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August 31, 2009

Monday Laundry: First-time homebuyers, shaky banks, scams, students and more

My weekly list of things I meant to say, follow-ups, requests, all the personal finance news that need to be cleaned up and aired out.54497%2C1216250385%2C1.jpg
The ship is coming in
State money from Florida tax receipts that will be an advance on the $8,500 tax credit for first-time homebuyers is beginning to make its way through the system. But the money is still not in the hands of anxious homebuyers that I'm hearing from in South Florida. I'm told more than $5 million has been dispersed to Broward County and 60 other local governments. More on this later.

UBS
One reader in Palm Beach says he has proof that UBS set up a Swiss bank account without his permission. Anyone else?

Small fry investor losses
That’s how we came to refer to the story I wrote for Sunday’s paper about the huge increase in investor disputes with advisors and allegations of investment fraud. I called it small fry because, gee, next to Madoff, almost any investment fraud seems small potatoes. Yet these are painful losses. My question that remains: Do small fry investors have trouble getting a lawyer to help them? Do regulators pay attention to the small fry complaints?

If you missed the story, it's here:
http://www.sun-sentinel.com/business/yourmoney/sfl-smallfry-losses-082909,0,1642153.story
and here's the sidebar:
http://www.sun-sentinel.com/business/yourmoney/sfl-smallfry-sides-082909,0,5865169.story

Best reaction to small fry investor losses
The reader who called to say, no, that research from FINRA on who becomes a victim of investment fraud, that didn’t apply to him. He wouldn’t’ fall for a fraud.

(The FINRA research noted that most victims of investment fraud direct their own investments, rather than use an advisor. The anonymous caller said that couldn’t possibly be true. A big problem, FINRA’s investment education foundation president John Gannon said, was getting people to believe that anyone, including the smartest, self-directed investors, could fall victim to fraud.)

Here's the link
To my commentary on Marketplace Money,
the American Public Media show on National Public Radio, that aired on Saturday.
Title: No credit card for my college-age son.
http://marketplace.publicradio.org/display/web/2009/08/28/mm-moneyforcollege/

Textbook rentals
Looking for people who have experience with renting college textbooks. It’s starting to take hold and I want to know how well it’s working. Let me know if you or your student is using this service.

Banks
That FDIC report on bank earnings last week had the headline that more than one in four FDIC-insured institutions lost money in the second quarter of this year. A lot of that had to do with charge-offs for loans. There's an interesting glimpse into the nation’s personal finances included here. And it's a bit better than the picture you see of business borrowers. Both are in poor shape. But the FDIC report noted that the increase in charge-offs for commercial loans was about double the increase in charge-offs for credit cards. Commercial loan charge-offs increased 165 percent, while credit card loans charge-offs increased 84.5 percent

Overall, these are rotten records. For 52 straight months, the rate of bad loans has been rising.

Madoff
Didn’t see any report from the SEC on how it mishandled Madoff and what it learned. I guess we all wait.

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August 27, 2009

Limbaugh, take three

My colleague Doreen Hemlock checked with auto dealer Rick Case and here's what he says:12320683.thb.jpg

Florida is not charging sales tax on the rebate portion.
But only a handful of states have followed suit.

So, if you buy a $10,000 car and you use the $4,500 Cash for Clunkers rebate, you pay only $5,500 for the car but you pay sales tax on $10,000 if you buy it in, say, Georgia, where Case has dealerships. He said the same thing is happening in Ohio.

But if you buy it in Florida, you pay sales tax only on $5,500.

Where does all that leave Rush Limbaugh?

Half right.

His post, from Tuesday, I have copied below. And I quote:

Story #2: Surprise! $4500 Clunker Rebate is Taxable

RUSH: Get this. If any of you participated in the Cash for Clunkers program and bought a new car -- hee, hee -- "Many of those cashing in on the clunkers program are surprised when they get to the treasurer's office windows. That's because the government's rebate of up to $4500 dollars for every clunker is taxable. 'They didn't realize that would be taxable. A lot of people don't realize that. So they're not happy and kind of surprised when they find that out,' Nelson said. The amusement here is how most (if not all) states compute sales tax (charged when you register the vehicle.) When you buy a new car you pay tax on the difference between the new car's purchase price and the trade-in you present to the dealer. This is an intentional distortion in the law that is intended to favor dealers over private-party used car sales; if you sell your used car privately the new buyer pays sales tax but you do not get the offset on the purchase of your replacement vehicle - the only way to get that is to trade the car. Dealers use this, of course, in negotiations, effectively pocketing the sales tax - and why not? It's a real difference to you! But the 'cash for clunkers' is not a trade-in. That's a $4,500 check from the government, basically," and that's in income that you have to pay tax on. Ha-ha-ha-ha-ha-ha! I love it when people learn that when they think they're getting something free, and it isn't free!

