Question:
Hi, I'm in more than a bit of a quandary...I purchased my home (townhouse) in 2005 and refinanced in 2006 (to get away from an frightful interest only mortgage to a traditional 30-yr fixed mortgage). While I live quite frugally, my mortgage is more than 60% of my income, and of course now my property value has tanked into what appears to be the abyss! I do also have a student loan that I'm paying off (great interest rate so I don't want to mess with that), so between all my mandatory payments, I feel I have absolutely no wiggle room at all, and do feel more than stressed. Will this new stimulus package be able to help someone like me, i.e., can I take advantage of this package to do some thing about my mortgage? Thanks so much. Mini, Herndon, VA.
Answer:
I don't blame you for feeling stressed out. You're paying out way too much of your income for shelter. Let's hope the Administration's housing plan does buy you some relief. Now, it seems to me that the mortgage refinancing portion of the plan is designed for people like you. You're current on your payments. You have good credit, paying your bills on time. But you can't refinance into today's low rates because you don't have enough equity in your home after the steep decline in home prices. The new rules allow Fannie Mae and Freddie Mac to refinance mortgages where the value of it is between 80% and 105% of the value of the property. Many borrowers that are making their mortgage payments on time have seen their loan-to-value ratios climb into this range because of falling house prices. However, this program is for "conforming" mortgages, ones that fall within the $417,000 loan limit of Fannie Mae and Freddie Mac. (There are higher loan limits for 59 high-priced sections of the country.)
That's one avenue to pursue. There's another tactic to consider, or at least explore. The loan modification part of the package is aimed at borrowers in imminent risk of default. That's not you. But it has incentives for mortgage lenders and mortgage servicers to reduce monthly repayments to 31% of gross income--considerably less than you're paying right now. (And the new loan modification plan is supposed to stop the practice of lenders loading up mortgage modifications with fees, penalties and the like so that the new arrangement is actually more expensive than the previous one. How's that for disgusting?) I would at least try to see if you can get your loan modified. But if you do get an offer look carefully at the deal to make sure you come out ahead.
Hopefully, you will be able at least to refinance your mortgage at a lower rate.
Friday, February 27, 2009
Thursday, February 26, 2009
Condo Insurance: Question and Answer
I took our strata corporation policy to the company that provides our homeowner insurance. The broker told me that it was irrelevant, returned it to me and processed our annual renewal.
Well our new washing machine flooded our home and two others just before Christmas. The strata insurance paid the claim, but we have a $10,000 water deductible.
Our insurance covered only $2,500 of the claim and we're left paying the rest.
What was the point of bringing in our strata policy if the broker never bothered to review our deductibles and adjust our insurance accordingly? The broker claims there was no additional coverage available.
We want everyone to know that, when they buy homeowner insurance for their condo, they should read the strata policy and ask their broker for specific coverage for the water deductible, before they are crushed with a major bill.
Christina Matthews, Saanich
Dear Christina: Depending on your insurance provider, there is additional insurance available to cover the higher values of insurance deductibles that a strata unit may be facing.
The insurance industry suffers significant losses from water damage claims each year, so while additional coverage may be available, it might be included with the policy or it might cost more. That is a decision you will make when arranging for your insurance.
When homeowners, tenants or landlords purchase insurance, the only way to ensure they can protect themselves is to deal with an insurance company that is experienced with condominium homeowner policies. You should send or bring a written notice to your agent/broker, including the strata binder cover that shows the deductible amounts for your strata corporation and what your expectations for coverage will be.
If an agent misrepresented the information or disclosure of the coverage, you may have grounds to sue the brokerage.
Consumers can also file a complaint with the Insurance Council of B.C. (www.insurancecouncilofbc.com).
Many strata owners and strata corporations are still sadly underinsured or improperly insured. If your strata is operating any type of commercial ventures, mixed use properties, suite rentals, public facilities or sub-lease facilities, confirm those activities are covered on your policies.
Unit owners also need to understand that there are limitations of coverage to your unit if the occupancy changes. Policies are different for resident owners, tenants, landlords, short-term vacation rentals and commercial strata lots. Confirm that your strata unit use is clearly identified on the policy, that you have confirmed the deductible amounts of the strata policy and that you are satisfied with the coverages.
There are significant differences in coverage from company to company, so take the time to read the fine print and understand the exemptions.
Well our new washing machine flooded our home and two others just before Christmas. The strata insurance paid the claim, but we have a $10,000 water deductible.
Our insurance covered only $2,500 of the claim and we're left paying the rest.
What was the point of bringing in our strata policy if the broker never bothered to review our deductibles and adjust our insurance accordingly? The broker claims there was no additional coverage available.
We want everyone to know that, when they buy homeowner insurance for their condo, they should read the strata policy and ask their broker for specific coverage for the water deductible, before they are crushed with a major bill.
Christina Matthews, Saanich
Dear Christina: Depending on your insurance provider, there is additional insurance available to cover the higher values of insurance deductibles that a strata unit may be facing.
The insurance industry suffers significant losses from water damage claims each year, so while additional coverage may be available, it might be included with the policy or it might cost more. That is a decision you will make when arranging for your insurance.
When homeowners, tenants or landlords purchase insurance, the only way to ensure they can protect themselves is to deal with an insurance company that is experienced with condominium homeowner policies. You should send or bring a written notice to your agent/broker, including the strata binder cover that shows the deductible amounts for your strata corporation and what your expectations for coverage will be.
If an agent misrepresented the information or disclosure of the coverage, you may have grounds to sue the brokerage.
Consumers can also file a complaint with the Insurance Council of B.C. (www.insurancecouncilofbc.com).
Many strata owners and strata corporations are still sadly underinsured or improperly insured. If your strata is operating any type of commercial ventures, mixed use properties, suite rentals, public facilities or sub-lease facilities, confirm those activities are covered on your policies.
Unit owners also need to understand that there are limitations of coverage to your unit if the occupancy changes. Policies are different for resident owners, tenants, landlords, short-term vacation rentals and commercial strata lots. Confirm that your strata unit use is clearly identified on the policy, that you have confirmed the deductible amounts of the strata policy and that you are satisfied with the coverages.
There are significant differences in coverage from company to company, so take the time to read the fine print and understand the exemptions.
Monday, February 23, 2009
Increasing Home insurance rates: Comments
Insurance is not priced the way other products and services are priced. The premiums collected today are not used to pay for losses that have already happened. Doing so is prohibited in Texas. Instead, premiums you pay today go to help pay for losses that will occur in the future.
Texas has experienced billion-dollar-plus losses from catastrophes in nine of the past 27 years, and the average annual catastrophe losses are $940 million.
Insurance is a business not unlike other forms of commerce, where a reasonable return on investment is fundamental to the principle of a market-based economy. A considerable investment is needed to start, run and grow insurance companies, with no guarantee of success.
No one would be willing to take on those kinds of risks unless there was a reasonable expectation of earning a return on investment commensurate with the risk of a catastrophic loss.
Jerry Johns, President, Southwestern Insurance Information Service, Austin
Your recent comments on the high cost of home insurance have been interesting. Just taking into consideration the cost of this type of insurance, without the value of a specific house, the insurance increase is a big thorn in the side of the average homeowner.
My annual premium was going to increase in 2002 from $1,479 to $2,225. By increasing the deductible from $250 to $1,000, the premium was lowered to $1,673. For 2009, the premium is back to $1,972. It would be higher, but in 2004, the insurance company eliminated the cost and coverage for itemized personal property from the house policy to a separate policy with an additional $262 premium. The only coverage which has been added has been identity theft, backup sewer and the usual increase in maximum amount of coverage, which has been declined at times to keep the premium cost down.
The premium would be higher if I did not get credit for multiple coverage with the same company.The increase problem is not limited to the house, but it also applies to car and property tax.
The Legislature representatives are representing their own interests and not those of the people.
Ralph Williams, Dallas
Texas has experienced billion-dollar-plus losses from catastrophes in nine of the past 27 years, and the average annual catastrophe losses are $940 million.
Insurance is a business not unlike other forms of commerce, where a reasonable return on investment is fundamental to the principle of a market-based economy. A considerable investment is needed to start, run and grow insurance companies, with no guarantee of success.
No one would be willing to take on those kinds of risks unless there was a reasonable expectation of earning a return on investment commensurate with the risk of a catastrophic loss.
Jerry Johns, President, Southwestern Insurance Information Service, Austin
Your recent comments on the high cost of home insurance have been interesting. Just taking into consideration the cost of this type of insurance, without the value of a specific house, the insurance increase is a big thorn in the side of the average homeowner.
My annual premium was going to increase in 2002 from $1,479 to $2,225. By increasing the deductible from $250 to $1,000, the premium was lowered to $1,673. For 2009, the premium is back to $1,972. It would be higher, but in 2004, the insurance company eliminated the cost and coverage for itemized personal property from the house policy to a separate policy with an additional $262 premium. The only coverage which has been added has been identity theft, backup sewer and the usual increase in maximum amount of coverage, which has been declined at times to keep the premium cost down.
The premium would be higher if I did not get credit for multiple coverage with the same company.The increase problem is not limited to the house, but it also applies to car and property tax.
The Legislature representatives are representing their own interests and not those of the people.
Ralph Williams, Dallas
Farmers' insurance double-digit rate increase.
CONSUMER RESPONSE
I read about the 10 percent increase in premiums for Farmers Insurance customers with a smug grin. At least I am not with Farmers.
My homeowners policy renewal (with AAA) came that afternoon. There on Page 7 -- in bold type -- it said: "This represents a 32 percent increase in your premium."Needless to say, the smile disappeared.
There is something dreadfully wrong with the system . Even if it does not save me any money, AAA will see a 100 percent reduction in my premium. I will gladly pay some other company the same amount just to get away from one that, after many years with no claims, finds it necessary to raise my rate by 32 percent.
Archie VanSchoonhoven, Dallas
I read about the 10 percent increase in premiums for Farmers Insurance customers with a smug grin. At least I am not with Farmers.
My homeowners policy renewal (with AAA) came that afternoon. There on Page 7 -- in bold type -- it said: "This represents a 32 percent increase in your premium."Needless to say, the smile disappeared.
There is something dreadfully wrong with the system . Even if it does not save me any money, AAA will see a 100 percent reduction in my premium. I will gladly pay some other company the same amount just to get away from one that, after many years with no claims, finds it necessary to raise my rate by 32 percent.
Archie VanSchoonhoven, Dallas
Friday, February 20, 2009
How the Stimulus puts more in your pocket
The $787 billion stimulus bill was signed into law Tuesday. Now people want to know when they'll get some money in their pockets.
Robin Davis from Warner Robins wrote to us and asked, "How soon after the stimulus bill is signed will we start seeing a difference in our pay and unemployment checks in Georgia?"
The bill has a category that gives more money to the unemployed. It provides a $25 a week increase in unemployment insurance benefits to 505,000 Georgians.
Sam Hall with the Department of Labor in Atlanta says as of February 17th, the average weekly unemployment pay to Georgians is $274 for 11.5 weeks. He says the maximum for unemployment is $330 a week for 26 weeks.
The bill also continues a program through December 2009 that provides up to 33 weeks of extended unemployment benefits. That will affect around 100,000 Georgians.
Doug Moore, spokesman for Congressman Jim Marshall, says since the bill was signed it technically goes into law immediately. But he says the beaurocratic system slows down the process a bit. He says the unemployed should see more money very quickly. Possibly on their next check.
For the working, the bill also includes a payroll tax deduction. Moore says you don't see that money in the form of a check, but you'll have fewer taxes taken out of your pay for the rest of the year.He says it could take anywhere from two weeks to a month to see a difference in your pay check.
So, if you're unemployed, you should see more money coming your way soon and if you're working, your paychecks should be a little bigger within the next month.
Robin Davis from Warner Robins wrote to us and asked, "How soon after the stimulus bill is signed will we start seeing a difference in our pay and unemployment checks in Georgia?"
The bill has a category that gives more money to the unemployed. It provides a $25 a week increase in unemployment insurance benefits to 505,000 Georgians.
Sam Hall with the Department of Labor in Atlanta says as of February 17th, the average weekly unemployment pay to Georgians is $274 for 11.5 weeks. He says the maximum for unemployment is $330 a week for 26 weeks.
The bill also continues a program through December 2009 that provides up to 33 weeks of extended unemployment benefits. That will affect around 100,000 Georgians.
Doug Moore, spokesman for Congressman Jim Marshall, says since the bill was signed it technically goes into law immediately. But he says the beaurocratic system slows down the process a bit. He says the unemployed should see more money very quickly. Possibly on their next check.
For the working, the bill also includes a payroll tax deduction. Moore says you don't see that money in the form of a check, but you'll have fewer taxes taken out of your pay for the rest of the year.He says it could take anywhere from two weeks to a month to see a difference in your pay check.
So, if you're unemployed, you should see more money coming your way soon and if you're working, your paychecks should be a little bigger within the next month.
Georgia: Have good credit, get cheaper insurance!
Many Insurance companies in Georgia are lowering their car insurance rates for customers with top ratings.
Your credit score is a big factor in how insurance companies decide your rates. Agents say if your credit score is superior, it's a good time to shop around your car insurance.
State Farm, the largest auto insurer in Georgia, lowered its rates by an average of one and a half percent. That means savings of more than 16 million dollars for Georgia customers during tough economic times.
"Providing their current policy holders and potential policy holder with a chance to come up with a more feasible more competitive option for their car insurance," said State Farm Agent Jay Kimbro.
Many other car insurance companies are also offering lower rates in Georgia, if you qualify. Your insurance rating decides your risk level, and your bill.
"Your loss history, your drivers record, certain credit characteristics," said Kimbro.
Your credit score is a big part of that insurance score. If your credit score is superior, agents say now is the time to shop around. If your credit score is not good, your rates could increase.
"The more difficulty certain people have keeping their credit under control, then they may be more likely to have an accident and file a claim," said Doherty, Duggan, and Rouse Insurers Agent Lydia Livingston.
Georgians are driving fewer miles and having fewer crashes, and some insurance companies are lowering their rates accordingly. Agents say insurance companies rate customers differently, so drivers with good credit scores could save big bucks shopping around now.
"Anytime the economy gets to the point it is now, it's always a good time to go and make sure you are getting the most competitive option," Kimbro said.
