The recent bank regulations enacted under the Dodd-Frank Financial Reform bill has created a serious situation for the banks that issue free debit cards to their checking account holders. Under the regulation, the fees charged to merchants by banks or credit card companies for debit card transactions must be reasonable and proportional to the cost of processing those transactions. In other words, the banks that issue debit cards will be forced to give up tens of billions of dollars in revenue. Unfortunately, it's the consumer that bears the brunt of this so-called reform. The merchants will not be required to lower their prices, so the windfall will go right into merchant pockets. The consumer, the one be protected, is now going to be charged more money and be more inconvenienced at the bank he is with.
The banks must figure out a way to replace lost income, so basically they will do several things. First, they will reduce the amount of low balance checking accounts on their books, basically closing these now unprofitable accounts. Second, they will require much higher account balances to be maintained by insisting that a consumer keep $ 1000, $ 2000 or more in a combination of accounts. Also, they will not be waiving monthly account fees even if they use the debit card multiple times each month.
Finally, there is talk that many large banks will limit the amount that can be debited from a card in an individual transaction. The measures they are taking is designed to reduce losses, and raise revenue.
It is estimated that 60,000,000 people are currently not receiving financial services through a bank or credit union. That figure is going to rise dramatically over the next year. Recent Master Card and Visa studies show that over 69% of the transactions processed by these companies are debit card transactions, not credit cards transactions. The trend is clear. People are shifting to debit cards in greater numbers, but they run the risk that their costs for banking will now raise dramatically, and that their inconvenience will soar.
Reloadable, or prepaid debit cards are now becoming a major force against this consumer onslaught. There are several major players in this industry, but in many cases the cost to obtain, maintain and use these prepaid cards is very high. Be aware of cards that carry very high monthly maintenance fees, have an upfront cost to buy them, and have high transaction fees. You will not find one card that is free of any transaction fees. Free debit cards don't exist. However, if you don't need to maintain a checking account, love online banking or bank by phone, have direct deposit from one or more sources, a prepaid debit card be a major blessing to those that need it.
Anthony Fontana has been a banker, tax accountant and entrepreneur for over 30 years. When he discovers something that makes his life easier, and makes his clients' lives and businesses more effective and profitable, he loves to share it with everyone he knows! Visit: http://tonyfontana.com for excellent information on improving your life, saving money and reducing financial stress.
Sunday, February 27, 2011
Saturday, February 26, 2011
WHEN WILL WASHINGTON GET IT?
Every day I read the news of a crisis in this country. We have a fiscal crisis, a water crisis, a debt crisis, a mortgage crisis, a home price crisis, food crisis, and on and on. What is amazing to me is that there does not seem to be sense of urgency in Washington to do anything productive to get us out of the current multiple “crisis” enveloping our great Nation.
There are probably several reasons for this but not all of them are political in nature. Peggy Noonan in the Wall Street Journal wrote “If you are from the deep left, if you're on the leftward ridges of the Democratic Party, you believe in high spending, higher taxing and a more dominant role for the federal government. So you wouldn't be alarmed at the current crisis, you'd be more or less happy: You're sort of getting what you want. If you're told entitlement spending will ultimately force severe cuts in America's defenses, you might think, "Good, fewer guns, more butter." Since you likely think America is a prime source of trouble in the world, you wouldn't be too concerned that nations that hold our debt might come to exert influence on our foreign-policy choices. In the new and emerging global world, what's so bad about a more bridled America?”
But this opinion belongs to just the very far left of our country. Most of us are not far left in our leanings. I have no issue if you are, but I see a country that is mostly in the center. The problem I have, why are the more moderate “level headed” of our political class not in any rush to solve the problems we are clearly having and work together to get things done? Why were they all off for a week vacation during “President’s Week”? I don’t get it. Did any of you get a week off for the holiday? Not sure what I am seeing here. If the fiscal crisis is so important, why take off a week. Why not hammer out a deal that everyone finds reasonably fair, and end the madness?
