The next generation: Imagining Life without Fannie and Freddie

From the New York Times’ Gretchen Morgenson.

KUDOS to Treasury and the Department of Housing and Urban Development for some straight talk about the nation’s broken mortgage system.

A report to Congress from those departments, published on Friday, provided some long-awaited analysis by the Obama administration about what went wrong in housing finance — and how to fix it.

 The report, entitled “Reforming America’s Housing Finance Market,” zeros in on the perverse incentives created by the nation’s mortgage complex during the years leading up to the panic of 2008. The Treasury’s recommendation that we wind down Fannie Mae and Freddie Mac and let the private mortgage market step in is spot on.

So what’s next?

Still, it is not clear that such moves, sensible though they are, will be enough to prevent taxpayers from having to bail out institutions that back mortgages in the future. That is because the debate over how to put the Treasury’s ideas into effect will soon become a brawl. Powerful participants are already working overtime to keep taxpayers on the hook.

The opponents to reform: the Mortgage Bankers Association, the Financial Services Roundtable and the Center for American Progress. They are urging the creation of a new federally-related entity.

Taxpayers surely do not want to create new government-sponsored enterprises that may later fail. So why not work toward a system where the government is solely the home lender of last resort? That way, the private market could operate in good times; the government would step in only if the market froze up.

Friday’s report seems to be leading in this direction. But it supplies no road map to a government system that provides a catastrophic insurance program only for those times when the private market is not working.

There is much to hash out if we are to build an effective housing finance system in America. Being truthful about what went wrong in the past, the report paves the way for a meaningful discussion. But we must also be sure that the solutions do not bring us back to where we began. That is where the real fight will be fought.

Read the full article.   What do you think?

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Sign of the times - mortgage assistance and income taxes

From Bankrate.com. The question and its answer - Is mortgage payment help taxable?
By George Saenz

Dear Tax Talk,

I am receiving money from my mortgage lender as part of a job loss mortgage protection insurance program. Are these payments taxable and if so, how would I report them?  -- Karen

Dear Karen,

I'm sure you had enough bad news when you lost your job. However, more bad news is that the mortgage assistance payments are considered other income by the Internal Revenue Service. The good news is that you can still deduct your mortgage interest as long as you itemize your deductions on Schedule A.

According to IRS Publication 525, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability or unemployment. Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year.

I don't see that there would be any distinction between credit card and mortgage insurance that would change the tax consequences. However, unlike credit cards, the interest on your mortgage is tax deductible.

Read more: Is mortgage payment help taxable?

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FDIC bank closures - and they're off!

The FDIC hit the ground running this year by closing three more banks, bringing the total this year to 14.

The failed banks, so-called community banks, are located in Georgia and Illinois, but have a message that resonates across the country.

Community banks get their money locally, and lend locally.  When they venture into commercial loans, which tend to be larger, they enter dangerous ground because a problem with a commercial loan translates into a large hit on the bank's books.
Read the full report from the New York Times, Regulators close three banks

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WaMu deal in trouble?

From the Seattle Times, bad news about the WaMu settlement.  Too early to predict the fallout.

Washington Mutual Inc., former parent of the biggest U.S. bank to fail, missed the deadline for approval of its bankruptcy plan, making a related, $10 billion settlement subject to cancellation, a company lawyer said.

The missed deadline means the parties involved in the settlement, JPMorgan Chase and the Federal Deposit Insurance Corp., have the option to cancel the agreement, said Brian Rosen, a WaMu attorney.

The settlement, which splits billions of dollars worth of tax refunds and cash, is the central feature of WaMu's bankruptcy-exit plan, and JPMorgan and the FDIC are unlikely to pull out of the deal, Rosen said.

Read the full story - Deadline passes for approval of WaMu deal

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6 House repairs to tackle

From Bankrate.com.

In this economy, you may be tempted to delay or even skip minor home maintenance repairs, cleaning jobs and inspections in your home. But don't be penny-wise and dollar-foolish. That $200 or $300 you save today could result in expenditures of $3,000 or even tens of thousands next month or next year if hidden problems in your home go unnoticed and become worse.

Consider coughing up a little dough to take care of these small jobs before they morph into gigantic, expensive jobs later.

Here’s the list of repairs:

1. Annual HVAC inspection in spring or fall. Why?

"Things that happen often happen at the worst possible time in the worse possible conditions and you're looking at the maximum rate," says Terry Townsend of Townsend Engineering in Chattanooga, Tenn., and former president of the American Society of Heating, Refrigerating and Air-Conditioning Engineers. Remember, continual maintenance prolongs the life of the equipment. "You're sitting there with an investment of thousands in your HVAC system and you're investing a few hundred dollars in maintenance."

2. Chimney inspection, annually. Why?

"A simple chimney cleaning can prevent chimney fires and damage to your entire house," says Ray Gessner, a licensed professional engineer and owner of A Step in Time Chimney Sweeps, with offices in the eastern U.S. "Water is the No. 1 problem with chimneys. With water damage, you might need to have your whole chimney rebuilt."

3. Termite inspection, annually, in spring or early summer. Why?

"Termites eat the wood from the inside out," Curtis says. "A typical homeowner would not be aware they are even in their home until months or years after they get in and start causing damage. A lot of people don't realize that termites don't just feed on the home. They'll eat flooring, insulation, books -- I've even seen them penetrate through swimming pool liners."

4. Power washing and sealing of your wood deck. Every 1 -3 years depending on amount of traffic, mildew and mold. Why?

Power washing gets rid of stains, algae, mold, mildew and moss. Algae and mold can make your deck slippery and dangerous, says Justin Lee of JL Power Washing in Williamsburg, Va. Sealing your deck after it is cleaned helps prevent water damage. Wood soaks up rain like a sponge, expands and then shrinks, Lee says. Sealing makes the water bead up and roll off. And let's not forget -- your deck will look nicer, too.

5. Dryer vent cleaning, annually. Why?

Once the vent gets clogged, the dryer can overheat and start a fire.

6. Carpet cleaning every 12 months. Why?

Your home also will be healthier with pollen, bacteria, insecticides and dirt removed, says Howard Partridge, founder and president of Clean as a Whistle, a cleaning company outside Houston.

Read the full article on Bankrate.com

For your next title order or

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Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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