Solutions For PIRP Fraud | Brooklyn Covered

Tell you what, I’d really like to know how many yellow taxi and livery car drivers actually take the PIRP classes they are supposed to complete every two years. I know I’d feel a lot better they actually sat through a class, and didn’t just do a “walk in and walk out” class.

Solutions For Fraudulent PIRP Activity

Before we examine solutions for PIRP fraud ( PIRP is the acronym for the New York State-approved Point / Insurance Reduction Program), I’d like to review some of the problems, both real and potential, for people getting credit for classes they never took.

  1. New York State licensed drivers who are the primary operators of a motor vehicle, receive a minimum 10% discount on their automobile insurance. These discounts are in a real sense a reward for supposedly improved knowledge of New York State vehicle and traffic laws, and safe driving techniques. When combined, these increased skill sets should, in the words of Empire Safety Council, one of New York State’s leading PIRP class providers, help drivers, “Survive the driving experience.”
  2. Drivers who would otherwise lose their licenses continue to drive on our streets and highways. Their poor attitudes towards the responsible operation of a motor vehicle, not modified through actual class attendance and participation creates an even greater threat with their feeling of having “beaten the system.” Tell you what, I’d really like to know how many yellow taxi and livery car drivers actually take the PIRP classes they must complete every two years. I know I’d feel a lot better if they actually sat through a class, and didn’t just do a “walk in and walk out” class.

Both scenarios are, in a word, frightening. Should fraudulent activity in the program continue, there is the real possibility New York State could make attending PIRP classes every three years a requirement for enjoying the privilege of being a NYS licensed driver. Without any accompanying discounts or point reduction. And, with you paying for the classes out-of-pocket.

Now, don’t scoff at the idea the state could do just that. As a licensed NYS insurance agent and broker, I must complete 15 hours of continuing education , either through self-study or actual classroom attendance, every two years. Should I fail to do so, I will lose my licenses.

As an Income Tax Preparer, I must now complete 15 hours of income tax continuing education every year to qualify for my federal Preparer Tax Identification Number (PTIN). On top of this, I must study for and pass an exam to become a Registered Tax Return Preparer (RTRP), no later than December 31, 2013, or else I can no longer prepare income tax returns.

And yes, I pay, or will pay out-of-pocket for all the above.

So don’t think for a second we can’t lose this valuable means of legitimately lowering our premiums and reducing points on our NYS drivers licenses.

Hey, Wait A Minute. Didn’t You Promise Some Solutions?

Why, indeed I did. Here are a few solutions for PIRP fraud.

  1. Submit photocopies of each participant’s NYS drivers license in the package sent to the program providers.
  2. Require a group photograph of each class. And don’t try to tell me anyone’s camera-shy, or you can’t figure out how to use the time feature on your camera.
  3. Increase the number of random calls made to listed class participants of every class. Ask them “What do you remember about Mr. Jones?”, or “What did you think of the office decor?’, or “Where did you eat lunch?”, or “Who did you eat lunch with?”
  4. Increase spot checks to ensure classes are actually being conducted.
  5. Employ “shoppers” whose express purpose is to attend random classes and assess the content and conduct of each instructor.
  6. Increase the financial penalties for those Delivery Agents and Instructors who engage in fraudulent PIRP activities. And send some to jail, with the loss of every other state or federal license they now hold. You’d have to be a durn fool to risk everything for a few measly dollars.
  7. Finally, I’d impose severe penalties on those drivers who participate in any fraudulent PIRP activities. Again, fines and possible jail time should stop those looking for a “quick fix” for their auto insurance woes.

When enacted, you’d realize an immediate decrease in the number of student completions. It might hurt the pocketbooks of the state,  and provider agencies for a time. In the long run, however, we’d all enjoy safer roads, better able to “survive the driving experience.”

And, with all the people necessary for enforcement, we could solve a good part of the jobless problem here in New York  

Until my next post, make every day an outstanding day.

 

EITC and PIRP. Perfect Together | Brooklyn Covered

Tell you what, let’s apply the same penalties to everyone who’s ever claimed to attend and participate in a six-hour Point and Insurance Reduction Program class, but didn’t. They would lose both the 10% discount on their auto insurance, and the reduction of up to four points on their drivers license. And they would not qualify for either benefit for a period of no less than ten (10) years.

Let’s Apply EITC Penalties To PIRP

You may be wondering why I think EITC and PIRP ( Earned Income Tax Credit and Point and Insurance Program, respectively) share any similarities. Well, they don’t. At least not yet.

Under the current personal income tax law, if you claim the earned income tax credit, and it is later disallowed because you made a fraudulent claim, you lose the right to claim the EITC for ten, count ’em, ten years. Which means by the time you’re able to legitimately claim the EITC again, you’ll either be too old, or the children you would’ve used to qualify for it have children of their own.

What Types Of Penalties Should We Impose?

