Best home mortgage rate

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As advisors, many of our clients are homeowners. For these taxpayers, the mortgage interest expense on their homes indebtedness results in signicant tax savings along with other common itemized deduc- tions such as real estate taxes, state and local income taxes, and contributions to charitable organizations. This issues column offers a general discussion on the rules for deducting home mortgage interest.

The Internal Revenue Code allows individual taxpayers to deduct qualied residence interest as an itemized deduction.1 The term encompasses interest paid on the principal amounts of two loans: acquisi- tion indebtedness and home-equity indebtedness. The law also requires that in order to secure a qualied residence interest deduction: (1) only two homes may qualify for the annual deduction as qualied residence, and (2) the loan must be secured by the residence(s). The qualied residence rules allow taxpayers to have one main residence at any one time. This would be the home where a taxpayer lives most of the time. The second residence can be any home that the tax- payer chooses to treat as the second home.2 You do not have to use the home during the year for it to qualify as a second residence. If the second home was rented during part of the year, the home may still be considered a qualied residence.3  If you are married and le a joint return, your qualied residence(s) can be owned either jointly or only by one spouse.4 Acquisition indebtedness is dened as any secured

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indebtedness which is incurred in acquiring, construct- ing, or substantially improving the qualied residence(s) and is subject to a $1,000,000 limitation ($500,000 for married individuals ling separate returns). Home-equity indebtedness is any debt other than acquisition indebtedness secured by a qualied residence. Unlike acquisition indebtedness, use of the loan proceeds is not restricted. A deduction for interest on home-equity indebtedness is limited to the lesser of: (1) the fair market value of the qualied residence reduced by the amount of acquisition in- debtedness, or (2) $100,000 ($50,000 for each spouse ling separately).5

Only the individual(s) who are legally obligated to pay the debt, and actually make the payments, are able to claim a tax deduction for mortgage interest. If parents pay their sons or daughters mortgage, they are not able to deduct the interest unless the parents have also cosigned on the loan.

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Determining the allowable deduction for mort- gage interest expense can be as easy as reporting the amount on Form 1098, Mortgage Interest State- ment, issued by the mortgage holder.6  On the other hand, the law contains several limitations that could result in surprises and unsuspecting outcomes on the amount of deductible mortgage interest. Three categories can be relied upon to initially determine whether interest paid during the year is limited.

  1. Mortgages taken out on or before October 13, 1987 (grandfathered indebtedness).7
  2. Mortgages taken out after October 13, 1987, to purchase, build, or improve your residence (ac- quisition indebtedness). However, these mort- gages plus any grandfathered debt must total $1 million or less ($500,000 or less if married ling separately).
  3. Mortgages taken out after October 13, 1987, other than to purchase, build, or improve your residence (home-equity indebtedness), but only if these mortgages total $100,000 or less ($50,000 or less if married ling separately) and total no more than the fair market value of the residence

reduced by grandfathered indebtedness and ac- quisition indebtedness.8

If all of your mortgages fall into one or more of the above three categories at all times during the tax year, you can deduct all of the interest on those mortgages. (If any one mortgage falls into more than one category, add the debt that falls into each cat- egory to your other debt in the same category.) If one or more of your mortgages does not fall into any of these categories, your home mortgage interest de- duction will be limited.

Best refinance home mortgage

29In this article you will find information about best refinance home mortgage, best mortgages, best mortgages

Best refinance home mortgage

Michaelson’seyewitnessaccountisarichsource of examples for management courses. Some in- structors may want to assign the book as a supple- mental reading, using the material as an extended case study to address such topics as groupthink, organizational culture, faulty decision making, charismatic leadership, crisis management, public relations, marketing, organizational politics, and ethics. Like any good case study, Michaelson’s nar- rative encourages discussion and reflection. Take the author’s role at Countrywide, for example. Some readers will be critical of his decision to stay at Countrywide despite his misgivings about the future of the company and his marketing role. Oth- ers will be more forgiving. Michaelson himself is ambiguous about his career at the firm. He was initially committed to the firm and its vision. He tried never to break the law or to lie to the public. Yet the author recognizes that his efforts helped put thousands of Americans into homes they couldn’t afford and contributed to the ongoing fi- nancial crisis. His experience also demonstrates the moral complexity of organizational dissent. He tried to derail the Pick-a-Payment program, which demonstrates courage. However, his moral cour- age could have caused widespread suffering. Had Michaelson been successful in convincing his su- periors to tighten mortgage requirements, thou- sands at Countrywide would have immediately lost their jobs.

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The Foreclosure of America       demonstrates the   limitations of first person accounts. Michaelson states that he never personally witnessed wrong- doing at Countrywide. Nevertheless, press reports suggest that fraud was widespread at the com- pany. Investors, consumer and industry groups, government regulators, and others have accused the firm of inflating the incomes of borrowers, steering homeowners into risky mortgages, over- charging customers, failing to disclose loan terms, hiding fees, defrauding insurers, and discounting loans for influential borrowers (Der Hovanesian, 2008. Morgenson, 2008; Pfeifer & Puzzanghera, 2009; Goldfarb, 2009). In a settlement with several states attorneys generals, Bank of America agreed to lower principal and interest payments for custom- ers of Countrywide Financial (El Boghdady, 2008; Morgenson, 2008). Professors using the book will need to supplement it with other sources to high- light the company’s unethical activities and ongo- ing legal challenges.

