New York Governor David A. Paterson is looking to keep more distressed borrowers in their homes by expanding previous laws and establishing safeguards against foreclosure scams.
New legislation would require banks and mortgage lenders to give all homeowners a 90-day pre-foreclosure notice so they have more time to work on viable alternatives; this was previously in place only for subprime loans.
Lenders would also be required to make a regulatory filing with the Banking Department within three days of the pre-foreclosure notice, providing specified borrower information so the Division of Housing and Community Renewal could provide targeted assistance to those most in need.
Tenants living in foreclosed properties would be given written notice of change of ownership and the opportunity to remain in the homes until the lease expires, or for an additional 90 days, whichever is longer.
Plaintiffs who obtain a judgment of foreclosure would be required to maintain the foreclosed property, and brokers who perform distressed property consulting services would be barred from accepting upfront fees.
Additionally, $25 million would be set aside to fund counseling and legal services to homeowners facing default or foreclosure.
“This legislation will provide added protections for homeowners who are behind on their mortgages and crack down on scams that prey on vulnerable homeowners,” said President and Chief Executive Officer of “NYHomes” Priscilla Almodovar, in the release.
“It will also offer greater opportunity to offer counseling to homeowners to help them stay in their homes. These proposals are consistent with our efforts to promote sustainable homeownership in New York State.”
Unfortunately, we’ve seen similar legislation in California do little more than delay an inevitable problem.
The much anticipated and hotly contested homebuyer tax credit is officially back on, though with some big changes.
Borrowers applying for an FHA loan will now be required to come up with a minimum 3.5 percent down payment, but will be able to use the tax credit for additional down payment or for other closing costs.
Originally, the FHA had it worked out to where potential homebuyers could use the tax credit for their entire down payment, though critics seemed to think that resembled questionable seller paid down payment assistance loans too closely.
“Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit,” HUD Secretary Shaun Donovan said in a statement.
“We believe this is a real win for everyone,” he said. “Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation’s housing market.”
“Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders.”
The FHA will keep close tabs on the program, collecting the names and employer identification numbers of each organization providing the service along with the associated fees and charges.
That said, homeowners should be aware of potential mortgage scams and carefully compare benefits and costs (more than 2.5% of the anticipated credit is considered excessive) when seeking out monetization of the tax credit.
“What we’re doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing.”
Benefit for communities, or benefit for homebuilders?
Oh, a couple of paragraphs later Donovan mentions that the National Association of Homebuilders said the tax credit will help stimulate 160,000 home sales across the nation, so go figure.
In a remarkable feat of financial prowess, a 28-year-old individual has shattered traditional notions of wealth accumulation. By strategically harnessing the power of multiple income streams, this trailblazer has managed to generate an astounding $189,000 a year while working fewer than 4 days a week.
As the rest of us marvel at their achievements, it’s time to unravel the secrets behind their incredible success and explore the seven streams of income that have become the cornerstone of their financial empire.
In today’s dynamic world, traditional employment is no longer the sole means to financial prosperity. Creating multiple streams of income allows you to diversify your earnings, reduce risk, and unlock the potential for wealth accumulation.
By understanding and leveraging these seven streams of income, you can take significant steps towards achieving financial freedom.
Understanding Multiple Streams of Income
Multiple streams of income refer to having multiple sources from which money flows into your life. These streams can vary in terms of their origin, nature, and the effort required to maintain them.
By creating multiple streams of income, you can enjoy a more stable financial situation and gain the freedom to pursue your passions without worrying about money.
Diversifying your income through multiple streams is not only about mitigating risk, but it also allows you to tap into different income opportunities and maximize your earning potential.
Stream 1: Earned Income
Earned income is the most common and widely known stream of income. It refers to the money you earn by providing your skills, knowledge, or expertise in exchange for a salary or wages. This can come from your primary job, freelancing, or running a business. While earned income is essential, relying solely on it limits your earning potential and leaves little room for growth.
Financial expert Sarah Johnson advises, “While earned income provides a stable foundation, it’s important to consider expanding your earning potential by exploring other income streams. This can help you achieve your financial goals faster.”
