When we did our taxes this past year, it looked like we were actually going to get a marginal refund. We weren’t really expecting it because half of the year one of my wife’s paychecks (she is paid by two institutions) wasn’t withholding any taxes. That’s usually a recipe to have to cut Uncle Sam a paycheck. So it was a pleasant surprise to find out that it almost evened out exactly. We’d owe the state a bit of money, but the feds would owe us.

Then we got that one last form: Debt forgiveness. We live in an underserved area, and so there is some loan forgiveness involved. The thing about loan forgiveness, though, is that it’s taxed as income.

Senate Democrats, however, are on it:

New loan forgiveness programs were supposed to make it easier for those students who were unable to pay, but a provision in the Tax Code can make a bad situation worse: the amount of the loan forgiveness is considered income for federal tax purposes. In other words, if your student loan debt of, say, $25,000, is written off, that same amount, $25,000, is treated as though you received cash in hand – and it’s taxed.

That tax treatment doesn’t just include student loans in default but also those that are discharged because of death or disability, or those with balances written off under federal income-based repayment (IBR) and income-contingent repayment (ICR) loan forgiveness programs.

Senators Bob Menendez (D-NJ) and Elizabeth Warren (D-MA) are hoping to change that. The pair, together with Ron Wyden (D-OR), Debbie Stabenow (D-MI) and Cory Booker (D-NJ) have introduced the Student Loan Tax Relief Act. The Act would exempt student loans discharged for any reason from being taxed as income.

I have mixed feelings about this. I don’t like it, and I also don’t like it.

What I mean is my first response is “Oh, yeah, now you do this! After we’ve already paid!” Except that we’re going to have to pay again next year, which should be the last year. But It’d almost be worth it to pay it next year just so that I can wave my cane at those deadbeats who aren’t paying their fair share.

Well, not really. The second “I don’t like it,” though is that I think we were right to have to pay it, and others whose debts are forgiven (or defaulted on) should have to pay it, too. Though obviously we are going to accept it as it comes, I think compensation through this mechanism is generally not a good idea. It’s often scheduled in such a way as to give recipients false hope. It’s the compensation equivalent to mail-in rebates. The fact that a lot of people who think they’re going to be getting it don’t get it is built in to the whole scheme.

It’s also economically inefficient. We would have paid off our debt by now if it weren’t for this program and ones like it. We are structuring how we tackle our debts in part in response to this program, and that strikes me as a net loss. Better we have a program to simply give physicians in underserved areas a paycheck boost.

Granted, we are not who the senators have in mind anyway. They are mostly interested in helping out those who default on their loans. I guess I have some sympathy for them and this is the government itself taking a haircut and that’s better than demanding that creditors do. Offering it to people like us is mostly a way of making it seem like it’s not about the defaulters, and maybe getting some upper class support. Which, to be fair, I don’t mind benefiting from.

America Is Finally Putting Home Foreclosure Crisis Behind It

It’s taken nine years, but the number of U.S. homes in foreclosure has fallen to a level not seen since before the 2008 housing crisis.

More troubled borrowers are making their way through the foreclosure process, which can take more than five years on average in some states. The number of properties in active foreclosure declined by 24,000 to 631,000 in March, according to Black Knight Financial Services. That’s the lowest since October 2007. Neighborhoods across the country were in the coming years flooded with more than 2 million notices from banks.

The wave of foreclosures crested in 2010 when banks seized a record 1.2 million properties and served even more with notices of default, auction or repossession. People suffering from the worst economic crisis since the Great Depression just “mailed their keys to the banks and just said ‘take it’,” said Ben Graboske, a chief technology officer at Black Knight.
The huge inventory of foreclosures has taken years for lenders and borrowers to work through. “We are finally getting back to a very clean slate,” Graboske said.

What could possibly go wrong? pic.twitter.com/0LO3CStW8F

— Will Truman (@trumwill) May 1, 2016

Profs: violates ADA for banks to consider poor credit history if poor financial choices result of mental illness. https://t.co/eYPSjcNCbV

— tedfrank (@tedfrank) May 1, 2016

Will’s comment here got me thinking about times in my customer service jobs when I refused to bend the rules but probably should have bent them. Here are two examples, both of which pertain to my time as a bank teller.

