20071010 Economy Stiglitz in
Archive for October, 2007
Taxes: Capital Gains Tax is Going UP! It is just a matter of time.
Do your Tax Planning now or pay more later…a lot more.
They seem to think that any deduction, “tax break” or “tax loophole” is the government giving government money back to us. That is not the case at all. These people forget that what we pay and don’t pay in taxes is originally our money, not the government’s money.
EditorialToo Timid for Tax Increases Published: October 11, 2007Someday, Americans who earn millions upon millions of dollars each year will no longer pay taxes at a lower rate than the middle class and the merely affluent. Someday. But not this year, and with 2008 being an election year, probably not then either. The Washington Post reported this week that the Senate will not advance a proposal this year to raise taxes on private equity partners, the deal makers who have become multimillionaires and billionaires mainly via debt-driven buyouts of public companies. The partners pay a flat tax rate of 15 percent on most of their earnings, compared with rates as high as 35 percent for most everyone else — say, firefighters, nurses, doctors, teachers and soldiers. A spokesman for the Senate majority leader, Harry Reid, told The Post that time appeared to have run out to act this year and that, in any event, the issue needs more study. That decision has all the signs of a delaying tactic to avoid raising taxes on an industry that is a heavy campaign contributor. Mr. Reid controls the Senate calendar, so he could make time if he wanted. And several Congressional hearings have made it clear that there is no justification for private equity’s low tax rate. Its legality rests on outdated provisions of the tax code that should be changed. It is morally indefensible. And it is illogical from a tax perspective. The law rewards investors for taking risks with their money by allowing them to pay taxes on their profits at a special low rate of 15 percent. But private equity partners are, by and large, managing other people’s money. As money managers earning performance fees, they don’t deserve an investor’s low tax rate. To avoid looking craven, Congressional Democrats may move forward with a bill to raise taxes on publicly traded partnerships. They may also try to end a dubious practice whereby private equity partners convert the relatively small share of their pay that is taxed as ordinary income, at 35 percent, to investment profit taxable at 15 percent. These sorts of baby steps would be better than nothing, but they are not nearly enough. Fairness demands that the very richest among us should not enjoy a lower tax rate than most everyone else. Necessity demands that the
20071005 US Economy Job Growth Accelerates in September (Update4) Initial reports on employment are like weather reports—they are so wrong so often, you wonder why anybody even listens to them. The bottom line: The
The Fed rate cut was the right amount at the right time.There is still a lot of blood-letting necessary to deflate the real estate bubble. Along those lines, I have reviewed several situations in which investors have bought large numbers of properties in previously “hot” markets. Now they are desperate for help because their properties are vacant and underwater. They owe more than the properties are currently worth—in some instances their potential net losses are more than they have taken out in borrowed “profits”. Unfortunately, if they can’t sell it, rent for payments or afford the negative cash flow, the prices of their properties are in free fall. How much can they pay to stop the pain? And can we find someone else who can step up and make payments—even after a deep short sale? We will find out…and so will thousands of investors and homeowners in similar situations as their property prices fall. Ironically enough, property values are increasing daily, but who wants to hold onto properties that are falling 30-50% in price while they are still not cash flowing on a monthly basis? It is still not time to buy on value alone if prices are falling so much with more to come.http://www.bloomberg.com/apps/news?pid=20601087&sid=a1eZDfCaMXto&refer=home By Joe Richter
Oct. 5 (Bloomberg) –
Treasury notes fell as traders speculated that the central bank, which reduced borrowing costs by half a point on Sept. 18, will resist lowering them at the next meeting. Analysts said more jobs and rising wages will help consumers weather falling home prices, sustaining the spending that accounts for more than two-thirds of the economy. “It certainly doesn’t look like an economy that’s losing momentum,” said John Ryding, chief
While I’m in a legislative mood, here’s another one that has an impact on our ability to do subject to’s. It applies to transactions after 1-1-08.This law requires a notice to the buyer and the lenders when a property is sold with an underlying lien-most notably subject to transactions.
It sets out the warning required and allows for a rescission of the contract if the warning isn’t provided.
Of most importance to you are exceptions that are probably most applicable to real estate investors.
First is the exception if the property is conveyed to someone who buys sell or otherwise conveys 4 or more properties in a year.
