danhavey

Taxes on Short Sale, Loan Modification & Mortgage Foreclosure Part 6 (Excerpts) Arizona is not a recourse state, so chances are you will not owe 1099 C Income In Arizona, typically its not a recourse state, so if they are telling you that theyre going to garnish your wages because you didnt pay back your entire mortgage, there is a local bank ,that was threatening a very good colleague of ours about a small second mortgage that person had taken out. Threatening to send it to collections and garnish her wages. It simply isn't going to happen. But nevertheless, there is still the tax implications that apply, if you need to navigate through this maze. There is a lot to it, you need to protect yourself. You talked about bankruptcy is one of those exclusions, right? One of the problems with bankruptcy is people dont understand the bankruptcy laws. They are so tight now and your feet are really held to the fire from the federal government right now. It's not like you just didn't make your mortgage payment, so you go file bankruptcy, it's just not realistic. Assuming bankruptcy is the last resort option for everybody. And we certainly want to avoid that, it would not be sound financial advice from any credible source that I can think of. Let's walk through a case scenario, somebody who is listening to this broadcast, their head is spinning right now, they're thinking, oh my gosh. I should have known about the tax implications, a short sale versus loan modification. Let's start at the top and work through a quick scenario. And then we'll point out the specifics of what they should be considering right now. For example, we talk about this all the time and to your credit Michael Barnes and to Velocity Financials credit, you were early in bringing out the loan modification for people who were in a distress situation regarding a mortgage, maintaining or keeping up with the mortgage payment. So you started going down the path where the refinance started

Taxes on Short Sale, Loan Modification & Mortgage Foreclosure Part 7 (Excerpt) Beware of grandiose claims when dealing with a loan modification firm. You know I am glad that were back, when we went to the break we were talking amongst ourselves about some of these concepts, I really want to bring this back down to the listeners. So they really understand what this means to them. You have three strategic partners, each of them experts in their field, sitting around these microphones in the studio talking about how these factors have an impact on the listening public, the people listening to this station right now. Velocity Financial is an expert in all things mortgage related. It represents the largest asset many people have in terms of their home. What were talking about is, we know the economic pain that exists, you probably read that Arizona has the dubious distinction according to the Case-Schiller index of having the highest property value declines in the country. People are feeling some pressure here and for those people who want to consider what a loan modification might do for them, should call you and talk about what that represents. Then from there, you can refer them to people like Mike Patenella to talk about the tax ramifications, Mike can speak to some of those items and I can talk about their overall financial planning. But to start with let's talk about what the loan modification process really represents and who can benefit from. We have talked about all the different things you can do with your home as a home owner, there is the loan modification and there's several different types of loan modifications, there is the option of a short sale, which can have huge tax implications that people may not be aware of. There is the option of foreclosure, which is almost the last thing you want to do and there is also bankruptcy. Loan modification is essentially for the person who is unable to make your payment, because there was a material

Taxes on Short Sale, Loan Modification & Mortgage Foreclosure Part 8 (Excerpt) If facing financial issues make sure you hire qualified help, mortgage broker, financial planner, CPA and attorney So with the real estate market, we know here in Arizona, there are literally hundreds of thousands, maybe millions of people that are confronted with a very difficult decision, declining home values, upside down in the home, the home value is worth much less than they actually owe, we need to give them options. If the option is foreclosure, short sale or loan modification, I would take the modification approach, most likely we would have to look at a person's situation a little bit closely, but as I am going down some of the things that we have prepared for the show today, it looks like there are four main issues that people should know they need to consider, the cancellation of debt income, capital gains tax issue, the deficiency judgments side, and the credit report side and Mike, I know you can talk to some of these things. But we brought up in the first segment what I think this might represent and then I think we started to talk about how Mike can help people minimize the impact of what that would look like on the tax return or eliminate based on the situation, so let's make sure that the people know these four concerns are something they should consider as they seek advice. Absolutely, and it's really important that you talk to each arm of the team. You're not going to be able to make all of these decisions just by talking to your tax guy, or your mortgage guy. They all need to be on the same page, because one of the decisions by one of the three is going to impact the other two aspects of the situation. Mike, that's a really good point. And thats one of the reasons why we work together, Brett and I are working together and you and Brett have been working together for years and the three of us have like ideals and also know for the most part what the ramifi