Tell you what, let’s apply the same penalties to everyone who’s ever claimed to attend and participate in a six-hour Point and Insurance Reduction Program class, but didn’t. They would lose both the 10% discount on their auto insurance, and the reduction of up to four points on their driver’s license. And they would not qualify for either benefit for no less than ten (10) years.

Even better, for those we catch engaging in fraudulent actions, let’s give them two (2) points for the first infraction, three points for the second, license suspension for a period of not less than six months for the third, and license revocation for no less than a year for the fourth infraction for as long as they have the privilege of a New York State Drivers license.

If they’re crazy enough to try it more than four (4) times? Well, you can’t fix stupid.

Mandate that those so caught must actually attend an actual  PIRP class at least once every three (3) years, without the benefit of getting either point reduction or a discount on their insurance. Talk about your new assessment!

Wait, you supposedly attended a class, and you claim to have never heard about assessments?

Are you sure you attended a full six-hour class?

So why am I venting about this today? Well, as a NYS-certified PIRP Delivery Agent and Instructor, I take great pride in making sure everyone who attends one of my classes leaves feeling;

  1. Empowered by the knowledge they’ve acquired,
  2. Confident in their ability to “survive the driving experience” or,
  3. Afraid to drive ever again. And wondering how the heck they’ve lived this long.

What really drives me nuts is when I talk to clients about an upcoming class, and they tell me they did it the easy way. They are not ashamed to tell me they go to certain agencies where they pay about $100.00, copy the answers to the driving test, fill out a few forms.

No six-hour class. Heck, I’m surprised if it takes more than six (6) minutes to “complete” a course this way. This is dangerous for you and anyone else near the road. For insurance companies, they are losing premium dollars. For the driving and walking publics, you’re sharing the road with people who shouldn’t legally have drivers licenses. And the United States Treasury loses because these crooks require payment in cold, hard, cash. Just imagine how much taxable income is not being declared.

Isn’t it just amazing how I can make my wild titles work out at the end?

How Do We Prevent This Type of Fraud?

In my next post, I’ll outline the methods I’d use to stifle the growth of this felony activity.

What Ever Happened To The Series On Force-Placed Homeowners Insurance?

Not only will that series continue, I’ve got some new wrinkles for you. Stay tuned.

Income Tax Games Without A Bow | Brooklyn Covered

So, after dodging the aforementioned honest young lady for several days, I finally admitted that while I’d completed her return, I felt I was making a error somewhere. I just couldn’t understand why she suddenly owed an amount in the thousands when she usually only owed no more than $300.00. And that was considered a bad year.

After much conversation, she finally became very quiet. I just knew I’d lose her as a client. And then, the clouds of doubt and gloom parted when she said, “Mr. Greaves, I think I know why I owe so much.”

Playing Income Tax Games Will Leave You With Your Own Version Of The Hunger Games

So there I was, pacing around the office, the block, the neighborhood, Brooklyn. Trying to figure out why the heck I suddenly found myself unable to complete an income tax return which made sense. I mean, I’ve only been doing this for, what, about 20 years? Then, a propitious conversation with an honest young lady awakened me to the latest version of “Income Tax Games.”

When you’ve prepared someone’s income taxes for a while, you tend to learn “how they roll.” Some of my clients are homeowners who know exactly how many therms they use each month. With many, I’m just glad they put their bills and receipts in the envelope.

Too few contribute to 529’s and Roth IRA’s. Again, far too many fail to contribute the maximum to their employer-sponsored 401k’s. It always cracks me up when they say how hard it is to save now. Just wait until it’s time to retire, they’ll wish they’d done with less now to have more then.

So, when several of my clients suddenly owed amounts to the taxing authorities far and above what I’m accustomed to them owing, I wondered, (foolishly, in hindsight) what did I do wrong?

So, after dodging the aforementioned honest young lady for several days, (“Mr. Greaves, is my return done yet?”), I finally admitted that while I’d completed her return, I felt I was making an error somewhere. I just couldn’t understand why she suddenly owed an amount in the thousands when she usually only owed no more than $300.00. And that was a bad year.

After much conversation, she finally became very quiet. I just knew I’d lose her as a client. And then, the clouds of doubt and gloom parted when she said, “Mr. Greaves, I think I know why I owe so much.”

My only response was “Huh?”

“Mr. Greaves, a friend of mine on my job told me if I wanted to increase the amount of take-home pay each paycheck, all I had to do was increase the number of exemptions I claim for several months, and then go back to, in my particular case, Single, with one exemption.”

DING! DING! DING!

“Youngster, how many extra exemptions did you claim, when did you start claiming them, and, when did you stop claiming them?” I asked.

“I claimed Single, with 20 exemptions, starting in July, ending in November. Then I went back to Single, with one exemption.”

Thank the Maker I don’t have high blood pressure.

“And was the extra money good to you?”

“Man, yeah! I was getting paid!”

“And now?” I asked.

“I have to pay most of it back?”

“Sorry, I didn’t quite hear you.”

“I have to pay most of it back. But why?”

