New CA law provides tax relief for forgiven debt

As short sales, loan forgiveness, and foreclosures proliferate, many former homeowners are finding themselves with a huge tax bill. Any amount of your loan the is forgiven is subject to taxes as if it were income.

In California, there is now some relief.  Gov. Schwarzenegger signed SB 401 into law last Monday which modifies California law to match the tax treatment of forgiven debt with that of the federal government, recently changed through the federal Mortgage Forgiveness Debt Relief Act, which forgives this “phantom” income up to certain amounts.  The new California law retroactively applies to such income back to the beginning of 2009.

The limits are complicated and not easily described.  For more detail, read the text of SB 401 (California) or the text of the  Mortgage Forgiveness Debt Relief Act (IRS).

Chicago Tribune article discusses filing chapter 7 to escape mortgage

For those of you struggling with mortgage debt, chapter 7 bankruptcy may be an alternative as described in this recent Chicago Tribune article:

Moral bankruptcy?

Financially struggling homeowners say they’re just being shrewd when they file for Chapter 7 to escape a mortgage

Cash-strapped, jobless and denied a loan modification, Del Phillips faced the same straits as millions of homeowners who risk losing their homes to mortgage lenders.

Some have struggled unsuccessfully to keep their homes, and others have just walked away. Phillips decided he wanted revenge and was willing to ruin his credit record for it.

read more …

Dumping big banks now mainstream

Even the Los Angeles Times is jumping onto the dump-your-big-bank bandwagon with an article in Saturday’s business section:

Dumping your big bank? How to choose a new one

By E. Scott Reckard, Los Angeles TimesJune 26, 2010 | 7:10 p.m.

Mark and Roberta Maxwell had been zapped by fees for overdrawing funds and using the wrong ATM, and they felt their bank, the former Washington Mutual, had lost its personal touch since a takeover by Chase.

Adding insult to injury, Roberta said, they had to pay a special fee for depositing more than $5,000 in cash to their small-business account in a single month — something they might do again because Mark, a saxophone player, earns much of his living selling his smooth-jazz CDs at street fairs.

read more …

Jamie Dimon speaks

From a business standpoint, Jamie Dimon has done well.  JP Morgan Chase is making record profits and shareholders are pleased.  But clearly from a customer service perspective, on his watch the experience of customers of Chase bank has gone from bad to worse.  Chase sees customers no so much as people to server, but as people to extract fees from and who provide the banks needed capital.

So given the experiential evidence of his philosophy towards treading his customers, his recent remarks at Syracuse University’s commencement ceremony has me scratching my head.

More than any previous generation, you have been tested and shaped by unrelenting change …

The opportunities that you’ll create … may not yet be evident …

But you will change the world for the better.  Of this I am sure.

Given how Chase treats its customers, and Jamie Dimon is the man that sets the tone for his entire organization, how in the world can he consider himself an expert on changing the world for the better.

Jamie Dimon, if you are reading this, treating your customers fairly and with respect is WAY better for business than the slash-and-burn tactics that Chase currently employs.  And you will become much more credible as an authority on changing the world for the better.  Perhaps you should read your own speed again and take it to heart.

WaMu unclaimed property

This news story from Wisconsin about $500,000 in unclaimed property funds deposited with the state’s unclaimed property account by the FDIC has me wondering if there are more such unclaimed property coffers for other states.

If you want to check for unclaimed property from WaMu, or of any kind, start your search at unclaimed.org.

Update:  I came across a similar notice for Oregon, which contains a little more information on why the FDIC turned over unclaimed property from WaMu to states’ unclaimed property accounts when WaMu was seized and sold to JP Morgan Chase:

Washington Mutual (WaMu) went into receivership with the Federal Deposit Insurance Corporation (FDIC). Chase is managing the active WaMu accounts but the FDIC is responsible for the insured, inactive accounts that existed at the time WaMu went into receivership.

The FDIC is handling only those accounts that appeared to be inactive – i.e., there was no record of a deposit, withdrawal or other positive contact with the account holder for at least three years.

Federal law required WaMu/Chase customers to acknowledge the account or it would be turned over to the FDIC.

FDIC resources:

• 1-800-930-1904
• 1-877-875-4821
• www.fdic.gov/bank/individual/failed/wamu.html
• irvdepositorservices@fdic.gov

Chase recently sent a letter to inactive WaMu account holders that said: “Over the past year, we have worked hard to be your financial partner and have made multiple attempts to contact you regarding your unclaimed former Washington Mutual deposit account(s).  According to our records, as of March 25, 2010, you had one or more former WaMu deposit account(s) that were not claimed.  As a result, we were required by the FDIC to close your account(s) and return those funds to the FDIC.”

The FDIC forwards inactive and dormant accounts to the state of the owner’s last known address according to the bank records.

The FDIC has sent the Department of State Lands/Unclaimed Property Section about 27,000 accounts, and we hope to have all the names listed in the online database by July or early August.  People are encouraged to wait until their name is on our Web site, and send in the claim that is generated online.

It may take up to 90 days for claims to be processed.

The state of Oregon will have custody of the deposits for ten years, during which time we will treat the deposits as unclaimed property.  After ten years, the money must be returned to the FDIC.

All unclaimed property is held in the Common School Fund, a trust fund for Oregon schools.  Earnings from the fund are distributed to K-12 public school districts twice a year.  In 2010, schools will receive $50.4 million.

Update:  Now Nevada has chimed in with a press release.

Chase executive washroom picture?

Someone tried to pass this picture off as from the JP Morgan Chase executive washroom.  But it can’t be real though, because it would be $100 bills, not $1 bills.

Chase Auto Finance plays pass the buck

Just try to get a straight answer from Chase Auto Finance as this blogger did when a car returned from lease was not inspected for a month after it was returned from a lease, during which time it was vandalized.  The blogger was charged for the damage to the car.

Think that is wrong?  So did the blogger, so he tried to get Chase to accept responsibility for the damage, which they did, and then later said they never did.

Fannie to disallow new loans to strategic defaulters

The bad-news:  Fannie Mae reported today that they are establishing a new policy banning anyone who strategically defaults on their loan from obtaining a new Fannie Mae loan for seven years.  Fannie Mae backs a large portion of residential mortgages in the US.

The really bad news:  What exactly is a strategic default?  Whether someone walking away from a mortgage/home is a strategic default  depends on whether or not they are able to afford the loan.  So who determines this?  Now here is the really bad news:  Your loan servicing company determines this.  This means that Chase now has the power to threaten you with classifying your non-payment of your mortgage as a strategic default rather than due to hardship.

The good news:  This Fannie Mae policy doesn’t really matter for a couple of reasons.  First, if you default on a mortgage, it is not-likely that you would be able to obtain a new mortgage within seven years (when it goes off of your credit report) anyways.  Second, at the rate they are going, Fannie Mae (and Freddie Mac) could be gone well before seven years comes around.

Don’t worry, be happy.  With respect to your mortgage, make the decision which makes the most financial sense to you.