Taxes on Short Sale, Loan Modification & Mortgage Foreclosure Part 4 (Excerpt) 1099 C is for Cancellation of Debt Income Only, not for Interest Rate and Payment Reduction So for people who find themselves in a very difficult situation considering these options whether it's a loan modification or a short sale, whatever they need to do to relieve themselves of this particular burden of a mortgage, that for whatever reason they're no longer able to maintain, they are not always considering the tax ramifications associated with taking a specific course of action, like this example the short sale option. Right there is actually two pieces of tax component here, you have the forgiveness of debt income that we talked about, they still have the fact that you sold your house and you have to see if there was a gain on that. Over and above the cost basis of the home. We talked about the 1099Cs a few moments ago, did you say that the lender sends a copy of the 1099C to the IRS? Absolutely. Now I'm the guy for a few minutes ago who bailed on $400,000 and sold it for $300,000 am I going to get a copy of the 1099C if I haven't given my lender my new address. Well that could be a problem, they will send it to the last address they have on record for you. And as a homeowner it's my problem. The IRS will get a copy, so they will look for it on your return, if you forget to put it on then you're going to get a friendly notice from the IRS. If somebody is going to do a short sale, its a fairly civil transaction and when I say civil I mean going for a short sale is horrible for them and their family, but it beats the alternative which is foreclosure, and I think the real problem is when there's a foreclosure and the guy just walks away and moves off to El Centro California, he's the one who's really getting hurt. So in the event that somebody takes a course of action, and I know that Velocity financial and Michael Barnes, youre not necessarily advocates for that short sale

Taxes on Short Sale, Loan Modification & Mortgage Foreclosure Part 2 (Excerpt) A team approach is best when dealing with all issues regarding taxes, real estate and investments Brett, wow what an exciting four days Yes the last four days in the stock market have been a really wild, you know the doom and gloom. I will give you an example, the year to date low closing of the S&P 500 at 752 was the value for that index. And that occurred last Thursday, November 20 the last four days in the stock market has virtually gone straight up, as a matter-of-fact, reporting a yearly 15% gain in those four trading sessions. What people fail to realize is that level of gain, coming off a loss in your portfolio is really important to get you back on the right track, so those who are wondering if its time to buy or should I have sold. I say November 20 you can't afford to miss a 15% rally. I can't tell you what the market will do come Friday, which is a half day or next week, but I can tell you there is a growing consensus among multiple economists, and experts say were in for the mother of all rallies in an otherwise bear market economy. And one other thing that I want to point out really quickly, thats so important to the listeners out there in regard to this show specifically. We spent a lot of time talking about strategic partnerships, and today is a perfect example of what Velocity Financial and the Velocity of Money Radio Show are all about. We have strategic partnerships to work towards the best possible outcome for the listeners that are tuned into the broadcast. They are looking for a ray of hope, theyre looking for education, theyre looking for information. And when you put those factors together and introduce tax experts like Mike Patenella, the certified professional mortgage strategies such as you, registered financial consultants like I. Thats how people, when we have these experts and strategic partners working towards the best possible outcome. Th

Taxes on Short Sale, Loan Modification & Mortgage Foreclosure Part 3 (Excerpt) Cancellation of debt income reported to the IRS on form 1099 C So we talked about 20 million homeowners are upside down on their mortgages, thousands of their homes are being foreclosed on every week, property values may still be declining in some areas. Homeowners are walking away, they are doing foreclosures, there is a deed in lieu that people may not be aware of, loan modifications in many different shapes, forms and fashions and short sales. These are all things that do have tax implications that a lot of people are not aware of. Each has its own consequences thats why we have asked Mike Patenella, a CPA to be with us today on the air. Mike tells a little bit about yourself. Well I am a CPA. I have been in public accounting since 1988, I have my own tax practice and operate out of Scottsdale, and we focus on tax-preparation, advance planning for high net worth individuals and small businesses throughout the Valley. I moved to the Valley in 1990 back from New York. You know, I have had the opportunity to work with Mike as a strategic partner as well and I share a number of clients. Each time I have had the honor of providing him a referral for tax work the outcome has exceeded expectations, so I am really pleased to be part of the discussions today and to work with such a great group. It has been a pleasure, and again if you're talking about that strategic partnership, the financial power team, as our good friend Dan Havey likes to call it, the outcome is important, but when a client calls you up or a homeowner calls you up and says thank you so much for sending me to Brett or Mike, what a great job, wow. Thats the greatest, again Mike thats why youre here with us today So we should probably dive right in. I know we've been talking a lot the last few weeks about loan modifications and how Velocity Financial can help in that regard. But, help me out, even for my fin

