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November 2011 Newsletter

WHAT IS THE PRELIMINARY CHANGE OF OWNERSHIP FORM? When an Escrow Officer prepares documents to finalize a closing, one of the forms which may not seem important is the “Preliminary Change of Ownership Report” or “PCOR” as we call it. In actuality, this is a particularly important form for a new owner of a property and it is getting more and more attention by the government agencies as time goes by.

First of all, the form is put forth by the State Board of Equalization, one of the collection arms for California’s Revenue and Taxation Code, under Section 480.3 of the Code. Its main function is to determine the taxation of real property (including mobilehomes) so that the proper tax is assessed by the Tax Assessor’s office and thereafter collected by the Tax Collector’s office. It is a form designed to find out 4 basic things from the property that is being transferred: (1) who are the parties (transferor and transferee), (2) what is the purported value of the transfer (per the purchase contract), (3) is there a Homeowners Exemption that the property qualifies for, and (4) if there should be no re-assessment of the existing property tax, the reason why.

For the full article and updates on changes to the penalties, please click on this link on our website: http://www.vivaescrow.com/for-your-convenience/faq/what-is-the-pcor

ARE E-SIGNINGS THE NEXT BEST THING? My client Cristina forwarded me the following article regarding “E-signings” and asked me, “Is this the wave of the future?” My answer is that, “Yes, sooner or later, we will have more and more financial institutions who will hop on to this particular train.” Before that happens though, the institutions will have to first and foremost reconcile their views on the traditional paper intensive process with this new non-traditional paperless procedure. And in this day and age of the Dodd Frank Act, they will also need to work with the new guidelines that the Consumer Financial Protection Bureau will be issuing.

Back in 2009-2010, we had AmTrust Bank as the front runner of e-signings. They were bought out, however, and we have not really seen another institution take up the banner. We loved e-signings, and so did those clients of ours who were more technologically advanced. They could just sit in front of our computer and click, click, click. Voila! All done and the clients get a copy of what they signed electronically. Besides signing a hard copy of the Deed of Trust for recording purposes, there was nary a pen or paper involved. No signing until you got carpel tunnel syndrome and we didn’t need to cut down a whole tree either.

However, have there been issues regarding e-signings? Have there been problems selling the loans? Have there been cases of fraud involving e-signings? All these are questions I don’t have much information about, but feel should be answered before it goes further along.

The scenario today is that all the Lenders are coming down hard on Settlement Agents, making us responsible for many matters relating to their lending process that we may not have control over. With this observation, I can’t help but feel very ambivalent towards e-signing. Will e-signings be another facet which Lenders will hold us responsible for, particularly when the loan goes sour and/or when the clients come back and claim they were misinformed throughout the application process? Maybe the clients will claim that “they were not aware of what they were clicking!”

So, the jury is still out, Cristina!

STUDENT LOANS – THE NEXT DEBT CRISIS: With one daughter in grad school, 1 niece and 1 nephew in college and 1 going into college next year, you can imagine what we talk about at our family get-togethers. Time Magazine had this eye-opening article called “I Owe U” in their October 31^st issue in which I am taking the liberty of breaking down and quoting some of their main (shocking!) points:

Student loan debt will reach $1 trillion this year. 2/3^rd of students borrow to go to school.
Cost of college has jumped 538% the last 30 years yet starting wages have not increased in the last 10 years. The return on investment is just not there.
Graduating from a top tier undergraduate school may generate over $100,000 in student loan debt.
Many are generating the debt in the liberal arts field in which employment is hard to find. Our schools are not producing enough science and math majors so those high paying jobs are going to foreigners.
Unemployment for the 2011 graduating class is 13.2%.
Repayment of the student loan starts after a 6 months grace period, regardless of whether the student has actually received a degree and/or finds a job.
You can’t walk away from these loans. Bankruptcy does not clear student loans and defaulting means you won’t be able to qualify for credit cards, home mortgages or car loans later in life.
The government can garnish up to 15% of wages and deny security clearance if loans are not paid.
41% of borrowers who entered repayment in 2005 became delinquent or defaulted within 5 years.
How can you continue to graduate school if you are overburdened by loans in undergrad?

I didn’t realize how huge this issue has become and now and I am very much afraid that the student loan crisis will surpass the mortgage debt crisis that hit us in 2007, especially as it is coming one right after the other.

Some things for your college or grad school bound kids to think about:

Start at a more affordable state or community college and transfer to a more impressive school to get the final diploma.
Look into little things like alternative housing and reduced meal plans when budgeting.
Seriously consider your major. Is it one that can land you a job when you graduate?
Don’t stretch the attendance years. Every additional year you stay in school over the standard 4 years will be more expense and less income.
Look for all possible resources for help.

Here are links to articles for a more in-depth analysis of the looming crisis.

Student Loans: A crisis in waiting?

8 ways to pay down student loans.

Obama’s Student Loan Plan

Big changes come to student loans

SPEND LESS AND SAVE MORE! What a concept!

Don’t buy if you can get it free (free phone apps!)
Holiday shop throughout the year (not just on Black Friday)
Check for online coupons
Bring food and drink from home (healthy, wealthy and wise)
Use generic brands
Don’t shop when you are hungry or sad……and 24 more tips right here.

STRATEGIZING YOUR 2011 TAX LIABILITIES NOW: November is the month to think about what you can do to decrease the tax liability you have for this year. Forget December with all its holidays and scrambling for year end deadlines. November is the month to recap for the year. You will know how you stand for the year and what your potential tax liability will look like. If you think you made too much this year there are some things you might be able to do as suggested by this article:

Pay your January 1 mortgage payment in December so that you can deduct that interest this year
Pay both sets of property taxes now
Make that high end purchase now for the sales tax deduction
Make that next semester’s college tuition payment now

And if none of the above work and you still made too much money…