Expiring Mortgage Debt Relief Act Fuels Strategic Default: Survey

A foreclosure prevention agency found that the pending expiration of the Mortgage Debt Relief Act of 2007 is prompting struggling homeowners to strategically default on their loan.

YouWalkAway.com conducted a national survey and found 34 percent of respondents indicated that the act, which is set to expire December 31, 2012, contributed to their decision to walk away sooner rather than later from their property. Those surveyed were YouWalkAway.com clients who were actively considering or navigating through the foreclosure process.

The Mortgage Debt Relief Act releases homeowners from the obligation of paying taxes on mortgage debt forgiven from a short sale, foreclosure, or modification. Taxpayers are eligible if the property is the primary residence.

“The survey results are not surprising; YouWalkAway.com saw a number of homeowners reach out to us in early and mid-2011 due to the impending 2012 deadline,” said Jon Maddux, CEO of YouWalkAway.com, in a release. “Many were prompted to begin the foreclosure process in 2011 in order to ensure their foreclosure is complete by the end of 2012.”

While the expiring act motivates homeowners to seek completion of the foreclosure process before the expiration date, for those who won’t qualify in time, Maddux said not extending the act will then cause short sales to stop immediately due to the fear of getting hit with a huge tax bill.

In addition, 78 percent of respondents from the YouWalkAway.com survey expressed intentions of walking away from their home. Of those, at least 74 percent would qualify for relief under the act.

“Potentially millions of people will find themselves stuck with a huge tax bill after foreclosure if the government doesn’t renew the Debt Relief Act at the end of 2012 or if they don’t finalize their foreclosure by that date. The bill may just expire, like when Congress chose not to renew the home buyer’s tax credit,” said Maddux.

Cheryl Gerhardt, a CPA who has worked with YouWalkAway.com clients, said about 80 percent of the people who approach her about foreclosure tax consequences qualify for the relief under the act.

“These are usually people who purchased during the height of the market from 2005 to 2007 and never had the opportunity to take out a second, whereas a few years ago clients who were getting foreclosed upon had made purchases in the early 2000’s, took out a home equity line of credit and could not qualify,” said Gerhardt.

In March, House Bill H.R. 4290, or Homeowner Tax Fairness Act, was introduced to extend the act to 2015. The bill is sponsored by Rep. James McDermott.

The Mortgage Relief Act was actually extended in October 2009, three months before the act’s expiration date.

YouWalkAway.com works with borrowers facing foreclosure as well as those opting to strategically default on their underwater homes. The survey the agency conducted reached out to 2108 borrowers and received responses from over 25 percent of those contacted.

Article Source: http://www.dsnews.com/articles/survey-reveals-expiring-mortgage-debt-relief-act-leads-to-more-strategic-defaults-2012-05-29

15 Ways to Stop Wasting Money on Food

As anyone who’s ever cleaned up after a dinner party knows, Americans waste a lot of food. In addition to the fruit, vegetables, and other items that go bad in our own kitchens, farmers and grocery stores toss unused goods as well. According to Jonathan Bloom, author of American Wasteland, it adds up to at least 160 billion pounds of wasted food each year. The problem is considered so serious that food industry groups have launched an initiative to reduce the amount of food that ends up in landfills while increasing the amount that goes to food banks.

[In Pictures: 10 Ways to Save on Food Costs]

In his book, Bloom says Americans themselves can also do a lot to stop food waste, starting with a few adjustments to refrigerator organization. Bloom recommends keeping a “use it up” shelf for items that will soon go bad so you remember to eat them. Here are 15 more recommendations from Bloom on how to waste less money on food:

1. Buy less food overall. The European model of more frequent and even daily shopping trips can help reduce food waste compared with the more American-style mega-shopping sprees on the weekends. After all, when you’re shopping on Sunday for Friday’s meals, the chances of food spoiling in the interim is greater. Plus, shopping more frequently gives you flexibility to make use of unexpected leftovers, Bloom says.

