April 6, 2017
Thursday’s Advocacy & Think Tank Roundup
- The CEO of one of America’s largest and most influential banks has called for significant changes to the FHA’s mortgage rules. Many of the mortgage rules now in place came after America’s financial crisis. Jamie Dimon, CEO of JPMorgan Chase names the changes as “too costly for consumers.“
- Banking giant, Wells Fargo, recently uncovered an employee scandal. Over 5,000 employees opened fake accounts in order to receive additional sales bonuses. Recently, the bank reached a 110 million dollar settlement in a class action lawsuit brought by customers affected by the scandal.
April 6, 2017 | Permalink | No Comments
April 5, 2017
Prepaying Your Mortgage
Newsday quoted me in Paying off Your Mortgage Early Might not Make Sense (behind paywall). It opens,
There are few greater feelings than making that last mortgage payment. Some people feel better still if they pay it off early. But sometimes it doesn’t make sense to pay off your mortgage early.
First things first: Be sure you have adequate emergency savings before you put extra money into paying off the mortgage early. Then consider what’s the best use of any extra money you have.
While taking a shorter-term mortgage or prepaying principal saves you tons in interest, remember that mortgage interest is typically tax deductible.
Warren Goldberg, founder of Mortgage Wealth Advisors in Melville, offers an example. If you had a 5 percent interest rate on your 30-year fixed mortgage, depending on your tax bracket, your equivalent, after-tax interest rate might only be 3.3 percent. Even in today’s tumultuous market, it’s not difficult to earn a return greater than 3.3 percent after taxes.
“By paying the minimum on your mortgage and investing the balance, your money can be working for you. Your investments can be earning more than the interest you are paying,” says Goldberg.
David Reiss, a professor at Brooklyn Law School specializing in real estate, agrees: “If you have not maxed out your retirement savings, it might make sense to direct your extra funds to tax-advantaged retirement accounts. You could end up being better off overall as those accounts grow tax-free over time.”
April 5, 2017 | Permalink | No Comments
Wednesday’s Academic Roundup
- Small and Medium Multifamily Housing Units: Affordability, Distribution, and Trends, An, Bostic, Jakabovics, Orlando, and Rodnyansky.
- Spillover Risks in REITs and Other Asset Markets, Chiang, Kittle, Sing, and Tsai
- Institutional Property-Type Herding in Real Estate Investment Trusts, Lantushenko and Nelling
- Out-of-Town Buyers, Mispricing and the Availability Heuristic in a Housing Market, Horenstein, Osgood, and Snir
April 5, 2017 | Permalink | No Comments
April 4, 2017
Payday v. Installment Loans
OppLoans.com quoted me in What’s the Difference Between a Payday Loan and an Installment Loan? It opens,
If you’re looking to borrow, you may already know about payday loans—they’re fast, dangerous, and designed to take advantage of those in need. (Think of them as the jackal of the lending animal kingdom.) Is there a better option? Something just as fast, but… you know, not evil?
You bet there is.
When it comes to lending, consider the personal installment loan the noble lion, king of the lending jungle.
Payday loans are short-term, unsecured loans that target the financially vulnerable—the low income, the elderly, and those without limited financial education. Payday lenders won’t perform a credit check and, depending on the restrictions in your state, they may not even check your income first.
Fast money without a credit check? What could be wrong?
Well, a lot. Payday loans charge unfair fees and massive interest rates, meaning they have extraordinarily high annual percentage rates (APR)—the measurement that allows you to see the full cost of loans.
Certified financial educator Maggie Germano (@MaggieGermano) says, “Payday loans usually turn out very negatively for the borrower. Interest rates and fees are sky-high and many people are unable to pay them back in time. Every time you miss your payment due date, the amount owed increases significantly. This makes it impossible for people living paycheck to paycheck to pay them off. This can destroy a borrower’s credit and wipe out their bank account.”
It may be tempting to try out the fast, risky option with the short payment terms, but don’t forget: it’s a trap.
When it comes to payment terms, installment loans are the exact opposite of payday loans. Instead of having to make a massive payment in a short amount of time, installment loans offer you the chance to make regular, smaller payments over a much longer period of time.
Most installment loans will offer you a MUCH lower APR on your loan than a dangerous payday loan and also—unlike many payday loans—they won’t charge a sneaky prepayment penalty.
What’s a prepayment penalty? Law professor David Reiss (@REFinBlog) sums it up well: “Prepayment penalties come into play if the borrower repays all or part of a loan before the payment schedule that the borrower and lender had agreed upon when the loan was first made. In theory, they compensate the lender for the costs of making the loan in the first place and any decrease in interest payments that the lender would get as a result of early repayment. In practice, prepayment penalties can be a new profit center for lenders if the fees are set higher than the amounts actually lost by prepayment.”
April 4, 2017 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- After studying the housing crisis of the early 2000’s, Congress created the Consumer Finance Protection Bureau to protect U.S. citizens from poor and damaging practices of the American financial institutions. In early 2017, the Trump Administration questioned the constitutionality of the bureau and is seeking to shift some of its practices at the very least. As a result, the Democrats of Congress have rallied together to save the federal agency.
- A Michigan pastor is under investigation by the Securities and Exchange Commission (SEC). The federal agency alleges the pastor created a real estate scheme to garner over 6 million dollars fraudulently. The pastor is accused of targeting Michigan’s most exposed citizens such as retirees and laid off auto-workers.
April 4, 2017 | Permalink | No Comments
Monday’s Adjudication Roundup
- The J.A. Green Development Corp. is dissatisfied with the services provided by their previous legal and accounting team. The real estate development company sued both their legal and accounting teams due to alleged misguidance regarding their prior tax practices.
- Trump University real estate seminars have made residents on the east and west coast upset about the content of the seminars. Individuals attending, claim the seminars were fraudulent. As a result, President Trump has reached a 25 million dollar settlement deal which was approved by a California court.
- Attorneys in the Ninth Circuit are begging a federal judge to “overturn the fees and sanctions” against them. The fees and sanctions stem from a failed lawsuit attorneys filed against a resort in which they alleged the owners participated in a “loan-to-own scheme.
April 3, 2017 | Permalink | No Comments