Stream 2: Profit Income
Profit income involves making money by buying and selling goods or services at a higher price than the cost of production. It includes businesses, entrepreneurship, and investments where you can generate profits through successful ventures. Profit income allows you to leverage your skills, creativity, and market knowledge to create additional wealth.
Profit Income Examples:
E-commerce business: Starting an online store and selling products or services can be a profitable venture. You can source products at a wholesale price, set your own retail prices, and reach a wide customer base through online platforms. Profit is generated by selling products at a higher price than the cost of acquisition and fulfillment.
Investing in stocks: Buying stocks of promising companies at a lower price and selling them when their value appreciates can generate profit income. Successful stock investments rely on careful research, analysis, and timing to capitalize on market opportunities.
Flipping real estate properties: Buying properties below market value, renovating or improving them, and selling them at a higher price can be a profitable venture. Real estate investors aim to create value through property upgrades or by capitalizing on favorable market conditions.
Dropshipping business: Running a dropshipping business involves selling products online without holding inventory. You partner with suppliers who fulfill orders directly to customers. The difference between the price at which you sell the product and the cost of the product from the supplier generates profit income.
Profit income offers the potential for financial independence and wealth creation. However, it requires careful planning, market knowledge, and risk management to succeed in various profit-generating ventures. By evaluating market trends, identifying profitable niches, and delivering value to customers, you can maximize your profit potential in this income stream.
Certified Financial Planner Mark Davis suggests, “For those with an entrepreneurial spirit, starting a business or investing in profitable ventures can be a great way to generate substantial income. It’s important to conduct thorough market research and develop a solid business plan to maximize your chances of success.”
Stream 3: Rental Income
Rental income involves owning and leasing out assets such as real estate properties, apartments, or vehicles. By collecting rent from tenants, you can generate a steady cash flow that can supplement your primary income. Rental income offers the advantage of passive earning, as the properties can appreciate in value while providing you with regular income.
According to Susan Thompson, a real estate expert, “Investing in rental properties can provide a reliable source of income over time. However, it’s important to carefully consider location, property management, and tenant screening to ensure a positive rental experience and maximize your returns.”
To learn more about the tax implications of rental income, you can refer to the IRS publication IRS Publication 925: Passive Activity and At-Risk Rules.
Stream 4: Dividend Income
Dividend income is earned by investing in stocks or mutual funds that pay regular dividends to their shareholders. Companies distribute a portion of their profits to shareholders as dividends, providing you with a passive income stream.
Dividend income can be a valuable source of long-term wealth accumulation, especially when reinvested over time.
Certified Financial Planner Emily Carter highlights the benefits of dividend income, stating, “Dividend-paying stocks can provide a steady income stream and potential capital appreciation. It’s important to diversify your portfolio and carefully evaluate the dividend history and financial health of the companies you invest in.”
Stream 5: Interest Income
Interest income is derived from lending money to individuals, businesses, or financial institutions, who repay the borrowed amount with interest. This can be in the form of savings accounts, certificates of deposit, bonds, or other fixed-income investments. Interest income allows you to earn a passive return on your capital while preserving the principal amount.
Interest Income Examples:
Savings accounts: Banks and credit unions offer savings accounts where you can deposit your money and earn interest on the balance. These accounts provide liquidity and are suitable for short-term financial goals or emergency funds. The interest rates offered can vary depending on the institution and prevailing market conditions.
Certificates of deposit (CDs): CDs are time deposits that offer a fixed interest rate for a specific period. They often provide higher interest rates compared to regular savings accounts. CDs are suitable for individuals who have a specific savings goal and are willing to lock their money for a predetermined time.
Government bonds: Governments issue bonds as a way to borrow money from investors. These bonds pay periodic interest to bondholders until the bond matures. Government bonds are considered low-risk investments, and their interest rates are influenced by market factors and the creditworthiness of the issuing government.
Corporate bonds: Companies issue bonds to raise capital. Investors who purchase these bonds receive periodic interest payments and the return of principal upon maturity. Corporate bonds carry varying levels of risk depending on the financial health of the issuing company and prevailing market conditions.
