses. Anyone with a pulse could get a job as a construction worker. Many were immigrants who sent a portion of their wages to their remaining family members in Mexico. Eventually, many of them purchased homes and managed to get their family members to also cross the border. Typically, these people do not participate in paying income tax. Many were given housing loans with payments 50-75% of their monthly income. Now they are abandoning their homes and abandoning the housing debt they helped create.
As result of this swell in population, our schools are bursting at the seams. School districts had to hire additional teachers and have additional resources such as English as a SEcond Language Classes in every school. Many times, multiple, extended families lived in one dwelling which meant multiple students and yet only one property tax was paid. Our school districts can no longer balance the budgets. In our own high school district, it was announced last week, that 176 high school workers, i.e. teachers, assist. principals,janitors etc., would not have their contracts renewed and four sport programs and various clubs would be completely eliminated due to budget constraints. Our elementary school is now serving free breakfast and lunch to more than 65% of the school's students and we thought we were living in an mid to upper level middle class subdivision. In addition, our elementary district serves a free meal all summer long to families who claim they otherwise would not have a daily meal.
Our hospital emergency rooms are overrun with non emergencies because all recognize that if they seek emergency medical treatment, one does not need to have medical insurance to be treated. To balance out the deficits, hospitals and doctors are raising their prices and passing the costs on to those who have insurance.
Az's violent crime statistics are up and we are number 2 in the world for kidnappings. Why? Because illegal immigrants pay smugglers thousands of dollars to get them across the border. They house up to 100 immigrants in a house in AZ and then hold the immigrants ransom until their family members pay extra for their release. Consequently, Home invasions are up. What about those immigrants who dont' have the money? They agree to strap 50 lb bundles of marijuana on their backs in exchange for a guided trip thru the desert to AZ. Drug related violent crimes are up. Our prisons are so crowded we house criminals in tents. Soon those criminals with less than 1 year left on their sentences will be sent to county jails because our state cannot afford to keep them...and the counties cannot afford it either.
Az has had it. Our neighborhoods have 1 of 7 homes in foreclosure. Our state coffers are empty. We thought our previous governor, who is now the head of Homeland Security would help us when she got to Washington, but no. So, sometimes you have to aim high to hit the target. Is the law a bit extreme? Yes. But did it hit the target of gaining the Feds attention. Yes, it did.
I think that all the people marching at all the cities across the country could greatly help AZ by passing the hat for our state at these events. If each state's citizen gave just $1, then we could begin to recover from the burden that we have been carrying for the entire nation. Did we aim too high? Perhaps. But, from where I am sitting, AZ is now right on target.
As we stand today, our neighborhoods have a glut of foreclosures and short sales. How did this happen? Because of our temperatures and our open borders more and more people moved to AZ, so we built more and more houses. Anyone with a pulse could get a job as a construction worker. Many were immigrants who sent a portion of their wages to their remaining family members in Mexico. Eventually, many of them purchased homes and managed to get their family members to also cross the border. Typically, these people do not participate in paying income tax. Many were given housing loans with payments 50-75% of their monthly income. Now they are abandoning their homes and abandoning the housing debt they helped create.
As result of this swell in population, our schools are bursting at the seams. School districts had to hire additional teachers and have additional resources such as English as a SEcond Language Classes in every school. Many times, multiple, extended families lived in one dwelling which meant multiple students and yet only one property tax was paid. Our school districts can no longer balance the budgets. In our own high school district, it was announced last week, that 176 high school workers, i.e. teachers, assist. principals,janitors etc., would not have their contracts renewed and four sport programs and various clubs would be completely eliminated due to budget constraints. Our elementary school is now serving free breakfast and lunch to more than 65% of the school's students and we thought we were living in an mid to upper level middle class subdivision. In addition, our elementary district serves a free meal all summer long to families who claim they otherwise would not have a daily meal.
Our hospital emergency rooms are overrun with non emergencies because all recognize that if they seek emergency medical treatment, one does not need to have medical insurance to be treated. To balance out the deficits, hospitals and doctors are raising their prices and passing the costs on to those who have insurance.
Az's violent crime statistics are up and we are number 2 in the world for kidnappings. Why? Because illegal immigrants pay smugglers thousands of dollars to get them across the border. They house up to 100 immigrants in a house in AZ and then hold the immigrants ransom until their family members pay extra for their release. Consequently, Home invasions are up. What about those immigrants who dont' have the money? They agree to strap 50 lb bundles of marijuana on their backs in exchange for a guided trip thru the desert to AZ. Drug related violent crimes are up. Our prisons are so crowded we house criminals in tents. Soon those criminals with less than 1 year left on their sentences will be sent to county jails because our state cannot afford to keep them...and the counties cannot afford it either.
Az has had it. Our neighborhoods have 1 of 7 homes in foreclosure. Our state coffers are empty. We thought our previous governor, who is now the head of Homeland Security would help us when she got to Washington, but no. So, sometimes you have to aim high to hit the target. Is the law a bit extreme? Yes. But did it hit the target of gaining the Feds attention. Yes, it did.
I think that all the people marching at all the cities across the country could greatly help AZ by passing the hat for our state at these events. If each state's citizen gave just $1, then we could begin to recover from the burden that we have been carrying for the entire nation. Did we aim too high? Perhaps. But, from where I am sitting, AZ is now right on target.
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