The one I see that is the best one is the one that exempts you from the disclosure if a title policy is ordered. As many of you know, we have expanded our services by (soon) becoming a fee attorney for LandAmerica Lawyers Title. This means that we are like a ‘branch office’ of LandAmerica and can do real estate closings just like other offices of LandAmerica or other title companies. This has the added advantage of having YOUR attorney at the table and drafting documents that are in your favor, not someone else’s. We offer evening closings for those that can’t get away during the day and offer lower fees for our clients than most other companies. We’ ll send more info when it’s official.
Below is the act itself (it’s only 7 pages long). Give me a call if you have any questions.
As always, we ask that you not forward this email to others as it is intended for our clients only and to give them a competitive advantage over others in the business.AN ACTrelating to the conveyance of certain residential real property encumbered by a lien.BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF
SECTION 1. Subchapter A, Chapter 5, Property Code, is amended by adding Sections 5.016 and 5.017 to read as follows:Sec. 5.016. CONVEYANCE OF RESIDENTIAL PROPERTY ENCUMBERED BY LIEN. (a) A person may not convey an interest in or enter into a contract to convey an interest in residential real property that will be encumbered by a recorded lien at the time the interest is conveyed unless, on or before the seventh day before the earlier of the effective date of the conveyance or the execution of an executory contract binding the purchaser to purchase the property, an option contract, or other contract, the person provides the purchaser and each lienholder a separate written disclosure statement in at least 12-point type that:(1) identifies the property and includes the name, address, and phone number of each lienholder;(2) states the amount of the debt that is secured by each lien;(3) specifies the terms of any contract or law under which the debt that is secured by the lien was incurred, including, as applicable:(A) the rate of interest;(B) the periodic installments required to be paid; and(C) the account number;(4) indicates whether the lienholder has consented to the transfer of the property to the purchaser;(5) specifies the details of any insurance policy relating to the property, including:(A) the name of the insurer and insured;(B) the amount for which the property is insured; and(C) the property that is insured;(6) states the amount of any property taxes that are due on the property; and(7) includes a statement at the top of the disclosure in a form substantially similar to the following:WARNING: ONE OR MORE RECORDED LIENS HAVE BEEN FILED THAT MAKE A CLAIM AGAINST THIS PROPERTY AS LISTED BELOW. IF A LIEN IS NOT RELEASED AND THE PROPERTY IS CONVEYED WITHOUT THE CONSENT OF THE LIENHOLDER, IT IS POSSIBLE THE LIENHOLDER COULD DEMAND FULL PAYMENT OF THE OUTSTANDING BALANCE OF THE LIEN IMMEDIATELY. YOU MAY WISH TO CONTACT EACH LIENHOLDER FOR FURTHER INFORMATION AND DISCUSS THIS MATTER WITH AN ATTORNEY.(b) A violation of this section does not invalidate a conveyance. Except as provided by Subsections (c) and (d), if a contract is entered into without the seller providing the notice required by this section, the purchaser may terminate the contract for any reason on or before the seventh day after the date the purchaser receives the notice in addition to other remedies provided by this section or other law.(c) This section does not apply to a transfer:(1) under a court order or foreclosure sale;(2) by a trustee in bankruptcy;(3) to a mortgagee by a mortgagor or successor in interest or to a beneficiary of a deed of trust by a trustor or successor in interest;(4) by a mortgagee or a beneficiary under a deed of trust who has acquired the real property at a sale conducted under a power of sale under a deed of trust or a sale under a court-ordered foreclosure or has acquired the real property by a deed in lieu of foreclosure;(5) by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust;(6) from one co-owner to one or more other co-owners;(7) to a spouse or to a person or persons in the lineal line of consanguinity of one or more of the transferors;(8) between spouses resulting from a decree of dissolution of marriage or a decree of legal separation or from a property settlement agreement incidental to one of those decrees;(9) to or from a governmental entity;(10) where the purchaser obtains a title insurance policy insuring the transfer of title to the real property; or(11) to a person who has purchased, conveyed, or entered into contracts to purchase or convey an interest in real property four or more times in the preceding 12 months.(d) A violation of this section is not actionable if the person required to give notice reasonably believes and takes any necessary action to ensure that each lien for which notice was not provided will be released on or before the 30th day after the date on which title to the property is transferred.Sec. 5.017. FEE FOR FUTURE CONVEYANCE OF RESIDENTIAL REAL PROPERTY AND RELATED LIEN PROHIBITED. (a) In this section, “property owners’ association” has the meaning assigned by Section 209.002.(b) A deed restriction or other covenant running with the land applicable to the conveyance of residential real property that requires a transferee of residential real property or the transferee’s heirs, successors, or assigns to pay a declarant or other person imposing the deed restriction or covenant on the property or a third party designated by a transferor of the property a fee in connection with a future transfer of the property is prohibited. A deed restriction or other covenant running with the land that violates this section or a lien purporting to encumber the land to secure a right under a deed restriction or other covenant running with the land that violates this section is void and unenforceable. For purposes of this section, a conveyance of real property includes a conveyance or other transfer of an interest or estate in residential real property.