Then we got into a discussion about how the U. S. system of taxation is a pay-as-you-go system. As long as you’re making the necessary payments during the year, you shouldn’t end up owing at the end of the tax year.

She understands that now.

Then she mentioned how this young man, the financial genius who played the exemption game every year, still got a huge refund when he filed his taxes. Their pay was similar, they are both single, and give modest amounts to their churches. Neither one owns real estate, or has any entries for unreimbursed employee expenses. Just two young people with some interest, some stocks sold, and not much else.

I told her his preparer may be one of the biggest crooks out there, and it was probably just a matter of time before the IRS caught him for preparing fraudulent returns. And, when the preparer is caught preparing fraudulent returns, all of their clients will end up in IRS Examinations, and wind up owing a ton of money. With penalties and interest tacked on. 

“So what have we learned today?” I asked.

“To pay a bit each payday as I go along, and at the end of the year I won’t sing a sad song.”

“And will we be playing income tax games any longer?”

“Only if I have a death wish.”

I am revived. Income taxes make sense again. Back to the numbers.

My Homeowners Insurance Policy, Part 2.5 | Brooklyn Covered

Here’s another suggestion. Why not get a whole-house review? I’m honored to refer my friend and client, Mr. Curtis (“Caulk Is Cheap”) Godoy, a NYC licensed and insured General Contractor, Master Carpenter and EPA Certified Painter. You can reach him at 1-347-581-5562, or drop him an email at [email protected] . If he thinks anything is amiss, he’ll let you know.

(In our last thrilling published post, we learned how failing to maintain our homes can lead to increased and larger claims, causing us to lose our voluntary homeowners insurance policy, and the accompanying threat of the dreaded force-placed policy.)

Okay, Why Should I Care?

Just one word.

Accessibility.

Accessibility to affordable, quality insurance in the voluntary market for you and the community you live in.

Let’s say your community’s claim results spike. Soon, the premiums for homeowners insurance could demonstrate a “similar propensity for growth,” or, go up like crazy. Or, in a worse-case scenario, major companies will choose to neither write nor renew policies in your community, providing fertile ground for the entry of more expensive players.

And, what happens if a homeowner can’t qualify for one of the newer companies due to their checkbook balance, or the credit score from hell?

Well, there’s always force-placed insurance.

Don’t I paint the rosiest pictures?

It’s Time

It’s time to renew your commitment to a disciplined program of home maintenance. With it, you should no longer suffer pipes or roofs leaking with regularity. You’ll replace the flexible hoses behind the washing machine with new, high-pressure hoses designed to resist kinks and sudden breaks. You’ll begin regularly performing a deep cleaning of your clothes dryer to prevent lint fires in either your dryer or dryer vent. (You do have a dryer vent, don’t you?)

You’ll caulk around your windows and doors, saving money on heating and cooling while keeping rain outside. You’ll check to ensure your windows are properly screwed into the frame. You’ll make sure your landscaping draws water away from your foundation, and not towards it. You’ll check and clean gutters and downspouts.

In short, you’ll do what every homeowner should do: Maintain your home.

Here’s another suggestion. Why not get a whole-house review? I’m honored to refer my friend and client, Mr. Curtis (“Caulk Is Cheap”) Godoy,  a NYC licensed and insured General Contractor, Master Carpenter and EPA Certified Painter. You can reach him at 1-347-581-5562, or drop him an email at [email protected] . If he thinks anything is amiss, he’ll let you know. If he feels you need a new roof, he’ll contact Gus Jean Louis, a.k.a., Gus the Roofer. You can reach him at 1-347-564-3009, or email him at [email protected]. Pipes leaking? Contact Keith Huggins of Pusky Plumbing at 1-917-531-8385. Mr. Godoy  can put you in touch with qualified professionals who are licensed and insured. Why do I recommend these gentlemen? Because they are the only building professionals I let do any work in my mom’s home. They are true professionals, and have yet to disappoint.

Next time, we’ll see how your home’s location can cause your banishment to the force-placed insurance market.

(Need a plan for home maintenance? Just drop me an email at [email protected], and I’ll email you a copy of the home maintenance schedule provided by Travelers Property and Casualty. And subscribe to BrooklynCovered.com for automatic notification of every new post. No email address? No problem. Just provide me with your address and phone information and I’ll  send you the brochure.)

My Homeowners Insurance Policy, Part 2 | Brooklyn Covered

When the economy was blasting away like a furnace in a steel mill, homeowners actually spent money, copious amounts of money, on the regular maintenance of their homes. This investment, a direct reflection of the pride of homeownership, came with a accompanying benefit: Because of the amount of care and attention paid to keeping their homes in tip-top shape, there were fewer claims impacting, for example, my agencys results. And, the claims which were submitted were smaller in size. Less cost, less frequency.

(In our last exciting segment of “Dude, Where’s My Homeowners Insurance Policy?”, we learned submitting a claim during the first 60 days after applying for homeowners (and auto) insurance is akin to bringing a vampire out in the daylight. Without the special sunshade.