State Farm reports their overall auto insurance rates in Georgia will cost 12% less than five years ago. Finally a little good news in the economy.
Premiums for collision and comprehensive coverage are decreasing. Liability and medical coverage is not impacted by the rate decreases.
Your credit score is a big factor in how insurance companies decide your rates. Agents say if your credit score is superior, it's a good time to shop around your car insurance.
State Farm, the largest auto insurer in Georgia, lowered its rates by an average of one and a half percent. That means savings of more than 16 million dollars for Georgia customers during tough economic times.
"Providing their current policy holders and potential policy holder with a chance to come up with a more feasible more competitive option for their car insurance," said State Farm Agent Jay Kimbro.
Many other car insurance companies are also offering lower rates in Georgia, if you qualify. Your insurance rating decides your risk level, and your bill.
"Your loss history, your drivers record, certain credit characteristics," said Kimbro.
Your credit score is a big part of that insurance score. If your credit score is superior, agents say now is the time to shop around. If your credit score is not good, your rates could increase.
"The more difficulty certain people have keeping their credit under control, then they may be more likely to have an accident and file a claim," said Doherty, Duggan, and Rouse Insurers Agent Lydia Livingston.
Georgians are driving fewer miles and having fewer crashes, and some insurance companies are lowering their rates accordingly. Agents say insurance companies rate customers differently, so drivers with good credit scores could save big bucks shopping around now.
"Anytime the economy gets to the point it is now, it's always a good time to go and make sure you are getting the most competitive option," Kimbro said.
State Farm reports their overall auto insurance rates in Georgia will cost 12% less than five years ago. Finally a little good news in the economy.
Premiums for collision and comprehensive coverage are decreasing. Liability and medical coverage is not impacted by the rate decreases.
Saturday, February 14, 2009
Stimulus Bill: Questions and Answers
The final draft of the $787 billion economic stimulus bill includes a variety of tax breaks and benefits for individuals. The bill weighs in at a whopping 1,073 pages, so many readers responded to our invitation to submit questions on how the bill may affect them. Selected questions and answers follow.
Benefits for Buying a Car
Q. I am a single-income household making less than $75,000 a year. I recently had to turn in a leased vehicle that was at the end of the lease as of 1-29-09. I purchased a NEW car on 1-16-09 from the same dealership I had been leasing from. Will I qualify for the stimulus package refund? — Laura Stone, Greenville, S.C.
Q. Does the car-buyer tax deduction cover cars bought starting in November 2008, as in the Senate bill, or starting when the bill is enacted? —Whitney Muse, Philadelphia
A. Unfortunately, the car deduction goes into effect for purchase on or after the day the bill is signed, according to Clint Stretch, the managing principal of tax policy at Deloitte L.L.C. in Washington. As Mr. Stretch noted, it may be a slow weekend for car sales. Congress passed the bill Friday, and President Obama is expected to sign the bill by Monday.
After the bill is signed, you will be able to take a deduction for state and local taxes, as well as excise taxes, paid on a new (but not used) vehicle, up to $49,500. The tax break is an above-the-line deduction, which means that you can take the deduction, even if you do not itemize other deductions on your tax return. The deduction begins to phase out for single tax filers with adjusted gross income of more than $125,000, or $250,000 for married couples filing jointly. Remember, the break applies to most vehicles, as long as they weigh no more than 8,500 pounds. That means sport utility vehicles, light trucks, motorcycles and even motor homes qualify, according to CCH, a tax information service.
Extended Health Benefits
Q. Can you tell me if the House provision regarding the long-term employees (10 years or age 55) and their eligibility for Cobra made it into the final bill? I can’t find any references to it, which I guess says something. — George Baker, Boise, Idaho
Q. Does it still contain the provision that those forced out of their jobs after Sept. 1, 2008, and did not elect Cobra, will have an additional 60-day period to elect Cobra? — Dennis S., San Diego
A. For those unfamiliar with Cobra, it’s the law that requires your company to provide you with health benefits for up to 18 months or so after you are fired or leave your job voluntarily. Unfortunately, it’s not free. It can often cost more than $1,000 a month, especially if you are seeking coverage for your entire family.
A provision in the House bill would have made Cobra health benefits available to workers on the job for more than 10 years and those older than 55 until they were eligible for Medicare, but it was not included in the final draft.
The period in which Cobra benefits can be requested was extended, however, and the stimulus bill eases the cost burden. To summarize, I’ll point you to Ron Lieber’s most recent Your Money column.
The federal government will subsidize 65 percent of the premium for up to nine months. To be eligible, you need to have been forced out of your job between Sept. 1, 2008, and Dec. 31, 2009. Also, your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples filing their taxes jointly.
If you lost your job after Sept. 1, 2008, and declined Cobra coverage, you’ll now get another chance. Call your former company in the next two months to find out how this will work.
More on Cobra
Q. I was laid off in September 2007. My Cobra is expiring April 1 of this year. Why did they only include a portion of 2008? I need help on this. Any suggestions? — Martha W.
A. To keep the cost of the bill under control, Congress had to set certain limits. That’s probably why they couldn’t extend the Cobra subsidy too far back. Individuals may extend their Cobra coverage beyond the 18-month period if they become disabled, according to the Department of Labor Web site. But if you’re perfectly healthy, you may have to shop for insurance on your own. If that’s the case, I’d recommend reviewing Your Money’s Health Insurance primer, which outlines several options for buying coverage.
Q. I am a retired federal worker collecting a federal pension that is taxable. Will I receive the income tax credit of $400? — Mel Shrader, Mesa, Ariz.
Q. Will people who derive all of their income from annuity payments receive the tax credit, or only those people who have “earned income”? — Arnold
Q. Could you explain exactly who is, and who is not, eligible for the $400/$800 tax rebates? What about married couples that file together? I made $40,000 and my wife made $35,000 last year. Will we each get the full amount, or will we get a reduced amount? — Michael W.
Benefits for Buying a Car
Q. I am a single-income household making less than $75,000 a year. I recently had to turn in a leased vehicle that was at the end of the lease as of 1-29-09. I purchased a NEW car on 1-16-09 from the same dealership I had been leasing from. Will I qualify for the stimulus package refund? — Laura Stone, Greenville, S.C.
Q. Does the car-buyer tax deduction cover cars bought starting in November 2008, as in the Senate bill, or starting when the bill is enacted? —Whitney Muse, Philadelphia
A. Unfortunately, the car deduction goes into effect for purchase on or after the day the bill is signed, according to Clint Stretch, the managing principal of tax policy at Deloitte L.L.C. in Washington. As Mr. Stretch noted, it may be a slow weekend for car sales. Congress passed the bill Friday, and President Obama is expected to sign the bill by Monday.
After the bill is signed, you will be able to take a deduction for state and local taxes, as well as excise taxes, paid on a new (but not used) vehicle, up to $49,500. The tax break is an above-the-line deduction, which means that you can take the deduction, even if you do not itemize other deductions on your tax return. The deduction begins to phase out for single tax filers with adjusted gross income of more than $125,000, or $250,000 for married couples filing jointly. Remember, the break applies to most vehicles, as long as they weigh no more than 8,500 pounds. That means sport utility vehicles, light trucks, motorcycles and even motor homes qualify, according to CCH, a tax information service.
Extended Health Benefits
Q. Can you tell me if the House provision regarding the long-term employees (10 years or age 55) and their eligibility for Cobra made it into the final bill? I can’t find any references to it, which I guess says something. — George Baker, Boise, Idaho
Q. Does it still contain the provision that those forced out of their jobs after Sept. 1, 2008, and did not elect Cobra, will have an additional 60-day period to elect Cobra? — Dennis S., San Diego
A. For those unfamiliar with Cobra, it’s the law that requires your company to provide you with health benefits for up to 18 months or so after you are fired or leave your job voluntarily. Unfortunately, it’s not free. It can often cost more than $1,000 a month, especially if you are seeking coverage for your entire family.
A provision in the House bill would have made Cobra health benefits available to workers on the job for more than 10 years and those older than 55 until they were eligible for Medicare, but it was not included in the final draft.
The period in which Cobra benefits can be requested was extended, however, and the stimulus bill eases the cost burden. To summarize, I’ll point you to Ron Lieber’s most recent Your Money column.
The federal government will subsidize 65 percent of the premium for up to nine months. To be eligible, you need to have been forced out of your job between Sept. 1, 2008, and Dec. 31, 2009. Also, your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples filing their taxes jointly.
If you lost your job after Sept. 1, 2008, and declined Cobra coverage, you’ll now get another chance. Call your former company in the next two months to find out how this will work.
More on Cobra
Q. I was laid off in September 2007. My Cobra is expiring April 1 of this year. Why did they only include a portion of 2008? I need help on this. Any suggestions? — Martha W.
A. To keep the cost of the bill under control, Congress had to set certain limits. That’s probably why they couldn’t extend the Cobra subsidy too far back. Individuals may extend their Cobra coverage beyond the 18-month period if they become disabled, according to the Department of Labor Web site. But if you’re perfectly healthy, you may have to shop for insurance on your own. If that’s the case, I’d recommend reviewing Your Money’s Health Insurance primer, which outlines several options for buying coverage.
Q. I am a retired federal worker collecting a federal pension that is taxable. Will I receive the income tax credit of $400? — Mel Shrader, Mesa, Ariz.
Q. Will people who derive all of their income from annuity payments receive the tax credit, or only those people who have “earned income”? — Arnold
Q. Could you explain exactly who is, and who is not, eligible for the $400/$800 tax rebates? What about married couples that file together? I made $40,000 and my wife made $35,000 last year. Will we each get the full amount, or will we get a reduced amount? — Michael W.
A. The operative word in the “Making Work Pay” tax credit is “work.” For 2009 and 2010, this provision provides a tax credit of up to $400 for working individuals and $800 for married couples filing their tax returns jointly. You can calculate your credit by taking 6.2 percent of your earned income (and subtract it from the other federal taxes you owe). The credit begins to phase out at income levels of $75,000 for individuals and $150,000 for married couples filing jointly. Since the credit is “refundable,” you’ll get money back even if you have no federal income-tax liability.
The bill also provides a one-time payment of $250 in 2009 to retirees and disabled people receiving Social Security benefits. A separate $250 credit is also provided to certain government retirees who are not eligible for Social Security. If you are also eligible for the income-tax credit, however, it would be reduced by $250, according to Mark Luscombe, principal analyst at CCH.
Home Buyers’ Credit
Q. Is the tax credit for first-time home buyers in the stimulus bill only for homes purchased in 2009 or does it also apply to homes eligible for the $7,500 interest-free loan enacted last year? The information currently online seems to give conflicting accounts. — Ellen Rozan, Chapel Hill, N.C.
A. The latest bill provides first-time home buyers with a refundable tax credit of up to $8,000 for purchases made after Jan. 1, 2009, but before Dec. 1, 2009. The credit phases out for single taxpayers with adjusted gross incomes that exceed $75,000 (or $150,000 for married couples filing jointly). If you sell the home within three years, you’ll forfeit the credit.
First-time home buyers who made purchases between April 9 and Dec. 31, 2008, however, will continue to be covered by the original credit enacted last year for first-time home buyers. It’s delivered in the form of a refundable tax credit equal to 10 percent of the home price, up to $7,500. But it really amounts to an interest-free loan from the government because you need to pay back the amount you receive over 15 years (or earlier, if the home is sold). The income limits that apply to the new credit, which you do not need to pay back, also apply here, according to Maureen McGetrick, a tax partner with BDO Seidman in New York.
More on Home Buying
Q. I recently got married. I have never owned a home, but my wife owns one with her brother, which she will deed to him when we buy a house together. Can I get the home buyers’ tax credit by buying the home in my name, then adding her name to the deed later? — Hank Y.
A. That’s a tricky one. Since you are married, that means both you and your spouse have to meet the “first-time home buyer” requirement, which means that neither of you owned a principal residence for three years, Ms. McGetrick said. If the home your wife owns with her brother is considered an investment property and not a principal residence, it won’t affect your eligibility for the credit, she said. But be sure to check with a tax adviser regarding the specifics of your situation.
Co-Signers and the Tax Credit
Q. I was curious about the provision in the newly formulated stimulus plan for first-time home buyers. I am in the process of purchasing my first home, and because of credit restraints I had to have my mom as a co-signer. Is this going to affect my eligibility for the tax credit? — Ryan, Manchester, N.J.
A. If your mother is simply serving as a co-signer, you will probably still be able to claim the entire credit on your own. The Internal Revenue Service issued guidelines on how to allocate a similar credit (the $7,500 credit mentioned above) among unmarried taxpayers. And Ms. McGetrick expects the same general rules to apply to the latest tax break.
The allocation of the tax credit should be “based on the underlying economics of the transaction,” she said, including how much each party contributed to the down payment, who is responsible for paying the mortgage and the ownership interests of the parties involved. It may be more beneficial for one person to take the credit, so keep that in mind. Whatever you decide, seek the counsel of a tax adviser.
Alternative Minimum Tax
Q. What are the changes in the A.M.T. that are part of the stimulus package? — Eugene Monaco, Albany.
A. Every year, Congress typically passes what’s become known as the alternative minimum tax “patch,” which shields millions of taxpayers from paying the more onerous A.M.T. by increasing the amount of exempt income. This year, the patch was included in the stimulus bill. For 2009, the amount of exempt income is increased to $46,700 for single filers, up from $46,200 in 2008, according to CCH. And for married couples filing joint returns, it rises to $70,950 from $69,950.
Reading the Stimulus Bill
Q. Where can I read the stimulus bill and is there anything in there about your 401(k)?
A. Most people have watched their 401(k)’s drop like a rock, but there’s nothing in the bill addressing the accounts specifically. If you want to try to figure out how long it might take for your account to recover, check out Your Money’s Comeback Calculator.
Government and banks move to address housing crisis
With pressure growing for government action to stem foreclosures, the White House moved up to next week the unveiling of President Obama's housing rescue plan, while major banks said they would freeze seizures of homes for at least three weeks pending the rollout of the initiative.
For months, Congress has been pressing the executive branch -- first the Bush administration, now its successor -- to come up with a program to curtail the growing wave of borrowers forced to give up their homes. On Tuesday, Treasury Secretary Timothy F. Geithner disappointed lawmakers as well as the stock market by saying the foreclosure plan would be delayed several weeks.
