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A Student Loan Repayment Trick That Can Save You Money

It’s common knowledge you can save money by paying off loans and other debts quickly or ahead of schedule. You can also save money by making monthly payments as planned, if you put in a little extra effort and do the math.

The trick? You can change your repayment period to an extended plan (for example, a 25-year instead of a 10-year repayment period) but continue to pay the amount required to be debt-free within 10 years and request the extra payment go toward the principal balance. The amount you overpay reduces the interest you’ll pay over the life of your loan. Here’s where the extra effort is necessary: You should frequently follow up with your loan servicer and check your statements to make sure the extra payment is applied as you instructed.

Perhaps you’ve heard of this tactic — it’s particularly common among homeowners with mortgages — and wondered if it’s something you could do. A Reddit user recently posted about the strategy, saying, “Am I crazy, or can I actually save money by using the extended payment plan for federal loans?”

Not crazy. It’s a smart plan, you just need to make sure you know what you’re doing.

“That post is completely on target,” said Mitch Weiss, a finance professor at the University of Hartford. He frequently writes about student loan issues for Credit.com and has written about this strategy as a good way to save money but also give yourself flexibility. “You can always fall back on that lower payment when you need it. Managing your cash flow is in your hands, then.”

In the post, the redditor provided a good example. He pays $636 each month on a 10-year repayment plan, and the required monthly payment would drop to $333 a month for a 25-year repayment plan. By continuing to pay $636 a month, the extra money would go toward the principal balance on the loan with the highest interest rate (he checked with his loan servicer, and that’s its policy — you’ll want to check with your own servicer to confirm if this is its policy as well). In the event he can’t afford the $636 some months, he can fall back on the lower required payment, rather than having to go the servicer and explain the hardship and try and work something out (or make a partial payment and get hit with late fees or skip a payment and get a delinquency on his credit report).

The redditor said he used a loan calculator and found that he’d pay off his debt two months faster and save more than $1,000 in interest that the loan would have accrued under the 10-year plan.

“Am I missing something here, or is this a no-risk way of saving $1,100 and 2 months? I mean it gives emergency flexibility AND saves me money?” he wrote.

As dozens of people replied (and Weiss confirmed), the math is correct, but when it comes to student loans, you need to be careful.

“It’s all about execution, and the way that you ensure execution is that you have your directions in writing and you follow up,” Weiss said. Tell your servicer exactly what you want them to do with that extra payment (put it toward the principal balance, and if there are multiple loans, the principal balance of the loan with the highest rate), and make sure they do it. Otherwise, they may take the extra payment as a future payment and just not charge you again until the prepaid amount runs out.

Another Reddit commenter said it took emailing his or her servicer every 48 hours for almost two months to make sure the servicer applied the payment as instructed. Weiss said he’s heard and read about that complaint a lot.

“It was a very constructive string of comments,” Weiss said. “I think this demonstrates how serious an issue this is for so many people and how so many people are taking this so seriously.”

As you pay down your student loans (no matter your strategy), it can help to keep an eye on your credit reports for any inaccuracies or problems that could drag down your credit score. You can get a free credit report summary, updated every 30 days on Credit.com, to track your progress as you get out of debt.

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Brits Get Disney Fix as U.S. Banks Lend to Foreigners

Adele and Mark Lee, who live in England with their three children, said they got approved for a U.S. mortgage without setting foot on American soil. The vacation home they’re buying near Florida’s Disney World would have been out of reach if they had to pay all cash.

“It would have been a stretch,” said Adele, a 35-year-old nursery school teacher, speaking from the family’s home near Birmingham. “We wanted to keep some money here just to fall back on.”

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The Lees are using a foreign-national mortgage, a loan for overseas buyers that required a 40 percent down payment, to purchase the five-bedroom house later this month for $423,000. Adele and her husband, a construction worker, plan to rent the Orlando property when they’re not living in it.

Lenders are providing greater access to credit for non-U.S. residents to finance vacation houses and investment properties. Foreign buyers, who are helping to fill a void left by Americans facing high borrowing hurdles, spent about $35 billion on U.S. homes using mortgages in the 12 months through March, a 46 percent increase from a year earlier, according to the National Association of Realtors.

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“The American pool of borrowers is drying up,” said Anthony B. Sanders, an economics professor at George Mason University in Fairfax, Virginia. “Middle-class borrowers have flatlined due to low income growth, and domestic investors are finding it less appetizing because the foreclosure inventory has dried up. So who do you go to? Foreign investors.”

Growing Share

At HSBC Holdings Plc (HSBC), foreign-national mortgages, available to banking clients who deposit at least $15,000, account for about 30 percent of its U.S. home-lending business, according to Peter Alongi, a mortgage sales manager. That’s up from a share in the “teens” in 2008.

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FBC Mortgage LLC, an Orlando-based lender, has increased mortgages to international buyers by 65 percent this year compared with 2013. Calabasas, California-based Mega Capital Funding Inc. started lending to non-residents in June after seeing rising demand from Chinese buyers.

“Instead of buying two houses in cash they can buy four houses with loans,” said Brian Na, chief executive officer of Mega Capital, which is now issuing about $10 million of the mortgages a month. “At the same time, buyers can build a credit history in the U.S.”