Taxes on Short Sale, Loan Modification & Mortgage Foreclosure Part 1 (Excerpt) Expert tax advice from a CPA regarding a real estate related issues Today's show has a timely message.  We have with us, an expert in the tax ramifications of the different types of mortgage situations that people find themselves in, we have brought in Mike Patenella, that I will introduce in just a moment, as well as Brett Fallon is back with us.  Were going to be talking about the tax ramifications of short sales, foreclosures, and some of the different types of loan modifications.  Now if you listen to our show regularly, of course you know, we have been over the last several weeks, talking about loan modifications, but we have been getting hundreds of e-mails and calls requesting more information on the loan modifications.  There are also some interesting questions that people ask about whats going to happen in regard to taxes.  Thats the one thing that so many people are not talking about.  Well we need to talk about it.  Its something that we need to bring to you that you can hear and thats what were going to focus the majority of today's show on.  Before I introduce Mike I need to introduce one of my very best friends and the best financial advisor I have ever known, Brett Fallon.  Brett thanks for being on the show today. Brett also has some information in regard to the markets and there is some really great, exciting stuff out there.  But before I throw that back over to Brett, we have our expert guest today.  He is a CPA and his name is Mike Patenella, thank you for being on the air with us today. Mike is an expert in taxes, he is a CPA, he knows the ins and outs of all matters tax.  His expertise in this particular area is widespread.  Mike is an expert and will have specific answers to questions that we have put together.  If you have had a foreclosure or youre facing foreclosure or if youre considering a short sale or bankruptcy, any number of things. 

Real Estate & Mortgage 4 – Foreclosure Meltdown Fraud and Scams Dec08 – Mortgage Backed Securities

Part 4 (Excerpt)

Mortgage Backed Securities, Collateralized Debt Obligations and Tranches – Oh My!

Now, I put the colorful title on “How to Screw the Bank that Screwed You” for no other reason than to get people to click on it to get the information, because frankly, a lot of people were given really bad loans, were given really bad advice, and sometimes you have to fight back.

Here is one of the things and again I’ll try to make this as uncomplicated as possible. Let's say you bought the house and you got the loan through a mortgage broker. Well that mortgage broker didn’t really give you the loan. They bought that loan from a wholesaler of mortgages. That wholesaler of mortgages, in turn bought that loan from one of those big huge Wall Street banks, most of which are out of business right now.

Important thing to point out if I may, Velocity Financial is a mortgage broker, we do get our money from several wholesale banks, I just wanted to point that out because we're glad we’re a broker.

Just to continue the analogy. So the broker buys it from a wholesaler, who buys it from the Wall Street bank, and like I said, most of them are out of business now. And what the Wall Street bank did with thousands of these loans worth billions of dollars, they put them all together into what is known as mortgage backed securities. That is the stuff you hear like Fannie Mae is selling and there is an interest rate put on them, and what happened to these mortgage backed securities is they in-turn were bought up by other Wall Street banks, combined with other mortgage backed securities and they were called collateralized debt obligations.

Well then these brainiacs on Wall Street decided to chop these collateralized debt obligations up into what is referred to as tranches. So let's say you had your best quality AAA borrowers in the top tranch . And obviou

Real Estate & Mortgage 5 – Foreclosure Meltdown Fraud and Scams Dec08 – CDOs & Bond Rating Agencies

Part 5 (Excerpt)

CDO’s and the disgraceful actions of the Bond Rating Agencies

We just talked about the process regarding your mortgage lender and having “standing”, which is a legal term, which was a little complicated Dan. I'm not going to lie to you. That is why all the information is on the website, http://MortgageAnswerman.com And you can also go to VelocityFinancial.com. There is a link there to Dan's website.

Dan is talking about breaking these mortgages down and eventually selling them off to Bangladesh in different tranches. Some of the servicers are actually in India, of all places. If you have a mortgage that you're having trouble with and you need to call somebody to get help, you are actually calling India to talk to somebody about your mortgage here in Phoenix. I don’t really know why, but none the less, Brett, you wanted to address this from a financial advisor standpoint

Yes, I am pretty immersed in this because what Dan was describing in these collateralized debt obligations, CDO’s, CMO’s etcetera, does get a little complex. I think I can clarify it a bit as you may feel that this doesn’t apply to me, is this something I should consider in my own strategy. It works like this, this is true for most people who took out a mortgage in the last couple of years, you start your mortgage and get your payment book, and you are writing a check to Bank A, and then you get a notice maybe 30, 45 or 60 days into this loan that says “thank you for your business you are now writing your checks to Bank XYZ”, your payment to Bank XYZ. That is exactly what was happening.
When you slice the loans up this way, and you get it spun off.

Wall Street wanted their piece of profitability right? The mortgage industry was running rampant in terms of profitability. And so Wall Street says hey I want a piece of that and I know how we can do i

Real Estate & Mortgage 6 – Foreclosure Meltdown Fraud and Scams Dec08 – Recession & Inflation

Part 6 (Excerpt)

World wide recession caused by the mortgage melt-down. Is inflation far behind?