In response to that reaction, Obama is now scheduled to present the plan Wednesday in Phoenix.
"I think you'll see the president take a big step forward in dealing with the crisis that faces 10,000 people every day," White House spokesman Robert Gibbs told reporters.
The moratorium announcements by big banks also followed pressure from Congress this week. At a meeting Wednesday of the House Financial Services Committee in which lawmakers chastised banking leaders for their role in the economic crisis, panel Chairman Rep. Barney Frank (D-Mass.) asked the CEOs to freeze foreclosures until the administration's mitigation effort was announced.
A number of the banks said Friday that they would honor Frank's request, most of them pledging to wait three weeks, until March 6, to see how the Obama plan would affect them.
In a letter to Frank, JPMorgan Chase & Co. Chief Executive Jamie Dimon said his firm was ready to work with the administration on an "appropriate process" for handling troubled borrowers, including a standardized loan modification program.
Other large mortgage customer-service firms signing on to a moratorium included Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., as well as Fannie Mae and Freddie Mac, the mortgage-finance companies now controlled by the government.
The suspensions of foreclosures generally apply to single-family residences and small complexes of up to four units. Vacant homes are excluded.
All mortgage customer-service firms are likely to participate in the moratorium, said Guy Cecala, publisher of Inside Mortgage Finance Publications.
"No one would complain about delaying action for three weeks," he said. But he was skeptical "that the administration can roll out any plans that will keep the vast majority of these folks out of foreclosure once the moratorium is lifted. That's the big problem."
Many economists and lawmakers concede that foreclosures can't be avoided in every case but argue that unnecessary foreclosures are deepening the recession and taking a toll on the finances and morale of communities.
Administration officials say they are still working out details of the foreclosure plan.A key dilemma facing policymakers is how to treat borrowers who owe far more on their mortgages than their homes are now worth.
So far, lenders have fiercely resisted any plan that would force them to write down principal or otherwise take losses. But there is a fear that borrowers will be reluctant to make loan payments on homes in which they have no equity.
"Most economists believe that reducing the principal would be the single most important way to reduce monthly payments" for creditworthy borrowers, said Andres Carbacho-Burgos, a housing economist with Moody's Economy.com.
Many financial institutions have been reluctant to write down the principal on mortgages because doing so would make the banks' balance sheets, which are already fragile, even more precarious.
The Federal Deposit Insurance Corp. has been promoting a "streamlined" mortgage refinancing proposal based on its experience in handling the portfolio of failed Pasadena-based mortgage giant IndyMac Bank last summer.
Speculation in Washington has suggested the administration may favor a standard refinancing plan in which mortgage payments could be set at 31% of the homeowner's gross monthly income.But that may not solve the problem if it doesn't deal with a borrower's total debt and other financial hardships, said Bert Ely, an independent banking consultant in Alexandria, Va.
"I've found with streamlined mortgage refinancings that they don't deal with the larger problem," Ely said.
Gibbs suggested that speculation this week in the stock market about the Obama foreclosure plan reflected the hopes of investors, not decisions by officials."Some things may come out that aren't in the plan, as happened extensively with the financial stability package, based on somebody's hope that it would be," Gibbs said. "Be careful we don't set an unreasonable series of expectations, based on leaks from God only knows where."
In Phoenix, where Obama is scheduled to speak Wednesday, the housing market is among the hardest hit in the country, with prices plummeting 33% in the last 12 months, according to the S&P/Case-Shiller index. That was the steepest decline of the 20 metropolitan areas in the survey.
For months, Congress has been pressing the executive branch -- first the Bush administration, now its successor -- to come up with a program to curtail the growing wave of borrowers forced to give up their homes. On Tuesday, Treasury Secretary Timothy F. Geithner disappointed lawmakers as well as the stock market by saying the foreclosure plan would be delayed several weeks.
In response to that reaction, Obama is now scheduled to present the plan Wednesday in Phoenix.
"I think you'll see the president take a big step forward in dealing with the crisis that faces 10,000 people every day," White House spokesman Robert Gibbs told reporters.
The moratorium announcements by big banks also followed pressure from Congress this week. At a meeting Wednesday of the House Financial Services Committee in which lawmakers chastised banking leaders for their role in the economic crisis, panel Chairman Rep. Barney Frank (D-Mass.) asked the CEOs to freeze foreclosures until the administration's mitigation effort was announced.
A number of the banks said Friday that they would honor Frank's request, most of them pledging to wait three weeks, until March 6, to see how the Obama plan would affect them.
In a letter to Frank, JPMorgan Chase & Co. Chief Executive Jamie Dimon said his firm was ready to work with the administration on an "appropriate process" for handling troubled borrowers, including a standardized loan modification program.
Other large mortgage customer-service firms signing on to a moratorium included Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., as well as Fannie Mae and Freddie Mac, the mortgage-finance companies now controlled by the government.
The suspensions of foreclosures generally apply to single-family residences and small complexes of up to four units. Vacant homes are excluded.
All mortgage customer-service firms are likely to participate in the moratorium, said Guy Cecala, publisher of Inside Mortgage Finance Publications.
"No one would complain about delaying action for three weeks," he said. But he was skeptical "that the administration can roll out any plans that will keep the vast majority of these folks out of foreclosure once the moratorium is lifted. That's the big problem."
Many economists and lawmakers concede that foreclosures can't be avoided in every case but argue that unnecessary foreclosures are deepening the recession and taking a toll on the finances and morale of communities.
Administration officials say they are still working out details of the foreclosure plan.A key dilemma facing policymakers is how to treat borrowers who owe far more on their mortgages than their homes are now worth.
So far, lenders have fiercely resisted any plan that would force them to write down principal or otherwise take losses. But there is a fear that borrowers will be reluctant to make loan payments on homes in which they have no equity.
"Most economists believe that reducing the principal would be the single most important way to reduce monthly payments" for creditworthy borrowers, said Andres Carbacho-Burgos, a housing economist with Moody's Economy.com.
Many financial institutions have been reluctant to write down the principal on mortgages because doing so would make the banks' balance sheets, which are already fragile, even more precarious.
The Federal Deposit Insurance Corp. has been promoting a "streamlined" mortgage refinancing proposal based on its experience in handling the portfolio of failed Pasadena-based mortgage giant IndyMac Bank last summer.
Speculation in Washington has suggested the administration may favor a standard refinancing plan in which mortgage payments could be set at 31% of the homeowner's gross monthly income.But that may not solve the problem if it doesn't deal with a borrower's total debt and other financial hardships, said Bert Ely, an independent banking consultant in Alexandria, Va.
"I've found with streamlined mortgage refinancings that they don't deal with the larger problem," Ely said.
Gibbs suggested that speculation this week in the stock market about the Obama foreclosure plan reflected the hopes of investors, not decisions by officials."Some things may come out that aren't in the plan, as happened extensively with the financial stability package, based on somebody's hope that it would be," Gibbs said. "Be careful we don't set an unreasonable series of expectations, based on leaks from God only knows where."
In Phoenix, where Obama is scheduled to speak Wednesday, the housing market is among the hardest hit in the country, with prices plummeting 33% in the last 12 months, according to the S&P/Case-Shiller index. That was the steepest decline of the 20 metropolitan areas in the survey.
What’s in the Stimulus Bill for You & I?
All the talk the last couple of days about the stimulus bill was about compromise and slimming down. What is left, though, is a huge spending bill, with well over $100 billion in tax breaks and handouts for individuals.
And most of us will be able to use at least one of them, though it will be difficult to get much money immediately, unlike the stimulus checks that went out last year.
What follows is a list of some of the biggest provisions in the bill that will hit you directly in the wallet. Keep in mind that the language in the measure isn’t quite final and the Senate and House still have to vote to approve it.
INCOME TAX In 2009 and 2010, there is a tax credit of up to $400 for individuals and $800 for married couples filing their taxes jointly. You calculate your credit, subtracted from other federal taxes you owe, by taking 6.2 percent of your earned income.
Your eligibility for this credit begins to phase out if you’re an individual with an adjusted gross income over $75,000 or a couple with income higher than $150,000.
Employers may end up adjusting tax withholdings on paychecks so that this credit trickles into your bank account over the course of the year. People who are self-employed can adjust their quarterly tax filings to account for the credit.
This credit is refundable, according to a summary of the stimulus bill that the Senate Finance and House Ways and Means committees released Thursday. That means that even if you have no federal income tax liability, you will still get the money.
UNEMPLOYMENT Normally, you pay federal income taxes on federal unemployment benefits. In 2009, however, you won’t have to pay taxes on the first $2,400 in benefits you receive.
HEALTH INSURANCE If you get fired, your company is required, thanks to a law known as Cobra, to allow you to pay to keep your health insurance, generally for up to 18 months.
The problem is, it can cost you $1,000 a month or more to keep the coverage.
Now, the federal government will subsidize 65 percent of the premium for up to nine months. To be eligible, you need to have been forced out of your job between Sept. 1, 2008, and Dec. 31, 2009. Also, your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples filing their taxes jointly.
If you lost your job after Sept. 1, 2008, and declined Cobra coverage, you’ll now get another chance. Call your former company in the next two months to find out how this will work.
You need not keep an eye on the mail for a subsidy check from the government, according Kathryn Bakich, senior vice president in Washington of the Segal Company, a benefits consulting firm. Instead, your former employer will collect the money from the government.
SOCIAL SECURITY In 2009 a number of retirees and disabled people, including Social Security recipients, will receive a $250 refundable tax credit. The money would arrive within 120 days of the bill’s signing.
CAR BUYER TAX DEDUCTION For the rest of 2009, you’ll be able to deduct the state and local sales and excise taxes you pay on the purchase of a new (not used) car, light truck, recreational vehicle or motorcycle.
This will be an “above-the-line deduction,” according to Clint Stretch, the managing principal of tax policy at Deloitte L.L.C. in Washington. That means that you can take it regardless of whether you itemize other deductions on your tax return.
Mark Luscombe, principal tax analyst for CCH, a tax information service, notes that state sales taxes alone can run 6 to 7 percent, before any county or local tax kicks in. That said, if you trade in a vehicle, your taxable purchase price may be lower.
Eligibility for this tax break begins to phase out for single people with adjusted gross income over $125,000 or $250,000 for married couples filing jointly. And the deduction does not apply on spending above $49,500.
PELL GRANT According to a summary from the office of House SpeakerNancy Pelosi, the maximum Pell Grant will increase by $500, to $5,350 in 2009 and $5,550 in 2010. The grants are generally for low-income students.
HIGHER EDUCATION TAX CREDIT This credit covers up to $2,500 of the cost of college tuition and other related expenses in 2009 and 2010. You’ll need to spend at least $4,000 in a single year to get the full credit. The credit begins to phase out for individual taxpayers with adjusted gross incomes over $80,000 or $160,000 for married couples filing jointly.
Forty percent of the credit is refundable, which benefits low-income students paying their way through school (who may owe no federal income taxes).
529 PLAN EXPANSION When you withdraw money from a 529 college savings plan, you can use it for tuition, room, board, books and other college expenses. In 2009 and 2010, families can also use the money for computers and computer technology, which could include educational software and Internet service for students living at home.
FIRST-TIME HOME BUYER CREDIT First-time home buyers are eligible for a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000, if they made the purchase after Jan. 1, 2009, but before Dec. 1, 2009.
Unlike a similar credit that Congress provided last year, you don’t have to pay this one back over 15 years. The new credit, however, does phase out for individuals with incomes over $75,000 or married couples with incomes over $150,000 who file their taxes jointly. Also, you forfeit the credit if you sell the house within three years.
TRANSIT ACCOUNTS If you commute to work via public transportation, your employer may allow you to set aside pretax money from your paycheck to pay for the bus, train or parking. Currently, you can put aside only $120 a month for mass transit while those who drive and park can save $230. This year and next, those who take mass transit will also be able to put aside $230 each month.
A.M.T. PATCH Each year, Congress creates a temporary fix to keep millions of people from paying the alternative minimum tax. This year, the patch is part of the stimulus bill. “If you didn’t pay the A.M.T. last year, you probably won’t this year,” said Mr. Stretch of Deloitte. “For most people, this is a nonevent. They didn’t even realize they were in danger of being shot in the head by the A.M.T.”
And most of us will be able to use at least one of them, though it will be difficult to get much money immediately, unlike the stimulus checks that went out last year.
What follows is a list of some of the biggest provisions in the bill that will hit you directly in the wallet. Keep in mind that the language in the measure isn’t quite final and the Senate and House still have to vote to approve it.
INCOME TAX In 2009 and 2010, there is a tax credit of up to $400 for individuals and $800 for married couples filing their taxes jointly. You calculate your credit, subtracted from other federal taxes you owe, by taking 6.2 percent of your earned income.
Your eligibility for this credit begins to phase out if you’re an individual with an adjusted gross income over $75,000 or a couple with income higher than $150,000.
Employers may end up adjusting tax withholdings on paychecks so that this credit trickles into your bank account over the course of the year. People who are self-employed can adjust their quarterly tax filings to account for the credit.
This credit is refundable, according to a summary of the stimulus bill that the Senate Finance and House Ways and Means committees released Thursday. That means that even if you have no federal income tax liability, you will still get the money.
UNEMPLOYMENT Normally, you pay federal income taxes on federal unemployment benefits. In 2009, however, you won’t have to pay taxes on the first $2,400 in benefits you receive.
HEALTH INSURANCE If you get fired, your company is required, thanks to a law known as Cobra, to allow you to pay to keep your health insurance, generally for up to 18 months.
The problem is, it can cost you $1,000 a month or more to keep the coverage.
Now, the federal government will subsidize 65 percent of the premium for up to nine months. To be eligible, you need to have been forced out of your job between Sept. 1, 2008, and Dec. 31, 2009. Also, your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples filing their taxes jointly.
If you lost your job after Sept. 1, 2008, and declined Cobra coverage, you’ll now get another chance. Call your former company in the next two months to find out how this will work.
You need not keep an eye on the mail for a subsidy check from the government, according Kathryn Bakich, senior vice president in Washington of the Segal Company, a benefits consulting firm. Instead, your former employer will collect the money from the government.
SOCIAL SECURITY In 2009 a number of retirees and disabled people, including Social Security recipients, will receive a $250 refundable tax credit. The money would arrive within 120 days of the bill’s signing.