I believe the problem is that there are too many members of the Senate and the House that have been in their positions for a decade or more. Some of these guys have been in there for 30 plus years. The country has seen various crises loom up at various times and these people have become immune to the effects. They know that we’ve weathered every storm that has come our way, and don’t see anything now as all that urgent for their attention. While the rest of us are being pummeled by lower housing prices, high food, oil and gas prices, looming inflation and rising interest rates, chaos in the Middle East, we know that something is different now. Something is changing right before our eyes. They think they can do anything and America will always be rich. That is clearly not the case anymore.
Many of today’s political leaders just don’t see the problem that the rest of us see and are now living through. They get paid a nice amount of money, take off for what seems like a huge amount of time every year, and travel on our dime all over the world on junkets that have little to do with their actual job. Ms. Noonan writes “It is really convenient and pleasant not to see a crisis, because if you don't see it, you don't have to do anything about it. You don't have to be brave, you don't have to put yourself on the line, and you don't have to lead. You can tell yourself you don't have to be brave and lead because really, at the end of the day, despite all the screaming, there is no crisis.”
The sense of detachment that I see in Washington is amazing. It’s like the wealthy kid who has a family with wealth stretching back till the dawn of time, so the kid does not see any other way to live. Sometimes we see the children of the uber rich slide down into all kinds of mischief. Not all of them of course. There are notable and extensive exceptions, but you get the point. If you have lived your entire life at the public trough, you need to come up for air on occasion and see what the heck is happening around you. This country needs a better plan. The old one is done for. I don’t have the answers but at least I am willing to ask the question.
What are your thoughts on this?
Friday, February 25, 2011
Foreclosures vs REO's. Whats the difference?
If you are interested in investing in real estate, it can be very profitable. There are a growing number of foreclosures and REO properties on the market at this time, with no end in sight to the increasing inventory. There are risks and advantages associated with each method. Foreclosure is a legal process where a lender attempts to take legal possession of a property on which the homeowner has failed to make payments. If that property isn't sold in an ensuing auction, the title to the home is transferred to the lender. Then the home is known as a real estate owned, or REO, property. Knowing how each process works is crucial for an investor.
Let’s take a detailed look at each investment method.
Foreclosure is the procedure used by lenders who try to take legal possession of a property after the owner defaults on the mortgage payment. A lender usually begins the foreclosure process when the homeowner fails to make mortgage payments for three consecutive months. Each state has specific procedures and timelines that must be followed by a lender. Certain documents must be filed on a timely basis. At the end of a foreclosure, a judge will allow the sale of the property to proceed. The final step is when the property is auctioned off at a trustee sale. The lender will usually set the minimum price that it will accept from bidding investors on the courthouse steps. If investors' bids match or exceed the minimum set by the lender, the property is sold and the title to the property goes to the winning bidder.
If the property isn't sold at auction, however, it becomes an REO, or real estate owned. The property title is transferred to the bank. A foreclosure home that has become a bank-owned property can then be listed with a licensed real estate agent hired by the bank. Most lenders have a department that handles REO properties. To sell the home as quickly as possible, the lender will remove any liens on title and resolve any other issues that might interfere with the sale of the property.
There are several key differences between the two investment methods. A lender that succeeds in foreclosing on a property takes possession of the home but does not own the property at that time. REO properties, on the other hand, are owned by the lender that foreclosed on the property. Foreclosures are sold by a trustee to the highest bidder at an auction, not by real estate agents. By contrast, the lender in an REO case must authorize a real estate agent to sell the property. The responsibilities of the buyer also differ in each case. In a foreclosure, the home is sold as is and without a title warranty. The buyer may be liable for paying off any liens or encumbrances attached to the title, since the lender assumes no liability for any liens. For an REO, the lender must clear all liens and encumbrances from the title. Finally, a foreclosure cannot be financed with a mortgage but must be paid for in full, with a cashier's check, at the time of the auction. The buyer of an REO property, however, can pay cash or finance the deal with a mortgage.
