I recently wrote about the SAFE Mortgage Licensing Act.  Here is some of the actual wording from the proposed regulations regarding the SAFE Act.

As noted earlier, the SAFE Act encourages CSBS and AARMR to establish and maintain the NMLSR, and  these organizations have development of the NMLSR under way.   In addition to developing the NMLSR, CSBS and AARMR developed model legislation to aid and facilitate States’ compliance with the requirements of the SAFE Act.

I think that pretty much meets the definition of Gobbledygook.

HUD has proposed new mortgage licensing regulations that would affect how investors do owner financing.  Unless you are selling your own personal residence you would have to be a licensed mortgage loan originator in order to offer owner financing.  I felt this is an unreasonable and unnecessary requirement and submitted a comment saying so (See below).

Now becoming a licensed loan originator is no difficult task; it would be on the scale of effort time and cost to become a real estate agent.  However if you just want to sell one or two properties that is a lot of work and expense for no gain to either you or the buyer.  This is regulation for the sake of regulation.

This could potentially affect anyone doing rent to own, land contracts, lease options, wraps, owner financing  “Lonnie” mobile home deals, and perhaps others I haven’t thought of.  I wonder how many small property owners will be breaking the law simply because they won’t know about this new regulation.  At a time when we need creative ideas to get the real estate market moving a gain they want to add regulations to impede it from getting back on track.

The regulations were posted on a site that is new to me http://www.regulations.gov.   The specific regulations is called: SAFE Mortgage Licensing Act: HUD Responsibilities Under the SAFE Act.

Here is my comment:

I am a small business owner focused on real estate. I, like tens of thousands of other small business people around the country, renovate distressed property. We then sell these beautiful homes to deserving homeowners.  In any market, but particularly in this difficult market, the ability to offer owner financing is a benefit to both the seller and the buyer.

The proposed regulations would now require me to become a licensed loan originator in the event that my company decides to offer owner financing on home. I do approximately 5 -15 transactions a year. While large companies will simply chalk it up to the “cost of doing business,” small companies like mine will simply not offer financing – a detriment to buyers – the very people who these regulations are designed to help.

I request that the language under 3400.103 (e) (5) be replaced with:  “Any company or individual who only offers or negotiates terms of a residential mortgage loan secured by a dwelling that is owned in it’s entirety by that company or individual. This exemption applies to up to 10 transactions in a given calendar year.”

Reasons for this exemption – why regulation is unnecessary for owner financed deals..

1)      Owners are not “brokering” any one else’ money. Why should they comply with “brokers” rules?

2)      In most mortgage lending, the loan originator is a middleman whose interests are not aligned with either the borrower or the lender. The loan originator is compensated by the number and size of the deals not the quality. He or she actually has an incentive to make unsound mortgages happen. HOWEVER: When an owner sells a property with owner financing they are loaning their own money. They have a selfish best interest in seeing that the loan is appropriate and can be afforded by the buyer.

3)      Technically an owner is not even loaning money. They are simply accepting payments over time. Again the owner’s selfish best interest is to see that the mortgage is affordable to the buyer. This easily meets the requirement set out in the preamble; Supplementary Information: 1. Background “.   .   .   residential loan originators would, to the greatest extent possible, be required to act in the best interests of the consumer.”

4)      Consumers are protected because owners must still comply with other regulations regarding residential loans. These regulations apply whether the owner would be required to be licensed or not.

5)      Many of our financial problems today stem from loans made by licensed loan originators. Regarding owner financing, you want to solve a problem that doesn’t exist by requiring a license that did nothing to stop the problems we have now.

6)      Most importantly, who is being served here? Most small property owners, landlords, renovators, absentee owners, will simply not go to the trouble to get licensed. These are the very owners most likely to do owner financing! By instituting this requirement for owner financing you will be taking a legitimate option out of the marketplace for consumers.

Fortunately there are proposed regulations and not final.  The comment period is over but many investors posted comments.  I will post an update when and if I hear something further.

Happy investing

Ned

The Daily Record is reporting that Harvey Nusbaum will plead Guilty to tax lien auction bid rigging on February 12, 2010. His partner Jack Stollof pleaded guilty in January and will be sentenced March 25.  Steven Berman pleaded guilty in 2008 and paid a $750,000 fine in the same investigation.

Baltimore has announced the dates for the 2010 tax lien certificate auction.

• Monday February 1, 2010: Last day for homeowners to pay taxes with a personal check. Homeowners  Help for homes going into tax sale.
  
• Wednesday March 17, 2010: Listing of 2010 tax sale properties will be published in the Baltimore Sun. This listing will be updated approximately weekly at BidBaltimore.com
• Wednesday March 17, 2010: Bidder registration begins at BidBaltimore.com. The cost to register is $100.00
• Wednesday March 17, 2010: Last day for payments to avoid being in 2010 tax lien sale.
  
• Monday May 10, 2010: Last day to register for tax lien auction.
• Friday May 14, 2010: Final update of property listings
• Friday May 14, 2010: Bid Submission begins
• Monday May 17, 2010: Auction date

Good luck and watch my site for more tax lien information.

Ned

More articles on tax liens here

Back in July of 2008, I reported that Steve Berman had pleaded guilty to price fixing at Maryland tax lien auctions.  Others were implicated at the time.  Many of us active in local tax lien sales have been waiting for the other shoe to drop.

