Homeowners are delinquent on their mortgage provide an opportunity for investors!
There are still 1.5 million borrowers who are seriously delinquent or have late-stage delinquencies at 90 days or more past due on their home loans, according to the June Mortgage Monitor report from Black Knight.
While the national delinquency rate is at its lowest level since the beginning of the pandemic, about 1 million homeowners are expected to be in serious delinquency as September’s wave of mortgage forbearance program expirations begin, the report showed.
The economic recovery is expected to slow down even more as more Americans fall behind on their mortgage payments, and fewer can afford to purchase homes. The housing recovery will be delayed as banks tighten their lending standards.
What is the difference between default and delinquency?
Delinquency means that you are behind on payments. Once you are delinquent for a certain period of time (usually nine months for federal loans), your lender will declare the loan to be in default. The entire loan balance will become due at that time.
How did we get here?
One of the most difficult things about owning a home is taking care of your financial obligations. If you’re not making your monthly mortgage payments, you’re considered delinquent. In the past decade, this has been a problem for a lot of homeowners. In total, about 1.5 million homeowners are delinquent on their mortgage payments. This is a problem for the investors, as the value of these homes goes down because the homeowners can’t afford to pay their mortgage. It’s a frustrating situation for everyone involved.
Any homeowner who isn’t able to sell their home or modify their loan is likely to face foreclosure or other financially challenging options, such as a short sale, the researchers warned. Whether a homeowner leaves their home by choice or through foreclosure at the end of all this, it will have the effect of adding supply to the market they live in.
“As a result, a buyer’s market could develop in ZIP Codes with heavy exposure to such borrowers,” the researchers wrote, noting that these would be areas with a high concentration of FHA loans in delinquency. So which markets are most at risk?
Atlanta tops the list, with 17.4% of the city’s mortgages in delinquency as of May. The city also has a large share of FHA loans overall, with those loans representing over a fifth of all mortgages in the city.
Many of the metro areas most threatened by such a scenario were located in Texas, including Houston (No. 2), Dallas (No. 4), San Antonio (No. 8) and Ft. Worth (No. 9).
Should you buy a distressed property now?
If you’re planning to buy a distressed property, now may be a good time to buy. Just make sure you’re aware of the risks and understand what you’re getting into. Distressed homes offer a unique buying opportunity for real investors, but the average home buyer should probably look elsewhere.
If you need funding, apply now. I am working online with the rest of you.
Would you ever think to compare diamonds and real estate? At first glance, they seem like two completely different things. However, they are both hard assets that are cost-prohibitive to acquire for the average US worker. However, you can sell both “assets” quickly and not realize their full value in the marketplace. Let’s first compare the similarities and then differences from an investment perspective.
Both Diamonds and Real Estate are Hard Assets similar to other commodities
Negatively correlated with bonds and stocks, so when stocks crash both appreciate in value
Long Term Investments
Suitable for investors who are not looking for fast returns on their investment
Risk losing money if you try to “flip” your investment too early or didn’t acquire at the right price below market value
Provide the investor with enjoyment and value
Diamonds are pretty to look at and make the person or people associated with the diamond have better social value
Real Estate provides rental income and in the case of short-term rentals – owners can enjoy the property and generate revenue when not in use.
As investors, we all know that not all hard assets, such as real estate or diamonds, have the same return on investment. In fact, ROI performance varies greatly even among real estate classes: residential property, commercial real estate, agricultural property, etc. Financial crises prove time and again that real estate is a highly volatile asset. Diamonds are a closed market that is stable and less risky. However, there are still differences among the rate of returns on diamonds such as the colored diamonds are less risky.
Diamonds don’t have a maintenance fee … you’re ROI is based on the price you paid upfront for the diamond
Real Estate requires maintenance and repairs and possibly property management fees. All these factors need to be carefully considered before acquiring property and affect your return on investment.
Several millions of dollars can fit in your fist and transport in a pocket … the irony for not being the rarest stone they have the highest size to value ratio of the natural resource category. This is how historically (since the silk road trail) wealth was transported long distances and across borders.
