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March 31, 2010

Loan modifications: Yvonne still waits

Yvonne McBride Acosta, the poster child for the problems of the loan
modification mess, still has no loan mod.

I’ve written about her a number of times, documenting how she has been
offered and paid her loan mod payments, only to see the deal taken away
four times. I most recently reported that five months after she complained
to the Florida attorney general and local officials pulled business away
from Bank of America in protest of the way it was treating borrowers like
Acosta, still, she didn’t have a deal.

Acosta was supposed to get a loan modification offer shortly after that
column appeared. Bank of America’s spokeswoman said she would.

She did get a call the next day. Or rather, night. After refusing to leave
the house all day for fear she’d miss the bank’s representative, Acosta’s
phone rang at 8:45 p.m.

Let’s just say that conversation and a few others have not gone well.

Acosta has received a loan modification offer – for which the payments are
set around $200 a month higher than what she used to pay. If she was having
trouble with the loan at about $850, why should she have any less trouble at more
than $1,000 a month?

She has been told to return the loan mod papers by April 1. She says she won't sign them.

They kept their word. They did make her an offer. Just not one that she can

Ryan Wiggins, a spokeswoman for Florida's Attorney General Bill McCollum, says her office continues to try to work things out between Acosta and Countrywide, her original lender, which was acquired by Bank of America.

"We are trying to get to the bottom of what is actually going on," she said.

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Gambling, taxes and loan modifications

I'm catching up here, after a few days at home with a bad cold.

For anyone who missed my column last Sunday, here it is.

And here's the weekly Tax Q&A:

Is it right that you can take a deduction for gambling losses?

Some may not want to admit to it, but gambling income is always taxable just like income from your job. That applies to lottery winnings, raffles, the track and casinos. The payer might even give you a W2 if your winnings are significant.

But, if you take itemized deductions, you can write off your gambling losses. That is why you should save all those losing tickets. This is one of those itemized deductions that does not have to add up to more than 2 percent of your adjusted gross income. You can deduct whatever you lost up to the amount that you won.

But if you won more than you lost, then it has to reported as taxable income. The IRS requires that you be able to prove your losses. No ticket — or diary or other record of winnings vs. losses — means no write-off.

To find out more, go to and enter Tax Topic 419 in the search box.

Submit your tax question in the box at the right.

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March 26, 2010

Tax help Saturday

The Internal Revenue Service is holding special Saturday office hours to help taxpayers in distress.1194989166834876456aiga_waiting_room_.svg.thumb.png

The Saturday sessions are aimed at people who need to directly talk to an IRS employee about economic hardship issues, making payment plans or to figure out how to claim some of the special tax breaks that are available for unemployed and working people, as well as homebuyers.

In South Florida, the IRS offices that will be open from 9 a.m. to 2 p.m. are in West Palm Beach at 1700 Palm Beach Lakes Blvd., in Plantation at 7850 SW 6th Court, and in Miami at 51 SW First. Ave.

The Plantation office will also be open on Saturday, April 10.

-Harriet Johnson Brackey

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Here's how Making Home Affordable will work

Big changes announced this morning in the Obama administration’s Making Home Affordable program. Borrowers will be eligible to have their loan balances cut, if they owe more than the house is worth.

The highlights of the new rules:

-Loan servicers can slash payments for those who are unemployed. For up to six months, the payment could be set at 31 percent of the person’s current income, which, if that person’s only income is unemployment assistance, would be at a very low level

-Loan servicers must consider reducing the loan balance for those who owe much more than the home is worth. The rules now say that if the borrower owes more than 115 percent of the home’s value, the servicer has to consider reducing the principal or the amount owed.

-The principal reduction would take place in steps over three years. At first, there would be principal forbearance – which puts off payment due on a portion of the principal. If the borrower stays current with the payments, the amount of forbearance would be forgiven.

-Prohibits loan servicers from sending a home into foreclosure while the borrower’s request for a modification is being evaluated.

-Requires foreclosures to stop once a trial modification begins.

-Even if you are already in a trial or a permanent modification, loan servicers are required to consider doing a principal reduction retroactively.

For full details, look here:

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March 24, 2010

Loan modifications: Bank of America cuts principal

Bank of America Corp., one of the largest mortgage lenders in Florida, said Wednesday it will give some troubled mortgage borrowers a huge break.

It will forgive up to 30 percent of some customers' total mortgage balance.