Today’s installment will continue the study of claims and how they affect your ability to purchase homeowners insurance from preferred companies.)

Where’s My Homeowners Insurance Policy, Part 2

Let me start by saying in all my over 29 years in the insurance business, I’ve never seen claims come across my desk with the frequency and size the like of which I’ve seen in the last 20 years. You can blame Hurricane Irene and Tropical Storm Lee all you want. Truth is, too many people are simply not investing any real money and energy in maintaining their homes.

I blame the sin and disease of deferred maintenance.

Home Maintenance, The Economy, Deferred Home Maintenance

I believe there is a direct correlation between the state of the economy and home maintenance.

When the economy was blasting away like a furnace in a steel mill, homeowners actually spent money, copious amounts of money, on the regular maintenance of their homes. This investment, a direct reflection of the pride of homeownership, came with an accompanying benefit: Because of the amount of care and attention paid to keeping their homes in tip-top shape, there were fewer claims impacting, for example, my agency’s results. And, the claims were smaller. Less cost, less frequency.

Sounds like an old television commercial. The kind I really like.

The Years The Music Died

Then came 2006, 2007, and (why, oh why Lord?), 2008 and 2009, 2010, and 2011.

When once non-existent claims found life, and once-small claims became huge. When diamond rings began to “disappear,’ and water damage claims once averaging $3,000 to $5,000, suddenly ballooned to $10,000, $20,000 and beyond.

In one case, a clients home suffered interior water damage from a heavy rainstorm, caused by a leaky roof, caused by deferred maintenance, caused by reduced family income, further exacerbated by the family purchasing a home which was overpriced and in poor condition, inspected by an appraiser who over-appraised the property, accompanied by an equally unaffordable monthly mortgage committment.

The company I’d insured them with paid the claim. The check they received, less their deductible, should have been used to repair the defective roof, and replace water-damaged furniture, rugs and clothes . This way, when the raindrops fall in the future, no more leaky roof, no interior damage.

Your Homeowners Insurance Policy Is Not A Piggy Bank

Guess what? The next year, after a heavy rain, the same homeowner submitted yet another claim for the same cause of loss! Even the insurance company’s claims department was shocked they’d submit the same claim two years in a row.

I called the client, basically asking “What the hell? Why are you submitting the same claim two (2) years in a row? Why didn’t you repair the roof with the money you received last year?”

Their reply? “We used the money to catch up on the mortgage.”

Oy.

So, the company paid the claim, again. When policy renewal time rolled around, though, they got a different letter from the insurance company. Basically it read, “Your policy is being non-renewed for the following reason: Negative claim history.”

When you receive a letter like this from most voluntary companies, your options are few. You are done. End of story.

Now, this particular story could have had a happy ending, were I able to place them with another preferred company.

No one wanted them. Well, that’s not entirely true. One company did. At a premium of over $9,000 each year. (Don’t get all self-righteous and indignant. You want to dance to the band, you’ve got to pay the man, or in this case, the insurance company.)

So, once the bank learned their voluntary homeowners insurance policy lapsed, they graciously agreed to place a force-placed policy on the home. At a premium of $4,800 each year.

Heck, it was cheaper than the other policy I offered them.

(Our next post will address why home maintenance is important to individual homeowners and the communities they live in. Also, for the first time in the history of BrooklynCovered.com, referrals to home maintenance professionals! And please, take a minute and subscribe to BrooklynCovered.com by entering your name and email address at the top of the column on your right.) 

Dude, Where’s My Homeowners Insurance Policy? | Brooklyn Covered

Her first thought was to call the builder. You know what the builder said? He told her call me to put in a claim with her insurance company. I told her if she did that, with a brand-new house, I could almost guarantee her brand-new policy would be rejected. I reminded her of her homes ten-year warranty, which included the roof. I told her to inform the builder to have a roofer install a brand-new roof on the house, or her next call would be to the New York State Attorney Generals Office, followed by calls to Housing Preservation and Development, the Kings County District Attorneys office, etc.

She had him at the Attorney General of the State of New York.

(This post will begin a blog arc of posts surrounding the issues concerning what would cause a homeowner to lose their homeowners insurance policy issued by a preferred insurance company. While we’ll continue to return to the subject of Force-Placed hazard insurance, we’ll also examine issues surrounding claims, and  underwriting changes, just to name two.

If you are a victim of Force-Placed hazard insurance, and want to share your story, please drop me an email at [email protected] . Don’t worry, your identity will stay a secret. We just don’t want this shameful practice to remain in the shadows. We just need your stories to bring the dirty little secret out of the closet and into the light.

We’ll also examine some of the ins and outs of filing your income tax return this year, and planning tips for a more successful result on your income taxes next year.

So, while it may seem we’re running along different tangents, ours will , over the life of this blog,  converge. The convergence point? Your fuller understanding of things insurance, taxes and even defensive driving.

Thanks for joining us on the best ride in the carnival, BrooklynCovered.com !)