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Limbaugh, continued

4209592.thb.jpgHey, I was mistaken.

I believe, after reading Rush Limbaugh's comments for the umpteenth time, that Limbaugh was saying car dealers are collecting sales tax based on the full purchase price of vehicles, which includes the Cash for Clunkers rebate of up to $4,500.

So, you get to pay tax on that $4,500, even though you didn't actually pay that amount, the government gave it to you.

I had thought, first time around, that he was talking about income tax. I was wrong.
I have taken my original post down.

The Cash for Clunkers rebate payment is not taxable income.

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August 25, 2009

The gloom about the economy is lifting

Consumer expectations for the future are turning positive, showing the most improvement since the recession began — even in Florida, one of the hardest hit states. 3691350.thl.jpg

Rising home sales, stock market gains and no economic setbacks on the horizon have lifted consumer spirits, according to a University of Florida survey.

The index of Florida’s consumer confidence rose three points to 70 in August. It was the first increase since April.

“We are not out of this recession yet, particularly here in Florida, but things are not nearly as bad as they were a year ago,” said Chris McCarty, survey director of the university’s Bureau of Economic and Business Research.

Nationwide, the Conference Board said its consumer confidence index rose to 54.1 from 47.4 in July, The Associated Press reported. For the previous two months, the index had declined.

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August 24, 2009

The news isn't going to be pretty

Watching government this morning. The news will get ugly and uglier, I suspect.

What interests me this week:

-The Securities and Exchange Commission's inspector general's report on how and why it never uncovered Madoff's ponzi scheme. Don't know what day it will come out, but an early version has been circulating on Capitol Hill since July, according to one report.

-Thursday's report on bank earnings for the second quarter, from the FDIC

-

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August 19, 2009

Scams, schemes, frauds and such


Anyonoe can be caught by investment fraud. That's becoming clearer every day in this economy.

"When the tide goes out, it reveals all the shipwrecks." That's what securities lawyers say, according to attorney Scott M. Dimond, a shareholder at Dimond Kaplan & Rothstein in Miami.

Like other attorneys, he suspects the receding tide is uncovering the largest number of investment frauds since tech stocks collapsed in the bear market of 2000-2002.

A group of state regulators, the North American Securities Administrators Association, issued its list of the top ten investment scams -- from investing in infomercials to promissory notes.

Look at their list here:

http://tr.im/wCld

In fact, it was a busy day on the fraud front. Finra, the Financial Industry Regulatory Authority, and the SEC, issued an investor alert about leveraged Exchange Traded Funds and inverse ETFs. If you're considering one, read this first...

http://tr.im/wCyk


I'll be out of the office for a few days. Talk to you next week.


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August 18, 2009

The salary outlook for 2010

So, what about your pay next year?

5806596.thl.jpg
I mean, forget this year.

We can put 2009 down as the year of the pay cut, either with a knife or the pay cut that’s not called a pay cut.

It’s called a furlough or a forced unpaid vacation or a reduction in hours or the announcement that there will be no raises this year. In my reporting, I found so many examples of that.

And don’t forget the salary offers for new hires that recruiters said are coming in, across the board, at 10 percent to 50 percent less than a year ago.

So what’s ahead? The consultants at Hewitt Associates surveyed employers across the globe and found that salaried employees can expect a pay raise of 2.6 percent in 2010.

Before you start the party, know that 2.6 percent is an increase over 2009, when base salaries rose only 1.8 percent. That was the lowest such figure in 33 years. Hewitt started tracking this in 1976.

Okay, it’s better. But is it good?

Yes, at least by one estimate. In 2010, the Congressional Budget Office projects we'll have 1.7 percent inflation. So salaries will outpace rising prices.

This year, the CBO’s view is that we’ll have almost no inflation, a 0.1 percent rise in the Consumer Price Index, so pay was rising in real terms this year, as well.

But somehow, with all the stories of pay cuts, it doesn’t feel like it did at all.

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August 17, 2009

Monday Laundry: Mortgage Modification Fright

Missed my Sunday column?
54497%2C1216250385%2C1.jpg It was about a pretty scary thing. If you do get your mortgage loan modified, watch out.

The lender can report this to the credit bureau as a "partial payment," and this will slam your credit score.

It's distressing that borrowers trying to keep their homes would get hurt. And I'm hearing more and more people who simply can't get any help from their lenders. I'll be covering this mortgage crisis, I believe, for some time to come. So anyone who wants to share his or her story, drop me a line at hjbrackey@sunsentinel.com.

Here's the column...

http://tr.im/wxuI

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August 14, 2009

Will you trust Wall Street again?

Here I go, mixing it up with the financial services industry.

It surprises me to get emails from people who don't seem to know Wall Street is getting a lot of criticism. So much so that the Obama administration has proposed a major overhaul of how it is regulated.

