A New York Mortgae Planners View:

I read in the

A real estate publication in New York real estate Market That John D Dingell Chairmen of the house energy and commerce committee, expects to introduce a comprehensive Climate change reform legislation once Congress returns this month.
In an effort to reduce energy consumption the bill will Cutoff Mortgage interest tax deductions for all houses with 3000 square feet and up.

I learned one thing from Sandford C. Botkin, tax lawyer, CPA, former IRS attorney that whenever Congress proposes o do a Tax simplification something bad is coming. Now especially that they propose an outright tax deduction elimination!

Now what this bill will do in my opinion is penalize Congress them self's with less tax income because as a general rule the Rich will find another way of playing the system energy consumption will not be reduced in this world of technological evolution when even computers have to build like a military device to accommodate Have gamers

Another point that this bill goes to show you that you never know what tax law bring later therefore when dealing with retirement dollars it makes more sense to play with nonqualified  retirement plans that your  taxed on the principle dollars invested. (Refer to missed fortune By Douglas Andrew)

Sincerely
 
Joel Silberstein
Mortgage Planner

I read in the Realtor Magazine on-line that Chris Murphy democrat of Connecticut wants to ban the YSP, otherwise known as compensation from the lender to the mortgage broker on sub-prime loans.
He claims that this forces borrowers to pay higher rates

A Classic example of socialism. His intention is to save rates for the consumer right? or at least thats what he wantsyou to believe! What this will ultimately do is the following

• Increase fees up front from the borrower (unless he wants to ban that too)
• Decrease the supply for the sub-prime market which will ultimately push rates further up
• Get borrowers to loose the tax deduction they now have on interest. By shifting the compensation that brokers have to the from end meaning that the borrower will have to pay it in form a fee) thats deems it not deductible only when amortized over the life of the loan! most people don't stay in this type of loan for a long period of time therefore getting them to loose is it altogether!

The Mortgage Business is already a very regulated business. further regulation at the point of origination will not deem it more responsible, but possibly drive this entire market out of business therefore decreasing homeownership in the USA

Just another thought

Joel Silberstein

link to article

http://www.realtor.org/RMODaily.nsf/pages/News2007101805?OpenDocument

Link to the article

http://www.realtor.org/RMODaily.nsf/pages/News2007101803?OpenDocument

I am Not going to cut and paste the entire article but the bullet point the articles brings out is that the new disclosure law's that requires sellers to disclose if the property is in a flood zone or airport noise zone, hase a big impact on prices as high as 4% in certain parts of the country!

Wow Shocking, where have you been living beneath a rock? did you do business out of there?

Standard work of a mortgage Professional is to determine monthly payment for  the borrower

That consists of

• Principal and Interest
• Hazard Insurance
• Flood insurance (if required)
• Home Owners Association fees
• Taxes
• Total debt

It was always a big factor, the only difference is that prior to the law the problem was on the borrowers side like the payment is too high borrower cannot afford it but now, it is another tool in negotiation up front.

 It might even turn out to be a blessing in disguise: that the reduction in price will let more borrowers qualify in In spite of the higher monthly fees due to flood insurance.

Just another way of looking at it

Sincerely

Joel Silberstein

link to article

http://www.post-gazette.com/pg/07284/824509-68.stm

Affluent senior citizens tapping reverse mortgages for extra cash

Thursday, October 11, 2007

By Tim Grant, Pittsburgh Post-Gazette

Daniel Marsula / Post-Gazette

Reverse mortgages have been a popular tool for cash-strapped retirees, but wealthier folks are finding ways to use them, too.

With a mansion worth $21 million, a wealthy retiree near Philadelphia decided the most logical way to access that cash and improve his standard of living was to take out a reverse mortgage on the house and invest the money for more income.

"That's obviously an exception," said Douglas Ziegler, a reverse mortgage officer with Gateway Funding in Horsham, Montgomery County, who handled the transaction for a 64-year-old man. "It's not your typical loan."

Yet deals like that are becoming more common.

Once considered the option of last resort for poor retirees struggling to keep up with the cost of living, reverse mortgages are now growing in popularity with more affluent senior citizens.

Eric Declercq, managing director of the reverse mortgage unit for Countrywide Financial Corp., said the company had recently done two reverse mortgages for about $10 million each.

"We believe the future of reverse mortgages lies in improving the quality of life, freeing up cash for travel, leisure and investments," Mr. Declercq said.

A few of my Own Comments

You will see that The affluent will take a product thats designed to help the poor and twist a little and get more of it  then the poor for whom it was originally created. Don't they have  a way with money? (refer to my previous post)

Also Note in the article and I quote "that the affluent want to improve their standard of living uh" pretty intriguing! don't they already have enough money?  the answer is  that of course they have saved up allot in tax deferred vehicle's like IRA"s and 401K and the like they are just  looking for the Best way, less taxing, a way thats more for them and not for uncle sam!

Also note the at the very last line of the article where Mr Declercq is quoted he has the following priorities

Travel

Leisure

Investments. This explains why so many people are struggling financially!

Sincerely

Joel Silberstein

Mortgage Planner

Today while listening to the Ric Edelman's radio show a women called in. Apparently she was elderly and she owns 2 pieces of property one she currently lives in, and another an undeveloped piece of river front property and as large as 14 acres.

 Her question to Ric was that the house she lives desperately needs renovation and she is asking Ric if she can take out money from the other undeveloped property through a 1031 exchange.

Rick answered that 1031 exchange is merely a tax deferred method it takes all the money you get from the property you sell and rolls it into the new property therefore you will not have any money out of this transaction to renovate your home, therefore concluding that this strategy is not for her.

What I was starlet about was that he cut her short by answering what he did and elaborating on any other strategy therefore she might conclude from his answer that she should sell the property and incur a large capital gain and take part or the whole money (I don't know how big of a gain there is going to be) to renovate the property!

The problems I have with this is as follows

• Unnecessary tax to the government
• Taking an appreciating asset like Real estate and converting into a non appreciating asset that's analogous to buying an expensive Bentley for its stereo system that will be taken out.
• For Failing to show the client how to achieve greater financial comfort while holding onto the property and still achieve her objective of getting cash for the renovation of her other property

Now what would you professionals say about this conversation above?

I will follow up with my strategy in my next post!

Sincerely

Joel Silberstein

Mortgage planner