Buying a property at a trustee auction or purchasing an REO can be a very lucrative way to buy real estate. However, there are associated risks with each method. You must obtain clear title to the property. A foreclosed property might have liens that must be paid by the buyer, or the property might require costly repairs after the purchase. An REO property will have a clear title, but it, too, might need extensive repairs. Be sure to do your homework on the home you are looking to buy. Research title if you can, and try to get into the home to see if it needs major repairs, or if there are squatter living in it.
Need to save money, or get almost instant cash back on your normal shopping, visit me at http://tonyfontana.com for a free reloadable debit card, great deals on restaurants, discounted health and wellness benefits, including Aetna Dental discount plan.
Let’s take a detailed look at each investment method.
Foreclosure is the procedure used by lenders who try to take legal possession of a property after the owner defaults on the mortgage payment. A lender usually begins the foreclosure process when the homeowner fails to make mortgage payments for three consecutive months. Each state has specific procedures and timelines that must be followed by a lender. Certain documents must be filed on a timely basis. At the end of a foreclosure, a judge will allow the sale of the property to proceed. The final step is when the property is auctioned off at a trustee sale. The lender will usually set the minimum price that it will accept from bidding investors on the courthouse steps. If investors' bids match or exceed the minimum set by the lender, the property is sold and the title to the property goes to the winning bidder.
If the property isn't sold at auction, however, it becomes an REO, or real estate owned. The property title is transferred to the bank. A foreclosure home that has become a bank-owned property can then be listed with a licensed real estate agent hired by the bank. Most lenders have a department that handles REO properties. To sell the home as quickly as possible, the lender will remove any liens on title and resolve any other issues that might interfere with the sale of the property.
There are several key differences between the two investment methods. A lender that succeeds in foreclosing on a property takes possession of the home but does not own the property at that time. REO properties, on the other hand, are owned by the lender that foreclosed on the property. Foreclosures are sold by a trustee to the highest bidder at an auction, not by real estate agents. By contrast, the lender in an REO case must authorize a real estate agent to sell the property. The responsibilities of the buyer also differ in each case. In a foreclosure, the home is sold as is and without a title warranty. The buyer may be liable for paying off any liens or encumbrances attached to the title, since the lender assumes no liability for any liens. For an REO, the lender must clear all liens and encumbrances from the title. Finally, a foreclosure cannot be financed with a mortgage but must be paid for in full, with a cashier's check, at the time of the auction. The buyer of an REO property, however, can pay cash or finance the deal with a mortgage.
Buying a property at a trustee auction or purchasing an REO can be a very lucrative way to buy real estate. However, there are associated risks with each method. You must obtain clear title to the property. A foreclosed property might have liens that must be paid by the buyer, or the property might require costly repairs after the purchase. An REO property will have a clear title, but it, too, might need extensive repairs. Be sure to do your homework on the home you are looking to buy. Research title if you can, and try to get into the home to see if it needs major repairs, or if there are squatter living in it.
Need to save money, or get almost instant cash back on your normal shopping, visit me at http://tonyfontana.com for a free reloadable debit card, great deals on restaurants, discounted health and wellness benefits, including Aetna Dental discount plan.
Foreclosure Prices on the Rise
You’ll be happy to know that the homes in foreclosure on your block are going to sell at an average of 28 percent discount last year and may continue to drive down U.S. housing prices as the supply of distressed properties grows, according to RealtyTrac Inc. Of course I’m being facetious. Foreclosure prices are up a tad under 1 Percent from 2009. Although the prices are higher, they are still selling at significant discounts to the market price. If you are upside down on your mortgage and need to sell, this is NOT good news. If you were counting on cashing out the equity in your home for your retirement, and moving to sunny locales around the world, this news makes it difficult to do that.
A total of 831,574 homes that sold in 2010 had received notices of default, auction or repossession, the Irvine, California-based data seller said today in a statement. Properties in distress accounted for almost 26 percent of all home sales last year, down from 29 percent in 2009.