(c) This section does not apply to a deed restriction or other covenant running with the land that requires a fee associated with the conveyance of property in a subdivision that is payable to:(1) a property owners’ association that manages or regulates the subdivision or the association’s managing agent if the subdivision contains more than one platted lot;(2) an entity organized under Section 501(c)(3), Internal Revenue Code of 1986; or(3) a governmental entity.SECTION 2. The change in law made by this Act applies only to a transfer of property that occurs or a contract entered into on or after the effective date of this Act. A transfer of property that occurs or a contract entered into before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.SECTION 3. This Act takes effect
______________________________ ______________________________ President of the Senate Speaker of the House
I certify that H.B. No. 2207 was passed by the House on May 11, 2007, by the following vote: Yeas 135, Nays 2, 2 present, not voting; that the House refused to concur in Senate amendments to H.B. No. 2207 on May 25, 2007, and requested the appointment of a conference committee to consider the differences between the two houses; and that the House adopted the conference committee report on H.B. No. 2207 on May 27, 2007, by the following vote: Yeas 144, Nays 0, 2 present, not voting.______________________________Chief Clerk of the House
I certify that H.B. No. 2207 was passed by the Senate, with amendments, on May 23, 2007, by the following vote: Yeas 31, Nays 0; at the request of the House, the Senate appointed a conference committee to consider the differences between the two houses; and that the Senate adopted the conference committee report on H.B. No. 2207 on May 26, 2007, by the following vote: Yeas 30, Nays 0.______________________________Secretary of the Senate APPROVED: __________________ Date __________________ Governor
To all of my clients who are rehabbers:
You may have read the recent Sunday Express News article regarding the new standards that might affect your business as a rehabber. While I thought the article was confusing and not very well written, I have had an opportunity to review the law that the article discussed, and there are some potential effects on our business as rehabbers. (the law is also confusing and not well written!) I have provided a link to the new legislation below, which should be read in conjunction with the law as it exists before September 1, 2007.
Below is a summary of the provisions most applicable to our efforts as rehabbers, but as with any legislation, my intent here is to make you aware that you need to explore this further. Any summary I could give here would necessarily omit certain salient points that could change the effect of the law dramatically on any given situation or project. So, please review the law itself with respect to your efforts and proposed projects.
The legislature, passed (almost unanimously) amendments to the Texas Residential Construction Commission Act, with the passage of HB 1038 (the bill is about 19 pages long and can be accessed at (copy and paste into your browser if the link doesn’t work):
www.capitol.state.tx.us/tlodocs/80R/billtext/html/HB01038F.htm
This is the act (title 16) that governs builders, their licensing, construction requirements, building c odes, dispute resolution, etc. While most of the changes and modifications deal with the composition of the commission, penalties, and other more mechanical aspects of the law, there are a number of provisions that contrast with prior law. (the opinion of most ‘consumer groups’ is that the legislature acted as a lackey for the builder’s industry because they focused mostly on the changes to the builders code).
Of most importance to rehabbers, is found in section 8 of the legislation, which adds a provision to section 401.005. This section previously provided a broad exemption from title 16 (the Residential Construction Commission act). Prior law exempted folks that built their own home and lived there a year before selling and also exempted homeowners who supervised, or arranged construction of improvements on a home they owned. For most rehabbers, this provided the exemption from all of the provisions applicable to builders.
the new law adds a paragraph that, while not providing an exemption to title 16, has the potential to pull rehabbers into the act. it provides: An individual who builds a home or a material improvement to a home and sells the home immediately following completion of the building or remodeling and does not live in the home for at least one year following completion of the building or remodeling is responsible as a builder under the warranty obligation created by this title for work completed by the individual. Responsibility under this subsection does not automatically require an individual to register under Section 416.001. The first question is what is a material improvement to a home. The legislation defines a “material Improvement” in section 6 of the legislation: “Material Improvement” means a modification to an existing home that either increases or decreases the home’s total square footage of living space that also modifies the home’s foundation, perimeter walls, or roof. A material improvement does not include modifications to an existing home if the modifications are designed primarily to repair or replace the home’s component parts.”Thus if you don’t change the square footage, the exterior walls aren’t moved, the foundation stays the same and you don’t change the roof, it’s not a material improvement. Likewise , if all you are doing is replacing or repairing the component parts of the home, it also not a material improvement. If you do any of these things, you need to provide the builders warranty and you are subject to being classified as a builder.
