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Francis Vayalumkal
By Francis Vayalumkal

You receive several mails from certain mortgage companies offering you loans without you asking for it. Some of them look like enticing checks that you would love to cash. Sometimes, these offers come in as phone calls. Beware, these days, home-loan scam artists are lurking around every corner. They're hungry, determined and coming after your equity.

Unscrupulous loan peddlers are known as predatory lenders because of their uncanny resemblance to vultures. These loans encourage people to consolidate their debts and suggest this will prevent them from overspending and maxing out their credit cards again.

Predatory lenders deal in asset-based lending: They make the loans based solely on the amount of equity a borrower has in a property rather than considering the borrower's ability to repay the loan. I have had customers tell me they should have no problem qualifying for a loan because they received several offers in the mail. I remember one of them in particular because my customer was living in an apartment when he received a mail with something that looks like an official loan approval letter for a home equity line. I can’t blame him for being excited and convinced that he could get a large sum of cash in hand. I would have loved to mortgage my apartment complex when I lived in it too!

There are several ways you might be approached by a predatory lender. Most come in through deceptive marketing schemes. Victims of predatory lending frequently describe being subjected to a flood of phone calls and letters from brokers and lenders, encouraging them to take out a home-equity loan.

Caution: Lenders who engage in high-pressure tactics, telemarketing, cold calling and deceptive advertising campaigns.

Excessive fees: Predatory lenders routinely charge borrowers fees totaling as much as 10 to 15 percent of the loan amount. Fees alone can have a ruinous impact on a homeowner's equity, but add them to prepayment penalties and you're locked into a high- rate, financially disastrous loan.

Caution: You inquire about fees and charges, but you can't get the facts. They insist there are no "upfront" fees.

Equity stripping: You need money. You don't have enough coming in each month to cover your expenses. You have equity in your home. A lender tells you that you could get a loan. This is a big shock because you know you will have difficulty keeping up with the payments. The lender encourages you to "pad" your income on your loan application on which you repay only the interest each month. You might even be required only to repay at a rate much lower that your actual interest rate. It’s almost like they don’t want you to pay them at all. At some point in the future, the principal will be due, usually in a lump-sum payment.

Caution: Unrealistically low payments.

Loan churning: Elderly homeowners who are asset-rich but cash-poor are prime targets for this scam. A mortgage company contacts you offering to refinance your loan and throw in some extra cash along with it. The problem is that each time you refinance, the fees and quite possibly the interest rates go up.

Caution: Lenders that contact you and any suggestion that a loan is the way to get your equity to start "working" for you.

Not all lenders are predatory. The best way to protect you against those who are is to be keenly aware of their tactics and always be on the lookout for the red flags. If you need an explanation, talk to someone you can trust who has the knowledge about mortgages. Then, consider all the costs of financing and repayment before you agree to a loan.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 971-7555 or via e-mail at

Finance | Financial advice | Immigration | Banking | Accounting

Nitesh Patel

When you think about achieving a secure financial future, retirement savings and investments most likely come to mind. But while retirement savings protects our daily necessities and desired lifestyle tomorrow, what will protect your necessities and lifestyle today?

Disability income insurance protects one’s ability to earn an income – his or her most important financial asset – by guaranteeing monthly pay if one’s ability to work is impaired by sickness or injury. Unfortunately, for many, insuring one’s current income and lifestyle is never addressed – an oversight that can lead to eroded retirement savings, should work disability unexpectedly strike.

Ironically, even though they see the value in having insurance coverage, a number of Americans do not have protection should they become disabled. According to an ongoing Money Maladies survey by Northwestern Mutual conducted 2000-2003, while three fourths of Americans think it’s important to have financial coverage in case one becomes disabled, 30 percent of Americans reported not having enough disability income coverage1.

Work disability can lead to income disability

If you suddenly became disabled, how would you adjust financially? Many people mistakenly think they can simply scale back regular expenses to offset lost income during a period of disability. Surely, a disability may limit one’s ability to leave their home and, as a result, transportation, recreation and entertainment costs will likely be curtailed. However, it’s important to realize that most people’s monthly living expenses remain constant during a period of disability – and perhaps even increase with the addition of medical bills and other related costs.

The fact is that having to deal with lost income during a short- or long-term disability is a distinct possibility for Americans. Consider the following statistics:

There’s at least a 60-percent chance at ages 30, 40 and 50 that one in a group of five people will suffer a long-term disability before age 652.

Between the ages of 25 and 55, for both males and females, the probability of becoming disabled is greater than the probability of dying3.

By the age of 35, people have a one in three chance of being disabled for more than 90 days during the rest of their working life4.

While the prospect of disability is real – 18.1 million Americans reported a work disability in 20025 – people should be more concerned with the consequences of disability rather than the probability. The link between disability and retirement

In many ways, considering disability income options and retirement solutions work interdependently to secure one’s financial future. Each process helps replace a portion of lost earned income, meet daily living expenses and achieve a certain lifestyle.