CAR BUYER TAX DEDUCTION For the rest of 2009, you’ll be able to deduct the state and local sales and excise taxes you pay on the purchase of a new (not used) car, light truck, recreational vehicle or motorcycle.
This will be an “above-the-line deduction,” according to Clint Stretch, the managing principal of tax policy at Deloitte L.L.C. in Washington. That means that you can take it regardless of whether you itemize other deductions on your tax return.
Mark Luscombe, principal tax analyst for CCH, a tax information service, notes that state sales taxes alone can run 6 to 7 percent, before any county or local tax kicks in. That said, if you trade in a vehicle, your taxable purchase price may be lower.
Eligibility for this tax break begins to phase out for single people with adjusted gross income over $125,000 or $250,000 for married couples filing jointly. And the deduction does not apply on spending above $49,500.
PELL GRANT According to a summary from the office of House SpeakerNancy Pelosi, the maximum Pell Grant will increase by $500, to $5,350 in 2009 and $5,550 in 2010. The grants are generally for low-income students.
HIGHER EDUCATION TAX CREDIT This credit covers up to $2,500 of the cost of college tuition and other related expenses in 2009 and 2010. You’ll need to spend at least $4,000 in a single year to get the full credit. The credit begins to phase out for individual taxpayers with adjusted gross incomes over $80,000 or $160,000 for married couples filing jointly.
Forty percent of the credit is refundable, which benefits low-income students paying their way through school (who may owe no federal income taxes).
529 PLAN EXPANSION When you withdraw money from a 529 college savings plan, you can use it for tuition, room, board, books and other college expenses. In 2009 and 2010, families can also use the money for computers and computer technology, which could include educational software and Internet service for students living at home.
FIRST-TIME HOME BUYER CREDIT First-time home buyers are eligible for a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000, if they made the purchase after Jan. 1, 2009, but before Dec. 1, 2009.
Unlike a similar credit that Congress provided last year, you don’t have to pay this one back over 15 years. The new credit, however, does phase out for individuals with incomes over $75,000 or married couples with incomes over $150,000 who file their taxes jointly. Also, you forfeit the credit if you sell the house within three years.
TRANSIT ACCOUNTS If you commute to work via public transportation, your employer may allow you to set aside pretax money from your paycheck to pay for the bus, train or parking. Currently, you can put aside only $120 a month for mass transit while those who drive and park can save $230. This year and next, those who take mass transit will also be able to put aside $230 each month.
A.M.T. PATCH Each year, Congress creates a temporary fix to keep millions of people from paying the alternative minimum tax. This year, the patch is part of the stimulus bill. “If you didn’t pay the A.M.T. last year, you probably won’t this year,” said Mr. Stretch of Deloitte. “For most people, this is a nonevent. They didn’t even realize they were in danger of being shot in the head by the A.M.T.”
Obama Administration considers lowering mortgage rates
President Barack Obama's administration is considering spending taxpayer dollars to cut monthly payments for homeowners on the verge of foreclosure, according to two people briefed on the proposals.
The deliberations came as lawmakers prepared to enact a new tax credit of up to $8,000 for first-time homebuyers that is intended to boost the ailing housing market.
Details of the plans to aid troubled borrowers were not final but were expected to be unveiled in the coming weeks, according to the people who declined to be identified because the details were not yet complete. The effort would be part of a plan to spend $50 billion on foreclosure prevention and establish national standards for modifying home loans.
The administration has several ways it could spend money to stem foreclosures.
It could follow a proposal by Sheila Bair, chairman of the Federal Deposit Insurance Corp., who wants to give banks an incentive to reduce borrowers' payments by having the government absorb some of the losses should loans fail again.
Or, the government could direct federal dollars to loan modifications. If a lender, for example, agreed to reduce a borrower's rate, the government could subsidize a further interest rate drop.
Still, deciding who would qualify would be a challenge, especially as foreclosures continue to soar. More than 274,000 U.S. households received at least one foreclosure-related notice last month, according to RealtyTrac Inc.
The Obama administration also is expected to back a push in Congress — opposed by the mortgage industry — to let bankruptcy judges alter the terms of primary home loans. Earlier this week, Obama said it "makes no sense" that judges are not allowed to do so. The mortgage industry argues that this prohibition allows lenders to charge lower rates.
Meanwhile, the new tax credit for first-time homebuyers that's included in the economic stimulus package was far less than the homebuilding industry wanted. Analysts expect the credit to provide only a modest boost to the battered U.S. housing market.
First-time buyers are defined as those who haven't owned a house for at least three years.
The tax credit is part of the economic stimulus package expected to be signed soon by President Barack Obama. It was scaled back from a Senate proposal of $15,000 and is limited to first-time buyers who act between the start of this year and the end of November.
The credit of 10 percent of the value of a home, up to $8,000, would cost the government an estimated $6.6 billion. It would start phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers would have to repay the credit if they sold their homes within three years.
Struggling homebuilders, already looking ahead to the traditional spring selling season, had been counting on Congress to help spur pent-up sales after completing the worst year for new home sales since 1982.
Executives for one major builder, Beazer Homes USA Inc., noted earlier this week that they had seen an uptick in traffic over the weekend as many prospective buyers learned of the Senate's original incentive provision.
But with that proposal gone, Wall Street analysts said the homebuyer provision will have a negligible effect on homebuilders' fortunes.
"Congress, unambiguously, left the builders out in the cold," said Deutsche Bank analyst Nishu Sood. "It's a pretty big disappointment that they scaled it back."
Real estate agents were more optimistic. The National Association of Realtors projected the change will stimulate an additional 200,000 home sales.
"It'll make a big impact, I think on our market," said Paula Swayne, a real estate broker in Sacramento, Calif., an area flooded with foreclosures and sales of distressed properties. "Buyers will finally have to get off the fence in order to use it ... . There are so many affordable houses."
The big unknown, however, was the state of the economy. With employers laying off thousands of workers, many potential homebuyers are nervous about making such a big financial commitment.
Mortgage rates remain low, falling this week to a national average of 5.16 percent for a 30-year fixed-rate mortgage, according to mortgage finance company Freddie Mac.
But credit remains tight. And borrowers need a down payment of at least 3.5 percent to qualify for a loan backed by Federal Housing Administration, a popular option for many first-time buyers.
Many potential buyers haven't saved up enough money for a down payment. "If you don't have a way to get that, the tax credit doesn't do them much good," said James McCanless, an analyst who covers builders for FTN Midwest Securities .
But if the government can prod lenders to loosen credit standards and buy enough mortgage-backed securities to keep mortgage rates low, the tax credit could make a difference, said Mark Zandi, chief economist at Moody's Economy.com.
"I don't think it's enough to jolt the housing market back to life, but it's a plus," he said.
Last year, Congress enacted a $7,500 tax credit for first-time buyers, but that had to be paid back over 15 years and the impact on home sales was negligible.
When the new credit is signed into law, Chris Sipe, a loan officer with Mason Dixon Funding in Rockville, Md., plans to e-mail the more than 1,000 contacts in his database to let them know about the opportunity.
"The bulk of the market right now is first-time buyers," he said.
First-time homebuyers bought 2.2 million new and existing homes last year, according to the National Association of Realtors, making up about 41 percent of total U.S. home sales, up from 39 percent in 2007 and 36 percent in 2006.
Concerns about the bill's overall costs, plus criticism that a much larger credit would not benefit borrowers on the verge or foreclosure, and mainly help people with healthy enough incomes to buy a house, helped sink plans for a much larger credit.
The homebuilding industry mounted an unsuccessful push for a credit for up to $20,000 for all buyers, flying builders in from around the country last month for a massive lobbying push that wound up falling short.
"What the builders wanted was massive relief — not targeted toward where the real problem was — paid for by everybody," said Thomas Lawler, a Northern Virginia housing economist. "That seemed to be pretty egregious."
Sales fell in the fourth quarter of last year around the country, except for six states where buyers have been able to snap up foreclosed homes at a bargain: Nevada, California, Arizona, Florida, Minnesota and Virginia, the National Association of Realtors said Thursday. Nationwide, the median sales price was $180,100, down 12 percent from a year ago.
The deliberations came as lawmakers prepared to enact a new tax credit of up to $8,000 for first-time homebuyers that is intended to boost the ailing housing market.
Details of the plans to aid troubled borrowers were not final but were expected to be unveiled in the coming weeks, according to the people who declined to be identified because the details were not yet complete. The effort would be part of a plan to spend $50 billion on foreclosure prevention and establish national standards for modifying home loans.
The administration has several ways it could spend money to stem foreclosures.
It could follow a proposal by Sheila Bair, chairman of the Federal Deposit Insurance Corp., who wants to give banks an incentive to reduce borrowers' payments by having the government absorb some of the losses should loans fail again.
Or, the government could direct federal dollars to loan modifications. If a lender, for example, agreed to reduce a borrower's rate, the government could subsidize a further interest rate drop.
Still, deciding who would qualify would be a challenge, especially as foreclosures continue to soar. More than 274,000 U.S. households received at least one foreclosure-related notice last month, according to RealtyTrac Inc.
The Obama administration also is expected to back a push in Congress — opposed by the mortgage industry — to let bankruptcy judges alter the terms of primary home loans. Earlier this week, Obama said it "makes no sense" that judges are not allowed to do so. The mortgage industry argues that this prohibition allows lenders to charge lower rates.
Meanwhile, the new tax credit for first-time homebuyers that's included in the economic stimulus package was far less than the homebuilding industry wanted. Analysts expect the credit to provide only a modest boost to the battered U.S. housing market.
First-time buyers are defined as those who haven't owned a house for at least three years.
The tax credit is part of the economic stimulus package expected to be signed soon by President Barack Obama. It was scaled back from a Senate proposal of $15,000 and is limited to first-time buyers who act between the start of this year and the end of November.
The credit of 10 percent of the value of a home, up to $8,000, would cost the government an estimated $6.6 billion. It would start phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers would have to repay the credit if they sold their homes within three years.
Struggling homebuilders, already looking ahead to the traditional spring selling season, had been counting on Congress to help spur pent-up sales after completing the worst year for new home sales since 1982.
Executives for one major builder, Beazer Homes USA Inc., noted earlier this week that they had seen an uptick in traffic over the weekend as many prospective buyers learned of the Senate's original incentive provision.
But with that proposal gone, Wall Street analysts said the homebuyer provision will have a negligible effect on homebuilders' fortunes.
"Congress, unambiguously, left the builders out in the cold," said Deutsche Bank analyst Nishu Sood. "It's a pretty big disappointment that they scaled it back."
Real estate agents were more optimistic. The National Association of Realtors projected the change will stimulate an additional 200,000 home sales.
"It'll make a big impact, I think on our market," said Paula Swayne, a real estate broker in Sacramento, Calif., an area flooded with foreclosures and sales of distressed properties. "Buyers will finally have to get off the fence in order to use it ... . There are so many affordable houses."
The big unknown, however, was the state of the economy. With employers laying off thousands of workers, many potential homebuyers are nervous about making such a big financial commitment.
Mortgage rates remain low, falling this week to a national average of 5.16 percent for a 30-year fixed-rate mortgage, according to mortgage finance company Freddie Mac.
But credit remains tight. And borrowers need a down payment of at least 3.5 percent to qualify for a loan backed by Federal Housing Administration, a popular option for many first-time buyers.
Many potential buyers haven't saved up enough money for a down payment. "If you don't have a way to get that, the tax credit doesn't do them much good," said James McCanless, an analyst who covers builders for FTN Midwest Securities .
But if the government can prod lenders to loosen credit standards and buy enough mortgage-backed securities to keep mortgage rates low, the tax credit could make a difference, said Mark Zandi, chief economist at Moody's Economy.com.
"I don't think it's enough to jolt the housing market back to life, but it's a plus," he said.
Last year, Congress enacted a $7,500 tax credit for first-time buyers, but that had to be paid back over 15 years and the impact on home sales was negligible.
When the new credit is signed into law, Chris Sipe, a loan officer with Mason Dixon Funding in Rockville, Md., plans to e-mail the more than 1,000 contacts in his database to let them know about the opportunity.
"The bulk of the market right now is first-time buyers," he said.
First-time homebuyers bought 2.2 million new and existing homes last year, according to the National Association of Realtors, making up about 41 percent of total U.S. home sales, up from 39 percent in 2007 and 36 percent in 2006.
Concerns about the bill's overall costs, plus criticism that a much larger credit would not benefit borrowers on the verge or foreclosure, and mainly help people with healthy enough incomes to buy a house, helped sink plans for a much larger credit.
The homebuilding industry mounted an unsuccessful push for a credit for up to $20,000 for all buyers, flying builders in from around the country last month for a massive lobbying push that wound up falling short.
"What the builders wanted was massive relief — not targeted toward where the real problem was — paid for by everybody," said Thomas Lawler, a Northern Virginia housing economist. "That seemed to be pretty egregious."
Sales fell in the fourth quarter of last year around the country, except for six states where buyers have been able to snap up foreclosed homes at a bargain: Nevada, California, Arizona, Florida, Minnesota and Virginia, the National Association of Realtors said Thursday. Nationwide, the median sales price was $180,100, down 12 percent from a year ago.
Home loan/Home Insurance questions and answers
Q: I'm a full time student who's about to graduate this year. My plans are to hopefully begin the process of buying a home six months after I start working. How will my student loans affect my ability to qualify for a mortgage loan?
I expect to have $100,000 in student loans. Also, I should have started repaying these loans at the same time I'm trying to qualify for a mortgage.
A: Like so many students, you're graduating with what amounts to a mortgage on your education. In fact, some people have home loans this big!
The monthly payment for your loans (referred to as the "debt service") will be subtracted from the total amount you can use to pay for your mortgage, real estate taxes, homeowners' insurance and total debt.
Lenders will commonly allow you to use up to 28 percent of your total gross monthly income for your mortgage, real estate taxes and homeowners' insurance payments. You will be able to spend up to 36 percent of your gross monthly income on your total debt. If you get an FHA loan (as opposed to a conventional loan), you'll be able to stretch those debt-to-income ratios a little higher.
It's possible that with your student loan monthly payments, you may not be able to afford to buy anything until you've paid down those loans significantly. If your income is high enough, you may be able to afford to buy even while you begin repayment.