Real estate can’t be moved. Real estate is not physically portable and the value does not transfer easily either. However, 1031 exchanges are a great way to transfer appreciation as you sell your property.
At REI Capital Resources, we prefer real estate investing to diamonds. In fact, diamond prices are extremely volatile – shooting up 249% from 1978 to 1980 before falling 77% by early 1986 – but the value of diamonds has also long been propped up by a number of artificial sources. Real estate can be utilized and provide rental income. As the number of cloud and work from home startups rise, commercial real estate is increasingly valuable to investors to provide “server farms” to meet bandwidth demands.
We are not saying diamonds aren’t valuable or important – especially as emergency currency and making your future or current spouse a little happier this valentine’s day. We’re saying don’t buy a diamond as an investment with the idea of retained value. If you look at diamond prices since the 1970s, there has been “Too Much Price Volatility & Demand Uncertainty To Be Considered Investable” by numerous sources. Also, the use of diamonds as a symbol of a woman to be married is only about a 100-year-old custom. There are numerous other stones considered rarer. Thank you, Madison Avenue for making weddings a thing to save money for and cause the intelligent investor to consider generating a new stream of revenue.
We love this quote by Milton Friedman, “The speculator is looking for hidden weak spots in the market,” and acts as “the advance agent of the investor, seeking always to bring market prices into line with investment values.” Diamonds don’t provide an adequate hedge against inflation, and most people would be better off with more practical financial planning, than investing for catastrophe purposes. The diamond while a modern symbol of one’s love and commitment to another is expensive and ranks low when compared to value stability.
Diamonds vs. Gold vs. S&P 500
Gold ROI %
Diamond ROI %
S&P500 ROI %
*Data courtesy of the Rappaport Diamond Index, Kitco, the World Gold Council and Yahoo Finance. Diamond prices reflect monthly averages based on a 1-carat diamond. Gold prices are based on average annual London PM fixed prices. S&P 500 prices reflect average monthly adjusted closing prices. ROIs are cumulative.
The chart shows when the stock market suffered historic losses, diamonds at best served as a short-term hedge and very quickly fell behind the returns of alternative investments.
Therefore, I would recommend a 3 bedroom house that generates a positive return on investment that you can set aside the money after a year to buy your sweetie her diamond. If she loves you, she’ll wait a year knowing a diamond is coming.
Property investments potentially have excellent returns and can diversify your portfolio to insulate you from recessions and other adverse economic conditions. There’s no single right answer on the best way to invest in real estate. Are you getting started in Real Estate Investing and wonder how to live in your investment property?
Tip 1: House Hacking
This can mean a few different things. House hacking is essentially a hybrid of buying a home to use as a primary residence and buying a rental property. In general, the term refers to buying a residential property with two to four units or with a Granny Flat/Additional Dwelling Unit in the backyard and living in one of the units while renting the others out. In theory, if you have the money you could purchase an entire duplex or four-plex and rent out any apartment to tenants. Keep your expenses low so you can keep rent affordable to entice prospective tenants. You also could purchase property that you live in while renting out other rooms in the property.
Either way, you’re the landlord. Be a good one, and you’ll be in a much better position to succeed in this investment. Keep the property in great condition, be readily available to your tenants when needed, and if necessary hire someone who can help with repairs.
Let’s say you find a quadruplex (four units) for $200,000. Including taxes and insurance, we’ll say your mortgage payment is $1,500 per month. After you buy the property, you rent out three of the units for $600 each and live in the fourth. Not only do you live for free (the rent covers your entire mortgage payment), but you’re generating a positive cash flow of $300 per month and are building equity in a more valuable property than if you had bought one unit to live in.
House hacking can be an excellent low-cost way to start building a portfolio of rental properties. Because you live in the property, even a multi-unit residential property can qualify for primary residence financing, which comes with lower interest rates and lower down payment requirements than investment property loans. You’re typically required to live in the property for a certain amount of time after you buy it, but once that period expires (usually a year or two), you’re free to repeat the process with another multi-unit property.
