Archive for: ‘April 2011’

U.S. Regulators Order Banks to Quickly Improve their Foreclosure Practices

April 29, 2011 Posted by kingcade

U.S. regulators have ordered 14 financial institutions to lay out plans to clean up their mortgage-servicing operations- and another 60 days to make the changes. Recently Fannie Mae, Freddie Mac and their federal regulator established new guidelines designed to encourage more successful modifications while preventing foreclosures from dragging on. The rules will require servicers to approach borrowers earlier and more frequently after a first missed payment in order to have a better chance at modifying loans. The mortgage titans will also pay more to servicers that meet certain benchmarks and establish timelines for banks to modify loans or process foreclosures.

Below are the requirements of the new regulatory order and how the banks have adjusted so far:

  • Single point of contact. Borrowers who have been bounced from one bank employee to another must get a “single point of contact” to steer them through loan modification the foreclosure process.

In June, Wells Fargo & Co. began assigning an employee and backup employee to each borrower seeking a loan modification. It plans to expand the effort to foreclosures and short sales, or sales for less than what is owed on the property.

Ally Financial Inc. assigns borrowers who have had trouble submitting a completed financial package a team of employees to help them gather documents, execute a final loan modification or weigh other foreclosure alternatives.

J.P. Morgan is working on a software program to make it easier for employees and borrowers to track loan-modification requests. Last year, it started providing some borrowers with a “relationship manager” to advise on the process.

Citigroup now provides borrowers with a single point of contact for gathering documents and handling short sales. In the next months, it will roll out a “concierge” system that will assign a small team of employees to help delinquent borrowers and homeowners at risk of default navigate the system.

  • Deadlines. Banks are required to set “appropriate deadlines” for deciding whether borrowers can get a loan workout.

Wells Fargo’s initial reviews average 79 days. Ally Financial said it responds to the average borrower within seven to 10 days of receiving a complete financial package. At Citigroup, the goal is to give borrowers a final answer about a permanent modification within 22 days of their final trial payment.

  • Staffing levels. Banks must make sure they have enough employees to deal with the tidal wave of troubled loans.

J.P. Morgan said it will add as many as 3,000 new home-lending jobs, mostly drawing the workers from elsewhere in the company. BofA said it hired roughly 3,000 people in the first quarter to work on troubled mortgages. Citigroup said it will expand its loan-modification unit by 500 employees.

Wells Fargo doesn’t expect to increase staffing because the number of borrowers behind on loan payments is declining. It might transfer employees from other parts of the company with excess capacity.

To read more about this story visit: http://online.wsj.com/article/SB10001424052748703367004576288833360386502.html?mod=googlenews_wsj

Foreclosure defense attorney, Timothy Kingcade has helped many facing foreclosure alleviate their stress by letting them stay in their homes for at least another year, allowing them to re-organize their lives. If you have any questions on the topic of foreclosure please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia, P.A. website at www.miamibankruptcy.com.

The Mortgage Mess Settlement- Who’s expected to reap the benefits?

April 20, 2011 Posted by kingcade

Will homeowners benefit from reimbursements the government has ordered 16 mortgage lenders pay? Foreclosure victims and housing activists say it’s not likely. Under a settlement between regulators and banks announced last week, an independent review will be conducted of all foreclosures that took place in 2009 and 2010 to determine whether fees were improperly charged or homes were wrongfully foreclosed upon.

Included in the settlement was a cease-and-desist order against Mortgage Electronic Record Systems (MERS), a privately held company that operates an electronic registry system designed to track mortgage ownership and rights of mortgaged properties. Many experts think last Wednesday’s settlement is only a “drop in the bucket” and not adequately addressing the billions and trillions of dollars lost and the pain and suffering of not knowing who owns what.

To read more on this story, visit:
http://www.dailyfinance.com/2011/04/15/mortgage-mess-settlement-homeowners-skeptical-benefit/

Foreclosure defense attorney, Timothy Kingcade has helped many facing foreclosure alleviate their stress by letting them stay in their homes for at least another year, allowing them to re-organize their lives. If you have any questions on the topic of foreclosure please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia, P.A. website at www.miamibankruptcy.com.

Rising Food Prices Push People Further Into Poverty

April 20, 2011 Posted by kingcade

As global food prices reach record highs, the World Bank warns that further spikes could push more individuals and families into poverty. The organization that loans money to developing nations said its global food price index was up 36% in March from levels a year earlier. The increase was driven by sharp boosts in prices for corn, wheat, soybeans and other staples. The surge in global food prices has already driven 44 million people below the “extreme poverty line,” which the World Bank defines as living on just $1.25 a day.

According to the World Bank, an additional 10% increase in food prices would cause another 10 million people to fall below the poverty line, while a 30% spike would lead to 34 million more poor. Food prices have been on the rise since last year, as crops in many parts of the world were damaged by bad weather. Canada, Australia and Argentina were also hit with weather events that damaged crops in the second half of last year. More recently, food prices have been pushed higher by rising energy costs, as oil prices spiked above $100 a barrel. That has made producing and transporting agricultural goods more expensive.