I'd take the safe road: Don't begin to even look for a home until you know how much you'll be making, and what kind of a bite your debts will take out of that monthly income. And remember: if you spend 43 percent of your gross monthly income on your mortgage, taxes, insurance and student loans, it can eat up as much as 65 percent of your take-home pay, leaving little for everything else in your life.
For more help calculating these costs, please read my book, "100 Questions Every First-Time Home Buyer Should Ask" (3rd edition) to help you get started (it's available in most local libraries).
Q: Last March, we helped our son buy a townhouse. He had been renting for five years. He makes the monthly mortgage payments. However, the deed is in our name. Which one of us can claim the interest on the mortgage for 2008? Your expertise in this matter would be greatly appreciated.
A: If your name is on the deed and your name is on the mortgage, then I believe you would take whatever write-off is possible. What he is doing (if he isn't on the deed or named on the mortgage) is paying you rent, only he is paying it directly to your mortgage company for you. Which isn't good for his credit and it isn't good for his long-term financial planning.
I'm not sure what you and your husband were hoping to achieve with this arrangement, other than get your son moved into another place. I hope the arrangement is working out for everyone. Please talk to your accountant or tax preparer for more details.
Q: My wife and I purchased our second home in Wisconsin for $320,000 in 1991. My wife passed away last year. The house has been valued at $1.5 million.
How do I calculate taxes on my gain if I sell this year?
A: On a second home sale, you will be taxed on long-term capital gains. You can calculate this by taking the sales price, and subtracting the costs of the purchase and sale of the property, then subtracting the cost of any capital improvements (not including decorating) or structural additions you made to the property over the years.
Let's assume that after subtracting the costs of sale, you net out at $1.3 million. If you spent $320,000 to buy the place, and had another $250,000 in structural improvements over the years, your capital gains would be around $720,000. On that amount, you'd owe federal capital gains tax of 15 percent plus any applicable state tax.
I expect to have $100,000 in student loans. Also, I should have started repaying these loans at the same time I'm trying to qualify for a mortgage.
A: Like so many students, you're graduating with what amounts to a mortgage on your education. In fact, some people have home loans this big!
The monthly payment for your loans (referred to as the "debt service") will be subtracted from the total amount you can use to pay for your mortgage, real estate taxes, homeowners' insurance and total debt.
Lenders will commonly allow you to use up to 28 percent of your total gross monthly income for your mortgage, real estate taxes and homeowners' insurance payments. You will be able to spend up to 36 percent of your gross monthly income on your total debt. If you get an FHA loan (as opposed to a conventional loan), you'll be able to stretch those debt-to-income ratios a little higher.
It's possible that with your student loan monthly payments, you may not be able to afford to buy anything until you've paid down those loans significantly. If your income is high enough, you may be able to afford to buy even while you begin repayment.
I'd take the safe road: Don't begin to even look for a home until you know how much you'll be making, and what kind of a bite your debts will take out of that monthly income. And remember: if you spend 43 percent of your gross monthly income on your mortgage, taxes, insurance and student loans, it can eat up as much as 65 percent of your take-home pay, leaving little for everything else in your life.
For more help calculating these costs, please read my book, "100 Questions Every First-Time Home Buyer Should Ask" (3rd edition) to help you get started (it's available in most local libraries).
Q: Last March, we helped our son buy a townhouse. He had been renting for five years. He makes the monthly mortgage payments. However, the deed is in our name. Which one of us can claim the interest on the mortgage for 2008? Your expertise in this matter would be greatly appreciated.
A: If your name is on the deed and your name is on the mortgage, then I believe you would take whatever write-off is possible. What he is doing (if he isn't on the deed or named on the mortgage) is paying you rent, only he is paying it directly to your mortgage company for you. Which isn't good for his credit and it isn't good for his long-term financial planning.
I'm not sure what you and your husband were hoping to achieve with this arrangement, other than get your son moved into another place. I hope the arrangement is working out for everyone. Please talk to your accountant or tax preparer for more details.
Q: My wife and I purchased our second home in Wisconsin for $320,000 in 1991. My wife passed away last year. The house has been valued at $1.5 million.
How do I calculate taxes on my gain if I sell this year?
A: On a second home sale, you will be taxed on long-term capital gains. You can calculate this by taking the sales price, and subtracting the costs of the purchase and sale of the property, then subtracting the cost of any capital improvements (not including decorating) or structural additions you made to the property over the years.
Let's assume that after subtracting the costs of sale, you net out at $1.3 million. If you spent $320,000 to buy the place, and had another $250,000 in structural improvements over the years, your capital gains would be around $720,000. On that amount, you'd owe federal capital gains tax of 15 percent plus any applicable state tax.
AIA Commends defeat of Wyoming Auto Insurance bill
The American Insurance Association (AIA) commended the Wyoming House of Representatives for rejecting H.B. 168, Motor Vehicle Financial Responsibility, a bill that would likely have increased costs and led to more uninsured motorists in Wyoming. HB 168 proposed to increase the financial minimum limits on personal auto liability coverage from 25/50/20 to 50/100/25 for bodily injury or death, and injury to or destruction of property. In addition, HB 168 would have mandated UM/UIM coverage (at the level of the proposed financial minimums) and no longer allowed it to be an optional coverage.
“The defeat of this legislation is a victory for Wyoming insurance consumers during this most difficult economy,” says John Marlow, AIA assistant vice president of state affairs. “It’s unnecessary to mandate higher minimums as long as people may purchase higher limits on their policies if they wish, rather than being forced to do so.”
According to AIA, existing limits are more than satisfactory to cover typical liability exposures. ISO Fast Track Data for 2007 shows that private passenger auto liability paid claim severity averages in Wyoming were $14,851 for bodily injury liability and $2,877 for property damage liability — well below the current financial minimum coverage required by law.
“This bill would have negatively impacted the most economically vulnerable drivers who are trying to meet the state’s current legal requirements for auto insurance coverage,” says Marlow. “Consequently, this legislation would have inadvertently pushed more drivers into the ranks of the uninsured.”
“The defeat of this legislation is a victory for Wyoming insurance consumers during this most difficult economy,” says John Marlow, AIA assistant vice president of state affairs. “It’s unnecessary to mandate higher minimums as long as people may purchase higher limits on their policies if they wish, rather than being forced to do so.”
According to AIA, existing limits are more than satisfactory to cover typical liability exposures. ISO Fast Track Data for 2007 shows that private passenger auto liability paid claim severity averages in Wyoming were $14,851 for bodily injury liability and $2,877 for property damage liability — well below the current financial minimum coverage required by law.
“This bill would have negatively impacted the most economically vulnerable drivers who are trying to meet the state’s current legal requirements for auto insurance coverage,” says Marlow. “Consequently, this legislation would have inadvertently pushed more drivers into the ranks of the uninsured.”
State Farm plans to leave Florida Home Insurance Industry
The state of Florida has refused to allow State Farm Mutual to raise homeowner insurance premiums by nearly 50 percent. State Farm has responded by announcing it will get out of the property insurance business in the Sunshine State. That means 1.2 million policyholders will have to find new coverage.
Floridians are about to get a real-world lesson in the realities of risk. Bloomington-based State Farm set up a Florida subsidiary in 1998. State Farm Florida borrowed $750 million from its parent to stay afloat after a devastating quartet of hurricanes in 2004. It still hasn't repaid that money. There were no major hurricanes in Florida during the first three quarters of 2008, yet the subsidiary's surplus dropped by more than $200 million in that time due to higher operating costs and state-mandated premium discounts. State Farm Florida said that, without the 47 percent increase in premiums, it would be insolvent by 2011.
Florida's political leaders decided they could afford to lose State Farm—the largest private insurer of homes in the state. "I think Floridians will be much better without them," said Gov. Charlie Crist. Many property homeowners will end up as customers of Florida's underfunded insurer of last resort, Citizens Property Insurance Corp.
The state-backed insurer sells homeowner policies below cost. How can it do that? State Farm is a private company that has to take in more money than it pays out or it will go out of business. Florida's insurer of last resort will turn to Florida's taxpayers if future hurricane losses overwhelm it. Bank on that.
As Florida's governor was blithely declaring the state will be better off without State Farm, state lawmakers began writing a bill aimed at capping how many policies a company can drop in a given year. They intend to apply it retroactively. So the message Florida has sent to private insurers is: Come to Florida. We won't let you make money. And we won't let you leave.
Pretty soon Florida is going to have just one giant money-losing insurance company insuring homeowners—and they might as well rename it Taxpayers Property Insurance Corp. because that's who's going to foot the bill. Florida has a storm rising, but it has more to do with politics than hurricanes.
Floridians are about to get a real-world lesson in the realities of risk. Bloomington-based State Farm set up a Florida subsidiary in 1998. State Farm Florida borrowed $750 million from its parent to stay afloat after a devastating quartet of hurricanes in 2004. It still hasn't repaid that money. There were no major hurricanes in Florida during the first three quarters of 2008, yet the subsidiary's surplus dropped by more than $200 million in that time due to higher operating costs and state-mandated premium discounts. State Farm Florida said that, without the 47 percent increase in premiums, it would be insolvent by 2011.
Florida's political leaders decided they could afford to lose State Farm—the largest private insurer of homes in the state. "I think Floridians will be much better without them," said Gov. Charlie Crist. Many property homeowners will end up as customers of Florida's underfunded insurer of last resort, Citizens Property Insurance Corp.
The state-backed insurer sells homeowner policies below cost. How can it do that? State Farm is a private company that has to take in more money than it pays out or it will go out of business. Florida's insurer of last resort will turn to Florida's taxpayers if future hurricane losses overwhelm it. Bank on that.
As Florida's governor was blithely declaring the state will be better off without State Farm, state lawmakers began writing a bill aimed at capping how many policies a company can drop in a given year. They intend to apply it retroactively. So the message Florida has sent to private insurers is: Come to Florida. We won't let you make money. And we won't let you leave.
Pretty soon Florida is going to have just one giant money-losing insurance company insuring homeowners—and they might as well rename it Taxpayers Property Insurance Corp. because that's who's going to foot the bill. Florida has a storm rising, but it has more to do with politics than hurricanes.
State Farm Exit puts floridans in a spot
State Farm's decision to quit providing homeowners insurance in Florida shows that the state's insurance market simply can't survive in its current form. Moreover, the company's exit won't merely leave 1.2 million Florida homeowners scrambling for a reliable insurer, but it also will add to the financial risk that Florida would face if costly storm damage were to occur.
Indeed, unless Gov. Charlie Crist and the Legislature swiftly make several painful but necessary changes to Florida's current insurance system, State Farm's retreat places the entire state in grave fiscal peril.
That's because inaction means that Florida's taxpayers will become practically the only major underwriter for coastal property owners, whose homes are among the priciest and most exposed to storms. That could literally mean bankruptcy for a state that's already dealing with a budget crisis.
Whatever State Farm's faults as a company, it at least could back its promises with actual assets — about $60 billion worth. Moreover, it charged less than many of its competitors while providing insurance for about one-fifth of all Florida homes.
Only the state itself, through Florida Citizens Property Insurance Corporation, sells more homeowners insurance in Florida. Partly because State Farm is a mutual company operating on a not-for-profit basis, it also wrote lots of coastal coverage that shareholder owned companies tended to avoid.
Without State Farm, Florida easily could face a fiscal train wreck. No similarly-strong private company exists to take up the slack. In the wake of the illconceived property insurance "reforms" of January 2007, every sizeable out-of-state provider of homeowners insurance has either entirely withdrawn from the state or severely curtailed its business. The only companies writing significant numbers of new policies are Florida-only companies with fewer real assets.
Unlike State Farm, which purchased plenty of reinsurance (insurance for insurance companies), many of these in-state companies and Citizens rely almost entirely on the state government's own reinsurance entity, the Florida Hurricane Catastrophe Fund.
But the Cat Fund doesn't have sufficient real assets to back up its promises. Rather than making investments, as private reinsurance companies do, the Cat Fund plans to finance its payouts by selling enormous amounts of bonds after a major storm hit, with the debt to be repaid via surcharges on insurance premiums for homes and vehicles.
Under the current law, the state could assume liabilities totaling $32 billion. However, because no state has ever sold more than $11 billion worth of bonds all at one time, the Cat Fund simply cannot keep its promises - especially in today's troubled credit market.
As a result, a costly storm or series of storms almost certainly would cause the collapse of Citizens, the Cat Fund, and many nominally "private" companies. Yet because the State of Florida guarantees the solvency of all these entities, Floridians would end up footing the bill.
Moreover, because Florida has no personal income tax and has a statewide cap on property tax rates, the government has no practical way to collect the tax revenue needed to clean up the mess. If Congress doesn't have the appetite to bail out Florida —and there's a good chance that it won't — the state might well have to take a trip to bankruptcy court.
When the Legislature convenes in March, lawmakers need to consider some tough measures to pull Florida back from the brink. They should let the rates rise significantly for both Citizens and other insurers operating in the state - a step that will require real political courage. They should also act to reduce the size of the Cat Fund and encourage Floridians to do more to reinforce their homes against hurricanes.
Indeed, with whatever resources it can muster in tight times, the Legislature should strive to increase funding for the "My Safe Florida Home" program, which helps Floridians make their residences less vulnerable to costly storm damage.
Meanwhile, State Farm's exit from the Florida market makes it clear that Floridians - especially those who live near the coasts — will have to pay higher insurance rates. The alternative, however, is much, much worse.
Indeed, unless Gov. Charlie Crist and the Legislature swiftly make several painful but necessary changes to Florida's current insurance system, State Farm's retreat places the entire state in grave fiscal peril.
That's because inaction means that Florida's taxpayers will become practically the only major underwriter for coastal property owners, whose homes are among the priciest and most exposed to storms. That could literally mean bankruptcy for a state that's already dealing with a budget crisis.
Whatever State Farm's faults as a company, it at least could back its promises with actual assets — about $60 billion worth. Moreover, it charged less than many of its competitors while providing insurance for about one-fifth of all Florida homes.
Only the state itself, through Florida Citizens Property Insurance Corporation, sells more homeowners insurance in Florida. Partly because State Farm is a mutual company operating on a not-for-profit basis, it also wrote lots of coastal coverage that shareholder owned companies tended to avoid.
