Frisco Sunrise Rotary

Frisco Sunrise Rotary meets at 7:30am each Tuesday morning at Randy’s Steakhouse and our speaker this week is John Gay, owner of Frisco Financial Planning.  John has been a friend for years and I wanted him to come tell us all his thoughts on the “Fair Tax” idea.

Quote by William Simon

“The nation should have a tax system that looks like someone designed it on purpose.”

 

Quote by Will Rogers

“The income tax has made more liars out of the American people than golf has.  Even when you make a tax form out on the level, you don’t know when it’s through if you are a crook or a martyr.”

Quote by Hugo Black

“The United States has a system of taxation by confession.”

 

Quote by Arther Godfrey

 ”I’m proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money.” 

My State of the Industry Views

Many of you have watched me and my life changes over the years.  And I bet a few of you were surprised 8 years ago when I decided to change from fun loving bicycle guy to pencil pushing mortgage guy to 2 years ago opening my own Mortgage Company.  I sure was.  Over that time I have engrossed myself into this industry and it amazes me when I see huge changes like we have coming ahead of us.  Simply put- because of the actions of a few greedy individuals- the housing industry will change and not for the better.
 
There are 2 worlds in mortgage lending- Retail and Wholesale.  I am a Mortgage Broker and work out of the Wholesale channel.  We all deliver our loans to the same place for the most part in Retail and Wholesale- the large lenders that set their standards of underwriting and products via the guidelines of Fannie Mae and Freddy Mac.  Be it Wells Fargo, CitiMortgage, Chase or Bank of America- they all carry the same products and after closing, the loans, for the most part turn into a commodity that can be traded and sold without too much affect on us the home owners.
 
Since home values have dropped in many States- those commodities were not generating the same profit and when you don’t show a profit- folks start asking to see your books.  Hence- where we are today- bad books and deception.  Then came the finger pointing, “it wasn’t us, it was them.”  Sort of reminds me of Adam and Eve in the beginning- if only they would have 1. Stayed away from the darn tree and 2. Owned up for their actions instead of placing blame down the line.  Well- us Brokers are the ones that most have decided can’t defend themselves as well and therefore must be the root of all the problems we have.  Hard for me to understand that- if I am simply approving folks on guidelines for products that Fannie and Freddy created and that the Banks then underwrite and approve- how am I the bad guy again?
 
To save us- the Government has created many committees and they have started to put in place new laws and guidelines that Fannie and Freddy should follow and in turn- so must the Banks.  Potential borrowers are seeing new credit and appraisal actions start to take affect and both are stopping folks from that home loan transaction.
 
Credit:  The other day I was working up a refinance scenario for a friend of mine who we had just closed on their home loan a year ago- let’s call that Before Fallout, BF.  So a year ago this person with a credit score of near 689 was, in the Banks and Guidelines views- A Paper loan without any adjustments to their rate.  Today- After Fallout, AF- they are well below that A paper (with the same rate mind you as BF) and if the market rate for perfect credit was 4.875% that day- they would have gotten a 6.25% rate, after factoring in all the adjustments for risk.  Granted- we need to get the ropes pulled tight- but this is just silly.  It is them making up for past mistakes and looking to gain back as much income (risk) as they can and Mark my Words- this will hinder lending going forward.
 
Appraisals:  Soon I won’t be able to 1. Pick the appraiser to use on your transaction and 2. Have any communication with the appraiser that is picked.  The belief here is when Mortgage Brokers pick and speak with appraisers- we manipulate the market and push the values to what is most needed to make that loan work.  On my web site I list a few trusted appraisers that I have worked with for years, want a challenge? – call any of them and see if you can “manipulate” them into getting you the value you want for your home.  Can’t be done- these guys have licenses and risk all if even one appraisal comes back from a 3rd party reviewer and can either lose their license or go to jail.
 
I want this not to be a grim picture of the 2009 home buying and refinance season- just my views as to what I have been watching.  My belief is that many in power view Mortgage Brokers so poorly- they are looking for any and all ways to make us appear less attractive and to encourage the client straight to the Retail side of the banks.  Currently I am in a great place and have more business than I can keep up with and hope that those oh so powerful folks don’t look for more ways to change that.  Thanks for reading-

Quote by Laurence J. Peter

“America is a land of taxation that was founded to avoid taxation.”