Where’s My Homeowners Insurance Policy?

Remember the movie “Dude, Where’s My Car?” Yeah, well neither do I. For this blog post the title works well since homeowners all over the downstate area of New York State (The five boroughs, Nassau, Suffolk and Westchester) are asking the question, “Dude, Where’s My Homeowners Insurance Policy?”

I’m thankful for referrals to me by my clients and real estate professionals for the different insurance and income tax preparation services  I offer. Lately though, the homeowners insurance policy conversations usually start with one of three questions:  

  1. “Why did my company cancel my policy?” 
  2. “Why didn’t my insurance company renew my policy?”
  3. And there’s my all-time favorite, “Well, what the heck do I do now?”

There are several reasons why your insurance company would choose to not renew your homeowners policy. We’ll cover this topic over the next two (2) posts. Let’s begin with;

  1. Claims:

Let’s start with the claims you submit to your homeowners insurance company. As an example, if you submit two (2) claims for water damage within five (5) years of each other, you’re cancelled. Why? Multiple plumbing leaks are a sure sign of deferred maintenance. Too many people think it’s the job of the insurance company to make normal repairs. Read your policy. Home maintenance is your job, not the insurance companys.

This also applies to interior water damage caused by old and worn-out roofs, windows which weren’t properly fitted or sealed, and even a next-door neighbor whose boiler explodes, flooding his/her basement, and yours.

Mold, anyone?

Don’t think new homes are immune to these types of problems. New homes usually come with even more problems than homes built before 1970.  Remember when new homes started springing up all over Brooklyn back in the mid-90s to 2007? I watched the last group of three-family homes in Atlantic Center as they were built. They dug a hole on Monday,  erected the concrete form on Tuesday, poured the foundation floor on Wednesday, and poured the foundation walls on Thursday and Friday.

On Saturday and Sunday, they rested.

Come Monday morning, the pre-fab modules would start rolling in. Jump down, turn around, pick a losing Lotto number, and the house was done. Soon the proud, new homeowners would take possession of the brand-new home.

And that’s when the fun began.

I’ll never the forget the conversation I had with a client who just purchased a brand-new home in another development after suffering through her first rainstorm. Her upstairs tenant called her and said, “I hate to bother you, but it’s raining heavier in my apartment than it is outside.” And when my client reached home, she found the leakage was so bad her first floor apartment, with the new rug and furniture, and well everything was ruined. 

Submit A Water Damage Claim In The First 60 Days? For A Defective Roof? Kiss Your Policy Goodbye.

Her first thought was to call the builder. You know what the builder said? He told her call me to put in a claim with her insurance company. I told her if she did that, with a brand-new house, I could almost guarantee her brand-new policy would be rejected. I reminded her of her homes ten-year warranty, which included the roof. I told her to inform the builder to have a roofer install a brand-new roof on the house, or her next call would be to the New York State Attorney Generals Office, followed by calls to Housing Preservation and Development, the Kings County District Attorneys office, etc.

She had him at the Attorney General of the State of New York. A new leak-free roof was installed, and she joyously anticipated the next rainstorm.

Until the walls around the windows leaked.

Let’s just say the builder spent a great deal of time repairing every defect in her home and most of the other homes like hers. Had she submitted a claim during the first 60 days of her new policy, the insurance company could have rejected her application. Why? Remember this: Every homeowners and auto insurance company in New York State, has the right to reject your policy for underwriting reasons during the first 60 days after your coverage goes into effect for underwriting reasons. That’s one reason why top-tier companies want to have your date of birth, social security number, and last address when you apply for a homeowners insurance policy. They run a Comprehensive Loss Underwriting Exchange (C. L. U. E.) report on you and your future home, detailing just  every reported claim you’ve had in the last five (5) years, whether as a renter or a homeowner. They also review your credit report to see exactly which “rating tier” to assign you to.

Also, most companies arrange for a company home inspector to come to your home during those first 60 days to guarantee the house meets their requirements. I’ll never forget the first time the New York Property Insurance Underwriting Association (N.Y.P.I.U.A., a.k.a. “The Fair Plan”), rejected an application because the house had outstanding violations and was in lousy condition.

And when the Fair Plan refuses to cover you, you’ve got it bad. Force-placed insurance, anyone? 

Think about it: Why go to all the trouble and cost to issue a policy, only to reject it for underwriting reasons.? Better to underwrite before issue and before a claim.

Our next post will expose other reasons why you lost, or could lose, your homeowners insurance policy with a preferred company. 

Birth Of Force-Placed Insurance | Brooklyn Covered

Of course, the jackals were waiting in the bush. As soon the distressed fell into default, they pounced. Now the letters and calls offerd relief in the form of a quick sale. In many of theses cases, what the house sold for was barely enough to cover the outstanding mortgage. So, you had a home you’ve lived in for 30 or 40 years. No mortgage. Now you have nothing and nowhere to live.