While many Americans struggle to qualify for mortgages, lenders are chasing wealthy buyers, including foreigners, whose loans typically require a 30 percent to 40 percent down payment compared with 20 percent for U.S. residents. Banks and smaller firms are offering more loan products to buyers based overseas, most of whom have paid cash for homes in the last few years.

Cash Sales

Cash sales have been falling and in June made up the lowest share of total home purchases, at 33 percent, since September 2008, according to CoreLogic Inc., an Irvine, California-based property-data firm.

In Florida, the state with the largest share of cash sales, smaller community banks have gotten increasingly comfortable lending to foreign buyers, said Rob Nunziata, CEO of FBC.

His firm typically offers nonresident borrowers adjustable-rate loans of as much as $750,000 that are fixed for three to five years. The mortgages require at least a 30 percent down payment and six months of cash reserves. Borrowing costs are generally one or two percentage points higher than conventional loans.

Credit Profiles

The biggest challenges for lenders are verifying incomes and building credit profiles for non-UN.S. residents. Their home countries have tax systems that differ from America’s and lenders have to rely on third parties, along with documentation from employers or accountants, said Nunziata.

One of FBC’s borrowers, Yoram Yahav, said he purchased a few houses in cash before deciding to get a $100,000 loan for a Florida property. He’s seeking to build his U.S. credit profile because he plans to bring more foreign capital to America with other global investors.

“You may have $2 million in your bank account in England, but if you want to borrow $80,000 in the U.S. you can’t because of this issue with credit,” said Yahav, whose Tel Aviv, Israel-based firm works with management teams in scenario planning for future events. “This way I can also increase my cash portion and have more money to put into new businesses.”

While home loans were available to foreign nationals during the U.S. housing boom, financing dried up as banks tightened credit after the crash. Applications from international homebuyers are now at about the same level they reached during the peak in about 2006, when foreigners needed just a passport and an application to get a mortgage, according to Andy Scott, president of International Mortgages.Net in Orlando, which caters to mostly British clients, including the Lees.

‘Convoluted’ Process

“The process is more convoluted,” Scott said. “It takes longer to get applications through. And there are a lot more checks and balances.”

The company, which has worked with international buyers in the U.S. and elsewhere for about 13 years, now uses seven lenders, up from only two after the housing bust. The firm moved from Scotland to Orlando a year ago because so many clients were purchasing there, Scott said.

Buyers from the U.K., Canada, China, Mexico and India accounted for 54 percent of foreign sales in the year through March, data from NAR show. The top five states for international buying are Florida, California, Arizona, Texas and New York, according to the association.

Disney World

The Lees have only seen their vacation house in videos taken by their Realtor. They chose it for its swimming pool and proximity to Disney World, which they usually visit annually. The couple plans to rent it for the next five years and may eventually live there year-round.

“It’s amazing what you can get over there for the money,” Adele said. “I also like that we could do everything over the Internet. We have noticed that Americans love paperwork. But the process was fairly straight forward.”

Rising prices and competition from cash-rich investors have kept many American homebuyers on the sidelines. Renters have also been blocked from homeownership by down payment requirements and “very strict underwriting standards,” said Stuart Miller, CEO of Lennar Corp. (LEN), the largest U.S. homebuilder by market value.

“The process itself has become fairly invasive,” Miller said last week on a call with investors. It’s “almost designed to scare people away.”

Loan Dropoff

Mortgage applications for house purchases are 10 percent below the level a year earlier, according to data from the Mortgage Bankers Association. Banks this year are also struggling to replace a falloff in lending dominated by refinancing, which plunged last year when borrowing costs spiked.

While more financing for foreigners will boost property purchases in the U.S., smaller lenders who can’t hold as much debt are constrained by a limited secondary market for selling their loans, said Na of Mega Capital.

Foreclosure of delinquent borrowers could also be a complicated process for some foreigners, such as those with diplomatic immunity, according to Joseph Pisa, CEO of Northstar Funding Inc., a Hoboken, New Jersey-based lender which focuses on the New York City area. While the borrowers can still get financing, rates are higher because of the additional risk, he said.

Jerry Barker, a real estate agent in Celebration, Florida, said half of his clients, which are mostly European, now get foreign national loans. That compares with about five percent three years ago.

“Our business has increased because we are able to sell to people we couldn’t sell to before,” said Barker. “Not everybody has a shoe box under their bedsprings with cash.”

To contact the reporters on this story: Heather Perlberg in Washington at hperlberg@bloomberg.net; Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net Vincent Bielski

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Short-Term Loans Comes at a Heavy Price

Retired and low on cash, Lynn Frampton borrowed $2,600 from online lender CashCall to make ends meet. The loan came with a hefty price tag: a total finance charge of more than $11,000 if she paid it over four years. Her monthly payments were almost $300. The loan carried an annual interest rate of 138.58 percent.

“I can’t believe I agreed to that,” says Frampton, now 67. “It was stupid on our part. The interest is outrageous.”