If you are exempt from the title under the section above, you will need to provide a notice when you sell the property regarding the absence of certain warranties. The notice is contained in section one of the new legislation.
The legislation also changed the definition of a builder in section 6 of the legislation (401.003 of the act) to add those persons who sell or contracts for the construction of or the supervision or management of the construction of a material improvement to a home (other than replacing a roof) or an improvement to the interior of an existing home where the cost of the work exceeds $10,000.00 (prior law was $20,000.00).
The legislation also defines, for the first time, “improvements to the interior of an existing home” [which] means any modification or installation of permanent fixtures inside the home. An improvement to the interior of an existing home does not include improvements to an existing home if th improvements are designed primarily to rep[air or replace the home’s component parts. Thus changing existing faucets is OK; putting in a new sink where none existed before includes you in the definition.
Why is this important?? It’s important because if this applies, you are classified as a builder and builders need to register, take continuing education,operate to building code standards, provide warranties etc etc..
What’s it all mean?? It seems(and this is just my opinion) that rehabbers who do minor rehabs, carpet, paint, change fixtures, fans, etc will be able to operate as beofre. Those rehabbers that change walls, add or subtract square footage, modify the roof, add additions, spend over $10 K, or make serious changes to a dwelling, will, at the very least, be required to provide the builder’s warranty (which can be provided by a separate warranty company- but not teh usual home warranty company mentioned in the TREC contract though). In addition, doing the extensive rehabs will likely result in a classification as a builder, requiring registration and all that entails.
On a macro level, it will mean that less houses will be rehabbed by non-builders. You can debate the policy implications of this all you want, but the effect is to require more regulation and (presumably) more competent licensed persons doing major rehabs.
Rehabbers need to be very careful with their projects and each project needs to be examined as to what is being done to determine if the warranties need to be given. If you have any doubt, it’s best to get the opinion of an attorney as to whether the project will fall under the Act.
I hope this was helpful to your business. Please give me a call if you have any questions about the new law or about any projects you start after September 1, 2007 that may fall under this new law.
Attorney General Abbott Charges Foreclosure Rescue Firm with Operating
Unlawful Scam
Court freezes assets of Foreclosure Assistance Solutions
HOUSTON - Texas Attorney General Greg Abbott today charged a business with
operating an unlawful foreclosure rescue scam that targeted struggling Texas
homeowners. As a result, the 408th District Court issued a temporary
restraining order and froze assets belonging to three businessmen who
organized the scheme. According to court documents, the defendants
fraudulently advertised that they could save homeowners from imminent
foreclosures.
The defendants named in the petition are: Foreclosure Assistance Solutions,
LLC of Florida, and its principal operators, Herb Zerden and Adolfo
Quintero, as well as J.W.W. Services, Inc. of California and owner John
Woodruff. Under the temporary restraining order, the defendants must stop
falsely soliciting distressed homeowners immediately. Although the temporary
restraining order only applies in Texas, homeowners nationwide are protected
by the state’s asset freeze.
Media links
<http://www.oag.state.tx.us/media/videos/play.php?image=091007fas&id=245>
Click on image
Video of Foreclosure Assistance Web site
<http://www.oag.state.tx.us/newspubs/releases/2007/091007fas_sample.pdf>
Sample of
Deceptive Mailer
<http://www.oag.state.tx.us/AG_Publications/txts/homebuying.shtml>
Brochure: Avoid Home Buying Scams
<http://www.oag.state.tx.us/newspubs/releases/2007/091007fas_pop.pdf>
Attorney General’s lawsuit against Foreclosure Assistance Solutions
<http://www.oag.state.tx.us/newspubs/releases/2007/091007fas_tro.pdf>
Attorney General’s temporary restraining order against Foreclosure
Assistance Solutions
“Foreclosure Assistance Solutions preyed upon vulnerable homeowners who fell
behind on their mortgage payments,” said Attorney General Abbott. “Today’s
restraining order and asset freeze should put an end to an unlawful scheme
that attempts to profiteer from the mortgage crisis.”