The Birthplace of Force-Placed Insurance

While those who participated in the scam known as sub-prime lending deserve whatever punishment they receive, let’s not forget where they learned their lessons. And how force-placed insurance grew to become the serious issue it is today.

An Indication of Force-Placed Insurance

PropertyShark.com provides information about housing around the region. PropertyShark .com just  published a map showing all the distressed properties in New York City during 2011. You can see the map here: http://www.propertyshark.com/mason/ny/New-York-City/Maps?map=nyc2&x=0.5632&y=0.6809333333333333&zoom=2&basemap=lispendens&star=1&tab=themes&ll=40.6289391996291,-73.9243806440218

Now, as you look at the areas in Brooklyn and Queens, a disturbing trend becomes evident. In communities of color there are more of those nasty little dots than anywhere else on the map. How did this happen?

Well, blame the first phase of the problem on those dirt bags who engaged in the worse form of predatory lending known to man: The predation of elderly and unsophisticated homeowners.

They mailed thousand of letters each week, and employed telemarketers whose only mission was calling these unsuspecting homeowners and convincing them to meet with a consultant. They told these vulnerable folk about how their homes had money (equity) just sitting there doing nothing. They could use this money or repairs, a trip home, and many other reasons. They never told them about reverse mortgages. No, you see there was little profit in legitimate financial instruments like reverse mortgages. Heck, sometimes, they didn’t even say a mortgage was involved.

Then, when they met with their unsuspecting victims, they’d tell them how they didn’t have to take a dime out of their pockets for anything. Little did the public know everything was coming out of their home equity. Many didn’t know  how their loan applications were falsified to reflect fraudulent rental, pension and employment incomes.  Corrupt appraisers  valued homes for much more than they were worth, so lenders could meet the necessary “loan-to-value” numbers.

So, the homeowners applied for $25, 000 and more. They’d go to the closing table thinking about what they’d do with the money, only to walk away with $5,000 or $7,000. What happened to the rest of the money, you ask? Well, that went for attorney fees, application fees, and any other fees you can think of. Fees which, were the mortgage not predatory in nature, would average about 6% of the total cost of the loan. Money which shouldn’t come out of their equity, but from liquid cash.

Once the deception was discovered, some would revolt and demand, via the right of the three-day rescission rule, the cancellation of the loan and return of all of their funds.

Too few people did this.

Most, convinced this was the way business was done, struggled to pay loans with high interest rates, at a time of life when they should enjoy living in a home without outstanding debt. And yes, force-placed homeowners insurance helped many of these same people fall deeper into the pit. Many of these people wound up losing their homes, because their Social Security and pension checks couldn’t handle the weight of their new monthly obligation.

Of course, the jackals were waiting in the bush. As soon the distressed house fell into default, they pounced. Now the letters and calls offered relief in the form of a quick sale. In many of theses cases, what the house sold for was barely enough to cover the outstanding mortgage. So, you had a home you’ve lived in for 30 or 40 years. No mortgage. Now you have nothing and nowhere to live.

I’ll be returning to the subject of force-placed homeowners insurance next week. I just wanted to let everyone know this resource was available.

If you, a family member, or a close friend are either in, or facing default on your mortgage obligations, please call me at 718-783-2722. There are organizations like Bridge Street Development Corp. ,  (bsdcorp.org), and Neighborhood Housing Services (nhsnyc.org), ready to provide counsel and guidance to homeowners in need. If you’re paying for force-placed insurance, call me. Let’s work together to save you thousands of dollars you can use to bring and keep your mortgage obligations current.

Income Tax Refund Memo | Brooklyn Covered

Thank you for giving us more money during this last year than you were required to. Because of your kindness, we were able to use your refund as well as the pending refunds of millions of your fellow citizens to earn interest. We lent money to countries that may or may not pay us back. We even used some of the money to feed people in other countries who hate our way of life, especially since we ‘allow’ women the sacred rights of driving a car, or going for a walk by themselves. Let’s not even talk about the right to vote.

Tax Refund Memo To All Taxpayers

Dear (Taxpayer, please insert your name here):

Enclosed is your income tax refund of $ (Please fill in your normal annual refund).

Thank you for giving us more money during this last year than you were required to. Because of your financial laziness, oops, we mean kindness, we were able to combine your refund and the pending income tax refunds of millions of your fellow citizens to make loans. We lent money to countries that may or may not pay us back. We even used some of the money to feed people in other countries who hate our way of life, especially since we ‘allow’ women the sacred rights of driving a car, or going for a walk by themselves. Let’s not even talk about the right to vote. We provided funds to banks thought to be too big to fail. That’s right, the same banks that charge you all of those ridiculous fees if you don’t have a certain balance in your savings account. If you can afford to have a savings account. And don’t you dare be late with your credit card payments!