But the bank remains under fire in Florida, where hundreds of borrowers have lodged complaints with Attorney General Bill McCollum over its reluctance to modify mortgages, lost paperwork, or canceled deals for borrowers who are making their payments on time.

As the nation’s largest bank, Bank of America could lead the way for other lenders to start reducing principal, which is the amount the borrower owes. The U.S. Treasury has discussed making principal reductions a step in the Obama administration’s loan modification program. And, a group of influential mortgage investors recently called for it to become an industrywide practice.

“It’s a step in the right in the right direction,” said Peter E.S. Wallis, a Pompano Beach attorney who handles foreclosure defense cases. “We need to have all the major lenders, all the mortgage holders, to follow suit to bring principal reductions into line across the board.”

The plan, which would begin in May, is part of an agreement the Charlotte, N.C.-based bank reached 18 months ago with state attorneys general to settle charges over high-risk loans made by Countrywide Financial Corp. Florida was part of that agreement. The loans were made before Bank of America acquired Countrywide in mid-2008.

Those loans continue to trouble borrowers like Lynn Mankin of Coral Springs, whose lender was Countrywide and who has been battling Bank of America over a loan modification. She withdrew money – before retirement -- from her 401(k) account to keep paying her mortgage, after losing her job. But Bank of America later cancelled her loan modification. Her reaction to Wednesday’s announcment was skeptical: “I’m from Missouri,” she said. “Show me.”

Under Bank of America’s proposal, homeowners must be at least 60 days delinquent on their loans and owe more than 120 percent of their homes' value. Thousands of South Florida borrowers are “underwater” on their mortgages, meaning they owe more than their home is worth.

Roughly 54 percent of Broward County mortgage holders – 246,675 homeowners – are underwater, according to First American CoreLogic, a California research firm. In Palm Beach County, 45 percent of mortgage holders – 157,544 homeowners – face that problem.
Bank of America is the nation’s largest lender to systematically reduce principal, but it is not the first.

Ocwen Financial, based in West Palm Beach and a servicer of risky loans, has reduced principal on 15 percent of the 100,000 loans it has modified from its portfolio of 300,000 loans. It began reducing principal even before the Obama administration’s foreclosure program Making Home Affordable began a year ago.

Millions of homes have gone into foreclosure since the housing market collapsed in late 2007. The loans affected by Bank of America's announcement include certain subprime and option adjustable rate mortgages. Option ARMs allow borrowers to start with minimal monthly payments that actually increase the loan's balance.

The borrowers who can take advantage of the Bank of America program must also qualify for the Obama administration's $75 billion mortgage loan modification program.

Bank of America estimates that about 45,000 customers will qualify for its plan. It’s unclear how many South Florida homeowners might qualify.

The offer will cut total reduced principal by about $3 billion. That could lower the bank's earnings, which have already been hurt by consumers' continuing defaults on mortgage and credit card loans. Bank of America was among the hardest hit by the credit crisis and recession.

Even so, “the move helps create the best prospect of avoiding a further downward home price spiral, which would result in even deeper losses” for the bank, said Howard Glaser, a mortgage industry consultant, in an e-mail.

According to new plan, Bank of America will first offer to set aside a portion of the principal balance, interest free. That principal can be forgiven over five years, if homeowners don't miss any payments. The maximum decrease in principal will be 30 percent.

The forgiveness allows a homeowner to bring a mortgage balance back down to 100 percent of the home's value, the bank said.

Glaser said the program could lead the Obama administration to launch a similar effort for the entire industry. That, he wrote, would be a “major shift in loan modification efforts.”’

Lenders including Bank of America have been criticized for not helping enough borrowers to complete the Obama administration's $75 billion loan modification program, which is widely viewed as a disappointment. Only 170,000 homeowners have completed the program so far.
As of last month, Bank of America had completed modifications for about 22,000 homeowners, or about 8 percent of those signed up. That compares with about 12 percent for Wells Fargo & Co. and 11 percent for both JPMorgan Chase & Co. and Citigroup Inc.

The Treasury Department estimates that 1.5 million to 2 million homeowners will complete the program by the end of 2012, about half of the original goal. A report issued late Tuesday by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, says numerous changes to government guidelines “caused confusion and delay” and said the government did not do enough to advertise the program.

Staff writer Paul Owers contributed to this story.
Information from the Associated Press was used in this report.

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March 23, 2010

Tax Q&A: Can I still deduct sales taxes?