Attorney General Abbott added: “Homeowners facing difficulty making their
monthly mortgage payments should be wary of mortgage rescue scams. Schemes
offering too-good-to-be-true solutions are usually just that. Texans who
fall behind on their payments should contact their lender directly to work
out a resolution.”
According to the Attorney General’s enforcement action, the defendants
mailed cards and letters to homeowners whose mortgage payments were
delinquent and thus facing foreclosure. Their correspondence with homeowners
promised established relationships with mortgage companies and banks
nationwide. As a result, they claimed, Foreclosure Assistance Solutions
could stop the foreclosure process.
Homeowners who contacted Foreclosure Assistance Solutions were urged to sign
a $1,200 contract immediately. Under the contract, Foreclosure Assistance
Solutions strictly prohibited homeowners from contacting their lenders.
After homeowners paid the fee, they rarely heard from the company’s
representatives again. When homeowners repeatedly called the company for
answers, they were ignored. As a result, many homeowners still lost their
homes to foreclosure.
Today’s action prohibits the defendants from making false representations to
homeowners. Specifically, the company is prohibited from claiming that a
home is at risk without providing proof of that risk. The court also ordered
the defendants to stop offering assistance to homeowners without describing
the alleged assistance.
The Office of the Attorney General’s petition states that Foreclosure
Assistance Solutions deposited over $13 million in Bank of America accounts
between 2005 and 2006. Most of those funds came from homeowners who faced
foreclosure. That account and others are subject to today’s asset freeze.
The Attorney General seeks court-ordered restitution for homeowners who were
harmed by the defendants’ acts, as well as civil penalties of up to $20,000
per violation of the Texas Deceptive Trade Practices Act. Additionally, the
Attorney General requests up to $5,000 per violation for the defendants’
failure to register the business as one that conducts telephone
solicitations.
The Office of the Attorney General is engaged in a variety of efforts
involving residential mortgages. Last week, Attorney General Abbott launched
the Texas Residential Mortgage Fraud Task Force, a partnership that involves
key state regulatory agencies. The task force, established by House Bill
716, is required “to take a proactive stance towards tracking and
prosecuting mortgage fraud and the perpetrators of mortgage fraud
statewide.”
Earlier this year, Attorney General Abbott secured $21 million in
restitution for Texas homeowners who were harmed by lending giant Ameriquest
Mortgage Co. That case resolved allegations that the company and its
affiliates did not clearly disclose certain terms to homeowners, including
unpredictable adjustable rates.
Homeowners who believe they have been harmed by this or similar fraudulent
businesses may call the Office of the Attorney General’s toll-free complaint
line at (800) 252-8011 or file a complaint online at www.oag.state.tx.us.
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20070917 Economy Greenspan Recession Risk Up OR NOT It is easier to always be right when you state both choices at the same time.
Here is a video that reports that Greenspan says that US is not headed toward a recession. http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=4127451&src=finance&ch=1316259 Here is an article about an interview on his new book where he is saying that the danger of recession is increasing. http://news.yahoo.com/s/nm/20070917/bs_nm/usa_greenspan_dc;_ylt=AsWY9elPeJXzBrd9OIVtCRKb.HQA
Greenspan: Recession risk up
By Mark Felsenthal Mon Sep 17, 4:46 PM ET WASHINGTON (Reuters) - Former Federal Reserve chief Alan Greenspan said on Monday there is an increased risk of a recession but cautioned that the Fed must still be on guard for a rise in inflation. “Earlier in the year, I was talking about a one-third probability of a recession,” Greenspan told Reuters. “It’s come up somewhat, but it’s still at this stage somewhat less than 50 (percent).”He said the possibility of a large drop in house prices poses the biggest risk. A mild decline in home prices accompanied by a big pullback in construction that would help clear inventories would put the economy “in fairly good shape,” Greenspan said.“But if the whole thing festers, it will erode household balance sheets and eventually impact on what the critical support has been in this economy: consumer expenditures,” he said.The former Fed chairman spoke with Reuters and numerous other media outlets to publicize the release of his memoir, “The Age of Turbulence: Adventures in a
The book, for which Greenspan was reportedly paid an $8 million advance, hit store shelves on Monday. It was the No. 1 seller on Web retailer Amazon.com. GLOBALIZATION TURNSIts release comes as the spotlight turns to Ben Bernanke, the former
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