Treasury Weighs New Mortgage Subsidies: Sources

The U.S. Treasury Department may be about to give banks and investors millions of dollars in new incentives to modify mortgages. Check out the following article on the topic thanks to Reuters.com.

The Treasury Department is considering giving banks and investors billions of dollars in fresh incentives to modify troubled mortgages and save homeowners from foreclosure, sources familiar with official deliberations said.

Under one scenario, investors in second liens would receive a cash payment if they agree to ease the terms of troubled loans and accept a smaller return on their mortgage investment, the sources said.

During the height of the housing boom, some borrowers were able to buy a home with no downpayment by adding a second lien and many of those loans are now failing as the economy and housing market struggle.

Some on Wall Street will likely be angry if Washington doles out money to investors who hold the high-risk end of a home loan.

"Second-lien holders should get zero," said Bill Frey, president of Greenwich Financial Services in Greenwich, Connecticut. "Why should a second lien holder get anything if the first lien holder takes a loss? That's not the way the contracts work, that's not the way privatization works, that's not the way America works."

Officials also envision giving fresh subsidies to encourage 'short sales' in which the lender accepts a payment that does not cover the entire loan amount, according to the sources, who requested anonymity because they are not authorized to disclose details.

Fannie Mae and Freddie Mac, the mortgage finance companies, would administer the new program to resolve problems with second-liens under one plan being considered, they said.

A senior administration official declined to comment on Tuesday, but said the Treasury expected to unveil further details of its homeowner-aid program "soon."

The official said the Treasury Department is also considering ways it could resolve problems in the mortgage insurance industry battered by mounting foreclosure losses.

"We are aware of the difficulties in the industry and we are analyzing different options to deal with" those difficulties, the official said.

In February, President Barack Obama outlined a housing rescue plan that he said could move as many as 9 million homeowners into more-affordable loans by both refinancing and modifying their current mortgage.

Homeowners normally must settle all of a home's debts when they refinance a mortgage but a modified loan may hold the second lien in place.

A bulk of the Obama housing rescue plan involves modifying loans but officials have decided that they will try to ease those second lien payments in order to ease the costs of homeownership, the official said.

"Their debt overhang will be brought down," the official said. "We will have that program shortly."

Banks to Receive Billions in Tax Breaks

According to the Associated Press, the big banks in this country are about to receive pretty huge tax breaks in addition to the money they will receive from the Federal government’s $700 billion bailout program. Specifically, the tax breaks will go to companies that acquire struggling financial intuitions that are struggling to get by. However, interestingly some experts claim that the tax breaks they get could exceed the cost of acquiring the struggling banks.

“The change could cost the Treasury as much as $140 billion by enabling firms that acquire struggling banks to use more losses incurred by those banks to offset their own taxable profits.

Wells Fargo & Co., which made a bid to acquire Wachovia Corp., just days after the notice was issued, stands to reap about $20 billion in additional tax savings because of the change, according to the analyses. Wells Fargo paid $14.8 billion in a stock deal to buy Wachovia.

The notice was issued Sept. 30 as Congress debated the $700 billion bailout plan. Some members of Congress are upset that such a sweeping tax change was issued with no public hearings or congressional input.

‘I am concerned that the notice, which was never debated by Congress, could end up costing taxpayers tens of billions of more dollars on top of the hundreds of billions of dollars already approved by Congress in the financial rescue plan,’ Sen. Charles Schumer, D-N.Y., said in a letter last week to Treasury Secretary Henry Paulson.

Treasury Department spokesman Andrew DeSouza said the notice was issued to provide tax guidance to firms involved in bank takeovers at a time when numerous financial institutions are struggling and their value can be difficult to determine. He said it wasn't aimed at any one specific taxpayer or transaction.”

Roni Deutch Tax Center Offering Incentive To Veterans

My tax center recently put out a new press release on the financial incentives being offered to veterans. "Roni Deutch Tax Center, the nation's leading tax preparation franchise, built from the success of its founder Roni Deutch in saving American's millions of dollars in back tax liabilities, announced today it will participate in a national program designed to help military veterans become franchise owners." You can read the full release at Franchise.com.