Here's my commentary that aired this week on Nightly Business Report on PBS

http://tr.im/woVP


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August 13, 2009

Daily down, down, down

k2054728.jpgI couldn't figure out at first why you would want to do this. But SmartMoney has started a daily tweet of headlines from a year ago, so we can all Relive The Crash. Aren't we still living it? It's not over yet, is it? But then I had a look. I got a hearty laugh out of reading this headline from one year ago today:

Greenspan: The End Is Near

(Whose end are we talking about?)

The story reports that the then-Fed chairman predicts that home prices will bottom out in the first half of 2009. Greenspan wasn't much of a seer into the future, was he? Of course, big parts of the present seem to have escaped him as well. I remember his later admission that he didn't completely see the extent of the subprime mortgage market and the danger it posed to the economy.

If you enjoy the details of doom as it unfolded, you, too, can track the ballooning budget deficit, the bailouts, the growing foreclosures, the whole thing at :

smartmoney.com/crash

or just have it pester you daily, tweet by tweet, on Twitter at

http://twitter.com/ReliveTheCrash

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August 12, 2009

On TV tonight

Hey, Watch Me!
I'm on PBS tonight. Doing my monthly commentary on The Nightly Business Report. In South Florida, that's on Channel 2, WPBT, airing at 7 p.m. Tonight, I'm talking about Wall Street's biggest issue with its customers.

And, speaking of consumers, here's the story I had in the paper, with updates.

The Florida Office of Financial Regulation, under fire for its role in not uncovering what prosecutors say was Allen Stanford’s $7 billion bank fraud, has a new commissioner who represented the state's banking industry for more than two decades.

Gov. Charlie Crist's Cabinet appointed J. Thomas Cardwell, an Orlando attorney who has served as general counsel for the Florida Bankers Association for 25 years, as the new chief.

Previous Commissioner Don Saxon resigned last year after an award-winning Miami Herald investigation revealed that Florida allowed thousands of criminals to become mortgage brokers.The Stanford operation, based in Texas, had a large operation in Miami that apparently didn't draw state regulators' attention until the Securities and Exchange Commission stepped in during February.

“I have every expectation that Tom Cardwell will bring a strong enforcement mentality and responsible approach,” Florida Chief Financial Officer Alex Sink said in a news release.

But consumer advocates didn't share that view.

“The governor should have appointed a consumer advocate instead of an industry shill,” said attorney Robert Murphy of Fort Lauderdale.

“That he’s a banker says a lot about who the governor sides with,” said attorney Jeffrey Tromberg of Fort Lauderdale. “I certainly hope he’s going to jump in to what’s going on throughout the state with foreclosure scam artists preying on people suffering the most these days.”

Cardwell called me after deadline to say he has spent quite a bit of time in his career advocating for consumers. He is chair of Akerman Senterfitt's Financial Institutions group and in that role served as the banker's outside general counsel.

He said he was also a founder of Orlando's legal aid program and he was also a chairman of the local housing finance authority, which helps low-income consumers.

"I am not personally an industry ideologue," he said. "That's not my style."

In addition, he says it takes one to face off with one.

"My background and experience on the industry side probably puts me in a position of not being able to be buffalo-ed by what the industry may say."

The Office of Financial Regulation oversees state-chartered banks, credit unions, finance companies, non-depository financial firms and some parts of the securities industry.

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August 11, 2009

Can South Floridians unlock the value in their homes?

Here’s my question: Are we headed for House Lock in South Florida?

This would be a situation in which someone cannot possibly sell their home because the borrower owes so much more than the home is now worth. The homeowner bought at the peak of the real estate market or, the borrower loaded so much home equity debt onto the house that they can’t pay it all off at today’s low home prices.

How many years will it be before these borrowers can sell and get back to even?

A few? A dozen? A decade?

I stole the idea for this expression from “Job Lock,” a situation in which one could not leave one’s job because health insurance wasn’t portable – couldn’t be carried over to the next job. The person may have developed an illness and now would be considered uninsurable at a new employer. A change in federal law solved that one.

I don’t foresee the change that will resolve this one.

My colleague Paul Owers reported today that Zillow says 47 percent of South Florida borrowers are “underwater,” meaning they owe more than the property’s worth.

So does that mean half our homes can’t be sold right now, without injuring the owners?

Sounds like a lock to me.

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August 10, 2009

Monday's Laundry: Mortgages on your mind

Conversations with readers from last week about their mortgages, short sales and loan modifications, which mostly, aren’t happening or are going haywire.
54497%2C1216250385%2C1.jpg
The saddest story first: Helen Rudinksy, a Wells Fargo borrower, says she has been trying to modify her mortgage since the fall of 2008. She says her documents got lost a few times in Wells Fargo’s offices and she had to start the process over. Despite her efforts and because she says of delays on Wells Fargo’s part, her home was scheduled to be sold at auction last week.

