“I also know that we live in a society that has lived beyond its means. Much of the wealth around us was created by a huge increase in debt. Now, with the economy shrinking and credit tightening, much of that debt is going to disappear. Like it or not, America may once again become a place where people watch every penny.”

There is no doubt that being frugal can be hard on family members that don’t share the same sensibilities when it comes to money.  This was especially true when the whole nation was going crazy with debt.  Now that a lot of the big spenders are facing foreclosure or other severe financial strain, it is important to point out to your family what can happen if you over-extend.

Originally posted on pfhacks.com: On the Virtues of Being Cheap

This pause would allow time to attempt renegotiation of mortgage terms.  The plan would include home equity loans and secondary mortgages in addition to traditional first mortgages. 

The six lenders participating in the plan are: Bank of America, JPMorgan Chase, Citigroup, Countrywide Financial, Washington Mutual and Wells Fargo.

The plan will be called "Project Lifeline".

The banks reached this deal as the US housing market – particularly he portion financed with adjustable rate subprime mortgages – continues to deteriorate.  According to data from The Federal Reserve, about 1.5 million subprime mortgages are scheduled to reset to a higher interest rate this year.  An additional 500,000 will reset in 2009.

Homeowners already in foreclosure, or within 30 days of a foreclosure sale are not eligible for the plan.

Also, vacant homes and investment properties will not be eligible.

Source:

Banks to pause delinquent mortgage foreclosures

Originally posted on pfhacks.com: Big Mortgage Lenders To Pause Foreclosures

Short Answer: NO.

I have read a lot of misleading stories on the rebate portion of the Stimulus Bill.  For instance, Liz Pulliam Weston, writing in MSN Money writes:

To produce this cash, Congress created a one-time tax credit to reduce taxable income for most taxpayers this year.

Normally, you wouldn’t see that cash until the spring of 2009, when you filed your 2008 return. But Congress wants to speed that money to you now, so checks will start going out in May.

Remember, this is your money you’re getting back, and the rebate checks are basically an advance on your 2009 refund. When similar rebates were sent out in 2001, said tax expert Mark Luscombe, "a lot of people were upset to see their (next) refund reduced."

While technically true, I find it misleading because this is not a deduction we were expecting.  It’s not like we are getting an advance on an existing credit.  This is a one time credit for the express purpose of putting more cash into consumers hands earlier. 

I found the best explanation in an article on CNNMoney.com:

Your rebate is a one-time tax cut – an advance on a credit you’ll receive on your 2008 return.

It’s based on your 2007 income initially. If it turns out that your 2008 income and number of children would have qualified you for a larger rebate than the one you received, you’ll be sent the difference. If it turns out your 2008 income was lower than in 2007 and you should have gotten a lower rebate, you get to keep the difference.

"If you were supposed to receive a larger payment than you did, you will get the extra money," said Treasury spokesman Andrew DeSouza. "If you received more than what you should have gotten, you will not be penalized."

Originally posted on pfhacks.com: Do We Have To Pay Back The Tax Rebate?

The final plan will cost an estimated $168 billion versus the $150 billion cost of the House plan.   The Senate plan included rebates for senior citizens and disabled veterans. 

Here’s the final breakdown:

• Most single filers will receive rebates of $600 while couples will receive $1,200, plus $300 per child under the age of 17.
• Rebates will begin to phase out for those with an adjusted gross income of $75,000 for single filers and $150,000 for those filing jointly.
• Anyone with an earned income of at least $3,000 will receive a check for $300.
• Senior citizens drawing Social Security will receive $300, even if they paid no income tax.

Additionally, the stimulus plan will include tax breaks for businesses that will cost an estimated $50 billion.  The business benefits include: accelerated deprecation for equipment purchases and the ability for small companies to write off a greater number of expenses.

Originally posted on pfhacks.com: Details on Final Stimulus Bill

The Senate failed to pass their expanded version of the House stimulus plan last night.

From The Wall Street Journal:

Supporters of the Senate bill fell one vote short of the 60 needed to advance it, as most Republicans stuck together to oppose a plan for rebate checks of at least $500 to an estimated 135 million households in this election year. Eight Republicans broke with their leadership and supported the bill, including four who are up for re-election.

In order for the Senate to meet their goal of presenting a bill to President Bush by mid-month, it now appears they will need to more closely align their package with the one passed by the House.

The Senate bill had proposed expanding the benefits to $205 billion over two years, from the House plan that would cost an estimated $161 billion. The added proposals would have provided additional benefits for Social Security recipients and disabled veterans, as well as extending unemployment insurance and giving tax breaks to companies with operating losses.

Originally posted on pfhacks.com: Latest News On The Stimulus Bill

It shows all Income and Expenses of the US Government as projected in President Bush’s Fiscal 2009 budget, which begins October 1. 2008.

As you can see, the projected deficit will be over $248 Billion.

We continue to mortgage our children’s future so that we can spend now.

Originally posted on pfhacks.com: Where Do Your Tax Dollars Go?

As a follow up to my details of proposed stimulus bill post, the Wall Street Journal is reporting that changes passed by the Senate Finance Committee, including tax breaks for renewable energy and struggling businesses, are not expected to have enough votes to pass the Senate.

Another amendment proposing funding for food stamps and extensions of unemployment benefits is also likely to fail, the Journal reports.

This means that the original House plan will main largely intact, as this legislation continues to move forward at a brisk – for Washington, at least – pace.

Originally posted on pfhacks.com: Stimulus Bill Likely To Be Unchanged By Senate

UPDATE: The House and Senate have passed the final version of the Stimulus Bill. You can read the details in this post: Details on Final Stimulus Bill.

Congress and President Bush appear to have made a final agreement on the contents of the forthcoming economic stimulus bill.

Highlights:

• Tax rebates of at least $300 to anyone earning a paycheck, including low income earners that pay little to no income tax.
• Families with children would receive an additional $300 per child, capped at $1,200.
• Rebates would also only go to families with incomes less than $150,000, and individuals earning less than $75,000.
• New Business tax deductions including:
  • Advantageous changes in depreciation of assets.
  • Rule changes to allow small businesses to recovery previous taxes paid, if they are currently suffering losses.
• And here’s the really big one to me: Allow Fannie Mae and Freddie Mac to purchase home mortgages greater than their current limit of $417,000. This limit would be increased up to $700,000 in areas with the highest home prices. This would be great news for those living in areas with very expensive real estate markets, as it should lower the cost of borrowing, and provide more liquidity.

Conclusion:

It looks like both sides compromised on this deal. The Democrats wanted to extend food stamps and unemployment benefits, while the Republicans did not want rebate checks going to individuals and families that didn’t pay income tax in the first place.

Personally, I’m very concerned about the costs. My understanding is that the budget deficit for 2008 is estimated to be $250 billion before the stimulus package. This agreement, in its current form is estimated to cost $140 billion. That means the US will need to borrow $390 billion this year to fund its spending. Oh, and don’t get me started on the unfunded Social Security or Medicare liabilities.

While I’m not an economist, I have to wonder from a common sense point of view, if it makes since for an individual, or a government, to continue to borrow from tomorrow, to pay for today.

Originally posted on pfhacks.com: Details of Proposed Economic Stimulus Bill