A “bloated supply of foreclosures and weak demand from homebuyers” are depressing the market, James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement. Residential real-estate prices dropped 4.1 percent in the fourth quarter from a year a earlier, according to the S&P/Case-Shiller index of home values in 20 cities.
“While accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices,” Saccacio said.
Foreclosure filings may rise 20 percent to a peak this year as unemployment remains high and banks resume seizing property after a slowdown to investigate documentation procedures, the company said Jan. 13.
Distressed properties sold at a discount of 27 percent in 2009 and 22 percent the previous year, according to RealtyTrac. The discount reflects the sales price of homes in the foreclosure process compared with those not in distress, the company said.
Bank-owned properties or REO’s sold for an average discount of 36 percent last year, up from 33 percent in 2009, according to RealtyTrac. These houses accounted for 16 percent of all U.S. sales, compared with almost 18 percent in 2009 and 13 percent in 2008. Residences in default or scheduled for auction sold for a discount of 15 percent, down from almost 17 percent in 2009.
Anthony
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A total of 831,574 homes that sold in 2010 had received notices of default, auction or repossession, the Irvine, California-based data seller said today in a statement. Properties in distress accounted for almost 26 percent of all home sales last year, down from 29 percent in 2009.
A “bloated supply of foreclosures and weak demand from homebuyers” are depressing the market, James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement. Residential real-estate prices dropped 4.1 percent in the fourth quarter from a year a earlier, according to the S&P/Case-Shiller index of home values in 20 cities.
“While accelerating foreclosure sales will help clear the oversupply of distressed properties and return balance to the market in the long run, in the short term a high percentage of foreclosure sales will continue to weigh down home prices,” Saccacio said.
Foreclosure filings may rise 20 percent to a peak this year as unemployment remains high and banks resume seizing property after a slowdown to investigate documentation procedures, the company said Jan. 13.
Distressed properties sold at a discount of 27 percent in 2009 and 22 percent the previous year, according to RealtyTrac. The discount reflects the sales price of homes in the foreclosure process compared with those not in distress, the company said.
Foreclosure Sale Prices Rising
Foreclosures sold at an average price of 172,030 in 2010, up from $170,775 in 2009 and down from $200,708 in 2008. Counter balancing this news is another report from the National Association of Realtors released yesterday that sales of previously owned homes in the U.S. rose in January to the highest level in eight months as investors used all-cash transactions to snap up distressed properties. Investors are making a killing at this time, IF they have cash with which to buy. Break open the kids’ piggybanks immediately.Bank-owned properties or REO’s sold for an average discount of 36 percent last year, up from 33 percent in 2009, according to RealtyTrac. These houses accounted for 16 percent of all U.S. sales, compared with almost 18 percent in 2009 and 13 percent in 2008. Residences in default or scheduled for auction sold for a discount of 15 percent, down from almost 17 percent in 2009.
Anthony
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Welcome to my Live Spot Blog!
I want to welcome you personally to my LiveSpot Blog and hope that you find useful information to help you navigate today's complex financial environment. I look forward to your comments and suggestions, as well as sharing with you my 34 years in banking and finance, tax accounting, and marketing.
Thursday, February 24, 2011
IRS eases up on tax liens
The IRS is the biggest debt collection agency in the world, and the scariest for most people and businesses. Instead of making threatening phone calls to your home, the IRS files tax liens. This official notice establishes priority rights for the IRS against other creditors, meaning that when the property against which the lien is filed is sold, Uncle Sam will get his owed money first.
IRS has decided that perhaps they are being a bit to harsh. Today they announced that it will be giving beleaguered taxpayers who are having trouble coming up with the cash a bit of a break.
IRS Commissioner Doug Shulman announced today that his office is instituting new approaches to tax collection. These new policies and procedures, should help people who owe back taxes, especially lower-income taxpayers and small businesses. Here are the new collection rules.