The obvious downside is privacy. There’s value in having your own yard, and it can create some awkward situations when you live in the same building as your tenants. Even so, if you’re a new real estate investor and don’t really need your own house, you may want to consider house hacking. This isn’t as much of an investment strategy as it is a side hustle, but it’s still worth mentioning here. With the emergence of platforms like Airbnb, it’s easier than ever to rent out your home when you aren’t around or to rent out a spare room in your home for a few days here and there.
Tip 2: Tax-Free 2 Weeks Income
One interesting aspect of this strategy is that if you rent out your home for fewer than 14 days in a year, you don’t pay tax on the money you collect. If you go out of town for the holidays or take a summer vacation, using your home as an occasional short-term rental can offset your travel expenses with tax-free income.
Landlord Tax benefits:
The mortgage interest deduction for the mortgage interest you pay to buy and/or fix up your properties.
Deductions: insurance premiums, repairs, utilities (that are not paid for by the tenants)
Depreciation: You are allowed an annual deduction for the wear and tear your property experiences over time, spread out over 27.5 years for residential properties. Land cannot be depreciated.
Living with Tenants is Too Much – What is a Traditional Landlord?
Owning rental properties is an excellent way to invest in real estate while building wealth and generating income. The return potential is strong thanks to a combination of income, equity appreciation, and the easy use of leverage when buying real estate.
However, owning rental properties isn’t right for everyone, so consider these drawbacks before you start looking:
Cost barriers: It can be very expensive to buy your first rental property. Most lenders want at least 25% down for an investment property loan and it’s smart to keep several months’ worth of expenses in reserves.
Uncertainty: When it comes to rental properties, vacancies happen and things break. While the overall return potential can be great, rental properties have considerable short-term risk.
Time commitment: Even if you hire a property management company, owning a rental can be a time-consuming form of real estate investing.
Tip 3: Vacation or Short-Term Rentals
A vacation rental tends to bring in more income per rented day than a comparable long-term rental property. However, there are some potential drawbacks to owning a vacation rental. Marketing and managing a vacation rental is more involved than a long-term rental. As such, property management is far more expensive — expect to pay a property manager about 25% of the rent on a vacation rental. That’s more than double the 10% industry standard for properties with long-term tenants. Furthermore, you may need a special license in your preferred locations, which can be very expensive.
On the positive side, you may be able to use the home when it isn’t occupied. It can also be significantly easier to finance a vacation rental, especially if it meets your lender’s definition of a second home and you don’t use the rental income to qualify. There are loans options available for short-term rental funding.
Always buy property for the best possible price. You want to buy those properties that offer specific challenges that match your personal talents so you can use your skills to upgrade and enhance the value of the property and increase the Net Operating Income over time. Obviously, the higher the rents and the lower your total monthly expenses, the greater your net income from the property will be. Costs that affect cash flow include principal & interest payments; property taxes; insurance; maintenance/repair costs.
Although we’re always quick to advise against borrowing too much and overleveraging your real estate investments, you also don’t want to be too conservative and underestimate your cash needs. The cost of refinancing is such that you may be able to refinance the property no more than once every several years, and if you suddenly need cash to overcome some unanticipated problems, the costs of short-term funds can be high. Borrow extra money or have an untapped line of credit available (which some lenders offer at no carrying cost to their best customers) to allow for reserves.
Joint ventures, wholesaling, fix-and-flip, and property management are just a few of the other ways investors can profit from real estate.
If you need funding, apply now. I am working online with the rest of you.
The National Multifamily Housing Council’s rent payment tracker found that 92.1 percent of apartment households made a full or partial rent payment by August 27. The survey included 11.4 million units of professionally managed apartments across the country.
This is 210,458 households down from last August and compares to 93.3 percent of households paying last month (July 27, 2020).
When the economy collapsed because of coronavirus shutdowns, the federal government helped with additional unemployment benefits, stimulus checks, and a moratorium on evictions and foreclosures. Those who did not lose their jobs cut back on costs, paid off debts, and made home improvements 🔨🔧(WSJ.com). Those who did lose their jobs made it through the crisis but, according to Ben Eisen’s WSJ article, now are not sure they can pay their next month’s rent (WSJ.com).