So she drained her IRA, knowing she’ll face penalties for that, and borrowed money, rushed to the bank minutes before the sale and saved her home.

Next, Wells Fargo told her that she was missing documents and that’s why they were planning to sell the home. But she had check list and a letter documenting that they had received all that was needed.

The kicker: She’s a widow, raising a two-year-old who has autism. She was, at the time of the scheduled sale, across the country getting treatments for her child.

The true meaning of ruined credit: A friend called to say she had indeed sold her home in a short sale. This friend has been in financial peril for some time. What was surprising was what she said is the true cost of ruining your credit. When she rented her new apartment, she had to put down one year’s worth of rental payments. A year’s rent?

The misunderstanding of the Obama plan: A reader from Boynton Beach called to inquire who would qualify for a loan modification under the Making Home Affordable program. Her son, she said, was told he couldn’t qualify. The son’s monthly mortgage payment: $800. Due to loss of his job, his monthly income had fallen to about $1,000- $1,200. What’s wrong: The program aims to cut monthly mortgage payments to 31 percent of a borrower’s income. There’s no way this borrower can fit the mold. He doesn’t have enough income to have that mortgage anymore. The mother was not happy. She wanted to know who then does the program help.

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August 5, 2009

Time for a (tax) holiday

If you are the thrifty type, this weekend it is time for a sales tax vacation. 3178351.thl.jpg

It's been two years since Florida had a back-to-school season sales tax holiday in early August. But other states still do.

In Alabama, North and South Carolina, and Tennessee, the tax-free holiday begins Friday. August 7 and runs through Sunday.

You'll be able to keep the 4 percent through 9.75 percent sales tax in those states if you're buying school supplies, clothing and in some cases, computers.

If your vacation plans are taking you elswhere across the country, you can see a complete list of all 16 state sales tax holidays in the August issue of Real Simple magazine and at Kiplinger.com.

For more information, go to:
http://www.kiplinger.com/features/archives/2009/07/sales_tax_holidays.html

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Take this loan, please

Now we all know that banks, with a few exceptions, really aren't modifying mortgages for borrowers in distress. Look at the comments on yesterday's post. The stories there are difficult to accept. And, we know the Obama administration thought somehow that publishing the list of which banks had done what would bring public embarrassment to the banks.

Me, I don't think that's going to do much. The outrage they're hearing from consumers today also is not moving them off the dime.

I'd like to hear from anyone who has successfully managed to get a mortgage modified. I'd like to know your advice, your tips, for others who are beginning this tortured process.

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August 4, 2009

Loan modifications not happening

The mortgage crisis is so far from being resolved.
3661839.thl.jpg

Five months into the Making Home Affordable program, the Treasury Department reports today that only 15 percent of homeowners eligible for the loan modification program have been offered help. Less than nine percent have actually had their loans modified.

That leaves millions out in the cold.

"I think the banks are looking at the market bottom and trying to hold on to som eof their loans and properties until things get better," said Bill Newton, executive director of the Florida Consumer Action Network. "But it sure doesn't help the rest of us, especially since they're working with government bailout money."

The numbers from the first monthly Servicer Performance Report through July: 400,000 offers have been extended to 2.7 million borrowers who are more than two months behind in their payments. Of those, only 235,000 have started on the three-month trial period to begin a loan modification.

Some servicers, including PNC Financial, haven’t modified any loans at all. Or next to none.

National City Bank, the report says, has modified four loans but it has 37,126 eligible for the program.

The figures released are nationwide. Here are the details on some lenders that are active in South Florida:

Bank of America, 796,467 eligible, 27,985 modified
IBM Southeast Employees Federal Credit union, 72 eligible loans, 4 modified
J.P. Morgan Chase (which took over Washington Mutual), 394,075 eligible, 79,304 modified
Ocwen Financial, 55,516 eligible, 2,517 modified
Wachovia Mortgage, 62,852 eligible, 1,356 modified
Wells Fargo Bank, 329,085 eligible, 20,219 modified

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August 3, 2009

Portfolio repair, it's not too late

Here's my column from Sunday, in case you missed it.

jad0026.jpg

http://tr.im/viyX

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Investment fraud: Guess who's a victim

I enjoyed the discussion about broker pay, commissions and finding a financial advisor.
More comments?

And here's today's topic, because it's on my mind. Just had a chat with the investor education foundation folks at FINRA, the Financial Industry Regulatory Authority.

My question: Who is the typical victim of investment fraud?

The answer from their studies:

A man, age 55 to 65, who has a college education, financial literate, who is an active investor and whose portfolio is self-directed.

Not the little old lady, sittiing alone, waiting for that telemarketer's call.

.


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About the author
You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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