Interest income plays a vital role in a diversified investment portfolio by providing stability and preserving the principal amount. While it may not offer high growth potential, it serves as a reliable income source, particularly for conservative investors seeking steady earnings and capital preservation. It’s important to consider your financial goals, risk tolerance, and market conditions when incorporating interest-based investments into your overall financial strategy.
Stream 6: Royalty Income
Royalty income is earned by granting the rights to use intellectual property, such as patents, copyrights, trademarks, or creative works. Authors, musicians, inventors, and artists can earn royalties from their creations. Once established, royalty income can provide a steady stream of passive income for years to come.
John Stevens, a successful author, emphasizes the significance of royalty income, stating, “For creators, leveraging intellectual property can be a powerful income stream. By protecting your work and exploring licensing and royalty agreements, you can generate ongoing income from your creations.”
Stream 7: Capital Gains
Capital gains occur when you sell an asset, such as stocks, real estate, or collectibles, at a higher price than its purchase price. The difference between the buying and selling price represents the capital gain. By investing in appreciating assets and selling them at the right time, you can earn substantial profits and increase your overall wealth.
Certified Financial Planner Jennifer Adams advises, “Capital gains can significantly boost your wealth if you invest strategically and take advantage of market opportunities. It’s important to develop an investment strategy aligned with your risk tolerance and long-term financial goals.”
For a comprehensive understanding of capital gains taxation, you can refer to the IRS publication Over the Top for the Bournes and the Merkels.
The Bottom Line – 7 Income Streams
Diversifying your income through multiple streams of income is a powerful strategy for achieving financial prosperity. By incorporating various income sources, such as earned income, profit income, rental income, dividend income, interest income, royalty income, and capital gains, you can create a robust and resilient financial foundation.
Remember, building multiple streams of income requires time, effort, and a strategic approach. Stay committed, invest wisely, and continually explore new opportunities to secure your financial future.
Pay option arms, which allow homeowners to make less than the interest-only mortgage payment each month (negative amortization), may be partially banned in the state of California if proposed mortgage reform legislation becomes law.
Yesterday, Assemblymember Ted Lieu announced that the California Assembly passed “Assembly Bill 260,” which bans the worst of so-called “predatory lending practices.”
“More specifically, AB 260 would create a strong fiduciary duty standard for mortgage brokers across all loan products,” Lieu’s office said in a release.
“It eliminates compensation incentives that led to riskier loans, directly prohibits steering, and directly prohibits brokers and lenders from making false or deceptive statements connected with a subprime loan.”
It also establishes clear regulations for prepayment penalties and bans negative amortization on “higher-priced mortgage loans,” while imposing stiff penalties to prevent abusive subprime lending.
Essentially, brokers would not be able to receive compensation (yield spread premium) for tacking on prepay penalties to higher-priced loans (which I’ve yet to find a clear definition for), effectively rendering them useless.
A similar bill was vetoed last year by Governor Schwarzenegger, but the ongoing mortgage crisis has forced him to call a Special Session of the Legislature.
“We must enact landmark reforms to address the systemic failures in California’s subprime mortgage industry,” said Assemblymember Lieu.
“These failures have not only devastated California’s economy, they have contributed to a national and international financial meltdown.”
The bill’s provisions would apply to the higher-priced mortgage loans originated on or after July 1, 2010.
The seasonally adjusted delinquency rate for mortgage loans on one-to-four unit residential properties increased to 9.12 percent during the first quarter, the Mortgage Bankers Association said today.
That’s up 124 basis points from the fourth quarter of 2008 and 277 basis points from a year ago, a new record going back to 1972.
The delinquency rate includes loans at least one month behind, but does not include those in foreclosure.
The percentage of loans in foreclosure increased to 3.85 percent at the end of the quarter, up 55 basis points from the fourth quarter and 138 bps from a year ago, also records.
The combined percentage of loans delinquent or in foreclosure was a non-seasonally adjusted 12.07 percent, another record.
“The increase in the foreclosure number is sobering but not unexpected. The rate of foreclosure starts remained essentially flat for the last three quarters of 2008 and we suspected that the numbers were artificially low due to various state and local moratoria, the Fannie Mae and Freddie Mac halt on foreclosures, and various company-level moratoria,” said Jay Brinkmann, MBA’s chief economist, in the report.