People are uncertain about the economy. Gasparro & Kang report in their WSJ article that one indicator of this anxiety is that spending on groceries 🍗🍺🧀🍦dropped sharply in mid-August particularly in states with high unemployment.
The federal government’s $600 per week additional unemployment benefits ended July 31. People who got those benefits and the $1200 economic stimulus payment from the federal government spent that money. Another round of stimulus has been discussed in Congress, but no agreement has been reached so far.
Doug Bibby, the President of the National Multifamily Housing Council (NMHC) (nmhc.org), said “Lawmakers in Congress and the Administration need to come back to the table and work together on comprehensive legislation that protects and supports tens of millions of American renters by extending unemployment benefits and providing desperately needed rental assistance.”
“The [multifamily housing] industry remains encouraged by the degree residents have prioritized their housing obligations 🔑🏡so far, but each passing day means more distress for individuals and families, and greater risk for the nations housing sector. If policymakers want to prevent a health and economic crisis from quickly evolving into a house crisis, they should act quickly to extend financial assistance to renters.”
REI Capital Resources is a funding source for SFR Fix-n-Flip, Fix-to-Rent, and refinance projects as well as larger commercial projects such as office buildings, 5-40 door multi-family buildings, and many others. These programs vary wide and far throughout the gamut of lending. Call or e-mail for more information.
Landlords should not bear all the risk of another government shutdown, but tenants are being more aggressive about demanding pandemic language in new leases, this according to reporter Esther Fung’s article, Retail Landlords Offer Pandemic Clauses in New Leases, August 25, 2020 in WSJ.com.
Covid-19 is persisting in many parts of the country and it is hard to tell what will happen now that schools begin to open and fall and winter approach. When the government ordered nonessential businesses to shut down due to the Covid-19 pandemic, many households lost their income and businesses lost their sales. Rents became hard to pay whether you were paying rent for your home or paying rent for your retail shop or office.
Previous force majeure language in lease contracts did not specifically mention “government mandated shutdowns in response to a global pandemic” under what was categorized as an “Act of God.” Force majeure language in lease paperwork allows tenants to terminate leases or reduce rent in extraordinary circumstances. However, the WSJ article cited above by Fung points out that “force majeure language in a lease hurts owners’ ability to get financing for the property.”
Landlords of both multifamily units and retail units have had to offer concessions to retain tenants and attract new ones. Philippe Lanier a principal for a property developer managing retail properties in Washington DC told Fung, that as a landlord, “You have to provide the tenant an easy decision. If you make it complicated, you’re not going to get this done.” Philippe Lanier, EastBanc
Percentage Concessions and Shorter Leases
What is a simple concession in a lease agreement? Lanier offered to cut the base rent by 50% if retail stores are forbidden to operate their businesses and this same concession could apply to an apartment tenant loses their job in a mandatory shut down. In Lanier’s agreement, the difference would be repaid in 6 equal installments that begin on the first day a business can reopen, or a tenant returns to work.
In Detroit, Bedrock, offered to waive base rents in return for 7% of gross sales for eligible tenants, which include restaurants and retailers. (WSJ.com) This company was also allowing the use of security deposits for other purposes.
Some investors are signing leases with shorter terms and that are more revocable by either party.
With rents taking a hit in large cities across the country it is hard to tell how long it will take an investor to make a profit on a rental property. Location still seems to matter, but the location may be in smaller towns and the suburbs near large cities rather than in the large metropolitan areas themselves.
Clear, simple language in a lease is best but the concessions themselves can be as creative as you are.
If you need funding, apply now. I am working online with the rest of you.
Many people are transforming rooms in their homes into home offices, but some people are transforming commercial spaces into homes.
Unused and Vacant
Today, CNN reports that outdoor retailer REI is selling their newly finished unused 8-acre corporate campus in Bellevue, WA as they redefine their experience of “headquarters.” Their new model they say will make remote working the “normalized model” for headquarters employees and the future headquarters building will be instead multiple satellite campuses in the Seattle area.