Is the deduction for general sales tax still in effect, and if so, how is it figured?gwil12509.jpg

The deduction is still there — for residents of states like Florida that don’t have state income taxes.

You can take advantage of this if you itemize deductions. If you take the standard deduction, you can’t use it.

To figure your sales tax deduction, you’ve got a choice. You can keep your receipts all year long and use the actual amount of sales taxes that you paid.

If you didn’t bother with that, the IRS has averages that you can use. These are sales tax expenditures, by income levels, computed from the most recent patterns in the Consumer Expenditure Survey from the Bureau of Labor Statistics.

You’ll find these averages in tables included in the 1040 tax form. Or you can go online, to use the Sales Tax Deduction Calculator to get your number. To find it, just enter those words in the search box at the top of

One more thing: If you bought a big-ticket item last year such as a car or a boat, you can add the sales taxes you paid on that to the average figure and use a larger number for your deduction.

For more tax answers or to ask a question, call 954-356-4628 or submit your question in the form at the right.

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Tax Q&A: I'm unemployed. Can I drain my retirement accounts?

Can I take money out of my retirement accounts because I’m unemployed and I need it to pay the bills?

In many situations, you’ll owe income tax on that money if you withdraw it. And depending upon your age, you could also owe a 10 percent penalty, said Ed Slott, an IRA expert.
The exceptions: If you have an IRA and you’re younger than 59 1/2, you can skip the 10 percent penalty if you’re unemployed, you received unemployment compensation for 12 consecutive weeks and you use the money to pay for your family’s medical insurance. See IRS Publication 590 for the full story.
And here’s another one: If your money is in a 401(k) and you lost your job at age 55 or older, you can avoid the 10 percent penalty on a withdrawal. But Slott warns this tactic only works if you keep your money in an old plan and don’t roll it over. Ordinary federal income tax will still be due.

For more tax answers or to ask a question, call 954-356-4628 or submit your question in the form at the right.

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Tax and credit cards: Palm Beachers aren't so delinquent

Should we be surprised?

TransUnion sent the figures on Palm Beach credit card delinquencies, to go with yesterday's blog post. It turns out, fewer Palm Beach residents are behind on their credit cards, fewer than in Broward and than in Florida. But the county's rate of credit card delinquencies is higher than the nation as a whole.

At the recent peak of delinquencies, the start of last year, the Palm Beach delinquency rate was 1.58 percent, less than Florida's 1.9 percent and far less than Broward's 2.15 percent.

It's not like they have less debt up in Palm Beach. They have about the same amount as the rest of us South Floridians. They're just better about paying it off.

The TransUnion figures show that the average per-borrower credit card debt at the end of last year was $6,014 in Broward, $5,883 in Palm Beach, $6,081 in Florid statewide and $5,434 in the United States.

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March 22, 2010

Tax and credit cards: Use refund to catch up

What do you do with your tax refund?

3165008.thl.jpgBelieve it or not, people are doing the right thing, paying off that debt.

TransUnion, the credit bureau, says that with one exception, the credit card delinquency rate has gone down this time of year since 2001. The one exception was 2007, when the rate stayed the same.

That surprises me, considering the stories I hear.

TransUnion looked into just how far behind we are on our credit cards here in South Florida. I have the numbers for Broward and hope to get them soon for Palm Beach.

The story is: Three years ago, at the start of 2007, Floridians and Broward County folk were falling behind on their credit card bills at about the same pace as the rest of the nation. But those two lines started to diverge soon thereafter.

By the start of last year, the gap was the widest. At that time, TransUnion says 1.32 percent of credit cards nationwide were 90 days late, but Broward County’s rate was 2.15 percent. That’s 63 percent higher.

Yes, it’s tough here. We knew that. Florida’s delinquency rate for three years has been a little to a lot higher than the nation’s.

And, it’s rising.

So, the announcement this morning from Washington that the average tax refund is up nearly 10 percent should put an even bigger ding in the credit card company’s bill, right? It's $3,036, up $266 from last year.

Hope so.

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March 17, 2010

Loan modifications: Yvonne's still waiting

Yvonne McBride-Acosta did get the call she was waiting for from Bank of America.
At 8:45 p.m. Monday.
But she didn't get a finalized loan modification.
She didn't get anything in writing.
The bank's representative said she would be getting a mortgage loan modification in May and that she would not have to start the process all over again.
But when Acosta told the bank's representative that she was recording the call, Acosta says the lady hung up.

"Are they trying to drain me or what?" she asks.

