Fairly or not, Countrywide Financial and its top executives would be on most lists of those who share blame for the nation’s economic crisis. After all, the banking behemoth made risky loans to tens of thousands of Americans, helping set off a chain of events that has the economy staggering.
So it may come as a surprise that a dozen former top Countrywide executives now stand to make millions from the home mortgage mess.
Stanford L. Kurland, Countrywide’s former president has formed a company called PennyMac to buy loans, some for pennies on the dollar, from the U.S. government and then proceed to collect on them. Bad idea?
It is quite evident that their efforts are, in fact, helping many distressed homeowners.
“Literally, their assistance saved my family’s home,” said Robert Robinson, of Felton, Pa., whose interest rate was cut by more than half, making his mortgage affordable again.
Others are not so happy.
But to some, it is disturbing to see former Countrywide executives in the industry again. “It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies.
Countrywide is the subject of lawsuits in several jurisdictions and Kurland's role in the busting of the lender is under scrutiny.
It's certainly not a crime to make money off of economic misfortune, but when you've been part of the problem....?
What do you think?
Vested Title Inc. 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306 Tel 201-656-9220 - Fax 201-656-4506 E-mail vti@vested.com - www.vested.com
President Obama continues to insist that only "responsible families" will benefit from his foreclosure prevention program. Addressing Congress last week, Mr. Obama said his plan "won't help speculators or that neighbor down the street who bought a house he could never hope to afford." Sorry, Mr. President. It's becoming increasingly obvious that your plan is going to help tens of thousands of borrowers who put the "liar" into liar loans.
Why won't it work as planned? "In Congressional testimony last week, [Federal Reserve Chair]Mr. Bernanke compared many troubled borrowers to people who accidentally start fires by smoking in bed." FDIC Chairman Sheila Bair "told public radio that it would be "simply impractical" to review old mortgage applications and try to distinguish between honest and dishonest borrowers. All of this moved the Associated Press to report that the President's "assurance Tuesday night that only the deserving will get help rang hollow."
Mortgage fraud is not at an end according to the Mortgage Asset Research Institute and the Treasury's Financial Crimes Enforcement Network.
There is a moral hazard in rewarding bad decisions. But it's worse than that: The White House plan contains penalties for everyone else. The mortgage "cramdown," allowing bankruptcy judges to reduce the amount owed, can only make investors less willing to lend to future homebuyers.
Even Fannie Mae has warned "investors that its focus on foreclosure prevention "is likely to contribute to a further deterioration" in results. Since the Obama plan shovels another $100 billion each to Fan and Fred[die Mac] -- for a total commitment so far of $400 billion -- Fannie is talking to you."
What do you think? We'd like to know.
Vested Title Inc. 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306 Tel 201-656-9220 - Fax 201-656-4506 E-mail vti@vested.com - www.vested.com
Arthur Conan Doyle's Sherlock Holmes would create a solution of 7% cocaine and 93% water for his drug habit. When America's economy ails, the drug of choice for American politicians appears to be taxes. As reported yesterday in The New York Times,
President Obama will propose further tax increases on the affluent to help pay for his promise to make health care more accessible and affordable, calling for stricter limits on the benefits of itemized deductions taken by the wealthiest households.
Today, February 26, 2009, the Wall Street Journal weighs in on the matter discussing The 2% Illusion,
President Obama has laid out the most ambitious and expensive domestic agenda since LBJ, and now all he has to do is figure out how to pay for it. On Tuesday, he left the impression that we need merely end "tax breaks for the wealthiest 2% of Americans," and he promised that households earning less than $250,000 won't see their taxes increased by "one single dime."
This is going to be some trick. Even the most basic inspection of the IRS income tax statistics shows that raising taxes on the salaries, dividends and capital gains of those making more than $250,000 can't possibly raise enough revenue to fund Mr. Obama's new spending ambitions.
The Journal then proceeds to show the weakness of the assumption that the tax increase will be a cure-all remedy. For instance,
The proposal is to raise the highest rate "only to 39.6%, plus another two percentage points in hidden deduction phase-outs. He'd also raise capital gains and dividend rates, but those both yield far less revenue than the income tax. These combined increases won't come close to raising the hundreds of billions of dollars in revenue that Mr. Obama is going to need."
But let's not stop at a 42% top rate; as a thought experiment, let's go all the way. A tax policy that confiscated 100% of the taxable income of everyone in America earning over $500,000 in 2006 would only have given Congress an extra $1.3 trillion in revenue. That's less than half the 2006 federal budget of $2.7 trillion and looks tiny compared to the more than $4 trillion Congress will spend in fiscal 2010. Even taking every taxable "dime" of everyone earning more than $75,000 in 2006 would have barely yielded enough to cover that $4 trillion.