Businesses all over the US are seeing what REI is seeing and adjusting their business models. Office building occupancies are going down in the downtown areas of large cities across the US primarily because of the effect of the coronavirus pandemic and its associated lockdowns. Businesses are either moving, transitioning to remote working, or closing altogether. Landlords of downtown office buildings in big cities are in danger of losing the income from their properties as companies move to small communities or have their staff work from home. If the landlord has a mortgage and cannot keep up with their payments, they could lose the building. These buildings are then left vacant.
According to STR, a global hospitality data and analytics firm, hotels are suffering as well. Their data show that a fifth of hotel properties are still closed and have been since March. Many of these hotels will not survive the pandemic.
This devastating business and economic situation may offer a sliver of optimism if we look at investing in converting office buildings and hotels into much needed housing.
According to an article in realtor.com (https://www.realtor.com/news/trends/office-hotel-conversions-to-housing/) office buildings and hotels in urban downtowns are attractive for conversions to apartment housing because they have wifi and cable infrastructure in place, parking areas, and common areas. While offices will require more plumbing to provide bathrooms and perhaps kitchens to each apartment, hotels can be converted less expensively because they are already divided into individual spaces with individual bathrooms.
Creating Affordable Housing
One example of a hotel converted to apartments is Plato’s Cave at 3524 Keetor St. in Branson Missouri. Repvblik (pronounced Republic) LLC, a Los Angeles based firm, converted a vacant six-building Days Inn into multi-family or workforce housing. The complex includes studio apartments, renting for $495.00 a month, and one-bedroom apartments, renting for $695.00 a month. According to its website, https://www.platos-cave.com/pictures-of-units, the complex incudes a gym, commercial kitchen, large dining area, an outdoor pool and beach volleyball on the property. There is plenty of parking and it is right on the strip within walking distance to the jobs there. It is affordable housing that is so badly needed.
Living and working in crowded downtowns were very popular until the pandemic hit these communities so hard. It is not clear how many people will be willing to move back to crowded downtowns after the pandemic ends or if it lingers for years. It looks certain that there will be many vacant office buildings and hotels around by the end of 2021 or when long-term leases run out. Landlords will have to keep their prices in line with demand and it is too soon to tell what demand will be.
Too Early to Give Up
Clare Trapasso, the author of the article, “As the Pandemic Empties Office Buildings, Can Those Spaces Help Solve the Housing Crisis” says, “… it may be too early to write the obituary of urban office buildings and hotels, as many did in the wake of 9/11.”
However, development can drive what happens, so you might want to be thinking about a strategy to help cities, people in need of housing, and your own financial security by seriously studying the risks and rewards of converting vacant downtown office space and hotel space into affordable housing in your own city.
If you need funding, apply now. I am working online with the rest of you.
As families migrate away from the high population concentrations of the northeastern cities, looking for more space, a lower cost of living, expanding employment opportunities, and lower taxes, they are likely to bring along their senior members who tend to retire close to family. These seniors will need housing, and despite the health crisis that has occurred in skilled nursing settings across the country during the pandemic, other senior living environments, such as independent living, assisted living, and memory care communities can still claim that seniors are better off in their care versus at home (MHN article). Independent senior living is attractive because seniors can be protected from uncontrolled interaction with younger family members better in an apartment than in a single-family home where multiple generations live together.
For investors in and operators of senior living communities, seniors make attractive renters because they do not depend on employment income to pay their rent. According to a July 16, 2020 MHN article, rent collection in the senior living real estate sector has remained strong during the pandemic. For other commercial real estate multi-family sectors, federal unemployment benefits and loan and rent forbearance measures have bolstered rent collections for a few months, but the true rent collection and apartment occupancy picture in the long term will not begin emerging until after the end of July when government unemployment benefits expire. It is uncertain how many renters will be able to keep paying their rent, how many vacancies will be created, and how rental rates will be affected by the withdrawal of federal program support.
According to the National Multifamily Housing Council, 87.6 % of renters made full or partial rent payments by July 13. That is slightly down from a month ago and from the same period last year.