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Michaelson ends his book by asking: “Who is to blame for the mortgage crisis?” This question is also worth discussing in management classes. Michaelson criticizes borrowers as well as lenders, arguing that Americans in general were all too eager to take advantage of lax lending standards to purchase homes they couldn’t afford, take out home equity loans to buy cars and additional goods, and make commitments they couldn’t keep. He concludes, however, that what happened was inescapable, just another example of a capitalist boom-and-bust cycle. Market forces, competition, widespread greed, and housing hysteria are to blame. However, his story seems to suggest other- wise. Disaster might have been averted if decision makers at Countrywide, Wachovia, IndyBank, World Savings, Washington Mutual, and other lenders, who held a large share of the market, had not engaged in wishful thinking and sacrificed their corporate values for the bottom line.

 

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Michaelson also discovered a contradiction at the heart of the firm’s culture. On the one hand, employees were committed to the firm’s noble mis- sion, which was to help Americans fulfill their dreams of home ownership, and they were regu- larly reminded of the importance of doing the right thing for customers and shareholders. On the other hand, the firm was a sales organization focused on quarterly results. Stock value, jobs, and bonuses depended upon generating loans and deposits. Employees competed to generate greater and greater sales and profits. Michaelson offers the following description of the financial pressure at Countrywide Financial, which would ultimately triumph over the corporation’s mission and values:

Every week, every month, every quarter was a nerve-wracking recap of how many loans were sold, how many Certificates of Deposit were opened, how many Home Equity Loans we signed, and what the amounts on those loans were. And, like a true sales organiza- tion, we were all only as good as our last reports (93).

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In chapter 9 the author returns to the meeting in the Vault, describing his efforts to convince his supervisor shortly thereafter that Countrywide was in danger from the Pick-A-Payment program. As his boss points out, even if he is correct there is little that Michaelson can do. Stopping the pro- gram would mean massive losses for the firm; the American public would turn to other lenders in order to satisfy its desire for larger homes. Chapters 10–13 describe the author’s career after this fateful confrontation. Still concerned about the future of the company and uneasy with his role in marketing questionable loan products, Michaelson moved to the banking division and focused on ac- quiring deposits instead. He was laid off in July 2007. as the refinancing business slowed. Michael- son then critiques Countrywide’s response to the rapid rise in defaults and foreclosures as an ex- employee. According to the author, the firm’s cul- tureandrecordofsuccessundermineditsabilityto respond to the emerging crisis. Countrywide man- agers believed that the company would emerge from the financial turbulence in a stronger position than ever. Instead of addressing the problem of defaults by recalling loans and working with the government and homeowners, CEO Mozilo launched a public relations campaign aimed at defending the company and attacking its critics. These ill-fated efforts failed, and in June 2008 Bank of America acquired Countrywide. Later Bank of America had to accept federal bail out money in part because of Countrywide’s toxic loan portfolio (Creswell, 2009).

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In the final chapter Michaelson broadens his focus to examine the causes of the housing/finan- cial crisis and outlines a series of steps for pre- venting a similar disaster in the future. He blames both lenders and borrowers for being greedy and irresponsible but suggests that the housing hyste- ria of the time probably made the boom and bust cycle inevitable. Some of his corrective steps, such as tightening up standards for home loans, elimi- nating adjustable rate mortgages, and ending commissions based on the generation of loan ap- plications, appear to have merit. Others, like the creation of an index to determine who deserves mortgage assistance and requiring financial edu- cation in elementary schools, are less compelling.

Best refinance home mortgage

New house owner. Key in hand and new cottage on background.

New house owner. Key in hand and new cottage on background.

 In this article you will find information about best refinance home mortgage, best mortgages, best mortgages

Best refinance home mortgage

At the height of the housing bubble earlier this decade, Countrywide Financial funded one out of every five mortgages in the United States. The de- cisions made by managers at Countrywide played akey role in creating the housing crisis that trig- gered a worldwide recession. In The Foreclosure of America,former Countrywide Senior Vice Presi- dent of On Line Marketing, Adam Michaelson, pro- vides an insider’s view of what went wrong at the mortgage giant and in the U.S. mortgage industry as a whole.

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Michaelson begins his narrative by recounting a critical meeting that took place in July 2004. Man- agers at this gathering, held in a bombproof base- ment room called the “Vault,” unveiled the Pick-a- Payment program that would let borrowers pay less than they owed on their mortgages each month. (Wachovia and other competitors also of- fered similar products.) As long as home values continued to increase, borrowers would be able to refinance their loans under this program. However, while sitting in the session, Michaelson quickly realizes that if housing values were to decline, overextended borrowers would default and Coun- trywide and the mortgage industry would implode. He then raises his concerns but cannot overcome the power of “groupthink.” The project leader de- fends the new product, declaring that it has been carefully vetted, and others in the room offer their enthusiastic support. Michaelson is told that he is welcome to take his concerns to top executives.

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In the next 7 chapters the author describes his experiences at Countrywide that led up to the crit- ical gathering in the Vault. Michaelson joined Countrywide in 2003 after working at advertising agencies. In this, his first position in the corporate world, he discovered a strong culture that bordered on “cultish,” confident in its record of success and highly loyal to its charismatic founder and CEO Angelo Mozilo, considered the pioneer of the mod- ern mortgage business. Ideal job candidates and employees—wholesome honest, hardworking— were described as “very Countrywide.” Not “being Countrywide” was enough to put a manager’s job at risk. Michaelson ran afoul of Countrywide’s cul- ture when he wore cuff links. At Countrywide, which prided itself on being a meritocracy that rewarded workers based on their financial perfor- mance, cuff links were seen as pretentious. Only very senior male executives (those with higher rank than Michaelson) were allowed to wear them.

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