The Santa Ana resident made her first two payments, then fell behind. Frampton, who eventually resumed payments, says she owes roughly $10,000. Delbert Services, a CashCall affiliate, has offered to settle her debt for $980, she says.

It might seem like a lot less, but she still can’t afford it.

It’s not illegal in California to charge triple-digit interest annually on consumer loans. The trick is to craft a loan of $2,500 or more.

Lenders who are licensed under the California Finance Lenders Law can choose any interest rate they want for consumer loans of $2,500 and over. Most loans under that amount are subject to an interest rate cap of roughly 30 percent.

This $2,500 cut-off played a prominent role in a false advertising complaint filed earlier this summer by the California Commissioner of Business Oversight, which asked that CashCall’s finance lenders licenses be suspended for up to 12 months. The company has asked for a hearing on the matter.

The regulator claims the Orange-based lender falsely advertised loans of up to $2,600. When consumers called the company or went to its website, they were told CashCall did not make such loans.

The CBO complaint states that when consumers told CashCall they wanted a loan for less than $2,600, the company routinely told them that on the day of funding or shortly thereafter, borrowers could give back whatever amount they didn’t want as a prepayment. On these loans, CashCall charged up to 179 percent interest.

CashCall declined to comment.

LENDING OPTIONS

The industry of small-dollar lenders has insisted it provides a valuable service for borrowers, and that higher interest rates counter the risk of loaning money to consumers with lower credit scores.

Small-dollar loans are a topic “near and dear to my heart,” says state Sen. Lou Correa, D-Santa Ana. A member and former chairman of the State Senate Committee on Banking and Financial Institutions, Correa said he believes these loans are a form of credit for people who don’t have other options.

“My perspective is to do everything we can to assure that people can borrow money — that people have access to capital,” Correa says. “When you begin to talk about caps on fees, what people should charge, what they should not charge … you may actually be limiting people’s ability to borrow. There may not be loans if lenders aren’t interested in lending money.”

Correa said it can be difficult for lenders to cover their costs when faced with interest-rate caps for loans under $2,500.

RATE CAP HISTORY

The $2,500 line in the lending sand dates to 1985.

When the late Democratic state Sen. Rose Ann Vuich authored a bill to lower the ceiling on regulated loans to $2,500 — increasing the number of loans with unlimited rates — supporters said they thought it would open up competition and eventually push rates down. In fact, the limit had been lowered to $5,000 from $10,000 in 1983.

“Rates above $5,000 are now set competitively in the marketplace and are generally below the former statutory rate ceilings,” Vuich wrote in a letter to then-Gov. George Deukmejian. The current bill “is expected to lead similarly to lower rates for loans in the $2,500 to $5,000 bracket.”

The state Department of Corporations at the time argued in favor of the 1985 bill, stating “rate regulation provides very little consumer protection and may even work against consumers since lenders tend to lend money at the maximum allowable rate irrespective of the credit worthiness of the borrower.”

THE SWEATBOX

Critics contend that on small-dollar loans, repayment is not a priority.

A 2008 class action lawsuit filed against CashCall in San Francisco federal court claims CashCall made loans with unconscionable loan terms including unconscionable usury rates. The suit partly involves California residents who borrowed from $2,500 to $2,600 from CashCall at an interest rate of 90 percent or higher from 2004 to 2011 for personal, family or household use.

In a counterclaim, CashCall denied the allegations, requested they be dismissed and asked for damages resulting from two of the plaintiff’s alleged breach of contract when they defaulted on their loans. The parties are currently in settlement talks.

Paul Leonard, the California director of the Center for Responsible Lending, has been following the lawsuit against CashCall.

He notes the litigation has brought to light a high level of defaults on the lender’s $2,600 loan products. According to a judge’s recent order from the suit, “the default rate for the $2,600 loan product has been 35 percent to 45 percent” from 2004 to the present.

Leonard asks at what point do excessive levels of charge-offs (debts written off as a loss by the lender) suggest these loans are being given to consumers without properly analyzing their ability to repay them.

He compares the loan process to the so called “sweatbox” model.

Georgetown University law professor Adam Levitin used the term in congressional testimony on abusive credit card practices. Coined by another law professor, “the sweatbox model does not aim to have the principal repaid,” Levitin wrote in his testimony on the credit card industry in 2009.

Levitin explains that in this model, a lender is counting on interest and fees to make back enough money should the consumer default and never repay the principal. Ultimately the principal gets discharged in bankruptcy, and the lender still makes a profit. By using high interest rates and high fees, the lender keeps the borrower in a proverbial sweatbox as long as possible.

“The business model is based on the idea that they’re going to eat really high levels of losses and still make a profit,” Leonard says. “Maybe it’s profitable for the business, but for the borrowers it’s horrific.”

CashCall’s website states borrowers must provide an active bank account statement and proof of income as part of its qualification process for unsecured personal loans.

AUTO TITLE LOANS

Auto title lenders are another group that seem to be capitalizing on California’s $2,500 and higher lending loophole. These loans, which use the borrower’s car title as collateral, are usually for less than 30 days and allow the lender to take ownership of the borrower’s car if the loan is not repaid. The lender can then sell the car to recoup the loan amount.