Marketing a senior living community may require appealing to the adult children of seniors as much as to the seniors themselves. According to Brett Gelsomino, Vice President of ZOM Senior Living some amenities to consider in new multifamily rental construction projects for seniors and in remodeling projects include amenities that ZOM is putting in its South Florida communities: walkable locations nearby, pools, lounges, dining venues, library, and business centers, garage parking, valet service. He expects that there will be pent-up demand for senior living communities by mid-2022.
Demand for senior living communities could rise as soon as the covid-19 pandemic expends itself and people can move about again. Hopefully by 2021. Who knows? If you have the funds and the desire, building through low economic times is good for the economy and good for your mental wellbeing. If you need funding, apply now.
Investing in, constructing, renting, and remodeling healthy multi-family living environments is still important and even more important now that the coronavirus has rubbed our faces in the dangers of living and working close to other people. Since more land has not materialized in most cities to give us more room to live on and in, builders and investors need to be creative about how to design or redesign compressed housing that will prevent and control the spread of an infection that is viable in air and on surfaces. People are and will be looking for homes that keep them safe from infection.
The Problem of Close Quarters
The necessity of elevators and lobbies, as well as the cost of swimming pools and on-site gyms they pay for but cannot use are scaring renters away from large apartment complexes. These are the places where dwellers must maneuver around each other in tight spaces, share air for minutes at a time, and touch buttons and handles others touched just moments ago.
Consider in Your Budget Some New Things
To update your multi-family housing project in this time of coronavirus spread, include in your remodeling budget something new, such as, touchless and voice technologies that can improve the safety of getting into or out of a home without touching contaminated surfaces, new air handling technologies that vent air to the outside and clean air within an elevator or other room after each use.
If your project has many units on multiple stories, you may need to consider some robotic or AI technology that will keep the number of occupants in an elevator down to one at a time. Perhaps the elevator itself could be modified into a capsule that only holds one person at a time, a capsule that could be disinfected and dried automatically between uses. Ah that will be expensive. Some complexes would require numerous elevator capsules.
It looks like fighting the virus will not be energy efficient. Supplying cleaner air includes containing contaminated air or exhausting it to the outdoors, diluting the virus in the air by injecting clean and filtered outdoor air, and cleaning the air within a room. Any of exchange of air with the outside will make temperature control more difficult and less energy efficient. Thus, to make your multi-family housing as safe as possible, you will likely need to install larger electrical capacity.
Smaller Price Tag for Separate Entrances
If a large complex seems to come with a price tag that is too high, there are smaller multi-family investment projects that have designs that handle the problem of indoor common areas by doing away with them. Small apartment buildings, duplexes, and joined houses work well as rental investments. They include individual entryways and even small yards or gardens.
Small units of 2 to 5 homes can easily be designed with individual outdoor entries that meet social distancing requirements. In one design I recently studied online at http://www.houseplans.com, the complex included 5 units. Each house was three stories, but the overall complex was only one housing unit tall. All homes included a ground-floor separate entrance. Those that had garages had two entrances counting the front door and an entrance from the garage.
Although this design might not be great for seniors because of the stairways, I found it a manageable complex size that allowed each home to be independent. Each unit in this design is roughly 1170 sq. feet with 2 beds, 2 baths, 3 floors, 1 garage, 3 levels, and separate outdoor entries. The garage and second bedroom or home office were on lower level. The living room, dining room, and kitchen with washer and dryer and utility room were on the second floor. The master bedroom, bath, walk-in closet and roof-top deck were on the third story. Five printed sets of plans cost $950.00.
If you need funding for your project, apply now. I am working online with the rest of you.
National Taxpayer Advocate Erin M. Collins released her first report to Congress June 29, 2020. She was sworn in on March 30, 2020 while IRS offices were closing one by one across the country. The IRS has begun reopening its operations, but it will take some time before they are restored to full capacity. The disruption caused by the COVID-19 pandemic has had an enormous impact. These are the general taxpayer challenges she presents in her report. Her report can be found at irs.gov.
Unopened Mail and Paper Returns: Among the taxpayer challenges arising from COVID-19, and a challenge for the IRS (I might add) is the about ten million pieces of unopened paper mail sitting in trailers at IRS campuses. The IRS could not process or respond to written correspondence from taxpayer because their operations were shut down during the coronavirus pandemic.