Increasing lien thresholds.
The IRS will "significantly increase" the dollar thresholds when liens are generally filed. Currently, liens are automatically filed against people with $ 5000 in taxes overdue. This threshold has been in place since the 1980's. In keeping with these fun times, IRS has raised that to $ 10,000! Awesome!
"Raising the lien threshold keeps pace with inflation and makes sense for the tax system," Shulman said. "These changes mean tens of thousands of people won’t be burdened by liens, and this step will take place without significantly increasing the financial risk to the government." We would not want any financial risk to the government, now would we?
Withdrawing liens for direct payment plans.
Lien withdrawals will be even easier for taxpayers who owe $25,000 or less and agree to pay off the debt via a direct debit installment plan. Set up such a plan, in which the regular payments are made directly to the IRS, rather than you writing a check each month, and the lien will be released.
If you already have such a debit payment plan, just ask the IRS to release the lien. And if your IRS installment plan is the traditional type in that you're still writing checks, just change it to direct debit and the lien will be withdrawn. A withdrawn lien is a stronger deal than a lien release. It is helpful when your credit file is updated. It should improve scores quickly.
Making installment plans more accessible.
The IRS will raise the dollar limit of its payment program to tax debts of $25,000 or less to allow more small businesses to participate. Currently, only small businesses with less than $10,000 in liabilities can get tax installment payment plans. Small businesses will have to enroll in a Direct Debit Installment Agreement and will have two years to pay off the debt.
Expanding the Offer in Compromise program.
The IRS is also expanding a new streamlined Offer in Compromise , or OIC, program to cover a larger group of struggling taxpayers. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed. Taxpayers with annual incomes up to $100,000 now can participate. In addition, the unpaid tax bill amount for eligibility has been doubled, from $25,000 or less to $50,000.
Commissioner Shulman said the changes will help people who are struggling in a weak economy get current on their tax bills. "These steps are in the best interest of both taxpayers and the tax system," he said. I applaud IRS for finally realizing that people need to eat, have a roof over their head, and pay their monthly bills to survive. Recognizing the difficulty taxpayers are facing is a step in the right direction. Now we just need to abolish the who department. Now THAT would be a big step.
IRS has decided that perhaps they are being a bit to harsh. Today they announced that it will be giving beleaguered taxpayers who are having trouble coming up with the cash a bit of a break.
IRS Commissioner Doug Shulman announced today that his office is instituting new approaches to tax collection. These new policies and procedures, should help people who owe back taxes, especially lower-income taxpayers and small businesses. Here are the new collection rules.
Increasing lien thresholds.
The IRS will "significantly increase" the dollar thresholds when liens are generally filed. Currently, liens are automatically filed against people with $ 5000 in taxes overdue. This threshold has been in place since the 1980's. In keeping with these fun times, IRS has raised that to $ 10,000! Awesome!
"Raising the lien threshold keeps pace with inflation and makes sense for the tax system," Shulman said. "These changes mean tens of thousands of people won’t be burdened by liens, and this step will take place without significantly increasing the financial risk to the government." We would not want any financial risk to the government, now would we?
Withdrawing liens for direct payment plans.
Lien withdrawals will be even easier for taxpayers who owe $25,000 or less and agree to pay off the debt via a direct debit installment plan. Set up such a plan, in which the regular payments are made directly to the IRS, rather than you writing a check each month, and the lien will be released.
If you already have such a debit payment plan, just ask the IRS to release the lien. And if your IRS installment plan is the traditional type in that you're still writing checks, just change it to direct debit and the lien will be withdrawn. A withdrawn lien is a stronger deal than a lien release. It is helpful when your credit file is updated. It should improve scores quickly.
The IRS will raise the dollar limit of its payment program to tax debts of $25,000 or less to allow more small businesses to participate. Currently, only small businesses with less than $10,000 in liabilities can get tax installment payment plans. Small businesses will have to enroll in a Direct Debit Installment Agreement and will have two years to pay off the debt.
