The percentage of U.S. consumers who are delinquent on their mortgages could fall to about 5 percent by the end of 2011, from an expected 6.2 percent at the end of this year, according to a leading credit bureau.
Archive for December, 2010
Eileen Aj Connelly and David Pitt, AP Personal Finance Writers, On Monday December 27, 2010, 6:27 pm EST
NEW YORK (AP) — Millions of H&R Block Inc. customers who relied on short-term loans backed by their expected tax refunds will not have that option this year, since Block’s banking partner was forced by federal regulators to stop offering the loans.
It’s a blow to Block, the nation’s largest tax preparation company, which could lose tax customers to competitors still offering the loans and has virtually no time to find a new funding partner before tax season starts in January.
That means Block could lose millions of dollars in revenue. About 17 percent of its customers used a refund anticipation loan in the 2010 tax season. Related revenue topped $146 million, or about 4 percent of annual revenue.
RALs, often referred to as “rapid refunds,” are short-term loans backed by an expected federal income tax refund. A refund anticipation “check” is actually an account where a refund is deposited. This enables taxpayers to have their tax return preparation fees deducted from their refund, rather than paying up front. Both products are typically used by low-income customers who file their taxes early in the season.
Block’s contract with HSBC Bank to back its RALs dates to 2005, but bank regulators ordered HSBC to stop funding the high interest loans, which typically are offered to customers with spotty or no credit histories. A spokesman for the federal Office of Comptroller of the Currency, the Treasury Department agency that regulates national banks, would not provide any explanation for the directive, stating that such actions by the agency are confidential.
It is likely that a change in policy this summer by the Internal Revenue Service contributed to the OCC’s decision. The IRS eliminated a code that let tax preparers know if customers will get their entire refund, or if some will be held to cover things like unpaid back taxes. Tax prep companies used the code as a form of credit check for the loans.
After the IRS announced its policy change, HSBC tried to pull out of the contract with Block, which prompted the tax preparer to file a lawsuit. Block said in a statement released Friday that negotiations related to the suit had led to an agreement calling for HSBC to fund the loans for the 2011 tax season with Block covering any defaults. That deal was blocked by the OCC action.
Block said the proposed new terms would have made it nearly impossible for HSBC to suffer any financial losses, potentially a big issue for regulators.
“As a result of the OCC’s decision, millions of taxpayers will be deprived of credit, or they will be forced to use higher?priced alternatives, without the slightest benefit to the solvency of HSBC or the banking system in general,” Block CEO Alan Bennett said in a statement. “While we are very disappointed by this decision, we have been preparing for the loss of RALs, so we have several other financial products available and under development for this tax season.”
He said while the company is working to provide other options, the OCC’s last-minute action makes it difficult to put alternative products in place at all locations in time for the early part of the 2011 tax season.
Block said it will continue to offer customers refund anticipation checks, which are funded through H&R Block Bank, along with direct deposit accounts through its Emerald Card program.
Block also provides other programs to its tax preparation clients, such as its Emerald Advance revolving line of credit. Lines of credit have been used by more than 4 million customers, the company said. But during a conference call last month the company said they would not be used to replace RALs.
Oppenheimer & Co. Inc. analyst Scott Schneeberger said in a worst-case scenario, Block could see up to a 7 percent drop in its tax preparation volume in the 2011 season, compared with this year. But he expects a 4 percent loss is most likely. That would cut Block’s 2011 profit by 13 cents per share to $1.44, from an earlier forecast of $1.57. Analysts surveyed by Thomson Reuters expect $1.61.
Schneeberger maintained a “Perform” rating on the company.
Block shares tumbled 89 cents, or 7 percent, to close at $11.80.
It’s expected some of Block’s customers may switch to a competitor still offering RALs. Jackson Hewitt Tax Service Inc. said on Dec. 17 it had secured funding that allows it to offer refund anticipation loans for the upcoming tax season. Jackson Hewitt amended its agreement with Republic Bank & Trust Co. to allow 80 percent of the expected refund anticipation loans. That gives the No. 2 tax preparer a leg up on main competitor Block.
The stock of the Parsippany, N.J., company surged 53 cents, or 30 percent, to end the trading day at $2.30.
Privately held Liberty Tax Service has also said it will offer refund loans.
In a note to clients, Schneeberger pointed out that the regulatory action could set a precedent that also hits competitors’ refund loan funding, or Block could try to “muscle-in” on the banks backing their loans.
David Pitt reported from Des Moines, Iowa.
The top federal agencies responsible for setting housing policy are clashing over a new program designed to help borrowers whose homes are worth less than they owe on their mortgages, according to industry and government sources.
By Robert Lewis
rlewis@sacbee.com
rlewis@sacbee.com
Published: Tuesday, Dec. 21, 2010 – 12:00 am | Page 6B
Last Modified: Tuesday, Dec. 21, 2010 – 12:27 am
Thousands of California homeowners struggling to make their mortgage payments could see some relief in the months to come.
As part of an agreement with the state attorney general’s office, Wells Fargo on Monday announced a new program to modify “pick-a-pay” loans for borrowers in danger of losing their homes. The bank has said it will make more than $2 billion in loan modifications statewide, helping 14,900 Californians – although the actual amount will depend on the economy and individual borrowers’ circumstances.