Especially pleasing to us is our ability to offer guaranteed rates of interest to those who, by not allowing us to keep their refunds for up to 15 months, watch their Treasury notes, bills and bonds investments grow. And don’t forget about the foreign investors who are buying Treasuries like ice cream on a hot summer day. Of course you can’t buy those investments since once you get your hot little hands on your refund, you dash to the stores for technology you don’t understand but must have because it’s new, shoes designed to destroy women’s ankles, knees, and reproductive organs just because they make you look good, and cars you can’t afford to maintain, much less pay the insurance for. Just to name a few. So what if you purchase things that really don’t make a significant difference in your life? Heck, they’re shiny and new, and isn’t that all that matters!? So what if you have trouble meeting the rent sometimes, you’re late on a credit card payment or two, or you’ll never save the down payment for the house you dream about. Don’t worry about it. Just keep getting those refunds.

And don’t listen to people like Eustace Greaves Jr. He’s got a big mouth. If it was up to him, you’d employ perfectly legal tax planning methods to bring your future money into the present. Then, you could use what is essentially your money work toward realizing the lifestyle you’ve always imagined. Being able to save, invest, and actually accomplish the important things in life, things that matter, like getting a home of your own, enjoying a secure retirement, having more liquid cash, or sending your children to the college of their choice and ability. What’s Greaves’ motto? “No income tax refund is a good income tax refund!!” Who died and made him king?

But hey, we’re not worried. We know income tax refunds turn you on more than watching your team playing in the Super Bowl every year. (That is, unless the big-screen TV you bought with borrowed money was repossessed. You didn’t have the money to pay the note. Doesn’t matter, you can’t pay the electric bill until you get your refund, anyway.) We know you’ll continue listening to us. So just keep doing what you’re doing and we’ll keep mailing those refund checks.

Thanks, and keep the excess money coming. Don’t worry, we’ll send it back eventually.

       

“An investment in knowledge always pays the best interest.” 

 Benjamin Franklin

Bundle Insurance Coverages, Or Else | Brooklyn Covered

According to a recent article in The Insurance Journal, a major insurance company announced plans to drop their North Carolina homeowers insurance clients who didn’t bundle, or combine, their automobile insurance policy with the same company. As many as 45,000 homeowners insurance customers were due to be non-renewed unless they bundled insurance coverages for their home and automobile insurance from this carrier by December 15, 2011.

Bundle Insurance Coverages, Or Else

According to a recent article in The Insurance Journal, a major insurance company announced plans to drop their North Carolina homeowners insurance clients who didn’t bundle, or combine, their automobile insurance policy with the same company. As many as 45,000 homeowners insurance customers were due to be non-renewed unless they bundled insurance coverages for their home and automobile insurance from this carrier by December 15, 2011.

The company doesn’t plan to simply let these former policyholders fend for themselves. They’ve already made arrangements with other companies to provide these former policyholders with coverage.

Let’s look at the positives of bundling insurance coverages.

  1. Bundling insurance coverages saves money. When you place one or more policies with the same company, you can qualify for what’s known as a multi-policy discount. This discount, depending on the company, can range from 5% to 15% on each policy you have with the same company.
  2. Bundling makes it easier to keep up with all your coverages. Now you won’t have to call two (2) or more agent or servicing companies to stay on top of your insurance. 
  3. Purchasing Umbrella Insurance. Adding an Umbrella Liability policy to your insurance portfolio is a cost-effective method of protecting your property from loss in case of a liability claim against you. To qualify to buy this coverage, many companies now require you to have both your auto and homeowners coverage with them. One reason for this is to guarantee the insured continually carries certain minimum personal liability amounts on each policy. And, the company knows immediately if either policy lapses, which could invalidate the umbrella policy coverage.

While there are positives, this “Forced-Bundling,” (sounds a bit like force-placed homeowners insurance doesn’t it?) does raise several critical questions. 

  1. What is their financial relationship with these other companies? Are they truly separate entities, or will they be some type of wholly owned subsidiary?
  2. How will this company compensate its agents for the loss of income they stand to face? Imagine an agent losing 50 – 250 clients in one fell swoop. This will create a huge loss of income during difficult economic times.
  3. Will they allow their agents to become licensed agents for these other insurance companies, or will that ability only be offered to  preferred agencies? Even if they allow all of their agents to seek agency contracts with the new companies, will those companies only offer agency contracts to the best and/or largest agencies?
  4. How will these same agents deal with the loss of community confidence and good will? People tend not to like being dictated to, and the easiest person to whom they can voice their displeasure is their local agent. And, they’ll vote with their feet, wallets and pocketbooks.
  5. How does the underwriting and claims handling ability of the  new companies compare with that of the original company?
  6. What if you’re paying less for your automobile insurance at another company, even while taking the multi-policy discount into effect? Why should you be forced to pay more than what you’re paying now with another carrier?
  7. Let’s suppose you have terrible credit and/or a lousy driving record. You may not even meet the basic underwriting criteria for any of this company’s auto insurance companies. What will happen then?

This situation will anger many, and that’s understandable. One of my clients claimed it was akin to being held up at gunpoint in a dark alley with the criminal telling you, “You’d better give me some money or I’m going to shoot you.”

And just your luck, you’re wearing your jogging shorts.