Without State Farm, Florida easily could face a fiscal train wreck. No similarly-strong private company exists to take up the slack. In the wake of the illconceived property insurance "reforms" of January 2007, every sizeable out-of-state provider of homeowners insurance has either entirely withdrawn from the state or severely curtailed its business. The only companies writing significant numbers of new policies are Florida-only companies with fewer real assets.
Unlike State Farm, which purchased plenty of reinsurance (insurance for insurance companies), many of these in-state companies and Citizens rely almost entirely on the state government's own reinsurance entity, the Florida Hurricane Catastrophe Fund.
But the Cat Fund doesn't have sufficient real assets to back up its promises. Rather than making investments, as private reinsurance companies do, the Cat Fund plans to finance its payouts by selling enormous amounts of bonds after a major storm hit, with the debt to be repaid via surcharges on insurance premiums for homes and vehicles.
Under the current law, the state could assume liabilities totaling $32 billion. However, because no state has ever sold more than $11 billion worth of bonds all at one time, the Cat Fund simply cannot keep its promises - especially in today's troubled credit market.
As a result, a costly storm or series of storms almost certainly would cause the collapse of Citizens, the Cat Fund, and many nominally "private" companies. Yet because the State of Florida guarantees the solvency of all these entities, Floridians would end up footing the bill.
Moreover, because Florida has no personal income tax and has a statewide cap on property tax rates, the government has no practical way to collect the tax revenue needed to clean up the mess. If Congress doesn't have the appetite to bail out Florida —and there's a good chance that it won't — the state might well have to take a trip to bankruptcy court.
When the Legislature convenes in March, lawmakers need to consider some tough measures to pull Florida back from the brink. They should let the rates rise significantly for both Citizens and other insurers operating in the state - a step that will require real political courage. They should also act to reduce the size of the Cat Fund and encourage Floridians to do more to reinforce their homes against hurricanes.
Indeed, with whatever resources it can muster in tight times, the Legislature should strive to increase funding for the "My Safe Florida Home" program, which helps Floridians make their residences less vulnerable to costly storm damage.
Meanwhile, State Farm's exit from the Florida market makes it clear that Floridians - especially those who live near the coasts — will have to pay higher insurance rates. The alternative, however, is much, much worse.
First foreclosure suit targets Orlando Firm
A local firm offering loan modification services to homeowners facing foreclosure violated a state law that prohibits companies from charging an up-front fee for their services, according a lawsuit filed Feb. 13 by Florida Attorney General Bill McCollum.
McCollum named Orlando-based FMA Servicing Inc. and its owners in the suit filed in Orange County Circuit Court.
McCollum’s economic crimes division investigation revealed that FMA Servicing, which does business under the name Financial Management Advisors, charges an up-front fee as high as $2,500 to homeowners seeking loan modification services, the complaint said. The complaint also said the firm claimed affiliations with lenders such as Fannie Mae, Freddie Mac and Lending Tree, but couldn’t provide any document to support that affiliation.
FMA also claimed to have attorneys and certified public accountants on staff, but later told the Attorney General’s office it has no employees beyond those named in the complaint, the suit said.
The complaint names the firm’s three directors as defendants: Salvatore Esposito, FMA president; Joseph Esposito, secretary; and Edward Billings, treasurer.
Calls to FMA were referred to Orlando Attorney Louis Gonzalez, who could not be reached for comment.
The suit asks the court to grant a permanent injunction prohibiting FMA Servicing from charging up-front fees and order the company to pay restitution on behalf of affected consumers, civil penalties of $10,000 for each violation, and reimbursement for costs related to the investigation and litigation.
“Companies and individuals who target homeowners in potentially desperate situations should not be operating in our state,” McCollum said in a prepared statement. “Florida will not tolerate businesses that prey upon those on the verge of foreclosure.”
This is the first lawsuit filed under the new Foreclosure Rescue Fraud Prevention Act, the release said. The law, which took effect on Oct. 1, protects homeowners in foreclosure or nearing foreclosure from companies offering potentially fraudulent foreclosure “rescue” services.
The Attorney General’s Office is reviewing the practices of companies statewide providing foreclosure-related rescue services to ensure the companies are in compliance with the new law.
McCollum named Orlando-based FMA Servicing Inc. and its owners in the suit filed in Orange County Circuit Court.
McCollum’s economic crimes division investigation revealed that FMA Servicing, which does business under the name Financial Management Advisors, charges an up-front fee as high as $2,500 to homeowners seeking loan modification services, the complaint said. The complaint also said the firm claimed affiliations with lenders such as Fannie Mae, Freddie Mac and Lending Tree, but couldn’t provide any document to support that affiliation.
FMA also claimed to have attorneys and certified public accountants on staff, but later told the Attorney General’s office it has no employees beyond those named in the complaint, the suit said.
The complaint names the firm’s three directors as defendants: Salvatore Esposito, FMA president; Joseph Esposito, secretary; and Edward Billings, treasurer.
Calls to FMA were referred to Orlando Attorney Louis Gonzalez, who could not be reached for comment.
The suit asks the court to grant a permanent injunction prohibiting FMA Servicing from charging up-front fees and order the company to pay restitution on behalf of affected consumers, civil penalties of $10,000 for each violation, and reimbursement for costs related to the investigation and litigation.
“Companies and individuals who target homeowners in potentially desperate situations should not be operating in our state,” McCollum said in a prepared statement. “Florida will not tolerate businesses that prey upon those on the verge of foreclosure.”
This is the first lawsuit filed under the new Foreclosure Rescue Fraud Prevention Act, the release said. The law, which took effect on Oct. 1, protects homeowners in foreclosure or nearing foreclosure from companies offering potentially fraudulent foreclosure “rescue” services.
The Attorney General’s Office is reviewing the practices of companies statewide providing foreclosure-related rescue services to ensure the companies are in compliance with the new law.
Thursday, February 12, 2009
Specialty license plates not so popular in Texas
Wanda Vallery ‘s license plate has a special meaning.
The plate, which reads “CYI FLY,” was first registered by her late husband when they lived in Louisiana and bought and sold planes. Vallery, now a Gregg County deputy, said her husband would tell her she was a better pilot than a driver. When they moved to Texas about 14 years ago, she registered the license plate with her new home state.
Vallery’s vehicle is among about 2.5 percent of registered vehicles that have a personalized or specialty plate. Of the about 21.2 million vehicles in Texas, about 530,000 vehicles have the special plates, according to information from the Texas Department of Transportation.
“It’s a conversation piece,” Vallery said.
The attention-getting plate came with a price, especially when she had it attached to a sports car.
“I got pulled over all the time,” she said with a laugh.
Specialty plates that benefit nonprofit organizations are more common than personalized plates.
The plate, which reads “CYI FLY,” was first registered by her late husband when they lived in Louisiana and bought and sold planes. Vallery, now a Gregg County deputy, said her husband would tell her she was a better pilot than a driver. When they moved to Texas about 14 years ago, she registered the license plate with her new home state.
Vallery’s vehicle is among about 2.5 percent of registered vehicles that have a personalized or specialty plate. Of the about 21.2 million vehicles in Texas, about 530,000 vehicles have the special plates, according to information from the Texas Department of Transportation.
“It’s a conversation piece,” Vallery said.
The attention-getting plate came with a price, especially when she had it attached to a sports car.
“I got pulled over all the time,” she said with a laugh.
Specialty plates that benefit nonprofit organizations are more common than personalized plates.
New license plates bring attention to child abuse
The colorful handprint on Janet Parker’s license plate is a reminder of children who face neglect and abuse, and that even while on the road there are things that can be done to help them.
Parker’s goal is to be there for children however she can. She is a 21-year board member of Brazoria County Child Protective Services, current chairwoman of the Region VI Child Protective Services board and longtime member of the Texas Council of Child Welfare Boards.
She’s among the first in Texas to receive the Texas Council and Texas Department of Transportation “Stop Child Abuse” license plate. About 200 plates have been issued statewide so far in 2009, the first year they’ve been available.
“These license plates show that we’re not alone in the prevention of child abuse and neglect,” Parker said. “Every time you see one of these, it’s a reminder that someone else is out there helping.”
Parker is one of many volunteers who assist local and area youth services, giving their time, efforts and money to help pay for “extras” not budgeted for normal business, Child Protective Services spokeswoman Gwen Carter said.
“In every community, there’s a group of citizens who support our efforts to stop child abuse and neglect,” Carter said. “They are an important part of helping us.”
The specialty plates cost $30 more than the price of regular annual registration, Brazoria County Tax Assessor-Collector Ro’Vin Garrett said. Of that $30 payment, $18 goes to the child protective services department in the county in which the plate is purchased.
Forms to purchase the plates are available at www.texasonline.state.tx.us or at the tax assessor’s office, Garrett said.
The money helps pay for things like blue ribbons for Child Abuse Prevention Month in April, teddy bears to make children feel less afraid when they’re forced from their homes and other items to make their lives easier, Brazoria County Family and Protective Services Program Director Peggy Gartman said.
“This is a difficult job, and it really means a lot to us to know there are people out there who support what we do,” Gartman said. “It means a lot for our staff and for the children.”
The plates are a way the general public can show that support and help pay for something that makes a difference, Carter said.“It’s an everyday reminder that it’s not just someone else’s issue, but a public issue,” she said. “It’s everybody’s problem.”
Parker’s goal is to be there for children however she can. She is a 21-year board member of Brazoria County Child Protective Services, current chairwoman of the Region VI Child Protective Services board and longtime member of the Texas Council of Child Welfare Boards.
She’s among the first in Texas to receive the Texas Council and Texas Department of Transportation “Stop Child Abuse” license plate. About 200 plates have been issued statewide so far in 2009, the first year they’ve been available.
“These license plates show that we’re not alone in the prevention of child abuse and neglect,” Parker said. “Every time you see one of these, it’s a reminder that someone else is out there helping.”
Parker is one of many volunteers who assist local and area youth services, giving their time, efforts and money to help pay for “extras” not budgeted for normal business, Child Protective Services spokeswoman Gwen Carter said.
“In every community, there’s a group of citizens who support our efforts to stop child abuse and neglect,” Carter said. “They are an important part of helping us.”
The specialty plates cost $30 more than the price of regular annual registration, Brazoria County Tax Assessor-Collector Ro’Vin Garrett said. Of that $30 payment, $18 goes to the child protective services department in the county in which the plate is purchased.
Forms to purchase the plates are available at www.texasonline.state.tx.us or at the tax assessor’s office, Garrett said.
The money helps pay for things like blue ribbons for Child Abuse Prevention Month in April, teddy bears to make children feel less afraid when they’re forced from their homes and other items to make their lives easier, Brazoria County Family and Protective Services Program Director Peggy Gartman said.
“This is a difficult job, and it really means a lot to us to know there are people out there who support what we do,” Gartman said. “It means a lot for our staff and for the children.”
The plates are a way the general public can show that support and help pay for something that makes a difference, Carter said.“It’s an everyday reminder that it’s not just someone else’s issue, but a public issue,” she said. “It’s everybody’s problem.”
California auto group cuts rates
The Automobile Club of Southern California has announced new lower rates that will save about $100 per vehicle, effective April 1 for renewals and new policies.
The group said the anticipated 5.4% decrease was possible because of lower claims losses and better operating expense control. California Insurance Commissioner Steve Poizner approved the rate cut and praised the group for its "consumer-friendly and smart business practices."
The group said the anticipated 5.4% decrease was possible because of lower claims losses and better operating expense control. California Insurance Commissioner Steve Poizner approved the rate cut and praised the group for its "consumer-friendly and smart business practices."
Wyoming Reps slap bill to raise minimum automobile liability coverage
The Wyoming House of Representatives has defeated a bill that would have increased the financial minimum limits on personal automobile liability coverage.
If it had passed, HB 160, the Motor Vehicle Financial Responsibility Bill, would have raised the minimum limits from $25,000 for bodily injury of death for one person to $50,000, raised the limits from $50,000 to $100,000 for bodily injury or death of two or more persons in any one accident, and raised the limits from $20,000 to $25,000 for injury to or destruction of property of others in any one accident. Additionally, the bill would have mandated uninsured and underinsured coverage at the proposed financial minimums, prohibiting it from being supplemental coverage.
The American Insurance Association considered the bill's defeat a "victory" for consumers. "It's unnecessary to mandate higher minimums as long as people may purchase higher limits on their policies if they wish, rather than being forced to do so," said John Marlow, AIA assistant vice president of state affairs.
According to AIA, Wyoming's existing limits are satisfactory to cover typical liability exposures. ISO Fast Track Data for 2007 shows that private passenger auto liability paid claim severity averages in Wyoming were $14,851 for bodily injury liability and $2,877 for property damage liability -- well below the current financial minimum coverage required by law, the association noted in a statement.
"This bill would have negatively impacted the most economically vulnerable drivers who are trying to meet the state's current legal requirements for auto insurance coverage," Marlow said. "Consequently, this legislation would have inadvertently pushed more drivers into the ranks of the uninsured."
If it had passed, HB 160, the Motor Vehicle Financial Responsibility Bill, would have raised the minimum limits from $25,000 for bodily injury of death for one person to $50,000, raised the limits from $50,000 to $100,000 for bodily injury or death of two or more persons in any one accident, and raised the limits from $20,000 to $25,000 for injury to or destruction of property of others in any one accident. Additionally, the bill would have mandated uninsured and underinsured coverage at the proposed financial minimums, prohibiting it from being supplemental coverage.
The American Insurance Association considered the bill's defeat a "victory" for consumers. "It's unnecessary to mandate higher minimums as long as people may purchase higher limits on their policies if they wish, rather than being forced to do so," said John Marlow, AIA assistant vice president of state affairs.
According to AIA, Wyoming's existing limits are satisfactory to cover typical liability exposures. ISO Fast Track Data for 2007 shows that private passenger auto liability paid claim severity averages in Wyoming were $14,851 for bodily injury liability and $2,877 for property damage liability -- well below the current financial minimum coverage required by law, the association noted in a statement.
"This bill would have negatively impacted the most economically vulnerable drivers who are trying to meet the state's current legal requirements for auto insurance coverage," Marlow said. "Consequently, this legislation would have inadvertently pushed more drivers into the ranks of the uninsured."