“Now that the guidelines of the administration’s loan modification programs are known, combined with the large number of vacant homes with past due mortgages, the pace of foreclosures has stepped up considerably.”
Brinkmann noted that delinquencies have shifted from subprime and option arm loans to prime, fixed-rate loans, with the latter doubling in the past year and accounting for the largest share of new foreclosures.
“What has not changed, however, is the oversized impact of California, Florida, Arizona and Nevada in driving up the national numbers. Those states continue to account for about 46 percent of the foreclosure starts in the country, and represented 56 percent of the increase in foreclosure starts, including half of the increase in prime fixed-rate foreclosure starts.”
In Florida, 10.6 percent of mortgages are now somewhere in the foreclosure process; in Nevada it’s 7.8 percent, Arizona 5.6 percent, and California 5.2 percent.
“Looking forward, it does not appear the level of mortgage defaults will begin to fall until after the employment situation begins to improve. MBA’s forecast, a view now shared by the Federal Reserve and others, is that the unemployment rate will not hit its peak until mid-2010.”
“Since changes in mortgage performance lag changes in the level of employment, it is unlikely we will see much of an improvement until after that,” said Brinkmann.
Georgia Senator Johnny Isakson has reintroduced legislation aimed at boosting the homebuyer tax credit from $8,000 to $15,000 for not only first-time homebuyers, but for all homebuyers.
A similar proposal failed to gain inclusion in the stimulus package that became law earlier this year, but increasing desperation in the flagging housing market could see such a bill through, with the MBA already pledging support.
Specifically, the bill would increase the homebuyer tax credit to a maximum of $15,000, make it available to all homebuyers, and eliminate income caps of $75,000 for individuals and $150,000 for couples, effectively expunging the limit.
The proposed legislation would extend the tax credit for one year from the date of enactment and allow homebuyers to claim the credit on 2009 tax returns for home purchases made in 2010.
“The first-time homebuyer tax credit has made a difference. First-time home buyers used it and the market stabilized, but we don’t have a recession in first-time home buyers. We have a recession in the move-up market,” Senator Isakson said in a statement.
“One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can.”
The hope is that such a tax credit will boost home sales and subsequently stabilize home prices while diminishing foreclosures.
Unfortunately, home builders continue to look for concessions instead of lowering home prices to more reasonable levels.
“Today, in the United States, one in two sales made every day is a short sale or a foreclosure. That is an unhealthy market, and it is continuing to precipitate a downward spiral in values, loss of equity by the American people and a protracted, difficult economic time for our country,” Isakson added.
Home appraisals are increasingly becoming an obstacle for those looking to refinance or sell their properties, according to a report in the WSJ.
Back during the housing boom, it wasn’t difficult to obtain that “right value,” but it seems the tables have turned, maybe too much, as some borrowers now believe appraisers are being too stingy when assessing home values.
Banks and mortgage lenders that allegedly pressured appraisers to find a specific appraised value in the past (remember the appraiser blacklists) are now supposedly pressuring them to be more conservative.
At the same time, lenders are asking for better, more recent comparable sales data, with some asking for comps within the past three months instead of the usual six, while others require at least one comp from within the past 30 days.
That type of sales data is hard to come by, with some areas experiencing very few recent sales, and many being distressed sales, which may not accurately reflect actual property values.
Then there’s the implementation of HVCC, which limits coercion between agent/mortgage broker and lender, and puts the job into the hands of appraisers who often live 100 miles or more away from the subject properties.
One appraiser who spoke with the WSJ said roughly half of the recent appraisals he completed came in low, meaning the borrowers couldn’t complete a refinance request.
If those borrowers want to try their luck again, they’ll need to order a new appraisal at a cost of a few hundred dollars, likely discouraging news for those in need of a lower mortgage rate.
But has home appraising really become too stringent, or is it just a rude awakening for those who bought into the unprecedented home price appreciation of years past?
A tax credit intended to spark sales of brand new homes in the Golden State looks to be running out, according to the California Franchise Tax Board.
