UNDERWATER HOMEOWNERS COULD FACE EXTRA TAX BURDEN IN 2014
Struggling homeowners could be hit with an unexpected tax bill in the new year, the Washington Post reported yesterday. A law that spared people who owe more than their homes are worth from being saddled with extra taxes when their banks provide mortgage relief is expiring next week. Underwater homeowners often try to negotiate with their banks so that they can sell their homes for less than they owe in a short sale or have their mortgage balances reduced. But the difference between what the homeowner owes and the lower sales price approved by the bank is considered taxable income for the homeowner by the Internal Revenue Service. Last year, Congress rushed to extend the Mortgage Forgiveness Debt Relief Act during negotiations about the fiscal cliff but only through the end of 2013, but has not done so for 2014. Lawmakers and housing advocates argue that the lapsing of the tax relief rule hurts those who are already financially strapped. Since 2009, more than 220,000 homeowners have sold their houses for less than they were worth through a short sale with help from a government program. There are more than 6 million homes still underwater across the country, according to a third-quarter report from research company CoreLogic, which is down from more than 11 million homes during the peak of the housing crisis in 2009. Read more.
FANNIE MAE FEE INCREASES TO BE DELAYED BY FHFA UNDER WATT
U.S. Representative Mel Watt, who will leave Congress to become regulator of Fannie Mae and Freddie Mac, said that he will delay a planned increase in the fees that the U.S.-owned companies charge to guarantee mortgages, Bloomberg News reported on Tuesday. Watt was confirmed 57-41 by the Senate on Dec. 10 and is scheduled to be sworn in as director of the Federal Housing Finance Agency on Jan. 6. He said on Friday that he needs time to evaluate fee increases that were announced this month by Edward J. DeMarco, the agency's acting chief. The announcement by Watt follows complaints by mortgage bankers and other housing-industry participants that the higher fees set to take effect in March and April were too steep and sudden. Such increases are typically passed on to borrowers in the form of higher interest rates. Read more.
ANALYSIS: BEHIND THE HEADLINE NUMBERS OF A MORTGAGE SETTLEMENT
Ocwen Financial moved into the foreground after the Consumer Financial Protection Bureau (CFPB) ordered it to enter into a $2 billion settlement over allegations that it had mistreated struggling borrowers, the New York Times DealBook reported on Tuesday. There were two parts to the settlement. First, the CFPB required Ocwen to provide $125 million in refunds to borrowers who entered foreclosure. Second, Ocwen was also required to write down the outstanding amount owed on the mortgages by $2 billion, which would make the loans more affordable for borrowers. However, Ocwen's refund payment is actually only $66 million, according to a filing by the company. The firms that handled the mortgages before Ocwen are paying the remainder. The $2 billion number is easy to misunderstand. Ocwen also is not going to have to bear any of that $2 billion write-down itself. Ocwen does not own the mortgages on which it collects payments. Bondholders own most of them since banks packaged the loans into securities and sold those bonds into the markets. Indeed, a $2 billion write-down would probably wipe out most of Ocwen's $1.8 billion in capital. Read more.
WEEKLY JOBLESS CLAIMS DECLINE MORE THAN EXPECTED
The number of people filing for initial unemployment benefits fell for the first time in three weeks, a finding that is in line with a gradually improving labor market, the Wall Street Journal reported today. Initial claims for jobless benefits, a measure of layoffs, decreased by 42,000 to a seasonally adjusted 338,000 in the week that ended Dec. 21, the Labor Department said today. This figure was slightly below economists' forecasts. A Labor Department analyst said that there were no special factors affecting the data. However, the number of claims around the winter holiday season tends to be volatile. Holidays and big swings in unadjusted data toward the end of the year can complicate seasonal adjustments for jobless claims, and many economists caution against reading too much into the figures during that period. Read more. (Subscription required.)
NEW ABILIVE WEBINAR SERIES LOOKS AT THE BASICS OF FINANCIAL STATEMENTS, DOCUMENTS AS EVIDENCE AND HEDGE FUNDS
Send your associates to ABI's "Back To Basics" webinar series, hosted by the Young and New Members Committee, next month. The series will cover the fundamentals of financial statements and operating reports (Jan. 14), using financial documents as evidence (Jan. 21), and hedge funds (Jan. 28). Let a trusted CLE provider help get your associates up to speed. Register for the complete series and get the third webinar free!
RENEW YOUR ABI MEMBERSHIP BY DEC. 31 AND SAVE!
Beginning in January 2014, ABI will institute its first dues increase to the regular dues rate in six years. The $20 increase will ensure that ABI can continue to provide you with the latest and most effective tools available in insolvency information and education. You can lock in 2013 rates, and additional discounts, for up to three years by using a multi-year renewal option (save $75!). You can also save 10 percent on future dues by opting into the automated dues program. To renew your membership and save, please go to renew.abi.org.
ABI LAUNCHES SIXTH ANNUAL WRITING COMPETITION FOR LAW STUDENTS
Law school students are invited to submit a paper between now and March 4, 2014 for ABI's Sixth Annual Bankruptcy Law Student Writing Competition. ABI will extend a complimentary one-year membership to all students who participate in this year's competition. Eligible submissions should focus on current issues regarding bankruptcy jurisdiction, bankruptcy litigation, or evidence issues in bankruptcy cases or proceedings. The first-place winner, sponsored by Invotex Group, Inc., will receive a cash prize of $2,000 and publication of his or her paper in the ABI Journal. The second-place winner, sponsored by Jenner & Block LLP, will receive a cash prize of $1,250 and publication of his or her paper in an ABI committee newsletter. The third-place winner, sponsored by Thompson & Knight LLP, will receive a cash prize of $750 plus publication of his or her paper in an ABI committee newsletter. For competition participation and submission guidelines, please visit http://papers.abi.org.
ABI IN-DEPTH
NEW CASE SUMMARY ON VOLO: IN RE D. ERIK VON KIEL (3D. CIR.)
Summarized by Julia Klein of The Rosner Law Group LLC
The Third Circuit ruled that D. Erik von Kiel concealed property belonging to and/or controlled by him within one year before the date of his chapter 7 petition and discharge of his debts was denied.
There are more than 1,000 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: FHA'S THE ONLY GAME IN TOWN FOR SUBPRIME BORROWERS
The Bankruptcy Blog Exchange is a free ABI service that tracks more than 80 bankruptcy-related blogs. A recent blog post makes the case that subprime borrowers with low credit scores have few private financing alternatives other than Federal Housing Administration-backed mortgage loans.
Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
ABI Quick Poll
A debtor may strip liens in a "chapter 20" case.
Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
INSOL INTERNATIONAL
INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 43 member associations worldwide with more than 9,000 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.