Wednesday, February 11, 2009
Nissan Versa Sedan Road Test
The economy is tanking, your car is following suit, and taking the risk on a used car is a little too unsettling. You prefer the warm comfort of a factory-backed three-year, 36,000-mile warranty but don’t have a whole lot of coin to spend. Nissan has a solution: the Versa 1.6, the cheapest brand-spankin’-new sedan in America. Not Even a Radio
The 1.6 is essentially a Versa with a smaller engine and almost no creature comforts. It comes in two very basic versions, the 1.6 Base and 1.6. Both are powered by a 1.6-liter inline four-cylinder with 107 hp at 6000 rpm and 111 lb-ft of torque at 4600 rpm, down 15 hp and 17 lb-ft from the 1.8 liter used in other Versas. Mated only to a five-speed manual gearbox, the 1.6 Base comes standard with six airbags, front-seat active head restraints, and a tire-pressure monitoring system for a base price of $10,685. The only options available on the Base are your choice of four exterior colors, anti-lock brakes for $250, and floor and trunk mats for $155. That’s it.
Spend an extra $1000 and upgrade from the Base car to the 1.6 trim, and you’ll get standard air conditioning and the choice of keeping the manual transmission or adding a four-speed automatic at no charge. We tested a fully loaded (!) Versa 1.6 manual with ABS and floor mats, which came to a grand total of $12,090. Music? Forget about it, since there’s no radio. The 1.6 only comes pre-wired with four speakers to accept a dealer-installed or aftermarket head unit, an addition we highly recommend—you can only talk to yourself for so long before you go nuts.
The Little Engine That Could
With all 107 hp only available near redline, you might think that it would take the better part of a week to reach 60 mph. Ringing in at 9.1 seconds from 0 to 60 mph and 17 seconds in the quarter-mile at 81 mph, the 1.6 is only a tenth slower in both sprints than the last Versa 1.8 we tested. The 1.6 makes up for the lost power by shedding the excess weight of such luxuries as power windows. The shifter is well positioned but does have the typical Nissan clunkiness, and the clutch take-up is still a bit numb. However, the clutch actually feels a bit better than that in our previous 2007 Altima long-termer.
While the EPA estimates 26 mpg in the city and 34 mpg on the highway for the manual 1.6 (the automatic is rated only 1 mpg less on the highway), wintry weather wheelspin combined with some aggressive acceleration netted us only 24 mpg overall. The Versa 1.6 comfortably coasted over our torn-up Michigan roads better than some cars twice its price, and body roll was kept to a minimum. The steering isn’t particularly talkative, although it comes alive a bit once you’re off-center.
A Non-Optional Option
We highly recommend that anyone purchasing the Versa 1.6 spring for the ABS package, as it’s a nominal fee for one of the best safety technologies since the invention of the seatbelt. (We wish the Versa was also available with stability control, but it’s not, at any price.) Even with a very soft brake pedal and fitted with doughnut-sized 185/65R-14 Bridgestone B381 tires (the rims are just five inches wide), the Versa 1.6 halted from 70 mph in an impressive 172 ft. That is an astonishing 23-foot improvement over the Versa 1.8 we tested, which also had ABS.
Neutral Interior
From the captain’s chair, it appears that hard plastics dominate the stark interior, but compared with, say, the Dodge Caliber, the Versa feels more like a Mercedes-Benz than the bargain appliance it is. The headliner is still made of typical mouse fur material, but the seats have La-Z-Boy–like comfort and a nice high position, allowing great visibility all around. The steering wheel is a bit of a reach and could benefit from a telescoping option, but we aren’t complaining at this price. In the back, rear-seat legroom is vast for full-size adults, while also offering a good 13.8 cu ft of trunk space—slightly more than Nissan’s one-size-up Sentra sedan.
Nissan has put together a nice little package with the Versa 1.6. Compared with the $12,090 sticker of our tester, the Toyota Yaris sedan starts about $1600 higher and the Hyundai Accent sedan an extra $1525. (The Accent three-door starts at $10,665, $20 less than the Versa 1.6 Base.) Our favorite small car, the 10Best-winning Honda Fit is more fun to drive and offers more utility with its hatch configuration, but it starts more than $3300 above a “loaded” Versa 1.6. With such good road manners and loads of utility at $12K with all the options, it’s hard to find a better choice in the extreme entry-level segment.
VEHICLE TYPE: front-engine, front-wheel-drive, 5-passenger, 4-door sedan
PRICE AS TESTED: $12,090 (base price: $11,685)
ENGINE TYPE: DOHC 16-valve inline-4, aluminum block and head, port fuel injection
Displacement: 98 cu in, 1598 cc
Power (SAE net): 107 bhp @ 6000 rpm
Torque (SAE net): 111 lb-ft @ 4600 rpm
TRANSMISSION: 5-speed manual
DIMENSIONS:
Wheelbase: 102.4 in Length: 176.0 in Width: 66.7 in Height: 60.4 in
Curb weight: 2552 lb
C/D TEST RESULTS:
Zero to 60 mph: 9.1 sec
Zero to 100 mph: 30.5 sec
Street start, 5-60 mph: 9.6 sec
Standing ¼-mile: 17.0 sec @ 81 mph
Braking, 70-0 mph: 172 ft
FUEL ECONOMY:
EPA city/highway driving: 26/34 mpg
C/D observed: 24 mpg
Oregon leading the way with electric cars
Everything about this place seems clean: the straight-line architecture of the Oregon Museum of Science and Industry; the brightly outfitted cyclists gliding quietly past in their wide, well-marked bike lane; the gentle, lapping sounds of Willamette River, its murky waters conveniently just out of view.
As if to complete the picture, John R.A. Benson, a self-described garage tinkerer, bends over a free charging station in the museum’s parking lot and connects his orange 1970 Porsche 914, which he converted to electric in 1997. The 120-volt outlet delivers power generated from renewable resources. After he unplugs his car, he steps in, turns the key, steps on the accelerator, and drives off silently into the morning fog.
Is this the future of the automobile? Maybe. With the electricity costing about a penny a mile, and with the total absence of tailpipe emissions, electric cars are slowly gaining among consumers.
Last November, Oregon became the first state to develop standards for a statewide infrastructure of electric-car plug-in stations in terms of performance, safety, and voltage. The stations should be ready for purchase by interested parties, such as cities and private companies, by the end of the year. Nissan, in turn, announced at the Los Angeles Auto Show that Oregon would be the site for the carmaker’s early introduction of its highway-ready electric cars around the same time.
But the question today is identical to the one posed in the late ’90s, when GM tested its EV1 on enthusiastic drivers in California: Will this latest bid for the electric car energize the nation or fizzle out beyond state borders?
Dozens of electric car startups are popping up, boasting futuristic names like the Obvio 828e, Aptera’s Typ-1e, and Myers Motors’ NmG (No More Gas). Even the big names are weighing in, from
Toyota’s plug-in hybrid Prius and Mitsubishi’s MiEV Sport Air to Mercedes Benz’s BlueZERO and GM’s much-touted Volt, whose revolutionary propulsion system will use a super-light lithium-ion battery with a gas-fueled engine to recharge the battery – not propel the car – when the car goes beyond its 40-mile range.
But the electric vehicle, which first appeared in the mid-1800s and outnumbered gas cars until Ford became a household name, faces an uphill battle for mainstream adoption, even if gas prices return to nearly $5 a gallon. The issue is not the motor, it’s the battery.
Like most electric vehicles today, Benson’s Porsche hauls around heavy, lead-acid batteries – 16 of them – that take hours to charge and only get him a 40-mile range. (The Volt’s lithium batteries are lighter but far more expensive.) This limited range is no problem for Benson, who commutes to work 20 miles each way, charging up at work or at home. But range is a major consideration for anyone who wants to drive farther without having to own two cars.
A statewide charging-station infrastructure should help ease the minds of Oregonians who ponder buying electric, says Tim Kutscha, chair of the Oregon Electric Vehicle Association. But realistically, most people will charge up in their driveways overnight. Because charging can take several hours, it will likely be a while before people take road trips in electric vehicles.
Good for errands, but not road trips
Mr. Kutscha, who converted two of his own cars (a Porsche and a Honda Civic), points out that for about 90 percent of people’s daily driving needs, a short range does the job, costs less, and leaves a much smaller carbon footprint.
“It becomes an issue when you want to go to the beach or drive up to Seattle,” he says. He drives a gasoline-powered Subaru on the weekends.
Kerlin Richter, who bought a three-wheeled Zap car in Salem, Ore., in 2008, charges up in her driveway and says she hasn’t noticed any change in her electric bill. The editor and publisher of Hip Mama magazine, Ms. Richter works from home and uses her electric car to drive to church, the grocery store, the library, and to run errands with her husband and 4-year-old son. Their Honda Civic suffices for road trips. Richter’s husband, who commutes near downtown, can plug in at the science museum, walk four blocks to work, and return to a fully charged car at the end of the workday.
Richter estimates they spent less than $20 to drive their electric car 2,000 miles last year. Still, she says, the car is a glorified golf cart, drafty and not terribly comfortable. Driving it takes planning and the occasional charging up at a friend’s house before returning home. “If there were more charging stations at all these workplaces, or on the street somewhere near your house, and it just became part of the culture, it would be really great,” she says. “But for it to become that, more people have to have electric cars, and the people who do it first have less comfort.”
It’s the classic chicken-and-egg conundrum: The infrastructure has to exist for the demand to rise, but the demand has to be sufficient to justify building the infrastructure. Art James, innovative partnerships project director at the Oregon Department of Transportation, pushed for the infrastructure now because of the promise of highway-ready EVs in the coming years, and also because of what he calls Oregon’s “environmental stewardship.”
“Oregon was the first state in the country to adopt land-use laws,” Mr. James notes. “We were the first state to have a bottle bill. We were the first state in the union to have a beach bill, where we protected all the beaches and made them all public. When you switch to an electric car, you immediately lose your tailpipe emissions, and any carbon impact from generation of electricity is significantly lower, and once we’re on completely renewable electric power, then you have zero emissions. That’s what’s driving this.”
James says that while the state is taking a leadership role now, and that cities and private businesses will have to buy the stations themselves, he expects that eventually there will be enough demand for the private sector to step in and profit from these charging stations.
Highest per-capita hybrid ownership
Portland General Electric, which stands to profit from all the additional electricity used if more EVs hit the road, has built 11 charging stations in the Portland area. Though it charges the station owners (such as the science museum) for the power, PGE buys green power on top of that to offset any additional usage.
“We expect Oregon to be one of the top markets for plug-in vehicles,” says PGE spokeswoman Elaina Medina. “Portland has the highest per-capita of hybrid ownership in the country, and one of the top renewable power programs in the country, so our customers are committed and we’re committed. It’s very exciting.”
For now, PGE’s plug-in stations are used infrequently – in part because there aren’t a lot of EV drivers yet, and most of them recharge at home. Lee Dawson, spokesman at OMSI, says he was so excited to see someone using the station recently that he and a co-worker ran outside to snap a photo.
But where are the customers?
Down the road from the museum’s charging station, the electric car’s future doesn’t look as bright.
Ecomotion, one of the country’s first exclusively electric vehicle showrooms, boasts plenty of three-wheeled Zap vehicles and not a single customer. The shop’s mechanic, who asked to remain anonymous, says they saturated their target market shortly after opening in 2007, and now they get little more than curiosity from people who walk through their doors – even though everyone seems to love the idea, including gas station owners who often let customers plug in their cars at an outdoor outlet for free.
Oregon Gov. Ted Kulongoski’s proposed $5,000 electric-vehicle tax credit, which should be voted on by June, will offset the cost of a new electric vehicle. And electric automakers like Nissan are coming to the right place if they’re looking for early adopters.
But if the combination of high gas prices, climate concerns, a statewide station infrastructure, and a tax credit doesn’t encourage a lot more drivers to go electric, what will?
“You don’t use this to drive to California,” Benson says of his own car and of any electric vehicle. “You use it for everyday driving. That’s what people need to realize. Once they get over that hurdle, then all of those other incentives look even more attractive.”
Who killed the electric car? Henry Ford.
At the turn of the 20th century, electric cars far outnumbered all other types of vehicles. Passengers didn’t have to put up with a gas car’s vibrations, smell, noise, and manual gear shifting, or provide the water and kerosene needed for a shorter-range steam car. Electric vehicles reached their production peak around 1912, and remained reasonably successful until the 1920s, as Henry
Ford’s revolutionary production line slashed the cost of the petrol-powered Model T.
Here’s a brief chronology of electric cars in America:
1830s: Robert Anderson of Scotland invents the first electric vehicle, which is a crudely built carriage. Sibrand Acker Stratingh of the Netherlands also designs a small electric car, which is then built by his assistant, Christopher Becker.
1842: American Thomas Davenport and Scotsmen Robert Davidson are the first to build electric road vehicles using nonrechargeable electric cells.
1865: Frenchmen Gaston Plante invents a better storage battery, which was further improved by Camille Faure in 1881.
1891: Americans A.L. Ryker and William Morrison jump-start the automobile industry with their electric tricycle and six-passenger electric wagon.
1897: The Electric Carriage and Wagon Company of Philadelphia builds an entire fleet of New York City taxis.
1899: Camille Jénatzy’s Belgian-built electric racing car, ‘La Jamais Contente’ (‘the never satisfied’) sets the world’s land-speed record: 68 miles per hour.
1902: The Woods Phaeton, which can go as fast as 14 m.p.h. and as far as 18 miles, costs $2,000 (nearly $55,000 today). Companies like Detroit Electric and Baker Motor Vehicle are producing the cars as luxury items, with makeup kits, cushions, and mirrors.
1912: An electric roadster sells for around $1,750, a gas-powered one for about $650. Electric car sales began to drop. Cheap oil from Texas, better roads (which beckon people to want to drive farther), and the invention of the electric starter accelerate the trend.
1916: Clinton Edgar Woods, of Phaeton fame (see 1902), invents a hybrid car that has both an internal combustion engine and an electric motor.
1932: Electric vehicles have all but disappeared. From now until the 21st century, most electric vehicles in production are golf carts, US Postal Service delivery jeeps, and the occasional concept car.
Today: Dozens of automakers – big and small – are working on electric vehicles that range in price from a few thousand dollars to Tesla Motors’ $109,000 Roadster.
Hybrid repair costs not higher afterall!
If you’re thinking of buying a hybrid car, here’s one more piece of good news on top of the superior gas mileage. Repair costs for hybrid models, which initially were higher than average, have now fallen in line with those of non-hybrids.