Taxpayers who filed a 2019 paper return and are entitled to refunds may be in for a long wait. The IRS had to suspend the processing of paper tax returns, and as of May 16, it estimated it had a backlog of 4.7 million paper returns. Although the IRS is reopening some of its core operations, it is not clear when it can open and process all the returns sitting in mail facilities.
Delayed Flagged Returns: All tax returns claiming refunds are passed through filters designed to detect identity theft and other types of refund fraud. Some of these filters produce “false positive rates” of more than 50 percent (meaning that more than half the taxpayers whose returns are stopped by certain filters are entitled to the refunds they claimed). Affected taxpayers are often asked to mail in documentation to substantiate their claims, but the IRS has not opened or processed many of their responses, delaying their refunds. Refund delays can have a significant financial impact on low-income taxpayers, as refunds often constitute a significant percentage of their annual household incomes. Notably, some of the refund delays have been generated by claims for the earned income tax credit or additional child tax credit.
No Taxpayer Assistance: Taxpayers who have needed help from the IRS have had difficulty obtaining it. The IRS shut down its Accounts Management telephone lines on March 21, 2020, so taxpayers could not reach a live assistance by telephone. The IRS shut down its Taxpayer Assistance Centers on March 20, 2020, making it impossible for taxpayers to obtain in-person assistance. The IRS also shut down its mail facilities, so it was unable to log or process taxpayer responses to compliance notices.
There was a substantial reduction in Volunteer Income Tax Assistance, Tax Counseling for Elderly, and Low-Income Taxpayer Clinic services.
Confusing Old Dates on Compliance Notices. IRS systems prepared over 20 million notices during the pandemic that could not be mailed due to closure of notice production centers between April 8 and May 31. The IRS is mailing these notices now. However, some collection notices bear old dates and include response deadlines that often have passed. The IRS plans to include “inserts” with these notices explaining that response deadlines have been postponed, but the report expresses concern that receiving compliance notices with response deadlines that have passed will be confusing and concerning to many taxpayers who may not read the inserts.
In addition, The National Distribution Center was shut down, depriving taxpayers of a means to acquire pre-printed forms.
The only resources readily available during the coronavirus shut down were IRS.gov and automated telephone lines.
The Taxpayer Advocate Service (TAS) is an independentorganization within the IRS that helps taxpayers and protects taxpayer rights. Your local advocate’s number is in your local directory and at Taxpayer Advocate Service – Contact Us.
If you need funding, apply now. I am still working online.
Although real estate agents are seeing increases in inquiries about homes in the suburbs compared to the same period last year and house sales are up slightly in the second-home market, consumers are not applying for as many loans and banks are not lending as much.
Millions of Americans, 29 million, filed for unemployment last week for the first time according to Investopedia.com, slightly more people than expected, but less than the previous week.
As they lost their jobs or were forced to close their businesses, homeowners who could not make their mortgage payments asked their mortgage servicers for permission to pause their payments. Once a rare occurrence, the number of accounts in deferment, forbearance, or some other form of relief rose to 100 million between March 1 and the end of May according to today’s Wall Street Journal article by Anna Maria Andriotis.
For lenders and borrowers, these are difficult times because the coronavirus stimulus package includes a provision that says lenders that allow borrowers to defer their debt payments cannot report these payments as late to the credit reporting companies, making credit scores an unreliable marker of how a borrower is doing paying their loans back.
Banks are pulling back on credit because lenders are having a difficult time determining if applicants’ credit scores and credit reports reflect their true levels of risk. Not only do they not know who to lend to, but they cannot tell how much their loan losses will be if the economy remains a mess.
Across the board, lending standards have been tightened. Even mailed credit card solicitations fell from 316 million in February to 74 million in May. (Wsj.com)
It takes more work to find borrowers who will pay their loans back. A lender will have to sort through more data. Some lenders are asking borrowers for permission to look at their payment history on accounts not appearing in their credit report and to analyze their banking accounts.
If you need funding, apply now. I am working online with the rest of you.