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Your Property Can Be Seized For Any Reason…Or No Reason At All

Did you know that the police can seize your property and keep it EVEN IF THEY DON’T CHARGE YOU WITH A CRIME?

It’s called civil asset forfeiture.  Once your property is seized you must go through the difficult, and often unsuccessful process to get your property–whether it’s a vehicle, cash or your home–back from the police.

Police officers do not need warrants to seize property under civil asset forfeiture, and police departments can keep seized assets — even if the owner is found not guilty.
The law allows for state and local agencies to pad their budgets with seized money and property.

Read more:  http://www.nationaljournal.com/politics/rand-paul-loretta-lynch-civil-asset-forfeiture-20150415

New Mexico has just effectively outlawed civil asset forfeiture.  It should be a model law for all states.  

Read more about the New Mexico law here:  http://dailycaller.com/2015/04/10/breaking-new-mexico-gov-abolishes-civil-asset-forfeiture-bill/

And watch this video to learn more about civil asset forfeiture:

How To Report Income Tax On Note Investments

“Suppose I buy a note for $5,000 that has a balance of $10,000. The note interest rate is 12%.
I collect interest for the year of $1,200 and principal of $1,000 in the first year.
How do I report the $1,000 principal collected on the tax return?”

Answered by John Moren, the author of the NoteSmith family of loan servicing software that tracks
mortgage notes, discounted notes, leases, rent, and other cash flows. www.NoteSmith.com

At first glance, this might seem to be a complicated tax question, but fortunately for note
investors there are two simple solutions. I’ll show the commonly used method first.

In the example you gave, the note, which is an asset, was purchased at a 50% discount. As
the payor makes the contractual payments, half of each principal dollar paid is your investment
coming back and half is profit. So on your income tax return, with $1,000 of annual principal
paid, you would show $500 of “discount earned” and $1,200 of “interest,” both of which are
taxable as income. The other $500 of the cash flow is your investment coming back, termed
“return of capital,” and is not taxable.

If you look at a typical two column amortization schedule for your example, principal and
interest, imagine the principal column being split into two more columns, 50% of which is
“discount earned” with the other 50% being “return of capital.”

To clarify with a slightly different example, assume you bought the $10,000 note at a
$3000 discount, for a purchase price of $7000. As each principal dollar was collected, 30%
would be taxable “discount earned” and the remaining 70% is your untaxed “return of capital.”
Interest is still interest.

There is another method referenced by the IRS which is less frequently used. You did not
quote a yield or a length of term in your example, so let’s just say it was priced to yield 18%. You
can print an amortization schedule showing your $5000 investment at 18%.
The principal column, although it won’t match the payor’s schedule, is your money
coming back and the “interest” column, which also does not match the payor’s, is really your
total taxable yield. The reason this is not selected often by investors — although the IRS
unsurprisingly is happy for you to use it — is that more taxable income appears in the early years
with more untaxable “return of capital” in the later years.

I hope that helped.
Happy investing!

This article appears in the April, 2015 issue of THE PAPER SOURCE JOURNAL, along with
much other information about note investing and brokering.  For information:
http://papersourceonline.com/paper-source-journal/infosubscribe/

 

Daily Foreclosure Postings Website

There’s a website where you can get daily postings of foreclosures in California, Arizona and Nevada:  www.countyrecordsresearch.com

I’ve made a special deal with the owner of the site to give you 30 days of free access with unlimited county searches (instead of the 5 days they normally offer).

To get this deal , go to the website and click on “5 Day Free Trial,” pick the state(s) and counties you want foreclosure info on, check the terms of service box, click the “Register Now” button, and in the “Enter Promo Code” field replace “5DaysFree” with the one word:

papersource

you’ll get 30 days free.

Dodd-Frankenstein: State Outlaws Seller Installment Sales w/o A Broker

The state of Hawaii now prohibits homeowners from using “seller financing” without a licensed broker.

According to a Hawaii real estate attorney, “The statute now requires any “seller financed” transaction to be handled by a licensed or registered broker, even in a family situation. I hear the registration process is too involved for most one-time sellers.

Our Government Affairs Committee has begun to look at options to get clarification and see if legislation is needed during the next session to provide appropriate exemptions.

Actually, the prior law allowed seller financing by exemption, but the new law removed the exemption. On that basis, the Hawaii State Bar has concluded that it now prohibits unregistered seller financing.”

This is a commentary by the Political Affairs Director of the Maui Realtors Association: December 03, 2014:

“This one appeared out of the blue. Or out of the telephone. About two weeks ago a long-time Maui agent called to complain that he was being told that the State Legislature wiped out the owner’s right to finance the purchase of the owner’s property.

“That was news to me, HAR (the Hawaii Association of Realtors), our attorney and a variety of other people one would expect to know these types of things.

“The agent said he was working on a deal involving family-held property in Olinda and the owner was offering financing. The buyer liked the proposal but wanted to ask her attorney. And that attorney informed the buyer that the State Legislature removed that owner’s right in its last session and that action went into effect on July 1.

“How can that happen without responsible persons knowing about it, you might ask? The answer is: easy, because our state legislative process resembles an organized train wreck. With 3,000 bills being reviewed in 60 days, seemingly innocuous measures that are depicted as “housekeeping” by the proposing agency, get a lot less review than more notorious measures. There are always goofs. Given the amount of material blasting through the State Capitol in such a short time, it’s just a wonder that there are not a lot more goofs.

