Foreclosures – part 2

On Friday, Bank of America announced it was freezing foreclosures in all 50 states.  http://mediaroom.bankofamerica.com/phoenix.zhtml?c=234503&p=irol-newsArticle&ID=1480657&highlight=.  The issue stems from some court cases where banks that were doing foreclosures, admitted that some of the time notaries were not present when the court documents were signed and that the signers relied upon others to review the file instead of doing it themselves.

The original freeze by a few banks was for 23 states that require a judicial foreclosure.  However, this is an election year so everything becomes melodramatic and blown out of proportion; thus, the 50 state freeze.  It is important that laws be followed, but the politicization of this is going to do great damage.  The core issue is that borrowers didn’t make their payments and as a result are losing their house.  The harder we make it for lenders to remedy the situation, the more difficult (and expensive) it will be in the future to get a loan on a house.

The biggest problem we have right now is short-term thinking.  The leaders of this great country can’t think beyond November 2nd and the impact will last for years.

Foreclosures

A good article on the current state of foreclosures.  We still have a ways to go; however, the window won’t be open forever.

http://news.yahoo.com/s/ap/20100916/ap_on_bi_ge/us_foreclosure_rates

“Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis.” 
“August makes the ninth month in a row that the pace of homes lost to foreclosure has increased on an annual basis.”
“That’s one reason fewer than one-third of homes repossessed by lenders are on the market, said Rick Sharga, a senior vice president at RealtyTrac.”

Calculator Problem – 2010-09-13

You have a credit card with an interest rate of 14.99% and a balance of $6700. If you paid $350 a month, how long would it take you to pay off your credit card?

(The answer will be posted with the new calculator problem in 2 weeks.  Or if you can’t wait that long, you can go to http://www.facebook.com/pages/Gary-Johnston-Seminars/111368472221424 for the answer.)

To find the answer to the 2010-08-30 calculator problem, we first need to find the future value of our $30,000 which is FV=1,584,825.92 (N=240, I=20, PV= -30,000, PMT=-0).  If we borrow another $30,000 and invest at 20% but pay 10%, we would net $250 a month ($30,000 * 10% = $3000 / 12 months).  If we add that $250 every month to the calculation, we would get FV=2,362,238.88 (N=240, I=20, PV= -30,000, PMT= -250).  Now that we future value, we can calculate the yield on our original investment.  I=22.30 (N=240, PV= -30,000, PMT=0, FV=2,362,238.88).  22.30% on our original investment.

1099 requirements

As a part of the health care reform bill, there will be a new requirement starting in 2012 for self-employed workers, businesses, and charities to issue a 1099 to every vendor that they purchase more than $600 from during the year.  This is going to be a big change and you will want to start thinking about how you will implement this.