The ones without the pockets.

 I’ll let you know how this works out for all parties concerned.

 

Force-Placed Home Insurance | Brooklyn Covered

When you signed your mortgage commitment, one of the requirements you agreed to do was maintain home insurance on your home. This homeowners insurance policy would contain a certain amount of Coverage A – Dwelling Coverage, as well as a mortgagee clause, naming the bank and your loan number.

What Is Force-Placed Home Insurance?

Force-placed home insurance is insurance your mortgage bank places on your home when you fail to maintain contractually required home insurance coverage.

Why Do I Need Home Insurance?

When you signed your mortgage commitment, one of the requirements you agreed to do was maintain home insurance on your home. This homeowners insurance policy would contain a certain amount of Coverage A – Dwelling Coverage, as well as a mortgagee clause, naming the bank and your loan number.

When you think about it, home insurance protects the homeowner against the loss of what is once again, the single largest purchase many families will ever make. Imagine a fire reducing your home to cinders and burned bricks. Without home insurance containing coverages in the proper amounts, you’d probably suffer a total loss of all you’d worked so hard to acquire.

So How Does The Bank Figure Into All Of This?

When a bank makes a home mortgage loan this creates the need for the bank to protect its interest in the collateral supporting the loan, otherwise known as the home. So the bank is fully within its right to require you keep certain coverage on the home.

What Creates The Need For The Force-Placed Home Insurance?

Your mortgage is composed of four (4) basic components:

  1. Principal, or the amount which amortizes or reduces the amount you owe the bank.
  2. Interest, or the cost of the money you’re borrowing. (What, you thought you get a $500,000 loan for free?)
  3. Taxes, or what your local municipality charges you for your home to sit in or on dirt. This amount is usually based on the number of stories, square footage and lot size of the house. That’s right, you’re paying more just to have the huge burned lawn.
  4. Insurance, which is my favorite part.

The portion of the mortgage for the taxes and homeowners insurance are escrowed monthly. That means a part of the quarterly or annual bills for each are collected and held by the bank each month, presumably to make payments when due. The key point to remember is the escrow system works well when your monthly mortgage payments are made on time each and every month. Fall behind by even one payment and you ‘ve developed a shortage in your escrow account.

Now here’s the kicker. Let’s say you bought a home during the period I will always call “The Time of Home Purchase Madness.” First, you paid too much for the house. Second, you someone qualified for a mortgage by being able to fog a mirror. No documentation, lousy credit score, and no down payment? Heck, certain mortgage brokers would knock their mommas out of the way to get you a loan.

Let’s move forward to what I call the “What The Hell Were We Thinking?” or, “What Do We Do Now?” time. That’s when too many people realized they should’ve stayed in their rent-stabilized apartments, kept the affordable home they already had, or kept sleeping on Mom’s couch. Suddenly, you miss first one mortgage payment, then another. Now, banks will move heaven and earth to make sure  the real estate taxes on your home are always paid on time. The last thing they want is to lose a property they’re holding a note on to someone who purchases a tax lien.

Banks Do The Same Thing For The Home Insurance, Right?

Wrong.

Let’s imagine your escrow is now short by two to four months payments. Home insurance bills are usually sent to the bank or mortgage servicing company 30 days before the due date.

In the worse case scenario, you have an escrow shortage when the bill from your homeowners insurance company arrives.

Guess what? Since you failed to keep up your end of the bargain, the bank is not required to go out of pocket to pay your homeowners insurance premium . The policy usually lapses. And then guess what happens? Because your world is collapsing around you, and each day brings more despair, you stop opening the mail or answering the telephone. It’s only months later when you learn your homeowners insurance policy lapsed and the bank placed another, force-placed policy on your home. And what gives you a clue? The sudden increase in the negative balance of your escrow account to the tune of $3000 to $8000.

Why so much? Because they can. It’s stupid, really. Instead of just paying a premium of say, $1800, the bank instead buys a policy for you which will cost at least three times as much. With less coverage. See, that’s the real zinger: Every force-placed policy I’ve ever seen covers only one thing – the outstanding mortgage balance.

There’s no coverage for your personal belongings in case of fire or theft. No coverage for liability should someone injure themselves on your property. No coverage to help you with the added expenses of renting an apartment while your home is being rebuilt.

Not even the full replacement cost of your home.

Just the outstanding mortgage balance.

And you’re paying at least three times as much for the privilege to get less coverage.

In my next post about force-placed home insurance, I’ll talk about how it will continue to drag down the economy, how to avoid having it happen to you, and what to do if it does happens to you. Also, I’ll include a link to a radio interview I did back in 2009, about the force-placed home insurance problem.

Eustace L. Greaves, Jr., LUTCF is a Brooklyn-based independent insurance agent and broker. Contact him today to make an appointment to review your home, life, disability, flood, renters, condo, coop, and auto insurance program. You can also reach him by email at [email protected]. And please take a moment to subscribe to BrooklynCovered.com.

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