Example #1: A young girl, probably 8 or 9 years old, came in with a jar of loose change and wanted to use our coin counter. The rule was only account holders could use the counter. I refused to count the change because when I asked her if she had an account, she said no.

Example #2: A young man came in with a cashiers check for $1,000 made out to his mother. His mother had endorsed the check, and because his mother was a regular customer, I even recognized the signature as hers (or strongly resembling hers). I was reluctant to cash the check because I had never met this man before. (The rule in this case was quasi-unofficial. Theoretically, if the check is endorsed by the payee, it’s negotiable. But in practice, we wanted to be very sure before simply giving away so much money.) He said his mother was outside in his car, but according to him was very sick. I told him to bring his mother in so I could verify that it was her. He did, but as the bank was very crowded, they had to wait in line, and by the time they got back to my teller window, she was so weak she almost collapsed onto the floor and would have if her son hadn’t caught her.

I should have bent the rules in both cases. For example #1, I should have just run the coins through the machine. I don’t think the little girl cried, but she was probably upset or embarrassed that I didn’t help her. And I remember what it’s like being a kid and trying to negotiate an adult world with its seemingly arbitrary rules.

For example #2, I think I was right to insist to talk to the mother, although that is debatable because the signature was probably valid. But I could have said, “Bring her into the bank. You won’t have to wait in line. Just let her sit down and I can skip out of the teller line and verify with her.

I think in both cases the “rule”  was defensible, or at least non-arbitrary. But enforcing them the way I did and with such consistency seemed and seems cruel.

 

As a part of the loan application process, they had to run a credit check with a credit score. My credit score has actually gone down a bit, from the low 800’s to the 790’s. This has me oddly bummed, feeling like I must have done something wrong.

A part of me takes solace in the fact that my score is, according to the report, higher than 99.5% of other Americans. I take solace in it at a personal level, but find it a bit depressing on a societal level. All I have really consciously done to maintain this high score is pay my bills on time. Even then, I have missed a few, but I guess never enough to have the credit agencies alerted?

It seems to me that at least a quarter of the population should have the same credit score as I do, or higher. Ideally, over half. That a lot of people simply cannot do that is actually sort of depressing. Not to assign universal blame, because by “cannot” I mean “despite being responsible, do not have the means” as well as “could if responsible, but is irresponsible so can’t.”

I don’t see myself voting for Elizabeth Warren any time soon.

My own observational experience with people who have bad credit is mostly with people who could pay their bills if they were sufficiently responsible but are not. Which actually says more about me than it does the average person with a low credit score. People I know come disproportionately from the the upper-middle or lower-upper or at least the solid middle class.

I wonder how much of this sort of thing colors our perception of the people struggling to make it by. Among people like me, I mean. If most of the people you know in financial trouble are there because of mistakes that they’ve made, and if you come from a background where financial responsibility leads to good financial results, then it becomes harder to relate to those who are struggling. It becomes easy to see that guy as being the equivalent of the guy who screwed up a good hand, instead of having a bad hand to begin with. It becomes easy to be removed from the entire notion of having a bad hand.

So we are buying a house. It’s actually a house that, on my wife’s current salary, we would never buy because we wouldn’t be able to afford it. But she’ll start making more money by year’s end and it won’t be a problem.

I had this silly notion that getting a loan for a house we cannot presently afford would be difficult. Haha. Or at least that we would have to demonstrate earning potential to be able to afford it. HAHA!

They really don’t care about my wife’s earning potential. They don’t care that we cannot afford the house on her current income. As far as they’re concerned, we can afford the house in our current economic situation.

Which I guess actually makes sense. Clancy and I are really conservative (“chickenspit” may be the more accurate assessment) and if everybody held themselves to the same standards that we do, nobody would be able to afford a house anywhere. Okay, that’s a slight exaggeration. But given home ownership rates, and despite the housing bubble, our country does seem to somehow make it work.

I ended up consulting two banks for loans. Both made good offers and had friendly and helpful agents that I didn’t want to say “no” to. I ended up going with our regular bank (ORB) instead of the credit card company (3C). I actually felt really about sending the email to my contact at 3C because she was so helpful and had put together an impressive deal. I would have felt just as bad sending an email to ORB guy. I suspect at some point I will feel buyer’s remorse when something goes wrong with a grass-is-greener view that everything would have gone perfectly had I gone the other way.