2. Keep your fridge uncluttered. If you can’t see the hummus, you might forget to eat it. (That’s also where Bloom’s “use it up” shelf helps.) He also suggests putting new groceries in the back and pushing older items to the front.

3. Make French toast. The classic recipe uses slightly stale bread; bread pudding and bread crumbs serve the same purpose. Banana bread similarly makes use of old bananas. Bloom also suggests chicken pot pies, chicken salad, fried rice, and soups for getting the most out of leftovers and vegetables approaching their expiration dates. (The recipe finder tool on Allrecipes.com makes it easy to look up uses for extra food.) You can also use leftover chicken bones and vegetable scraps to make your own stock, which can then serve as a base forsoups.

4. Ignore expiration dates. Well, maybe not completely, but because those dates tend to be conservative, Bloom recommends relying more on your own senses to determine whether or not food is still edible.

5. Decline the “extras” at restaurants. Once the bread basket hits your table, it can no longer be served to others, so speak up if you’d rather skip the carbo-loading before the main meal. Similarly, if you’re not going to eat the fries that come with your meal, let your server know.

[In Pictures: 10 Kitchen Tools That Will Save You Money]

6. Bring home leftovers. Some restaurants are famous for large servings; don’t let the leftovers go to waste. Bringing your own container for them makes the choice more environmentally-friendly, too.

7. Use smaller plates at home. One of the families Bloom profiles in the book uses smaller plates to encourage taking smaller servings, which can then be refilled if necessary. That way, children (and adults) are less likely to take more than they will eat.

8. Cook more. Bloom found that people are less likely to waste food that they or a loved one made, which means home-cooked meals have a better chance of avoiding the garbage disposal.

9. Grow your own herbs. The small amount of basil or mint often called for in recipes can lead to big waste, since you often have to purchase a larger bunch. Instead, consider growing the herbs yourself in small indoor pots, or plan several herb-heavy recipes in one week. Bloom also suggests dicing and freezing herbs in ice cube trays with water for longer-term storage.

10. Shop for fruits and vegetables last. Most of us do the opposite, since produce sections are usually the first we enter, but Bloom recommends saving it for last to protect them from getting buried and bruised by heavier items, and also to keep them refrigerated as much as possible.

11. Eat before you shop. Shopping on an empty stomach tends to lead to impulse buys and unnecessary stocking up.

12. Limit bulk buys. As research from Harvard Business School has shown, stocking up on items can lead to overspending (and waste), especially if we don’t get the chance to use up all that cream cheese before it gets moldy.

13. Save and eat leftovers. Some items, such as chili and meatloaf, taste even better the next day.

[How to Eat for $7 or Less a Day]

14. Use your freezer. Putting long-term leftovers in the freezer, along with other freezable items that you can’t use right away, can help reduce the amount that ends up in the trash. Using sealed bags will help prevent freezer burn.

15. Label items. Writing down the date and a description can help remind you to use them up. Bloom adds that including the monetary value of items can also provide an incentive to avoid waste.

Article Source:  http://money.usnews.com/money/blogs/alpha-consumer/2011/10/26/15-ways-to-stop-wasting-money-on-food

5 Questions to End Debt Problems

If you want to get out of debt, I have some very good news. You can ask yourself five questions and if you are willing to answer them honestly, you’ll find yourself debt-free in no time. Most people who are underwater financially think they know what caused the problem. And on the face of it, being in debt seems very straight-forward:

• Too much spending.

• Not enough income.

But in my experience, the root causes of being in debt are a bit more subtle than this. The problem starts well before you pull out your credit card. Its actual genesis is in the questions you ask yourself about money. The questions you ask yourself (and your answers) will impact every part of your financial life — from your credit score to your investment success. Here are the five questions you should start asking yourself to cure this problem rather than exacerbate it:

1. Am I committed to getting out of debt?

Getting out of debt is going to take work. You are going to have to get out of your comfort zone too. Let’s face it. Your very best thinking got you to where you are today. In order to spark change, you’re going to have to take a new road. Are you ready for that? As you’ll see, you can get out of debt pretty easily but it’s going to require a new way of being around money. If you aren’t fully committed to do the work, you’ll likely slip back into debt. That’s an ugly idea. Instead, get fully committed.