What their ratings were based on was simply that nobody thought real estate would go down again. They were just going to keep going up forever, doesn't really matter if you call it AAA or BBB. Isn’t going to matter if the note never get’s called.

We certainly saw that for years in the mortgage industry. We would refinances somebody and a couple of years later they would call us up again and say hey my house went up $100,000 in value and I bought a car and a boat and my kids need to go to school and give me another hundred grand out of my property, and it just kept going up forever and ever and ever and as long as that was happening everything was just fine. But then as we know everything just stopped.

There's only so much leverage that could exist out there and that is why the stop started if you will. Because as that leverage continued to balloon; how much more leverage can a Wall Street firm or a bank take on to buy up more mortgage backed securities? Oh I know we’ll carve out these tranches and we’ll sell them off overseas. So that is where it ballooned, how wide reaching and impactful has it been?

Well we see it now it's a global recession. It's not a US recession for that reason. And that is starting to clean itself up, not only by the Fed aggressively here at home, by working with other developed nations around the world with their equivalents of the Fed in those countries they are doing the same thing. They are acting aggressively and that's great for the short-term but that is like putting a band-aid on a carotid artery that has been severed, it doesn't work. That is okay for today and tomorrow, long term there are bigger issues, bigger issues translate into inflation. Where I am going with this is the fact that right now with money bei

Real Estate & Mortgage 7 – Foreclosure Meltdown Fraud and Scams Dec08 – Foreclosure Rescue Scams

Part 7 (Excerpt)

Foreclosure Rescue Scams and How to Protect Yourself

“The Foreclosure Sharks”, you have written this book or I think it's called a white paper. Free report whatever you want to call it its packed full of really good and interesting information. It's called “The Foreclosure Sharks - A look at the rampant theft of Americans’ homes through foreclosure rescue scams”.

And folks I have to tell you I think we're going to spend the next week, the majority of the show talking about what the heck is going on out there. And what you need to do to protect yourself in case you should happen to be against this problem. You really need to know what your options are. This free report is available online at http://mortgageanswerman.com. You have got to get this. The information is really good, and one of the taglines that you have here Dan is, “There’s blood in the water and the sharks can smell it”.

Right. What made me actually write this was a number of years ago I had been working with people in foreclosure for years, and it was just a way to let them know what was going to be going on once the foreclosure was filed against them. Now in many cases, these people were already experiencing what was going on.

And again I've recently had a friend or two go through foreclosure and I had them collect all of the paperwork that they got from all of the foreclosure guys out there trying to help them sell their house or do whatever it was, and I was surprised at how thin the stack was. This one gal in particular, lives in Scottsdale in a very nice house and she didn’t have more than maybe 6 letters. In the past, a couple of years ago, especially at the peak of the market, when somebody was in a foreclosure situation they would have seriously a stack 6 inches thick.

People would be knocking on their door 24 hours a day, calling them,

Real Estate & Mortgage 8 – Foreclosure Meltdown Fraud and Scams Dec08 – Foreclosure Sharks & Scams

Part 8 (Excerpt)

Rent skimming and other foreclosure scams – Home Owner Beware.

And what rent skimming is, a “shark” as I like to call them, a shark will go out and find a vacant house, and they will go in and change the locks and maybe clean it up a little if need be but then they will rent it out to somebody. They will move that person into the house, they will get their $1,000 or $1,500 a month rent payment on the house, and 3 or 4 months down the road the repo man comes knocking on the door and says, hey you have to get out. He says this to the tenant of course and the tenant says, hey you don’t own the house, and it turns out that the guy that they were paying rent from for the last 3 or 4 months didn’t own the house either.

So you are talking about somebody, a shark, who goes out and finds a vacant house, breaks in, changes the locks, cleans it up, puts it up on Craig’s list and rent’s it out and collects the money. He never owned the house, he never had any rights to the house, then all of a sudden the sheriff shows up and says you have to go. How can that be legal? Well it’s not legal; it’s not legal at all. Because the person who rented you the house knows that they don’t own the house, now of course the tenant doesn’t know that.

Now under Fannie Mae’s new guidelines, that tenant, if they are lucky enough to have Fannie Mae own that property, or own that note, you may actually get to stay in the house because Fannie Mae has some new guidelines that if they have a tenant in the house, they will re-sign a contract with them and let them stay in the house. It didn’t say how long but they will let them stay in there for a while.