These loans are based on the value of a borrower’s car that is owned free and clear, rather than the ability of the borrower to repay the loan, according to a 2013 report by the Center for Responsible Lending. The report analyzed records from more than 500 auto title borrowers made public during a suit against a Delaware-based lender. The median loan size was $845.

The Department of Business Oversight’s 2012 annual report shows that registered California lenders made less than 1,000 auto title loans under $2,500, and about 8,000 loans of $5,000 to $9,999 and 1,000 loans of $10,000 or more. But they made more than 54,000 for loans of $2,500 to $4,999.

According to the Center for Responsible Lending, 16 states explicitly allow auto title lending at triple-digit interest rates and four others, including California, allow it through a legislative loophole. Yes, that very same loophole.

PILOT PROGRAM

Seeing a need for more consumer loans in the $300 to $2,500 bracket, the Legislature created a pilot program for Increased Access to Responsible Small Dollar Loans earlier this year. The program targets loans subject to interest rate caps, which might be less attractive to lenders. (Payday loans, which are $300 or less, are an exception to the interest rate cap rule, hence the pilot program’s range.)

The program requires approved licensed lenders to provide some financial education to consumers, and an assessment of the ability to repay in exchange for a slightly higher maximum interest rate of 36 percent. So far, four firms have qualified for the program.

Leonard says there are simple alternatives to small-dollar loans: Ask friends and family or consider different decisions about spending and the urgency of spending.

“Everybody who needs money doesn’t necessarily need a loan to solve their problem,” Leonard adds. Especially if they don’t have the money to pay it off.

Contact the writer: musheroff@ocregister.com

Original headline: $2,500 is a costly line in consumer lending

[…]

U.S. Cash Home Purchases Surging as Rates Rise

Greg Leffel, an investor in Columbus, Ohio, said he relishes cash deals as much as he dislikes home loans. He has spent $150,000 buying and renovating 10 foreclosed houses in the past two years and turned them into rentals.

“Lending is so tight, and even if you do get a loan you’d have to jump through a bunch of hoops first,” Leffel, 44, said. “I like buying with cash, because then I can control my investments.”

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Investors like Leffel helped spur all-cash home purchases to a record 43 percent of U.S. deals in the first quarter, more than double the share a year ago, according to data firm RealtyTrac Inc. Cash is keeping residential sales trudging along while mortgage lending plummets, hurt by rising interest rates and stiff credit requirements. Americans seeking a loan to purchase their first dwelling are increasingly shut out.

“The cash buyers today mean that all is not well in the housing market,” said Clifford Rossi, finance professor at the University of Maryland’s Robert H. Smith School of Business. “First-time home buyers should make up 40 percent and we’re not seeing it because of mortgage rules.”

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U.S. lenders are cutting jobs as business contracts. They made $226 billion in mortgages in the first quarter, a 17-year low, according to the Mortgage Bankers Association in Washington.

Small Investors

Smaller investors, who deploy cash for homes to rent, flip, or vacation in, are finding better deals now that institutions have pared buying foreclosures, said RealtyTrac Vice President Daren Blomquist. Cash sales are rising from coast to coast, comprising more than half of all purchases in many metropolitan areas in the first quarter.

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In the Miami area, 67.1 percent of sales were cash deals; New York posted 57 percent; Detroit recorded 53.5 percent; Atlanta had 53.2 percent, and Las Vegas posted 52.2 percent, according to Irvine, California-based RealtyTrac.

In Manhattan, buyers are using cash for trophy apartments and to gain an advantage over borrowers who must depend on loans to finance a purchase. Pej Barlavi, owner of brokerage Barlavi Realty LLC in Manhattan, said three of his five current clients buying homes prevailed with all-cash offers.

Barlavi said two of them are hedge fund managers who used year-end bonuses to buy the properties: a $2.2 million two-bedroom apartment in Midtown, selling for $150,000 above the asking price; and $1.5 million for a one-bedroom in Tribeca. His client in the second transaction was “nudged higher by a foreign buyer” before being chosen by the seller, Barlavi said.

Foreign Buyers

“In Manhattan, you have foreign buyers coming in and using properties as a second, third, fourth or fifth home and hedging risks in their home countries,” said Chris Mayer, a real estate professor at Columbia University Business School in New York.

Private-equity firms, hedge funds and other institutional investors have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35 percent from the 2006 peak and rental demand rose from the almost 5 million owners who went through foreclosure since 2008.

New York-based Blackstone Group LP (BX), the biggest U.S. single-family home landlord, cut purchases by 70 percent from last year’s peak and is now concentrating on just five markets, Jonathan Gray, global head of real estate, said in a March interview. Blackstone has invested $8.5 billion since April 2012 to amass almost 44,000 rentals in 14 cities.

Strict Credit

American Homes 4 Rent (AMH) and Colony American Homes, the second- and third-ranked U.S. home landlords, have also cut acquisitions as the rebound in prices requires them to raise capital or improve operations.

“As institutional investors pull back their purchasing in many markets across the country, there is still strong demand from other cash buyers, including individual investors, second-home buyers and even owner-occupant buyers,” RealtyTrac’s Blomquist said.