I emailed 3C lady yesterday evening, and she’s taking it pretty hard. I got an email asking why I jilted her. Then I got a phone call. I missed the phone call, but responded with the email explaining that it was a really tough decision and I made it based on something really minor and situation-specific*. Today I got an email with my disclosures. “This is what you’re missing out on!” I guess. Actually, it’s probably automated.

I was pretty open about the fact that I was talking to two banks. This is why I am such a rotten consumer, though. I hate the idea of taking up someone’s time when I am not actually going to buy their product. This was inevitably true of one of the two companies I was talking to. At the same time, on a purchase this big, it wouldn’t have been responsible to take the first offer.

* – Basically, ORB already had more of our financial documentation in hand. They also required a bit less generally. Most importantly, they didn’t need it right now, which was a big deal because I am having to track a lot of it down.

In the old days, like the 1990s, if you wanted to raise money for an individual you had to either go person-to-person, or get a sympathetic reporter to do a story on you. I was a real Ebenezer Scrooge about those stories in my reporter days. I mean, if some family’s home got burned out, I was all over it. But stuff like college tuition or kids wanting to play soccer in Israel? Forget it. Like, one time we got a call from a “family friend” wanting us to do a story so people would give money to this girl who got into Harvard, but couldn’t afford to go there. No way, I told the editor. You think I didn’t get into places I couldn’t afford to go? I had to LIVE AT HOME during college! F**k her!

And even if you did do a story, there was no guarantee anyone would shell out. It was unpredictable. My story about that poor burned-out family attracted zilch. But someone did a story about a kid who supposedly saved his little brother from choking on a French fry (all entirely according to the family, who called in requesting the story), and some local business paid for them all to go to Disneyland.

Now sob stories are everywhere on news sites and blogs with little or no investigation — but always with links to a funding site. You get some presentable, charming kid like Griffin Furlong, who has a pretty blond girlfriend and a GoFundMe titled “Homeless Valedictorian: College Fund” (he hasn’t actually been homeless since he was 8 or 9, and he actually lives with his aunt and uncle or maybe grandmother, the details differ among stories), who managed to attract interest from feel-good outlets such as HuffPo and People and Diply. So far, he’s collected nearly $110,000 with no strings attached. As a reward for saying he’s poor, he now gets to be rich.

I guess you can’t blame people for trying after seeing that. I’ve been on Facebook for six years, and until recently, I’d only been asked for money once: for funeral expenses. A former classmate died of cancer, leaving three young children. I kicked in, using a Paypal account another alumna set up. That was three years ago.

Within the past several weeks, the requests have multiplied. And they’re getting — in my opinion — progressively less worthy. They’re not made personally. They come from crowdfunding sites such as GoFundMe.com, one of the main offenders.

The ones I gave to: 1) 3-D printer for science class at my kid’s school. 2) Classmate’s son’s Eagle Scout project, something about school supplies for poor kids. See, these are the causes I think of as classic fundraiser material.

One I ignored: Former classmate’s kid wanted to go to Africa for the summer to help some wild animal foundation. That’s nice, but don’t we all? I guess the charity part comes in with the non-profit foundation, so really it’s like a modern version of missionary work, only without the restrictions on sex and drinking.

One I’m on the fence about: Friend of a friend wants help with legal fees for a family law case. It involved a relative getting temporary custody of a mom’s kid, then moving away and leaving no forwarding address despite the court order. It’s believable because I’ve seen it happen. It’s stretching my usual views of the purpose of fundraising, but I sympathize. Then again, I don’t know the people.

This one made me feel a little uneasy: Single mom seeking donations so that she can bring her father from Cuba to meet his grandson. I mean, I feel bad she never got to meet her dad in person. But passing the hat to acquaintances to fund a trip? I couldn’t do it.

And here’s the one that really got me: Wine bar operator raising funds to expand the restaurant in her wine bar. Her justification seems to be that her business will be good for the community, and she promises to help promote worthy local causes, so therefore her endeavor is worthy of charity. If you donate a certain amount, she’ll provide you with free life coaching geared toward building your dreams. Her coaching philosophy appears based upon The Law of Attraction, you know, where if you visualize money, the power of your thoughts attracts money to you. If that’s true, I don’t see why she’d need crowdfunding.