Jack Stollof has pleaded guilty to fixing bids at Maryland tax sales.  His partner Havey Nusbaum is scheduled to go to trial in March.  Nusbaum and Stollof were indicted in June of last year.

Jack Stollof’s plea comes after the Judge in the case threw out their defense that they had formed a “Joint Venture” and told that to  the bank that was financing them.  He is expect ed to be sentenced after Harvey Nusbaum’s trial.  They could both receive up to ten years in prison and a  fine of up to 1 million dollars.

I am already getting a lot of hits to my site for people searching for information on the 2010 MD tax sales.  To get more information about tax sales and how to participate, see my past posts on tax sale investing.  More on tax sales here.

Watch my site for updates.  I’ll let you know as soon as I do of important dates for this years tax sales.

2010 Baltimore City Tax Sale

The 2010 Baltimore City Tax sale will be in May.  Information and details will start to be available in March.  See this post for updated info on the Baltimore City Tax Sale.

2010 Baltimore County MD Tax Sale

Baltimore County, MD tax sale is generally very early June. Information is not yet available. I expect more info to be available in April.

Happy investing,

Ned

What Is a 1099?

A 1099 is an informational return required by the IRS.  Employees receive a W-2 to let them know how much income was rep0rted to the IRS.  You may also get a 1099 INT from your bank telling you how much interest you received in the prior year.  In a similar way businesses are required to report how much they pay other business and independent contractors.

Some small businesses are not even aware they are required to supply 1099s.  A typical real estate investor may need to send them to their attorney, contractors, assistants, and Bird dogs they have paid.  I am sure many investors never considered this requirement and were unaware they were risking IRS fines and penalties.

Who Gets a 1099?

You are required to give a 1099 to any Payee to whom you pay at least $600 or more in the year.  This quote is directly from the 1099-MISC instructions

“At least $600 in rents, services (including parts and materials), prizes and awards, other income payments,   .   .   .   or Gross proceeds to an attorney.”

The key words there are “other income payments”.  If the income is taxable to the payee, you should send them a 1099.

There are some exceptions to the requirement.

• Trade or business reporting only.  Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. This does not mean you can skip this just because you didn’t make any money, or do business in your own name. If you intend to make a profit, you need to send them out.
• Generally payments made to a Corporation are not reportable. Keep in mind the IRS instructions specifically say a Corporation, not an LLC or other business entity. Also you must report amounts paid to an attorney even if they are incorporated – I guess the IRS doesn’t trust attorneys either!
• Payments for merchandise, telegrams, telephone, freight,  storage, and similar items are not reportable.  So if you buy plumbing supplies from the local hardware store you do not need to report that.

Extended Due Date for 1099 Forms

The due date for 1099 forms is Jan. 31st 2010, however since Jan 31, is a Sunday you have an extra day this year.  Form 1099s are due to the recipient by Feb. 1, 2010.  Reporting to the IRS is due by Feb. 28, 2010.  However the due date for reporting to attorneys (box 14 10099-misc)  or “Proceeds from real estate transactions” form 1099-s is Feb 16.

How do I file a 1099?

You must send a copy to both the IRS and the Payee.  You can get the instructions on the IRS website, www.irs.gov.  I am unable to find the 2010 instructions but  Here is the link to the 2009 instructions.

You will need their taxpayer identification number.  You get that by giving them a form W-9 Request for Taxpayer Identification Number and Certification. The W-9 instructions are available here.

Have Your Accountant File

Of course I just give the information to my accountant and he takes care of  it.   See this post, why I love my accountant Goodwich, Stoller and Associates. You can go to their site directly at Goodwich Stoller and Associates.

Happy investing,

Ned

This was originally posted in 2009 and has been updated with 2010 information.

“A pessimist is one who makes difficulties out of his opportunities.  An optimist is one who make opportunities out of his difficulties.”

- Harry Truman

I found this video from the Secret on a blog I read, I’m Just Sharing. It’s not about real estate but Mitch the author does have articles about business and marketing.   The video was so inspiring to me I had to share it here.

I am working on a vision for my life and honestly I am a little stuck.  I found some of the phrases in the video really hit home and I quickly added them to my vision.  One that really says what I want my life to be is “I live with Passion and Purpose. ”

Let me know what you think, leave a comment.  If you really like it tweet it, stumble it or otherwise spread the word.

My Personal Commitment to Charity

Many years ago I made a commitment to myself to donate more money to charity than the previous year.  While it is still a modest amount of money I have kept that commitment every year and I will do it again this year.

One charity I have donated to consistently to is So Others May Eat (SOME).  I like SOME because their mission is not simply to feed people, it is to help them grow.

We help break the cycle of homelessness by offering services, such as affordable housing, job training, addiction treatment, and counseling, to the poor, the elderly and individuals with mental illness.  – From SOME’s mission statement

You know the saying, “teach a person to fish and they eat for  a lifetime.”  I am against handing people fish, teach them to fish and that is something I can really support.

Help Me Pick a Charity

This year I have decided to add a new charity to my list.  You, my readers, get to help me decide.  Let me know about your favorite charity.  Tell me how it is both for a good cause and how they are effective at serving that cause.

So here are the rules.  Simply leave a comment with the reason you think I should donate to your favorite charity.  The charity that receives the  most compelling reason as to why they are the best will get a donation this year.

Scroll down to leave a comment.  If you don’t see the comment box click here and scroll down.

PS:  Help a charity out and Tweet, Stumble, DIGG, or otherwise promote this post.