Banks’ stricter credit standards following the housing crash, in combination with rising mortgage rates, have put the brakes on lending. More than 40 percent of borrowers had FICO scores above 760 in 2013 compared with about 25 percent in 2001, according to Goldman Sachs Group Inc. analysts in a Feb. 20 report. The 4.22 percent average rate for a 30-year fixed mortgage on May 6 rose from 3.53 percent a year ago, following the Federal Reserve’s announced plan to taper its bond buying, according to Bankrate.com.

Wells Fargo (WFC)

“The increase in all-cash purchases is partly because rates are higher than they were a year ago, so it’s made buying with a mortgage more expensive on top of home price increases,” said Jed Kolko, chief economist at real-estate information service Trulia Inc. in San Francisco.

At Wells Fargo & Co., the biggest U.S. mortgage provider, home-loan originations plunged to $36 billion in the first quarter after surpassing $100 billion for seven straight quarters ending in June 2013, according to the San Francisco-based bank. Second-ranked JPMorgan Chase & Co.’s $17 billion total in the first quarter fell below the trough in originations made during the housing crash.

First-time buyers in particular are struggling to get home loans. They comprised 30 percent of total existing-home sales in March compared with an average of 35 percent since October 2008, according to the National Association of Realtors.

Without these buyers, existing-home sales are declining. They fell 7.5 percent in March to a seasonally adjusted annual rate of 4.59 million compared with a year earlier, according to NAR. The sales volume in March remained the lowest since July 2012, according to the trade group.

“With fewer first-time buyers, you end up with more all-cash buyers and less trading up in home activity,” said Columbia’s Mayer. “To get that ecosystem working, you need to have first-time homebuyers so the trade-UNp purchasers can buy bigger homes.”

To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Alexis Leondis in New York at aleondis@bloomberg.net

To contact the editors responsible for this story: Vincent Bielski at vbielski@bloomberg.net; Kara Wetzel at kwetzel@bloomberg.net Rob Urban

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All Cash U.S. Home Purchases Surge With Rising Rates

Greg Leffel, an investor in Columbus, Ohio, said he relishes cash deals as much as he dislikes home loans. He has spent $150,000 buying and renovating 10 foreclosed houses in the past two years and turned them into rentals.

“Lending is so tight, and even if you do get a loan you’d have to jump through a bunch of hoops first,” Leffel, 44, said. “I like buying with cash, because then I can control my investments.”

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Investors like Leffel helped spur all-cash home purchases to a record 43 percent of U.S. deals in the first quarter, more than double the share a year ago, according to data firm RealtyTrac Inc. Cash is keeping residential sales trudging along while mortgage lending plummets, hurt by rising interest rates and stiff credit requirements. Americans seeking a loan to purchase their first dwelling are increasingly shut out.

“The cash buyers today mean that all is not well in the housing market,” said Clifford Rossi, finance professor at the University of Maryland’s Robert H. Smith School of Business. “First-time home buyers should make up 40 percent and we’re not seeing it because of mortgage rules.”

More from Bloomberg.com: Yellen Says ‘High Degree’ of Accommodation Still Needed

U.S. lenders are cutting jobs as business contracts. They made $226 billion in mortgages in the first quarter, a 17-year low, according to the Mortgage Bankers Association in Washington.

Small Investors

Smaller investors, who deploy cash for homes to rent, flip, or vacation in, are finding better deals now that institutions have pared buying foreclosures, said RealtyTrac Vice President Daren Blomquist. Cash sales are rising from coast to coast, comprising more than half of all purchases in many metropolitan areas in the first quarter.

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In the Miami area, 67.1 percent of sales were cash deals; New York posted 57 percent; Detroit recorded 53.5 percent; Atlanta had 53.2 percent, and Las Vegas posted 52.2 percent, according to Irvine, California-based RealtyTrac.

In Manhattan, buyers are using cash for trophy apartments and to gain an advantage over borrowers who must depend on loans to finance a purchase. Pej Barlavi, owner of brokerage Barlavi Realty LLC in Manhattan, said three of his five current clients buying homes prevailed with all-cash offers.

Barlavi said two of them are hedge fund managers who used year-end bonuses to buy the properties: a $2.2 million two-bedroom apartment in Midtown, selling for $150,000 above the asking price; and $1.5 million for a one-bedroom in Tribeca. His client in the second transaction was “nudged higher by a foreign buyer” before being chosen by the seller, Barlavi said.

Foreign Buyers

“In Manhattan, you have foreign buyers coming in and using properties as a second, third, fourth or fifth home and hedging risks in their home countries,” said Chris Mayer, a real estate professor at Columbia University Business School in New York.

Private-equity firms, hedge funds and other institutional investors have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35 percent from the 2006 peak and rental demand rose from the almost 5 million owners who went through foreclosure since 2008.

New York-based Blackstone Group LP, the biggest U.S. single-family home landlord, cut purchases by 70 percent from last year’s peak and is now concentrating on just five markets, Jonathan Gray, global head of real estate, said in a March interview. Blackstone has invested $8.5 billion since April 2012 to amass almost 44,000 rentals in 14 cities.