In other words: These days, your new Toyota Prius or any other hybrid shouldn’t cost more to repair, on average, than your Corolla or Camry. Despite vague worries about “hidden costs,” not to mention outright misinformation, hybrid repair costs have normalized over time. The data comes from a new study by Audatex,
a company that automates processing for insurance claims. Its survey looked at the costs of auto repairs for cars from model years 2001 through 2008.
Pricing Prius Repairs
It found that in the first few years (2001-2006), hybrid cars did cost slightly more to repair. In fact, the Toyota Prius—the only dedicated hybrid on the US market for many years, aside from a tiny handful of first-generation Honda Insights—cost 8.4 percent more to repair than other cars of a similar size.
The study attributes the difference to the relatively few Priuses sold in the model’s first years, especially prior to the release of the second-generated Prius for the 2004 model year. Prius sales didn’t cross 100,000 until 2005, against hundreds of thousands of Honda Civics and Accords and Toyota Corollas and Camrys sold each year.
Fewer Priuses sold meant the supply of repair parts available from recyclers—remember when they were called “junkyards?”—was correspondingly lower, so that more parts had to be bought directly from the dealer. The cost of manufacturer parts is usually higher than for used parts, so the average cost of any given repair would be pricier.
But there’s good news for potential Prius buyers. The repair-cost difference was by far most pronounced for cars from 2006 and before. Now, it seems to have vanished almost completely for the two latest model years (2007 and 2008).
The Audatex report studied cumulative repair costs for the Prius against those for the entire class of gasoline-powered economy cars, which together sell many hundreds of thousands a year. Almost 70 percent of that group is made up of just five cars: the Honda Accord, Honda Civic, Toyota Corolla, Nissan Sentra, and Hyundai Elantra.
Comparing Costs of “Shared” Hybrids and Non-Hybrids
A second piece of the study compared costs for cars that came in both regular and hybrid versions, including the Honda Civic, Toyota Camry, and every Lexus hybrid (except the upcoming Lexus HS250h).
Again, repairs for the hybrid models cost more. But in this case, the difference was a mere 3.8%—a difference that many consumers probably never noticed. The study attributes this to the advantages of sharing most parts for the hybrid version with the higher volumes offered by having both versions, with only a few electric and battery parts being unique to the hybrid model.
In both cases (Prius and “shared” hybrids), it’s notable that the cost difference even in early years was within 10 percent. This is clearly a tribute to the longevity and sound engineering of the unique—and very expensive—components of the hybrid-electric drive system. If battery packs, electric motors, inverters, or control units were failing in anything like noticeable numbers, the repair costs would clearly have been far higher than they are.
The majority of these repairs were for crash damage and the like, not for mechanical failures. In fact, regular hybrid maintenance occurs less often and is therefore less costly than for comparable conventional vehicles. Toyota has said that not a single Prius battery pack has needed replacement due to malfunction or simply losing capacity. Since the replacement packs cost thousands of dollars, that’s critical. The company said the only packs that had to be replaced were in cars damaged in collisions, and it has always claimed that the packs last the life of the car with little degradation.
Last fall, Toyota cut prices of replacement packs for the first-generation (2001-2003) Prius to $2,299; a current Prius pack will set you back $2,588.
How safe is your pickup truck?
The battle to produce the biggest, toughest, meanest pickup is never-ending. Carmakers spend breathtaking amounts of time, energy and money boosting horsepower, features, towing capacity and the like. Apparently, amid all the brawn and dust and sweat and steel-alloyed testosterone, a little something called safety sometimes gets left behind.
According to newly released safety ratings by the Insurance Institute for Highway Safety, of the six vehicles it places in the full-size pickup category, only three receive the highest marks for side-impact protection, and only four make the cut for rear-impact protection.
The safety laggards are the Nissan Titan and the Chevy Silverado, the second-best selling pickup in the country. For side impact safety, both are rated as "poor" in the IIHS's four-grade rating system (good, acceptable, marginal and poor), and both rank only "acceptable" in rear-end crashes. The Dodge Ram was only a bit better, scoring an uninspiring "marginal" for side impact.
The shining stars, meanwhile, are the Toyota Tundra, Honda Ridgeline and the Ford F-150, which netted perfect "good" ratings for front, side and rear impact.
Tough break for the Titan, Silverado and Ram. But hey, at least they're safer than cars, right?
Wrong, said David Zuby, senior vice president of the IIHS. "The size, weight and height of these large pickups should help them ace the side tests, just like the other large pickups we’ve tested," he said. "Not these three; they perform worse than many cars we’ve evaluated.” In fact, according to the IIHS, not a single midsized sedan scored lower than "acceptable."
Ouch....
According to the IIHS, the side-impact test is a good test for comparing vehicle safety since the institute uses the same size, weight and speed of an object to smack into the car being tested every time (it uses a truck or SUV-shaped barrier moving at 31 miles per hour). A frontal test is not so hot for that, because the mass of the test vehicle will differ.
So all things being equal in a side-impact test, trucks should always be safer, the IIHS said, since the passengers are higher off the ground, not to mention that trucks weigh more and tend to use more thick steel and nifty steel runners and the like. Get side-smacked in a truck, the thinking goes, and break a leg, but not much else. Cars, on the other hand, tend to put human livers, hearts and lungs right at bumper level.
What gives?
The Ford, Toyota and Honda offerings kept the crash on the outside of the cabin, where it belongs. Meanwhile, said the IIHS, the Silverado's lack of side torso airbags is a major problem, as are its insufficiently strong side structures. Nada bien. Crash-test dummies got broken ribs and internal organ damage. Adding the optional side curtain airbags did nothing to improve the picture.
The Ram and the Titan have beefier sides and doors, apparently, but the Ram also lacks side-torso airbags, and on the Titan they're only available as an option. With the airbags, the Titan jumps up to a "marginal" rating -- hardly confidence-inspiring. The Ram, well, it has a Hemi.
To be fair, the other major crash testing body, the National Highway Traffic Safety Administration, throws its top rating, five stars, to the Silverado for side impact, while it awards four stars to the Titan and the Toyota Tundra (the Ram is not yet rated).
But the NHTSA side-impact test, unlike IIHS', uses a low-height barrier to smack into the test vehicle, rather than a high one, and high impact is considered a much better test of structural integrity. It's like a body blow versus a uppercut to the jaw. As a result, NHTSA tends to rank most vehicles with four of five stars in side impact, whereas many vehicles score poorly in IIHS testing.
“It’s certainly possible to design a large pickup that offers good occupant protection in side crashes,” Zuby said. Unfortunately, according to his group's testing, Nissan, GM and Chrysler didn't quite do that this time around.
-- Ken Bensinger
Utah sued over natural gas car rules
A Taylorsville motorist who drives an SUV equipped to run on either gasoline or compressed natural gas is suing the state in an effort to block new safety rules that will increase the costs of conversion to the clean fuel.
Randy Lieber joined companies that sell both conversion kits and vehicles in suing Department of Public Safety Commissioner Lance Davenport and the Utah Safety Inspection Advisory Board over the rule change, which was published in the state's safety inspection manual this week. The rule requires inspectors to flunk Utah cars on safety checks if their CNG components are not certified by the federal Environmental Protection Agency.
It's a rule that runs counter to the state's goal of cleaning up the air, said Lieber, who drives a converted Chevrolet Suburban.
"This is important stuff," he said Tuesday. "It's the right thing to do. It's critical for our country and for our state."
He declined to discuss specifics of the legal dispute, but his Salt Lake City lawyer said it hinges on a safety rule that has nothing to do with safety.
EPA certification relates to pollution, attorney James McIntyre said, and is not an appropriate measure of safety. Even those converted cars that are not EPA-certified pollute far less than most gasoline-powered cars, he said, so there's no reason to penalize people who convert cars without paying thousands extra for the certification.
Tanks used in thousands of conversions to date were tested for safety by the U.S. Department of Transportation, McIntyre said, though many don't meet the new requirement. "DOT makes them go through some testing that no automobile gas tank could possibly go through," he said. "They shoot them with guns [and] subject them to a bonfire." Assistant Utah Attorney General Robert Morton said he was reviewing the complaint after receiving it this week and could not comment. Department of Public Safety spokesman Jeff Nigbur said the new rule follows the Safety Inspection Advisory Board's recommendation. It comes after an incident in which a gas valve on an uncertified conversion kit was improperly installed and endangered a family by leaking into the vehicle, he said. Getting EPA certification is costly for manufacturers, McIntyre said. It requires a separate expense for testing kits to convert every model, and another fee for each subsequent model year. It can add $10,000 or even $20,000 to the cost of converting a single vehicle that may not have been worth that much from the start, he said. "People just aren't going to do that," he said. The gas-leak incident also worried Utah Clean Cities Coalition Director Robin Erickson. She and other advocates recommend streamlining the EPA certification and thereby making it cheaper. "We have to understand where [the state is] coming from," Erickson said. "They're concerned about safety." At the same time, she said, there are valid issues in the lawsuit.
Maryland, Virginia laws target younger drivers.
Maryland teenagers might have to wait longer before getting a driver's license, while those in Virginia could be asked to pocket their cellphones, as proposed safety measures in the general assemblies of both states target the youngest and riskiest drivers.
Other measures under consideration in Virginia would tighten seat-belt laws and prohibit all drivers from reading or writing messages on cellphones and messaging devices.
Virginia's House of Delegates overwhelmingly passed a bill that would ban texting while driving. Safety advocates pushed for the bill, and an organization that represents telecommunications companies took no position.
"We are very concerned about the dangers of texting on a 2-by-2-inch screen while driving 70 miles per hour," said Martha Meade, manager of public and government affairs for AAA Mid-Atlantic.
Backers cited a study by the University of Utah showing that drivers are four times more likely to have an accident while using a cellphone, and a driver who is texting is six times more likely to crash. Other studies showed that although many people admitted to sending messages while driving, a larger number thought the practice should be outlawed.
"People really got the message that texting is very dangerous,'' said Del. James M. Scott (D-Fairfax), who introduced one of the texting bills this year. "People understand you have to use fingers and hands, and it's much more dangerous than using a cellphone."
A similar prohibition is under discussion in Maryland. There, lawmakers also took up a bill that would raise the age for teenagers to obtain a learner's permit from 15 years, 9 months old to 16 years. Teenagers would also have to wait until they are six months past their 16th birthday to obtain provisional, restricted licenses. They could not get a full license until they turn 18.
Teen drivers who have provisional licenses and are not driving with a parent or guardian would also have to get home earlier. The deadline would move from midnight to 11 p.m., and penalties would be stiffened for those who break the rules.
Two teens told the committee that the restrictions would make it harder for conscientious teens to take part in sports and other school activities.
"Many students would like to be more active in their schools but they cannot commit because they do not have transportation," said Mark Ritterpusch, 15, who spoke on behalf on the Maryland Association of Student Councils. He was joined by Chris Casey, 16.
Virginia senators also proposed a clampdown on teen drivers. The Senate passed a measure sponsored by Sen. George L. Barker (D-Fairfax) that would prohibit teenage drivers from using cellphones while driving, and it would also make the violation a primary offense, allowing police to stop drivers on suspicion of violating the ban.
Sen. Mark D. Obenshain (R-Harrisonburg), speaking out against the cellphone ban for teenage drivers, said police could stop almost any driver talking on a cellphone on the pretext that they appeared to be young. Similar objections were raised about a bill that would make it a primary offense to fail to wear a seat belt in the front seat.
Also addressing teen driving is legislation that would require parents in Northern Virginia to attend a driver-safety class with their child -- a measure that even its backers anticipate could make some parents groan.The bills -- sponsored by Del. David B. Albo (R-Fairfax) in the House and by Sen. Janet D. Howell (D-Fairfax) in the Senate -- would make parents or guardians attend a class on driver safety that lasts at least 90 minutes.
In both states, lawmakers are targeting those who drink and drive.
Maryland Gov. Martin O'Malley (D) is urging passage of several laws to curb drunken driving, particularly among repeat offenders and drivers younger than 21.
On Tuesday, the Virginia House passed a bill 91 to 7 that requires first-time DUI offenders to equip their vehicles with breath-testing machines for six months. The House passed the bill last year, but it failed in the Senate. The car cannot start if the machine registers a blood alcohol concentration higher than .02. The legal limit in Virginia is .08.
The machines are already required for a second DUI offense, for first offenders with a blood alcohol concentration of 0.15 or higher and offenders who violate terms of a restricted license.
Del. Kenneth R. Melvin (D-Portsmouth) opposed the bill, arguing that it would punish "soccer moms," "grannies" and others who were barely over the legal limit.
Florida Requires New Documents For a Driver Licence, ID Card
The Florida Department of Highway Safety and Motor Vehicles reminds customers seeking a new or renewed Florida driver license or identification card to be prepared to provide proof of their residential address and social security number. Driver licenses and ID cards now show the customer’s residential address. A customer’s mailing address, such as a Post Office Box number, will no longer be shown on driver licenses and ID cards. Customers visiting a driver license office must bring proof of their residential address.
Examples of acceptable documents include:
• deed
• monthly mortgage statement
• residential rental/lease agreement
• utility hook-up (or work order) dated within 60 days of the application
Customers must also provide proof of their social security number. Examples of acceptable documents include:
Examples of acceptable documents include:
• deed
• monthly mortgage statement
• residential rental/lease agreement
• utility hook-up (or work order) dated within 60 days of the application
Customers must also provide proof of their social security number. Examples of acceptable documents include:
• Social Security card
• tax return
• W-2 form
• pay check stub
• DD-214 (military discharge document)
• school record
The document must include the customer’s Social Security Number to be accepted.
The Department provides a list of acceptable documents online at www.flhsmv.gov/ddl/address.html.
To verify identity, customers are reminded that they must still present two forms of identification.
To help customers prepare them for their next office visit, DHSMV provides frequently asked questions and answers related to the new documentation requirements online at www.flhsmv.gov/ddl/newslaws_Oct2008.html.
The changes are a part of the Department’s preparation for implementation of the Federal Real ID Act. Recent changes in Florida law will move the state toward compliance by January 2010. The Real ID Act is part of a nationwide effort to improve the integrity and security of state-issued driver licenses and ID cards and reduce fraud
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