Bank slapped with fine after failing to modify loan terms

In a move called “unprecedented in its magnitude,” a bankruptcy judge recently opted to levy a $45 million fine against Bank of America Corp. for its treatment of homeowners who had requested lower mortgage payments.

If it stands, the fine would be the largest punitive damages award for violations of the bankruptcy law’s automatic stay rules, which ban lenders from advancing foreclosures and taking other actions.

The case highlights the importance of consulting a lawyer in any situation involving requests for loan modifications or in any case involving a foreclosure. [Read more…]

What you need to know about paid leads on property-search sites

Popular property-search site Streeteasy.com recently rolled out a change to its Premier Agent program for real estate agents that is confusing potential buyers and angering brokers.

Until recently, the site featured the name of a property’s listing agent and company prominently, making the main contact clear and providing a direct “contact agent” button. But now when a potential buyer clicks “contact agent,” the message instead might be sent to a broker who has paid to receive referrals for a specific zip code.

The listing broker can still be reached, but the process is more convoluted. Now users must click on a less prominent button that says “seller’s agent info.” The name of the listing broker and firm are much further down on the page and harder to find. [Read more…]

What to consider before backing out of an offer

Standard real-estate contracts contain inspection and mortgage contingencies that allow buyers a limited amount of time to back out of the contract and receive a refund of their deposit. They also spell out the terms of the deposit and where the money is held in escrow, whether with the buyers’ agent, the title company, an attorney or the developer.

But once all contingencies are satisfied, buyers are locked in and attempts to back out could mean losing earnest money and potentially having to pay brokers’ commissions. That’s because even if the seller lets the buyer off the hook, he or she may still be liable to the broker for the commission. Contracts state that the commission is due when the broker finds a ready, willing and able buyer. Some brokers will work with the seller in this situation, but not all will.

If a buyer truly does want to back out of a deal, even if he can’t do so under the terms of the contract, he can try to negotiate with the seller for the return of at least part of the deposit. [Read more…]

Don’t let the end of a home-equity line of credit sneak up on you

The terms of home-equity lines of credit, or HELOCs, typically come due 10 years in, at a time at which many homeowners are unprepared for the fact that their monthly payments are about to go up significantly and sometimes double.

HELOCs are secured by a mortgage, require only interest payments and can be used to consolidate debt, fund major expenses, etc. But after the initial 10-year period the principal becomes due. At that point, homeowners can choose to pay off the balance, refinance it into a first or second mortgage or make monthly payments of principal and interest, typically for a 20-year term.

Homeowners who are unprepared may wind up defaulting, prompting the bank to take legal action to collect the balance or to begin the foreclosure process. [Read more…]

Reverse mortgages offer cash to homeowners, but it comes at a price

A reverse mortgage allows a homeowner to convert part of the equity in a home to cash without having to sell the property. The cash may be paid in installments or a lump sum, so typically you don’t need to pay anything back as long as you live in your house.

Factors such as age, the value of the property and how much remains on the mortgage all affect the amount of money a homeowner may borrow through a reverse mortgage.

There are important things to consider. Owners typically must remain in the home for at least 5-10 years to make a reverse mortgage economical. In addition, because they’re deferring repayment of the reverse mortgage, the amount they owe will grow substantially over time. Interest charges are added to the loan each day it’s held, so it’s possible the reverse mortgage could grow to equal the value of the home. [Read more…]

Investing IRAs in real estate often leads to more risk than reward

 There’s nothing simple about investing an IRA in real estate. But people do it because it offers an alternative to traditional retirement accounts that comes with the potential for high reward. Potential investors should be warned, however, that there can be more negatives than positives associated with these types of investments.

Minuses

  1. The IRS requires a qualified trustee or custodian to administer the assets. This person will typically handle transactions and manage paperwork and reports.
  2. The options for a qualified trustee or custodian are limited. So far, only about two dozen companies in the U.S. can act as custodians of self-directed IRAs.
  3. You’ll need to hire a property manager. A third-party property manager will make sure you adhere to any applicable landlord-tenant laws and avoid illegal transactions. Typical commissions are equal to the first month’s rent and 6 to 10 percent of the monthly rent thereafter.
  4. The rules for self-directed IRAs can be tricky to follow. Did you know something as simple as mowing the lawn of a property you own through your IRA could put you on the wrong side of the law? It’s true: IRA owners are forbidden from engaging in certain transactions at their property.
  5. The penalties are high. Running afoul of the law makes IRA owners more susceptible to losing the IRA’s tax-favored status. If that happens, taxes and penalties could be triggered.
  6. It’s cash only. IRS rules require contributions to an IRA to be made in cash, not services.

[Read more…]

Business tax: time to consider Section 179?

Section 179 expensing can be a very powerful tax-planning tool for small- and medium-sized businesses acquiring capital assets. While it doesn’t change the amount of depreciation you can take over the life of a capital purchase, it can change the timing by allowing you to deduct your purchase in the first year you place it in service.

Review these details if you’re considering depreciating your business assets under Section 179:

  • Section 179 allows deducting the expense of up to $510,000 of qualified business purchases.
  • A Section 179 deduction cannot create a loss for the business.
  • A Section 179 deduction must be for business use. If an asset is not entirely used for business, the allowance is reduced.
  • If you sell a Section 179 asset prior to the full depreciation period, you will have to record any sales proceeds as taxable income.
  • Many states limit the use of this federal shifting of depreciation.

Taking Section 179 for capital purchases can be useful, but it’s not for everyone. Using it for an immediate tax break means it’ll no longer be available for future years.

Renew your ITIN now

If you have an Individual Taxpayer Identification Number (ITIN) rather than a Social Security number (SSN) you may need to take action or you’ll be unable to file a tax return for 2017.

What to know about ITINs
ITINs are identification numbers issued by the U.S. government for individuals who do not qualify to receive an SSN. An ITIN can be used to file tax returns and is also a form of identification often required by banks, insurance companies and other institutions. Unfortunately, ITINs are also a source of identity fraud. To combat this, the 2015 PATH Act made substantial changes to the program. Now a number of ITINs will expire if not renewed by December 31, 2017.

No ITIN, no problem. If you do not have an ITIN, but have an SSN, this expiration does not affect you. [Read more…]

How to Ace the FAFSA

The Free Application for Federal Student Aid (FAFSA) is a tool that students use to apply for more than $120 billion in federal funds. Unfortunately, each year many students miss out.

Even if you don’t think you or your child qualify for federal aid, filling out a FAFSA is important because it could be used to determine eligibility for nonfederal aid and private funds.

FAFSA available October 1, 2017
Previously, the FAFSA was unavailable until January. A recent change makes the application available October 1, 2017. That’s because the 2018-19 FAFSA can be completed with your 2016 tax info. [Read more…]

Tax Filing Reminders

  • October 16
    • Filing deadline for 2016 tax returns for individuals or corporations if you requested/received a six-month extension. Pay taxes due by this date.
    • Deadline to recharacterize a Roth IRA to a Traditional
    • Deadline to fund your Keogh or SEP plans if you requested a filing extension.