Strict Credit

American Homes 4 Rent and Colony American Homes, the second- and third-ranked U.S. home landlords, have also cut acquisitions as the rebound in prices requires them to raise capital or improve operations.

“As institutional investors pull back their purchasing in many markets across the country, there is still strong demand from other cash buyers, including individual investors, second-home buyers and even owner-occupant buyers,” RealtyTrac’s Blomquist said.

Banks’ stricter credit standards following the housing crash, in combination with rising mortgage rates, have put the brakes on lending. More than 40 percent of borrowers had FICO scores above 760 in 2013 compared with about 25 percent in 2001, according to Goldman Sachs Group Inc. analysts in a Feb. 20 report. The 4.22 percent average rate for a 30-year fixed mortgage on May 6 rose from 3.53 percent a year ago, following the Federal Reserve’s announced plan to taper its bond buying, according to Bankrate.com.

Wells Fargo

“The increase in all-cash purchases is partly because rates are higher than they were a year ago, so it’s made buying with a mortgage more expensive on top of home price increases,” said Jed Kolko, chief economist at real-estate information service Trulia Inc. in San Francisco.

At Wells Fargo & Co., the biggest U.S. mortgage provider, home-loan originations plunged to $36 billion in the first quarter after surpassing $100 billion for seven straight quarters ending in June 2013, according to the San Francisco-based bank. Second-ranked JPMorgan Chase & Co.’s $17 billion total in the first quarter fell below the trough in originations made during the housing crash.

First-time buyers in particular are struggling to get home loans. They comprised 30 percent of total existing-home sales in March compared with an average of 35 percent since October 2008, according to the National Association of Realtors.

Without these buyers, existing-home sales are declining. They fell 7.5 percent in March to a seasonally adjusted annual rate of 4.59 million compared with a year earlier, according to NAR. The sales volume in March remained the lowest since July 2012, according to the trade group.

“With fewer first-time buyers, you end up with more all-cash buyers and less trading up in home activity,” said Columbia’s Mayer. “To get that ecosystem working, you need to have first-time homebuyers so the trade-up purchasers can buy bigger homes.”

To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Alexis Leondis in New York at aleondis@bloomberg.net

To contact the editors responsible for this story: Vincent Bielski at vbielski@bloomberg.net; Kara Wetzel at kwetzel@bloomberg.net Rob Urban

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Payday loan changes may be coming to Missouri – WGEM.com …

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Editor’s note: An earlier version of this story included a short video clip of a “Liberty Tax Fast Refund” sign. That video clip was a mistake. The “fast refund” is not a payday loan. We apologize for the error.

HANNIBAL, Mo (WGEM) The average payday loan rate in Missouri is 454 percent according to the state’s finance division report. The rate has lawmakers considering changes to payday loans.

Current law in Missouri allows residents to renew a $500 payday loan up to six times, causing families to fall farther in debt with loans. The Missouri State Senate created a bill to prevent residents from falling in debt to payday loans. John Wood Community College Business Professor Greg Lee says this isn’t saying payday loans are bad.

“The ease at which we can go there versus that in which it takes to go to a bank or one of those other sources, that makes them very beneficial,” Lee said. “We’re not saying all people are going to find themselves in that debt snowball that grows ever larger. Some folks are very good at managing their money.”

The new law would eliminate the ability to renew a loan. Lee says this is a consistent problem that may be solved by the new law.

“The fees associated with it are usually very very high,” Lee said. “The problem that we see so often is once a person finds themselves taking advantage of one of these payday loans, they do so over and over again and that snowball just starts rolling downhill.”

Lee says this law may not solve all problems in the area being so close to multiple states. He says a person may just cross over into Illinois or Iowa to pull out another loan, causing the same problem as before.

The law passed the Senate last week and currently is in the House for debate.

[…]

Tax refund loan alternatives

Taxes » Tax Refund » Tax Refund Loan Alternatives

Just discovered you’ll be getting a tax refund? Don’t let your enthusiasm for spending that unexpected money get the better of you.

Some taxpayers, upset at the delay until Jan. 31 of the start of the federal tax-filing season, might consider offers to get their refund money sooner via private programs. In recent years, attorneys general have filed suits against refund anticipation loan, or RAL, operations for failure to disclose full costs of the products to consumers. Consequently, RALs are effectively unavailable. But alternatives, such as refund anticipation checks, remain and, say consumer advocates, can be just as costly.

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Thanks to today’s technology, there’s really no need to pay extra just to get your hands on your tax money a tiny bit sooner. If instant cash is more a desire than a need when considering a quick refund, consider these alternatives:

Go electronic. Abandon the traditional paper return sent via the U.S. mail and file from your computer. You’ll get the money almost as fast as you would with a refund anticipation loan and get it without paying any loan fees or interest. In fact, you may not need to pay for anything. An Internal Revenue Service partnership with tax preparers and software companies offers free online tax preparation and e-filing to some taxpayers. For the 2013 filing season, the Free File program kicks off Jan. 31. Last year, the income cutoff was $57,000, regardless of filing status. An inflation adjustment of $1,000 increases that amount slightly to $58,000.