The bottom line is that Mr. Obama is selling the country on a 2% illusion. Unwinding the U.S. commitment in Iraq and allowing the Bush tax cuts to expire can't possibly pay for his agenda. Taxes on the not-so-rich will need to rise as well.
Vested Title Inc. 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306 Tel 201-656-9220 - Fax 201-656-4506 E-mail vti@vested.com - www.vested.com
Will judges soon have input in the solving of the economic crisis? Some hope so. As previously discussed in these pages, moves are under way to allow Bankruptcy Court judges to "cram-down" first mortgages.
Legislation to do just that has stalled in the House and the Senate for the past two years because of opposition by Republicans and the lending industry. Has the foreclosure landscape — by 2012, one in every nine homeowners will have lost homes to foreclosure, according to a Credit Suisse Securities analysis — changed sufficiently to break the back of this determined opposition?
Says Ellen Harnick, senior policy counsel at the Center for Responsible Lending,
"I am encouraged." "I think there is a strong sense across the board that this is needed, but industry opposition has really been the issue. It's surprising because the current situation might have made you think opposition either would have gone away quietly or failed to matter significantly."
But David Kittle, chairman of the board of the Mortgage Bankers Association, said
"cramdown" (reducing the creditor's secured claim to the current value of the property) makes no sense in any shape or form.
"We've defeated it twice," he said. "We acknowledge the environment and landscape have changed, but there is nothing good about filing for bankruptcy. Our Congress should not be in the business of encouraging people to go into bankruptcy."
There are arguments on both sides of the cram-down issue. To read the full article go here.
Vested Title Inc. 648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306 Tel 201-656-9220 - Fax 201-656-4506 E-mail vti@vested.com - www.vested.com
While the subject of tax-related reporting requirements is generally beyond the scope of title coverage, we have received several inquiries concerning Bulk Sales and the provisions of N.J.S.A. 54:50-38 as amended. Here’s summary of the topic that we hope you will find informative.
The bulk sale of certain assets is subject to taxation under the Sales and Use Tax Act, N.J.S.A. 54:32B-1 et seq. Accordingly, the statutory scheme imposed a notice requirement in connection with such sales. Practitioners who routinely handle the sale of businesses are familiar with the need for the preparation of a so-called “bulk sale notice.”
In 2007 the Legislature enacted P. L. 2007, c.100, §5, (eff. June 28, 2007 and operative Aug. 1, 2007). This section, which has been codified as N.J.S.A. 54:50-38, expands the bulk sale requirements as follows:
Whenever a person shall make a sale, transfer, or assignment in bulk of any part or the whole of the person’s business assets, otherwise than in the ordinary course of business, the purchaser ... shall, at least ten (10) days before taking possession of the subject of the sale ... notify the Director [of the Division of Taxation]. ... Within 10 days of receiving such notice, the Director shall notify the purchaser ... that a possible claim for State taxes exists ... . [Emphases added.]
The statute goes on to state that if the purchaser fails to give notice to the State, the amount of unpaid taxes becomes a lien on the proceeds of sale payable to the seller. Furthermore, the purchaser shall be personally liable for the payment of the taxes due to the State. See also N.J.S.A. 54:49-1 (entitled “Tax a debt and a lien...”).
Does the sale of real estate fall within the scope of the foregoing statute? This past summer the Treasury Department, Division of Taxation, published a Technical Bulletin regarding this subject. TB-60 (7-3-08). The bulletin notes that the term business assets includes realty, but only “if the primary use of the realty is to support a business on its premises”. [Emphases added.]
What does the last phrase mean? Some attorneys have advised that notice of the proposed sale of all non-single family real estate must be given to the Division of Taxation. That notice would be given via form C-9600, Notification of Sale, Transfer, or Assignment in Bulk that must be submitted 10 days “before taking possession of, or paying for, the property.” The form must be submitted by registered mail, but” certified mail or overnight delivery is also acceptable.” Responsibility for compliance lies with the purchaser (or his or her attorney). And in the event of non-compliance, a personal penalty is imposed on the purchaser (rather than a lien on the realty).
So just what transactions ARE covered by the new notice requirement? Is the conservative approach mentioned earlier warranted? In short, yes!
In response to an inquiry we made to the Division of Taxation as to the applicability of the notice provisions, by letter dated February 19, 2009 the Division responded,
"The general rule applied to real estate transfers should be: If the realty is not the primary residence of the seller, the transfer should be reported by the transferee or their representative to the Division of Taxation as per the TB-60. Since there may be some exception so this general rule, it is best to file form C-9600 and discuss the specific facts and circumstances with a representative of the Bulk Sale Section.”
The telephone number for the Bulk Sale Section is 609-292-6604. Keep it handy.
Posts