“This particular action – removing the exemption in the state’s mortgage loan origination act (aka Hawaii SAFE Act or HRS 454) that allows owners to finance the sale of their own homes or for family members to finance the sale of property within the family – was a one-liner in an eight-page bill that dealt with a variety of adjustments to the SAFE Act. The SAFE Act was written to tighten up Hawaii’s mortgage origination laws and licensing requirements after the 2008 mortgage meltdown. It is a consumer protection measure and the decision to eliminate the owner’s right to finance fell into that category.

“Mortgage loans involved substantial assets and should be handled by qualified licensees,” DCCA said in its testimony on the bill. That one line is the sum total of the discussion on removing the owner’s right to finance that could be found in the testimony and committee reports on Senate Bill 2817, later to become Act 198-14.

“While not much of an argument, it did include a fundamental flaw in logic. Because the statement was not specific, there is no way to tell who the department was referring to by “qualified licensees.” Was the department referring to licensed mortgage originators or were they referring to licensed Realtors and attorneys? The bill was mainly about mortgage originators. But the DCCA bill did not request that the Legislature remove other existing exemptions for Realtors and attorneys if they are working on behalf of their clients who want to finance.

“It appears from later statements, that the Department wanted to eliminate the owner’s right in total and force them to take the mortgage originator licensing test if they want to make loans. But they apparently inadvertently left in place the other Realtor and attorney exemptions. And those exemptions imply that the right of owners to finance still exists as long as they are working with a Realtor or an attorney.

“Why did DCCA believe this action was necessary? Apparently because in the few years since the Hawaii SAFE Act when into effect, there had been a handful of owner-financed deals that had blown up. That was a handful too many for DCCA. The state was looking to update the SAFE Act anyway, making timely adjustments, and decided to include this minor adjustment.

“While HAR missed this one (that includes me), this action flew so far under the radar that even Senate Judiciary Committee Chairman Gil Keith-Agaran did not know about it. For some reason this measure did not go through his committee, so Gil never saw the bill’s details. When he figured out what had happened, the Senator spoke to DCCA to get their side of the story and then wrote a letter to the State Attorney General to get an official opinion: no owner financing is allowed or only with a Realtor or an attorney? He hopes to have an answer from the Attorney General by the end of the month. If not, then he will start writing a bill to amend HRS 454.

“HAR is also studying its options and getting ready to use its resources to get this fixed.

“So the question…is: what sort of amendment do we want? If the owners’ right remains, as long as they get an attorney to bless the deal, maybe an amendment is not necessary. Or do we want to go back to where the law was last year with called-out exemptions for owners selling their own homes or family members financing family members? But now that the door is open for this discussion, why not broaden the law so that an owner can finance the sale of any kind of property they own as long as they work with an attorney? Whatever the conclusion is, the resulting law definitely needs to clear up the current conflict.”

There is one organization fighting for the right of property owners to sell with installment sales (“seller financing”): www.SaveSellerFinancing.org Please visit the website, read the issues, sign the petition and support them by donating generously.

THE Cash Flow Event of the Year:  The Paper Source Note Symposium April 30 – May 2, 2015.  Learning, networking…Vegas!
Info and Super early-bird registration:  

http://papersourceseminars.com/paper-source-note-symposium-cash-flow-profits-2015/

US Supreme Court Rules Against Mortgage Originators

United-States-Supreme-Court

WASHINGTON (Reuters) – The U.S. Supreme Court on Tuesday (1/13/15) ruled in favor of homeowners seeking to back out of mortgages when lenders are accused of failing to follow the federal “truth in lending” law.

On a 9-0 vote, the court handed a win to an Eagan, Minnesota couple, Larry and Cheryle Jesinoski, over the $611,000 loan they obtained in 2007 from Countrywide Home Loans Inc, now part of Bank of America Corp.

On the technical question before the justices, the court said homeowners need only write a letter to the lender, as the Jesinoskis did, and do not need to file a lawsuit in order to benefit from a provision of a federal law known as the Truth in Lending Act.

The law allows consumers to rescind a mortgage for up to three years after it was made if the lender does not notify them of various details about the loan including finance charges and interest rates. The Jesinoskis filed their notice right before the end of the three-year period and filed a lawsuit a year later after the bank said it was disputing the claim.

The language of the law “leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind,” Justice Antonin Scalia wrote on behalf of the court.

The provision is typically used by homeowners who are struggling to pay their mortgages. Lawyers for consumers say mortgage companies routinely violated the law in the years prior to the 2008 financial crisis. Lenders contend that notice is not enough if the bank in question disputes the homeowners’ claim.

Appeals courts had been split over what homeowners have to do to trigger this rescission process. The Jesinoskis appealed a lower-court decision that favored Countrywide. The Supreme Court reversed that lower-court ruling.

The case is Jesinoski v. Countrywide, U.S. Supreme Court, No. 13-684

Note:  Those who sell property via installment sale notes (“seller financing”) are generally exempt from the Truth in Lending law disclosure requirements.

THE Cash Flow Event of the Year:  The Paper Source Note Symposium April 30 – May 2, 2015.  Learning, networking…Vegas!
Info and Super early-bird registration:  

http://papersourceseminars.com/paper-source-note-symposium-cash-flow-profits-2015/

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