For more on Yvonne's story, read my column here.

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March 15, 2010

Loan modifications: More than 7,000 get new deal

More than 7,000 homeowners got permanent mortgage modifications during the recent West Palm Beach “Save the Dream” event organized by the Neighborhood Assistance Corporation of America.

Thousands of additional modification applications are pending. In all, 24,331 loan modification applications were taken during the five-day event two weeks ago. Of those, 7,631 were approved and made final, NACA said.

The remainder should receive word within the next 30 days. Each homeowner’s file has been submitted to their servicer, said Darren Duarte, communications director for NACA.

Those who did not attend the event can get help online at Click on “home save program” under “At risk homeowners.”

The group said it is trying to organize another mortgage modification event in South Florida within the next month.

During the five days, more than 31 percent of the applications processed by NACA in West Palm Beach resulted in a permanent modification.

That compares with about 16 percent of all borrowers who have applied for a permanent modification under the federal Making Home Affordable program during the last year, the treasury said last Friday.

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Three loan modifications, now...

...She's heading for the fourth. After more than a year of haggling with her lender Bank of America, Yvonne McBride-Acosta doesn't believe anything the bank says. But she's still hoping for a new loan that will save her home. You can read my column about her here.

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March 11, 2010

Retirement: Slim to none for almost half of workers

The conflicting signals about where people are financially include: 2701196.thl.jpg

-Consumer spending is growing
-People say they are saving more
-Credit card debt is declining
-Credit card debt remains at level as high as last year

So what do we know? We know that 43 percent of workers have $10,000 or less in their retirement accounts. The Employee Benefit Research Institute's annual Retirement Confidence Survey, out this week, shows that figure of slim to none for retirement savings has been growing for three years.

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March 9, 2010

Loan modifications: Do you really want one?

It's hard to get a loan modification. But those who have been through the process are now saying the terms of the new deals they are getting are tough, really tough. You can get a loan modification, but do you want one? Read my story here.

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Tax Q&A: Second job, what about withholding?

I work two jobs, but no taxes are withheld at the second job. Should I pay quarterly estimated taxes?

-Frank Jones

Generally, you have to make quarterly estimated tax payments if you have income that is not subject to withholding, said Morris D. Gottlieb, tax partner in the West Palm Beach office of BDO Seidman. You could do that or you could increase the withholding amount at your first job. Just make sure you pay in either as much as you owed in tax last year (110 percent of your 2009 tax bill, if you are married and your adjusted gross income is more than $150,000) or 90 percent of what you expect to owe in taxes for 2010.

Are the closing costs on a reverse mortgage tax deductible?
-Steven Valdman, Boca Raton

No. Gottlieb said.
Settlement or closing costs such as attorney’s fees, abstract fees and title insurance, and recording fees and transfer taxes cannot be deducted.
You can use them, however, if you sell your home. You add these costs to what you paid for it and that increases your basis in the home. That, in turn, can be used to lower any taxes you might owe if you sell it for a profit.

And another tax issue: Interest on a reverse mortgage that is added to the outstanding loan balance is not deductible until the interest is actually paid in cash or when the property is transferred. Therefore the borrower does not get an interest deduction during the period of the reverse mortgage in which interest is not paid in cash.

For more tax answers or to ask a question, use the box at the right or call 954-356-4628.


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Credit reports: Employers are going to look, be ready

How are you supposed to get a job in this economy if someone is going to hold your bad credit against you?

4082847.thl.jpgSo many people’s credit is deteriorating due to job loss, reduced hours and all that the recession has dished out. Yet, ironically, I hear from the credit bureau TransUnion that only 0.8 percent of people surveyed check their credit report when looking for a new job.

They should.

Many people are unprepared for the 60 percent of employers who have checked credit histories, according to a survey by the Society of Human Resource Management.

They’ll be looking. They have the right to do that.

The Associated Press reported last week that 16 states are proposing a ban on employers checking credit histories.

Florida isn’t one of them. Employment attorney Allan H. Weitzman of Proskauer Rose in Boca Raton says he doesn’t know of any such proposal.

So, it’s up to you. If there’s bad news on your credit report, be prepared to explain it.

Check your report before you go to that job interview.

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March 8, 2010

Investing: Bull market is one year old tomorrow

Heard the discussion that Buy and Hold is dead?89678651.jpg

Like it never worked. And doesn’t still, for anyone who’s holding on for the one-year anniversary tomorrow of the start of the bull market. Which, if you held on like and let the negativity hit you on the head all the while, has paid off very handsomely. Between March 8, 2009, the day before stocks started going up, and last Friday, the Standard & Poor’s 500 has gained 67 percent.