Wow, that is fantastic. I actually didn’t know about that, so Fannie Mae is getting into the property management business. Yes, our government is now becoming a landlord as well as the entity

Real Estate & Mortgage 1 – Foreclosure Meltdown Fraud & Scams Dec08 – First Time Home Buyers

Part 1 (Excerpt)

Forget the doom and gloom, First Time Home Buyers can buy with FHA

Thanks to my very great friend Brett Fallon for taking the time to be here in studio today. Brett is one of America's finest financial advisors. And of course the infamous Dan Havey. Now we all love Dan Havey because he was instrumental in getting me into the mortgage industry about 14 years ago. Most importantly, Dan was instrumental in helping us put together the loan modification hotline and he is the author of “Real Estate’s Future”.

So today we have a few things we want discussed in regard to the economy, what's happened, we’re wrapping up the year. You may have heard about this in the media, of course the media's job is to scare you. Well our job is to tell you the truth. So Brett you have some data and some information that you wanted to share

Some of the things you hear in the media, you can’t escape, its pretty much doom and gloom, sky is falling, this is the next Great Depression. It's over for all of us and we should all just pack up and go. That kind of stuff is pervasive out there and creates fear and a lot of anxiety amongst people who are either investors, people who are looking to buy a house, looking to refinance a mortgage.

People don’t realize there are certain tools that exist that we will talk about during the course of the show today. They should understand that some of the things that we discussed prior to today's broadcasts were interest rates. Interest rates are at historic lows. Money is cheaper right now than it has ever been. We know the Fed recently reduced the Fed Funds Rate and that is the rate that banks are lending money to one another at.

Right now that rate is zero. Historically, that's never happened in the United States before. The Fed's idea is to help to unfreeze this credit market and we keep hearing all this ta

Real Estate & Mortgage 2 – Foreclosure Meltdown Fraud and Scams Dec08 – Bottom of the RE Market?

Part 2 (Excerpt)

Have we hit the bottom of the Real Estate Market yet?

And Michael as we mentioned before I'm in the middle of writing a book that is entitled “Real Estate’s Future”. And again what it is, is essentially a scoring model, where we have taken hundreds of different factors, enter them all together and what we look at is that this model can actually call the top and bottom of the real estate market. With this model we were actually able to call the top of the real estate market in Phoenix, Arizona six months before it happened.

Now we’re working on creating a national model. What we're seeing today in the building numbers is that they came out really bad. And there was something on Zillow the other day that said that Americans have lost trillions of dollars in real estate value. And its easy to get all emotional about this especially if you're one of those people who are losing their homes. And you are one of the people in trouble, but eventually we will get to the bottom market again. Hopefully by then I'll have my Book complete and we will be able to warn people that we think it's going to be the bottom of the market.

I always joke about, you know it’s the bottom of the market when something happens called “capitulation”. When essentially everyone has given up, and if you'll both recall when we were at the top of the market back in 2005-2006 you couldn’t go to a party without having at least 10 people tell you about all the real estate that they were buying, and all the millions of dollars that they were making.

And now my definition of when we’re going to hit the bottom is when you go to a party you tell someone you are going to buy some real estate and they all take you out back and slap you around because the think you’ve gone crazy. And that's how you are really going to know that we have hit the bottom. Bec

Real Estate & Mortgage 3 – Foreclosure Meltdown Fraud and Scams Dec08 – Jobless & Property Values

Part 3 (Excerpt)

Is the Media hype about jobless claims helping to push down property values?

Now we were talking in the previous segments about the current economy and the pitfalls. Let's talk about that more deeply, these jobs numbers. What should we make of this?

You know, it’s an interesting point, I keep hearing the media spin that this is the next Great Depression, talking about bread and soup lines and free government cheese and all that kind of stuff. That is absurd to me. The actual jobless number that was reported before the end of November for the past month reached a higher level for us as a country of 6.7%. There were 530,000 jobs lost during that month, but when you put that in the context of the 6.7% onto other historic recessions that number is still quite low. Yes it's tough, I get that, but we were riding high for so long that we tend to forget that and think this is as bad as its ever been.

Yes we got accustomed to job creation and this euphoria existed in the United States for decades. And that's fine. These are economic cycles that will continue to happen into the future. This is nothing new. To say this is a new place for the United States to be economically speaking, that is absurd. This definitely is a slowdown, this is definitely a recession. It might even be in depression, but what people fail to realize is how resilient this economy is and what this represents.

This show is dedicated to the home buyer, everything mortgage and real estate related. Well let's put that into context. In the first segment Dan was talking about the effects of his data and what that represents and what the median home price represents in Maricopa County specifically. So if you take that data and start to look at the people who still have a job, still have the ability to pay a mortgage - the buying opportunity that we need to address is re