“It’s the right thing to do to focus on working with borrowers,” said Franklin Codel, Well Fargo Home Mortgage’s chief financial officer. “It seems like a win-win for everybody.”
The loans in question are pay option adjustable-rate loans originated by World Savings and Wachovia during the housing bubble. Under such loans, borrowers could essentially choose how much they paid monthly. At the upper end, borrowers paid interest plus a portion of the principal. Some, however, chose to pay so little that it didn’t even cover the full monthly interest, and the unpaid portion was added to the principal.
As home values plummeted, many who had the loans found themselves deeply in debt and owing far more on their loans than their homes were worth.
Wells Fargo – which did not originate any of the loans – acquired Wachovia and World along with their loan portfolios in late 2008.
The “pick-a-pay” loans have come under intense scrutiny nationwide for their contribution to the subprime mortgage crisis. Attorneys general in eight states had been investigating the marketing of the loans. In October, Wells Fargo agreed to modify mortgages for delinquent borrowers in Arizona, Florida, Colorado, New Jersey, Washington, Texas, Illinois and Nevada.
The bulk of the loans went to California homeowners. Attorney General Jerry Brown’s office had been in contact with the bank and was following talks in other states, said Jim Finefrock, director of communications for the attorney general’s office.
Monday’s agreement, however – which Brown’s office is calling a “settlement” – didn’t come from an investigation or a lawsuit.
“(Wells Fargo) really took the responsibility and stepped up,” Finefrock said.
Under the agreement, Wells Fargo said it will lower the principal for homeowners struggling to repay their World Savings or Wachovia “pick-a-pay” loans. The bank will also pay $32 million in restitution to more than 12,000 borrowers who have already lost their homes through foreclosure. The average payout should be around $2,650. In addition, the bank is giving $1.9 million to the attorney general’s office.
It’s unclear just how much relief homeowners can expect. Bank officials said they couldn’t provide maximum or minimum relief amounts, and modifications will be made on a case-by-case basis.
The bank will do “just enough of what’s needed to ensure your home payment is sustainable going forward,” said Teri Schrettenbrunner, head of communications for Wells Fargo Home Mortgage.
So should distressed homeowners start celebrating?
Probably not yet, said Kevin Stein, associate director of the California Reinvestment Coalition, a homeowner advocacy organization.
Other much ballyhooed loan modification agreements have fallen short, as many homeowners have still struggled to qualify for relief, Stein said.
Language in the agreement gives Wells Fargo the discretion to opt for a foreclosure if such a move is better financially for the bank than modifying the loan, Stein pointed out.
“Whether or not this is a good deal depends on the terms of the modifications people are going to get,” Stein said.
Homeowners eligible for a loan modification should get a notice from Wells Fargo in the next two months. Those who already went through foreclosure and are eligible for restitution should receive a notice of eligibility by July.
Homeowners with pay option loans from Wachovia and World who are interested in discussing loan modifications with a Wells Fargo representative should call (888) 565-1422.
Read more: http://www.sacbee.com/2010/12/21/3272071/wells-fargo-to-modify-some-troubled.html#ixzz18pNLPeRp
By Work At Home Jobs.org
Published: Friday, Dec. 17, 2010 – 2:11 am
LOS GATOS, Calif., Dec. 17, 2010 — /PRNewswire/ — Work At Home Jobs.org, the world’s largest work from home job search engine, announced today the 234,000th new job added to their site since its founding in January 2010.
Created by an unemployed high-tech worker, Work At Home Jobs.org is helping the estimated 49.5 million unemployed and underemployed find legitimate work from home jobs online. With over 16,000 work from home jobs listed at any given time on the site, Work At Home Jobs.org is by far the largest work at home job aggregator online.
All jobs listed on Work At Home Jobs.org are freelance jobs that either pay on a project by project basis or on a full-time basis. Pay ranges from $30 for a small project (such as writing an article for someone) to $50,000 for a large project that will require several months of full-time work.
Work At Home Jobs.org is a 100% free service that anyone can use to find a job that fits their skill set. With over 16,000 jobs listed, in over 250 different job categories, job hunters can easily find customer service jobs, accounting jobs, graphic design jobs, IT jobs, virtual assistant jobs, sales jobs, translation jobs, data entry jobs, etc.
To apply for a job, applicants submit a bid for how much they would charge for the job and explain why they feel they are the best choice for the job. Higher priced bidders that explain themselves well usually get the job. Payment is made on a milestone basis, such as 25% of the pay is distributed when 25% of the job is completed.
“Working from home has enabled me to set my own hours and spend much more time with my daughter and son than when I was working full-time in an office environment,” said the founder of Work At Home Jobs.org. “In fact, without the work from home jobs listed at WorkAtHomeJobs.org, I’d still be on unemployment.“
Unlike the hundreds of work from home scams online that require you to pay money up front in order to secure a job, Work At Home Jobs.org is a 100% free service that only displays legitimate work from home jobs. Learn more at http://www.workathomejobs.org.
Contact: James Howlett 1-888-831-6391
SOURCE Work At Home Jobs.org
Read more: http://www.sacbee.com/2010/12/17/3264782/234000-new-jobs-added-to-us-economy.html#ixzz18QWDxc1u