For the past few years, the IRS has also expanded the online program to include taxpayers who make more money. Via the Free File Fillable Tax Form option, anyone, regardless of income, can enter their tax data onto online forms and then file them for free directly with the IRS. This is not a tax software program, but simply blank forms you can use via computer, and file directly, rather than filling them out by hand.

The IRS says that any e-filing option you use will get you your tax refund much more quickly than mailing a paper return. Whereas paper filers could wait up to eight weeks for their refunds, most electronic filers can expect their tax checks to show up in their mailboxes in half that time or less. The agency also points out that the error rate is less than 1 percent for electronic filers.

Direct deposit. Electronic filers who opt for a refund via direct deposit do even better. The IRS says the money generally shows up in taxpayer bank accounts in 10 to 14 days. Even if you file the old-fashioned paper way, having your refund deposited directly into a bank account cuts the time you have to wait for your tax cash. Plus, it’s added protection against lost or stolen refund checks sent via the mail.

Use store financing. If you want your refund to finance a must-have new appliance, store interest rates usually will be better than a refund anticipation loan. Many stores offer free financing for limited time periods. By then, the refund should have arrived and you can use it to pay off the store credit — and pay no interest at all.

Impatience usually wins. “Theoretically, with electronic filing and quicker turnaround on refunds, the need for tax anticipation loans has become obsolete,” says John L. Stancil, CPA and professor of accounting at Florida Southern College in Lakeland.

But ultimately, a refund anticipation product is a personal preference, not a fiscal issue for taxpayers. The prospect of cash a few days earlier appeals to those who value speed over cost, such as the person who stands impatiently in front of the microwave complaining that it’s taking too long for dinner to be ready.

Companies that offer quick refund options are well aware of such impatience, and that’s why some opportunities survive even as electronic filing increases, especially in the past two years when official filing was delayed.

But if you can squelch your refund appetite for just a few days, then you — and your bank account — will be better off.

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How Firms Tap Overseas Cash

U.S. companies say much of their cash is trapped overseas. But that doesn’t mean they can’t put it to use at home.

With some careful structuring, companies including Hewlett-Packard Co. and General Electric Co. have set up ways to borrow money from their foreign subsidiaries. In some cases, the firms use the funds for daily operations or to buy back stock.

The loans have to be short term. Yet when the borrowing is carefully set up to comply with Internal Revenue Service rules and U.S. auditing standards, the funds can be used over and over without incurring taxes.

Companies are not required to disclose these moves, which makes it difficult to assess how many use them. In interviews, corporate treasurers, chief financial officers and tax attorneys say the practice is common as more cash piles in overseas accounts.

U.S. multinational companies routinely set up units in low-tax jurisdictions to pool cash from their global operations and lend to other parts of the business, tax lawyers and corporate treasurers say. These units operate as internal banks or captive commercial-paper markets, they say, facilitating intracompany lending and charging and paying interest rates along the way.

GE says in regulatory filings that it uses loans from its foreign subsidiaries to fund its U.S. cash needs on a short-term basis. The company doesn’t disclose the amounts or the frequency. Smaller firms also use such loans, including packaging maker Sonoco Products Co.

U.S. companies say much of their cash is trapped overseas. But that doesn’t mean they can’t put it to use at home. Kate Linebaugh reports. Photo: AP.

Sonoco’s foreign units held 93% of its $373 million in cash at the end of last year, up from 86% a year earlier. The maker of bottles, jars and cardboard packaging said in a regulatory filing it borrowed funds from its foreign subsidiaries throughout 2011 and 2012.

The loans typically last for less than 10 days, according to Roger Schrum, Sonoco’s head of investor relations. The loans are “simply a short-term cosmetic effort to slim down the balance sheet,” Mr. Schrum said in an email. “Many, if not most, companies with similar opportunities do the same thing, although they are probably less diligent in disclosing it.”

The company said it had $145 million outstanding under the lending program at the end of 2011 and none at the end of 2012, though it said it would borrow again as needed.

GE spokesman Seth Martin said most of the earnings GE has kept overseas are invested in active business operations like manufacturing facilities and loans to non-U.S. customers.

H-P used such loans more heavily, alternating the borrowings between a unit called the Belgian Coordination Centre and a Cayman Islands unit known as Compaq Cayman Holdings Co., according to documents disclosed in a 2012 Senate hearing.

The documents show two H-P entities lent the parent about $6 billion in the year that ended in October 2010. For the 2011 fiscal year and through July 2012, the average outstanding balance of the alternating loans was $1.6 billion, according to testimony from Lester Ezrati, the company’s director of tax at the time.

The sums rivaled H-P’s borrowings in the commercial-paper market—the traditional source of big firms’ day-to-day funds. Those averaged $1.9 billion over the 2011-2012 period.

More details of H-P’s transactions have emerged since the hearing. Early this month, the company said it told the Senate panel it used the alternating loans for all but 85 days of the 2011 and 2012 fiscal years. In a 2008 internal presentation, H-P called the loans “the most important source of U.S. liquidity for repurchases and acquisitions.”

H-P spokesman Michael Thacker says H-P has “complied fully with all applicable provisions of the U.S. Internal Revenue Code, and auditor Ernst & Young has consistently reviewed and approved the accuracy of H-P’s financials.” The IRS has never raised concerns about the loan programs, he adds.