Expanding the Offer in Compromise program.
The IRS is also expanding a new streamlined Offer in Compromise , or OIC, program to cover a larger group of struggling taxpayers. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed. Taxpayers with annual incomes up to $100,000 now can participate. In addition, the unpaid tax bill amount for eligibility has been doubled, from $25,000 or less to $50,000.
Commissioner Shulman said the changes will help people who are struggling in a weak economy get current on their tax bills. "These steps are in the best interest of both taxpayers and the tax system," he said. I applaud IRS for finally realizing that people need to eat, have a roof over their head, and pay their monthly bills to survive. Recognizing the difficulty taxpayers are facing is a step in the right direction. Now we just need to abolish the who department. Now THAT would be a big step.
Say Goodby to Free Checking.
The battle between merchants and bankers over proposed caps on debit-card swipe fees intensified this week as the dueling industries brought their arguments to a financial services subcommittee on Capitol Hill. At present $ 12 billion is paid annually by merchants to the various banks that issue debit cards. New rules promulgated by Congress want to reduce interchange fees to no more than .12 cents per transaction. How does this impact you? Simple; if the banks cannot make money they will recoup their profits from YOU! Surprised? Don't be. Anytime the illustrious powers that be in Congress step in to help the little guy, they end up screwing the little guy because these guys rarely understand simple economics.
The sad thing is, none of this will save you money. Not one thin dime. Why? Well, the money that was being charged to the merchants is no longer going to be charged to them by the banks. Great you say. Its not. Those merchants will not be lowering their own prices to reflect their reduced costs. So every merchant that takes your debit card will receive a windfall in profits. The banks, God bless em, will do several things. One, they will close any small balance checking accounts. These are unprofitable to them now, and they will close them by the millions, adding to the 60 million people who don't have a bank account now. If you are lucky enough to make the cut, they will require that you keep $ 1000 to $ 5000 in total balances with them, AND they will eliminate the ability to use monthly debit card usage to count towards your free checking. In other words, say bye bye to free checking.
"If the interchange fee is capped, we are forced to go back and look at our pricing on all of our checking products," said Paul Van Ostenbridge, chief executive officer of Atlantic Stewardship, based in Midland Park. He said the bank is able to pay as much as 2.6 percent interest on its "Power Rate" checking account, for example, mainly because account holders must make a minimum of 10 debit-card transactions per month to qualify. The retailer making the sale pays the bank with each swipe. "Debit card usage is what drives the revenue to the bank," Van Ostenbridge said.
Thanks Mr. Dodd and Mr. Frank.
Visit me at http://tonyfontana.com for a solution.
The sad thing is, none of this will save you money. Not one thin dime. Why? Well, the money that was being charged to the merchants is no longer going to be charged to them by the banks. Great you say. Its not. Those merchants will not be lowering their own prices to reflect their reduced costs. So every merchant that takes your debit card will receive a windfall in profits. The banks, God bless em, will do several things. One, they will close any small balance checking accounts. These are unprofitable to them now, and they will close them by the millions, adding to the 60 million people who don't have a bank account now. If you are lucky enough to make the cut, they will require that you keep $ 1000 to $ 5000 in total balances with them, AND they will eliminate the ability to use monthly debit card usage to count towards your free checking. In other words, say bye bye to free checking.
"If the interchange fee is capped, we are forced to go back and look at our pricing on all of our checking products," said Paul Van Ostenbridge, chief executive officer of Atlantic Stewardship, based in Midland Park. He said the bank is able to pay as much as 2.6 percent interest on its "Power Rate" checking account, for example, mainly because account holders must make a minimum of 10 debit-card transactions per month to qualify. The retailer making the sale pays the bank with each swipe. "Debit card usage is what drives the revenue to the bank," Van Ostenbridge said.
Thanks Mr. Dodd and Mr. Frank.
Visit me at http://tonyfontana.com for a solution.
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