Quote by Ronald Reagan

 ”The taxpayer – that’s someone who works for the federal government but doesn’t have to take the civil service examination.”

I Want To Write About It, Really

The $700 Billion is all the news right now but I honestly have little to comment on it.  Guaranty this, I do not want the banking and insurance markets to take down all of this economy, but I am just mad.  Mad that the “smart guys” created ways to make their companies more profitable and then shared those ways with their other friends who were also leaders in their companies.  Credit Default Swaps without capital to back it up.  Want to know the scarry part- this is not about the “sub prime” mess, this is big banks and insurance companies getting greedy, leveraging some bets (not using their money while betting) and they now say there is over 60 Trillion exposed in this Shadow Market.  Yea to the smart guys who used a math equation to make millions and look at us now.  And better yet- shift the focus away from them and on to the “sub prime” fall out for the mess we are in…

Tax Relief, Sans Itemizing

By Kenneth R. Harney
Saturday, July 26, 2008; F01

 

The giant federal housing and foreclosure relief legislation heading for enactment contains a little-noticed — but potentially far-reaching — change in real estate tax policy.

 

It would permit millions of homeowners who do not itemize on their federal tax filings to claim a deduction for at least a portion of their local property taxes — up to a maximum of $500 for single filers and $1,000 for married owners filing jointly.

 

Intended as a one-year economic-relief measure for people who do not itemize, the new write-off is highly likely to become a permanent part of the tax code, tax experts say. Currently, it would apply only to tax returns filed on 2008 incomes and cost the federal treasury an estimated $1.2 billion to $1.5 billion for the year. The concept originally surfaced in February in the Senate’s version of the national economic stimulus package but was left out of the final deal with the House.

 

According to an analysis of 2005 IRS data by the nonprofit Tax Foundation, only 35.6 percent of taxpayers — tenants as well as homeowners — itemize on their returns. In some states, it’s less than 20 percent, such as in West Virginia, where just 18 percent of taxpayers itemized in 2005. Only in Maryland, a relatively high-income state, did more than 50 percent of taxpayers itemize.

 

Among homeowners nationwide, an estimated one-half itemize, but one-third of homeowners have no mortgage debt against their property, and therefore do not claim mortgage interest as a deduction.

 

The new legislation would effectively add another tax preference for people who own houses while offering nothing to those who rent. The idea, supporters say, is to provide greater fairness for a group of owners — often seniors and lower- to moderate-income households — who opt for the standard deduction but also pay local and state property taxes.

 

Critics of the plan say it’s another example of the government’s ongoing inequitable approach to housing policy — overemphasizing the financial benefits for homeownership vs. renting. Some critics argue that heavy tax subsidies for ownership helped stimulate buyer mania during the boom years, along with zero-down and “stated-income” financing that put thousands of people into real estate they could not afford.

 

“We think [the new deduction] is terrible policy,” said James Arbury, senior vice president for government affairs of the National Multi Housing Council, the country’s principal trade group for rental property developers, owners and managers. “It actually makes things worse, rather than better” by sweetening the pot further for ownership while ignoring tenants — the vast majority of whom are also non-itemizers.

 

“Many renters are under the same economic duress as owners,” Arbury said. “But nobody is giving them new tax deductions.”

 

The National Multi Housing Council has fought a long, unsuccessful campaign to persuade Congress to take a more even-handed approach in supporting taxpayers’ housing choices.

 

“We understand why members [of Congress] would want to put more goodies in homeowners’ baskets” in political terms, Arbury said. Owners outnumber renters roughly 2 to 1 and have influential lobbies such as the National Association of Realtors and the National Association of Home Builders pushing their interests. But renters ultimately end up paying for part of the subsidies that flow to owners, and critics such as Arbury say that’s not fair.

 

The Senate version of the housing bill provided larger maximum deductions but also contained language clouding the use of the write-off in jurisdictions that raise property rates immediately after enactment of the legislation, through Dec. 31.

 

The House successfully demanded removal of those restrictions as the price of accepting the Senate’s higher limits. Although specific procedural details were not spelled out in the legislation, owners who opt for the standard deduction on their 2008 tax filings are expected to be eligible for the new write-off benefit.