There was a fabulous story by Jason Zweig in the Wall Street Journal Saturday about why holding often times means you ride the winners to the end. It was about the retirement of a tremendously successful T. Rowe Price small stock fund manager, John Laporte of T. Rowe Price New Horizons fund. You can read it here. As Zweig reports, he barely traded.

But that’s not normal at all.

The average holding period for a stock on the New York Stock Exchange is six months, according to a recent note from James Moniter at GMO, a global investment firm that manages $107 billion. “This seems like the investment equivalent of attention deficit hyperactivity disorder,” he wrote.

It makes my head ache, thinking about all the work it would be for people to change out every stock twice a year. How can they have a plan? A goal?

It takes discipline, Monitor notes, to do nothing. To have patience.

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March 5, 2010

Credit card rates: Fed isn't helping end high rates

The Federal Reserve this week put out a proposal that is, to be kind, unclear, on the subject of credit card interest rates.3663119.thl.jpg

Credit cards have gotten markedly more expensive over the past year. And these proposals look like lots of work (for the credit card companies) but no change in what millions of consumers have to pay for credit.

The Fed proposed revisions to Regulation Z, which were mandated by the credit card reform law passed last year. There are some consumer-friendly items in there. Such as a proposed limit on penalty fees to no more than the amount charged – if you go $20 over the balance limit, the card can only charge you a $20 penalty, even though the industry average is around $39.

The proposals would also stop cards from charging you a fee for not using them, the “inactivity” fee.

But here’s where I stop applauding.

There’s a gobbledygook provision in these proposals that calls for credit card companies to review any interest rate increases that have happened since Jan. 1, 2009. But not for them to reduce them, if they’ve been increased for reasons that no longer exist.

Who decides? How? What penalties apply if no one puts the rates back to where they were? “A lot is unclear and a lot is left to the discretion of the (card) issuer,” said Nick Bourke, project manager of the Pew Charitable Trust’ Safe Credit Cards Project reports that since the Card Act passed last May and the date much of it was implemented Feb. 22, issuers have raised their rates by 2 percentage points – but that’s only the average increase. Some have really raised their rates.

The new law, when it took effect Feb. 22, was going to restrict how they could raise rates from that date on. Cards, most of them, did an end run.

“We know that a lot of people experience interest rate increases during that time in ways that are now banned,” said Bourke.

Oftentimes, the reasons given for higher rates – and remember, interest rates were stable during that same time period – were broad. So reviewing them now, it’d be hard to find either fault with the reasons or solid ground for increasing rates.

“Let's say they raised rates because of the economy or market conditions,” said Gerri Detweiler, a debt expert, author and advisor for “Who is to say market conditions are now better?”

It's difficult to see, she said, how this proposal will impact consumers, if at all.

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March 4, 2010

Bush, Babar, Borat: Financial reform Video

This is just too good.

Financial reform, one of my big topics, makes it to SNL, with Will Ferrell's help.

You gotta watch this.

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March 2, 2010

If you're unemployed, there are tax breaks

Looking for work? The tax code has a few things to help those who don't have jobs.

Here’s a few tax breaks for the unemployed, courtesy of CCH, a provider of tax and accounting informaiton and a Wolters Kluewer business.

-You can exclude up to $2,400 of unemployment compensation for 2009. This won’t be the case for 2010, under current law.

-There’s no penalty for taking a 401(k) distribution if you are 55 or older when you left your job or you retired.

-You could collect job-hunting expenses as an itemized deduction if you have enough miscellaneous deductions to exceed 2 percent of your adjusted gross income.

-If you need to move because you found a new job, you may be able to deduct moving expenses.

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March 1, 2010

College costs: Teenagers say they'll pay

The kids kick in…

The College Savings Foundation, which was in Miami last week, found that three-quarters of 16 and 17-year-olds say it is their responsibility to pay for all or part of their college costs.

A survey the group released says the teenagers plan to cover their education costs with financial aid, loans and their own money. At the same time, the students are concerned about debt and not completely sure how much they’ll need to pay for their education.

Sound a lot like their parents in that regard.

It is troubling and interesting to me that most of the kids are trying to figure out how to balance college costs with their own plans. Three out of ten said the price of the school is definitely going to be a factor in their choice.

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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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