2. How much do I spend every month?

I know that you want to get out of debt fast, but we are looking for lasting change. In order to do that, you must do some groundwork first. You simply must know how much you spend every month in order to get out of debt once and for all.

One way to track your spending is to use budgeting software like YNAB (You Need a Budget) or Quicken. But you can also use a spreadsheet. It doesn’t matter how you do it, but you simply must track your spending every month and continue doing so. This is the no. 1 most important financial move you can make if you want to be successful.

3. Can I afford this lifestyle?

Of course the only way to know if you are spending too much is to compare it to your income. Look at all your sources of income — work, pensions, social security, business and investment income. Is the total of this income greater than your average spending on a monthly basis?

If not, what are you going to cut in order to bring your spending in line? Are you going to start a side business to increase your income? Please don’t advance to the next question until you have a handle on this. If you are serious about getting out of debt, you need to know what exact action steps you are going to take in order to bring spending down or income up.

4. What does my future look like if I don’t make a change?

The three steps above take work. At some point you will be tempted to turn the page and go on to some other project. Resist that temptation. There is no way you will be financially successful if you don’t get out of debt. Project what your life is going to look like 5, 10, 20 years down the road if you continue down this path. Keep that picture very clear in your mind. This will help motivate you to stick with the program.

5. What is the most important thing to change and when am I going to do it?

After reading the above four steps, which one are you most resistant to? That’s the step you need to apply most of your energy to.

Are you in debt? How did you get there? What have you done so far to cure the problem? What’s worked best? What has not worked?

Neal Frankle is a Certified Financial Planner in Los Angeles and owner of Wealth Pilgrim, a personal finance blog.

Article Source:  http://money.usnews.com/money/blogs/my-money/2012/04/24/5-questions-to-end-debt-problems

10 steps to making a financial budget

Learn how to budget by following these 10 steps on how to bring your spending under control.

1. Budgets are a necessary evil.

They're the only practical way to get a grip on your spending - and to make sure your money is being used the way you want it to be used.

2. Creating a budget generally requires three steps.

- Identify how you're spending money now.

- Evaluate your current spending and set goals that take into account your long-term financial objectives.

- Track your spending to make sure it stays within those guidelines.

3. Use software to save grief.

If you use a personal-finance program such as Quicken or Microsoft Money, the built-in budget-making tools can create your budget for you.

4. Don't drive yourself nuts.

One drawback of monitoring your spending by computer is that it encourages overzealous attention to detail. Once you determine which categories of spending can and should be cut (or expanded), concentrate on those categories and worry less about other aspects of your spending.

5. Watch out for cash leakage.

If withdrawals from the ATM machine evaporate from your pocket without apparent explanation, it's time to keep better records. In general, if you find yourself returning to the ATM more than once a week or so, you need to examine where that cash is going.

6. Spending beyond your limits is dangerous.

But if you do, you've got plenty of company. Government figures show that many households with total income of $50,000 or less are spending more than they bring in. This doesn't make you an automatic candidate for bankruptcy - but it's definitely a sign you need to make some serious spending cuts.

7. Beware of luxuries dressed up as necessities.

If your income doesn't cover your costs, then some of your spending is probably for luxuries - even if you've been considering them to be filling a real need.

8. Tithe yourself.

Aim to spend no more than 90% of your income. That way, you'll have the other 10% left to save for your big-picture items.

9. Don't count on windfalls.

When projecting the amount of money you can live on, don't include dollars that you can't be sure you'll receive, such as year-end bonuses, tax refunds or investment gains.

10. Beware of spending creep.

As your annual income climbs from raises, promotions and smart investing, don't start spending for luxuries until you're sure that you're staying ahead of inflation. It's better to use those income increases as an excuse to save more.

article source:  http://money.cnn.com/magazines/moneymag/money101/lesson2/index.htm