Earlier this year, the state set aside $100 million for qualified homebuyers who purchased a property between March 1, 2009 and March 1, 2010, assuming the home was never resided in, used as a primary residence, and lived in for at least two years.
This first-come, first-served tax credit allows qualified buyers to receive the lesser of five percent of the home purchase price or ten thousand dollars, with the credit applied in equal amounts over the three successive taxable years beginning with the taxable year in which the purchase of the property is made.
The tax credit is in addition to the first time homebuyer tax credit that offers up to $8,000, meaning qualified buyers in the state could receive up to $18,000 in rebates for a new home purchase.
Unfortunately, strong demand has ripped through most of the $100 million fund, with more than $88 million claimed through June 10, including $30 million in the last month alone.
“As shown in the numbers below, we will soon reach $100 million in new home credit applications,” the Tax Board said on its website.
“Because many of these are duplicates, revised, or invalid, we plan to receive 12,000 applications. This will ensure we have more than enough valid applications to allocate the full $100 million. These additional applications will be subject to the availability of remaining credits.”
Through June 10, 9,145 applications have been received, with about 3,000 coming in the last month, so time is clearly running out.
New homebuilders may suffer as a result, especially now that mortgage rates have skyrocketed, but some have argued that the emergence of the tax credit motivated builders to add new homes at a time when inventory was already swelling.
An appraiser contacted me shortly after I posted the story about home builders wanting better values for new homes, which they believe are being dragged down as a result of neighboring distressed properties.
This is his viewpoint:
“Yesterday it was the Realtors, the day before it was the Mortgage Brokers, and today it’s the Builders.
The builders did NO demographics study and created the largest OVER SUPPLY in human history. Is it our fault the values are being destroyed?
Most of these builder homes are selling cheap because the BANK owns them and the buyers are paying CASH. Do you not expect a further discount when paying cash?…
Appraisers are being thrown under the bus…as usual when the bankers and builders get caught with their hands in the cookie jar.
I mean who’s next? Do you know about the HVCC? It cuts the appraisers fee in 1/2 and TAKES ALL our client relationships away. Those took years to build.
Not every appraiser worked for a crook. The HVCC was implemented on 5/01/2009. Do any appraisers really care about the appraisal quality at $150 when we used to make $300.
My bills have gone up….the borrower is also now paying MORE after the HVCC went into effect. How is that just? I have had it with all the crooks from DC down to the Main Street Bankers. They ALL wanted high values and now……you can’t come in low enough for the banks (appraisals coming in too low).
Every solid, honest, professional appraiser I know….HATES what this job has come down to. We work hard, play by the rules, turn in crooks……and are left to clean up the mess…at ½ price.”
So this is a taste of how some appraisers feel about the situation at the moment…not good.
The median home price paid for all new and resale homes and condos in the six-county Southland was $249,000 last month, up 0.8 percent from April, but still 32.7 percent below the $370,000 median seen a year ago, according to DataQuick.
It was the first time the median home price increased since July 2007, when it inched up 0.6 percent to $505,000.
Keep in mind that the median was the second-lowest for any month since February 2002 when it stood at $242,000, so we’re not out of the woods yet.
“We appear to be in the early stages of the market gradually tilting back toward a more normal balance of sales across the home price spectrum,” said John Walsh, MDA DataQuick president, in a release.
“As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we’ll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose.”
A total of 20,775 properties closed escrow in the counties of San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino last month, a 1.3 percent rise from April and 22.8 percent higher than May 2008.
Foreclosure sales accounted for 50.2 percent of all Southland resales, down from 53.5 percent in April and 56.7 percent a year ago.
Meanwhile, homes sales priced above $500,000 rose from 15.2 percent of sales in April to 17 percent in May, pushing the median higher, but it’s not all good.
“Let’s not forget we’re into the traditional home buying season right now,” he continued, “meaning more people are purchasing for all of the normal reasons, such as a new job or to get settled before school starts. Many are concerned with finding the right home in the right area, not just the most deeply discounted home.”
Unfortunately, jumbo financing remains tight, accounting for just 12 percent of sales and FHA loans are over-relied upon, used for about 40 percent of purchases during the month ; roughly 20 percent of sales were investment properties.