American concerns have long argued they should be allowed to bring back some of the estimated $1.7 trillion in profits they hold at their foreign subsidiaries, saying the money could be put to use in the U.S. The firms are deterred by the huge tax liabilities they would incur. The loans “tell us that less money is trapped offshore than thought,” says Stephen Shay, a tax professor of Harvard Law School.

The U.S. is the only major economy that taxes its companies’ overseas earnings. Those taxes aren’t actually incurred until the money is considered to have been transferred to the U.S. parent, giving companies an incentive to maximize their earnings at foreign subsidiaries and keep them there indefinitely.

People on both sides of the debate argue the system doesn’t work, creating perverse incentives that distort companies’ balance sheets and deprive the U.S. Treasury of tax revenue.

In February, Democratic Sen. Carl Levin submitted a bill to close a dozen provisions and loopholes related to the treatment of foreign income. “One of the key abuses is when companies use various gimmicks and tax loopholes to shift their assets and profits offshore,” Mr. Levin said, pointing to H-P’s string of short-term loans.

U.S. companies are stepping up pressure for a tax overhaul. A new business group including Caterpillar Inc., Procter & Gamble and H-P formed in March to push for a so-called territorial tax system that would exempt foreign earnings from U.S. taxes.

Under U.S. tax rules, a foreign subsidiary can lend funds to its parent without jeopardizing their untaxed status. But the rules—part of Section 956 of the Internal Revenue Code—are very particular. Even a slight misstep can render tax-free funds taxable, lawyers and corporate treasurers say.

Loans can remain outstanding throughout a fiscal quarter as long as they don’t cross beyond its end. If they do cross a quarter, they can remain outstanding for a total of 30 days. And that can be done for 60 days a year by any one foreign unit.

During the 2008 credit crisis, to help companies fund their operations after the commercial paper markets seized up, the Internal Revenue Service temporarily relaxed the rules by extending the terms.

IRS rules hold that short-term loans can’t be continuous. In a 1997 ruling, the government won a case against Jacobs Engineering Group Inc. that asserted that 12 short-term loans made by the company’s Panamanian unit to the U.S. parent amounted to a repatriation of funds.

That ruling tightened the ways that companies could use such loans. But companies can still tap offshore funds without breaching IRS rules as long as they don’t cross the boundaries of fiscal quarters.

H-P negotiated that requirement by setting up a system under which it borrowed from one foreign subsidiary for a 45-day period and then tapped funds from a different foreign subsidiary for another 45-day stretch. The two entities were given different fiscal quarters so they could lend at different times for U.S. tax purposes, Mr. Ezrati, the company’s former director of tax, said at the hearing.

The setup was one of those used by H-P to access offshore profits to cover its cash needs for a decade. In 2006, Chief Financial Officer Catherine Lesjak, then H-P’s treasurer, said in an internal email disclosed at the Senate hearing that the company was “constantly juggling onshore and offshore cash with no tax consequences.”

That alternating loan structure was aimed at avoiding U.S. taxes, according to a report by the Senate Permanent Subcommittee for Investigations, which Sen. Levin chairs. H-P declined to discuss any details of the lending program beyond saying that it complied with U.S. tax laws.

“H-P has an overall strategy to minimize expenses,” Mr. Ezrati told the Senate hearing. “One of those expenses is taxes, just like every other expense.”

Write to Kate Linebaugh at kate.linebaugh@wsj.com

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The Best Payday Loans Online for 2013, According to Cloud …

Westerville, OH — (SBWIRE) — 02/12/2013 — Cloud Technology Systems Inc. a Columbus based technology company weighs in on the best payday loans for 2013. Just posted on Cloud Technology Systems, Inc. YouTube Channel was a video by Professor Hans Von Puppet where he gives advice on the best pay day loans that can be found online.

When asked where to find the best payday loans online professor Hans Von Puppet declares that “CreditCardsForBadCreditNotBadPeople.com/payday-loans/ is the best place online to search in 2013”.

Professor Hans Von Puppet also states that many people ask him where to find the best payday loan online but many times those people have bad credit or other issues such as that don’t want to have to fax any paperwork to get qualified for the loan.

A payday loan is a small unsecured, short term loan that is also sometimes referred to as a cash advance although that term is usually referred to as cash borrowed from a line of credit such as a credit card according to Wikipedia.

About Joseph McClain
Joseph is an expert in the credit market and has published two Kindle books that can be found at Amazon, Credit Cards for Bad Credit and Best Credit Card Rewards.

Media Contact:
Credit Cards For Bad Credit,
Joe McClain,
6015 S. Sunbury Road #109,
Westerville, OH 43081, United States
740 641 6526
mail@joemcclain.com
http://creditcardsforbadcreditnotbadpeople.com/payday-loans/

[…]

PayDay Loans, Where to find the best PayDay Loans online. Professor Puppet Finds Pay Day Loans

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Everyone is asking me these days “Professor Where can I get the best payday loans online?” Many of these people have bad credit, some are looking for a cash advances some don’t want to have to fax any paper work… it’s just crazy. […]