There is however a plan that is being put into place to help alleviate the financial stress of putting a quality meal on the table. Officials from the Group of 20 (G-20) economic powers are scheduled to design a “code of conduct” on export bans, which many have blamed for exacerbating the increase in wheat prices. This proposed “code of conduct” would also do more to increase food production and help developing countries manage agricultural risks.

To read more on this story, visit:
http://money.cnn.com/2011/04/14/news/international/world_bank_food_prices/index.htm

If you have any questions on this topic or are in need of a financial fresh start, please contact our experienced team of bankruptcy attorneys at (305) 285-9100. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia, P.A. website at www.miamibankruptcy.com.

Decline in Foreclosure Filings Pushes Florida Court System into Deficit

April 5, 2011 Posted by kingcade

Florida’s court system is facing a $72.3 million deficit as a result of a decline in foreclosure filings. The State Courts Revenue Trust Fund, established in 2009, is currently incurring the debt. Of the $462 million court system budget, about $370 million is currently funded by the trust fund.

Recently released data suggest that foreclosure filings may not increase any time soon. Although Florida holds the largest shadow inventory in the U.S. at more than 441,000 properties, the average home sits delinquent for 638 days, according to the National Association of Realtors.

It’s been recommended that an emergency plan be created to provide funding to the Florida court system. A temporary transfer of $28.5 million to the State Courts Revenue Trust Fund from the court’s Mediation Arbitration Trust Fund and Court Education Trust Fund is being scheduled to help alleviate the deficit.

To read more on this story, visit: http://www.housingwire.com/2011/03/23/decline-in-foreclosure-filings-pushes-florida-court-system-into-budget-deficit

Foreclosure defense attorney, Timothy Kingcade has helped many facing foreclosure alleviate their stress by letting them stay in their homes for at least another year, allowing them to re-organize their lives. If you have any questions on the topic of foreclosure please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia, P.A. website at www.miamibankruptcy.com.

How to Avoid Getting Audited by the IRS

April 4, 2011 Posted by kingcade

The IRS audits only about 1% of all individual tax returns annually. Ever wonder why some individuals are selected and others are not? Listed below are 12 factors that can increase your chances of hearing from the IRS:

1. Failure to report all taxable income
The IRS receives copies of all 1099s and W-2s that you receive during a year, so make sure that you report all required income on your tax return. The IRS computers are pretty good at matching these forms received with the income shown on your return. A mismatch sends up a red flag and causes IRS computers to spit out a bill. If you receive a 1099 for income that isn’t yours or the income listed is incorrect, get the issuer to file a corrected form with the IRS.

2. Returns claiming the home-buyer credit
First-time homebuyers and longtime homeowners who claimed the homebuyer credit should be prepared for IRS scrutiny. Make sure you submit proper documentation when taking this credit. First-time homebuyers have to attach a copy of their settlement statement to the return, and longtime homeowners should also attach documents showing prior ownership of a home, including records of property tax and insurance coverage. All claims for this credit are being screened. As of May 2010, more than 260,000 returns had been selected for correspondence audits (examinations done by mail rather than face-to-face) because filers did not attach the necessary documents to their tax returns. And those numbers will continue to grow.

3. Claiming large charitable deductions
This comes up again and again because the IRS has found abuse on audit, especially with those taking larger deductions. We all know that charitable contributions are a great write-off and help you to feel all warm and fuzzy inside. However, if you’re charitable deductions are disproportionately large compared to your income, it raises a red flag. That’s because the IRS can tell what the average charitable donation is for a person in your tax bracket. Also, if you don’t get an appraisal for donations of valuable property or if you fail to file Form 8283 for donations over $500, the chances of audit increase. Be sure you keep all your supporting documents, including receipts for cash and property contributions made during the year, and abide by the documentation rules. And attach Form 8283 if required.

4. Home office deduction
The IRS is always very interested in this deduction, primarily because it has a pretty high adjustment rate on audit. This is because history has shown that many people who claim a home office don’t meet all the requirements for properly taking the deduction and others may overstate the benefit. If you qualify, you can deduct a percentage of your rent, real estate taxes, utilities, phone bills, insurance, and other costs that are properly allocated to the home office. That’s a great deal. However, in order to take this write-off, the space must be used exclusively and on a regular basis as your principal place of business. That makes it difficult to claim a guest bedroom or children’s playroom as a home office, even if you also use the space to conduct your work. Exclusive use means a specific area of the home is used only for trade or business, not also where the family watches TV at night.

5. Business meals, travel and entertainment
Schedule C is a treasure trove of tax deductions for self-employed. But it’s also a gold mine for IRS agents, who know from past experience that self-employed tend to claim excessive deductions. Most under-reporting of income and overstating of deductions are done by those who are self-employed. And the IRS looks at both higher-grossing sole proprietorships as well as smaller ones.
Big deductions for meals, travel and entertainment are always ripe for audit. A large write-off here will set off alarm bells, especially if the amount seems too large for the business. Agents know that many filers slip in personal meals here or fail to satisfy the strict substantiation rules for these expenses. To qualify for meals or entertainment deductions, you must keep detailed records generally documenting the following for each expense: amount, place, persons attending, business purpose and nature of discussion or meeting. Also, receipts are required for expenditures over $75 or any expense for lodging while traveling away from home.

6. Claiming 100% business use of vehicle
Another area that is ripe for IRS review is use of a business vehicle. When you depreciate a car, you have to list on Form 4562 what percentage of its use during the year was for business. Claiming 100% business use for an automobile on Schedule C is red meat for IRS agents. They know that it’s extremely rare that an individual actually uses a vehicle 100% of the time for business, especially if no other vehicle is available for personal use. IRS agents are trained to focus on this issue and will closely scrutinize your records. Make sure you keep very detailed mileage logs and precise calendar entries for the purpose of every road trip. Sloppy recordkeeping makes it easy for the revenue agent to disallow your deduction. As a reminder, even if you use the IRS’ standard mileage rate to deduct your business vehicle costs, ensure that you are not also claiming actual expenses for maintenance, insurance and other out-of-pocket costs. The IRS has found filer noncompliance in this area as well and will look for this.

7. Claiming a loss for a hobby activity.
Your chances of “winning” the audit lottery increase if you have wage income and file a Schedule C with large losses. And, if your Schedule C loss-generating activity sounds like a hobby…horse breeding, car racing, and such…the IRS pays even more attention. It’s issued guidelines to its agents on how to sniff out those who improperly deduct hobby losses. Large Schedule C losses are audit bait, but reporting losses from activities in which it looks like you might be having a good time is just asking for IRS scrutiny.
Tax laws don’t allow you to deduct hobby losses on Schedule C; however, you do have to report any income earned from your hobbies. In order to claim a hobby loss, your activity must be entered into and conducted with the reasonable expectation of making a profit. If your activity generates profit three out of every five years (or two out of seven years for horse breeding), the law presumes you’re in business to make a profit, unless the IRS establishes to the contrary. If audited, the IRS is going to make you prove you have a legitimate business and not a hobby. So, make sure you run your activity in a business-like manner and can provide supporting documents for all expenses.

8. Cash businesses
Small business owners, especially those in cash-intensive businesses…taxi drivers, car washes, bars, hair salons, restaurants are an easy target for IRS auditors. The agency is well aware that those who primarily receive cash in their business are less likely to accurately report all of their taxable income. The IRS wants to narrow the tax gap, and history has shown that cash-based businesses are a good source of audit adjustments. It has a new guide for agents to use when auditing cash intensive businesses, telling how to interview owners and noting various indicators of unreported income.

9. Failure to report a foreign bank account.
The IRS is intensely interested in people with offshore accounts, especially those in tax havens. U.S. tax authorities have had some recent success in trying to get foreign banks (such as UBS in Switzerland) to disclose information on U.S. account holders. Also, the IRS had a voluntary compliance program where people came in and reported their foreign bank accounts and foreign assets in exchange for lesser penalties than they would have otherwise been subject to. The IRS has learned a lot from these probes.

Failure to report a foreign bank account can lead to severe penalties, and the IRS has made this issue a top priority. Make sure that if you have any such accounts, you properly report them when you file your return. Keep in mind, though, that if you have never previously reported the foreign bank account on your return, and you decide to do so for the first time in 2010, that might also look suspicious to the IRS.

10. Engaging in currency transactions
The IRS gets many reports of cash transactions in excess of $10,000 involving banks, casinos, car dealers and other businesses, plus suspicious activity reports from banks and disclosures of foreign accounts. A recent report by Treasury inspectors concluded that these currency transaction reports are a valuable source of audit leads for sniffing out unreported income. The IRS agrees and it will make greater use of these forms in its audit process. So if you are a person who makes large cash purchases or deposits, be prepared for IRS scrutiny. Also, beware that banks and other institutions file reports on suspicious activities that appear to avoid the currency transaction rules (such as persons depositing $9,500 cash one day and an additional $9,500 cash two days later).

11. Math errors
One of the biggest reasons that people receive a letter from the IRS is because of mathematical mistakes they make on their tax returns. If you make an error in your favor, you are going to hear from the tax man, and there is a greater risk of the IRS pulling the whole return for audit. So take time to ensure all your calculations are correct. Even though math errors may not lead to a full-blown audit, it’s always best to remain under the radar of IRS computers.

12. Taking higher-than-average deductions
If deductions on your return are disproportionately large compared to your income, the IRS audit formulas take this into account when selecting returns for examination. Screeners then pull the most questionable returns for review. But if you’ve got the proper documentation for your deduction, don’t be scared to claim it. There’s no reason to ever pay the IRS more tax than you actually owe.

To read more on this story, visit:
http://www.kiplinger.com/tools/slideshows/slideshow_pop.html?nm=tax_audit_redflags

If you have any questions on this topic, please contact bankruptcy & foreclosure defense attorney Timothy Kingcade, who is also a certified public accountant (CPA), which provides him with a unique understanding of how to handle tax-motivated bankruptcy cases against the IRS at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia, P.A. website at www.miamibankruptcy.com.