The daily living expenses during disability and retirement are very similar; in most cases, each life phase requires payments for rent, mortgage, property taxes, housing maintenance, utilities, food, clothing, car maintenance, insurance, healthcare and installments loans. By planning ahead to cover these costs during disability and retirement, one’s standard of living can be maintained.

Unfortunately, for some without disability insurance, the onset of disability will cause them to dip into their hard-earned savings earmarked for their retirement years and run the risk of jeopardizing their financial future.

Consider how long would your retirement assets last during a disability: First, calculate your monthly household expenses during disability. Now total your savings and retirement account balances and divide that number by your monthly household expenses. Based on national averages for annual expenditures and account balances, the average savings account and 401(k) balance would be depleted within 24 months6. Another way to look at it is that one year of total disability can devastate 10 years of retirement (or education) funding if you’ve been saving 10 percent of your annual income each year6.

In the overall scheme of preparing for the future, the interdependent and complementary relationship between disability and retirement is key to building a secure future. Those who plan early to protect their income during disability and retirement will remain in better control if and when those times arise with minimal impact on their family’s finances today and tomorrow.

1 Money Maladies Survey, 2000-2003, Northwestern Mutual

2 1985 Commissioner’s Disability Table (a) Disability lasting at least 90 days. Best occupation classes. Sex-neutral statistics.

3 1975 – 1980 Basic Table; 1985 Commissioner’s Individual Disability Table (a) for all occupation classes.

4 National Association of Insurance commissioners, Commissioner’s Individual Disability

5 U.S Census Bureau, 2002, unpublished data

6 Based on average annual expenditures for 2001 as reported by the U.S. Department of Labor/Bureau of Labor Statistics; average 401(k) balance as of 2001 as reported by the investment Company Institute; and average savings account balance as of year-end 2000 as reported by the American Bankers’ Association.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

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Families with special needs children or other family members should be aware of a federal law that any special needs child/adult that has more than $2,000 in his/her name loses much-needed government support programs eligibility under Supplemental Security Income (SSI), Medicaid and Medicare. One of the most common mistakes by families is putting funds for a child with special needs into a UGMA/UTMA account (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act).

To make matters worse, even if the assets in a UGMA/UTMA account are liquidated, the funds will still be in the name of the special needs child and counted as income. If a UGMA/UTMA account has already been created for a minor with special needs, it is advised that the client contact a local attorney specializing in elder/disability law and discuss how these funds can be spent down appropriately or possibly transferred legally to a different account such as a Special Needs Trust before eligibility requirements can be applied.

Please take note that using UGMA/UTMA assets to fund a Section 529 plan will not be effective in removing the assets from the minor's name because the participant of the Section 529 account will still be the custodian of the UGMA/UTMA. Parents and guardians for special needs children have to pay close attention to the rules. Parents should talk to grandparents and family members who may possibly want to leave funds to the special needs child in their wills and estate that the monies are placed in a special needs trust. This way, the funds are outside the child’s estate and ownership. Careful planning and consideration will prevent much stress at a later time.


To avoid triggering disqualification from government agencies long before special needs children reaches the age of majority (usually 18 or 21 in most states), any educational monetary gifts for the special needs child being made should go to either a Section 529 plan or a Special Needs Trust. (Note: a Section 529 plan can be opened under parents/grandparents' names and Special Needs Trust can be opened under the name of the trustee (parent, guardian, nonprofit or individual professional trustee). In addition, families need to check for other beneficiary (ies) distribution(s) in 401(k), IRAs and insurance policies where a direct, automatic distribution to the special needs child can cause immediate disqualification from government programs. Should you have any concerns or questions speak to an attorney who specializes in this area.

Dr. Ram P. Ramcharran can be reached at

Finance | Financial advice | Immigration | Banking | Accounting

Kamlesh Patel

Don’t miss these often overlooked deductions

If you itemize deductions on your tax return, every additional deduction you find will save you money. Here’s a sampling of often-missed deductions. As you review the list, be aware that certain miscellaneous deductions are deductible only to the extent they exceed 2% of your adjusted gross income (AGI), and medical expenses are deductible only to the extent they exceed 7.5 percent of your AGI.

Also, itemized deductions are limited for higher-income taxpayers.

Often-missed deductions:

Disaster losses not reimbursed by insurance;
Job-hunting travel and telephone expenses;
Employment agency and job counseling fees;
Costs for resume preparation;
Union or professional association dues;
Specialized work clothing or small tools used at work;
Points paid by you on a new home loan;
Points paid by a seller on your behalf;
Points paid on refinancing your home mortgage (deductible pro rata over the life of the loan);
Remaining undeducted points on a prior refinancing when you refinance again;
Your actual expenses or 14¢ a mile for driving in doing charitable work (larger deduction if driving is in conjunction with 2005 hurricane charity work);
Gambling losses, but only to the extent of your winnings;
Fees paid for the preparation of your tax return.

New rules apply when you donate a vehicle

Donating your used car or truck to a charity has become popular in recent years. It’s an easy way to support a good cause and get a tax deduction at the same time. Before 2005, it was up to each taxpayer to decide how much their donation was worth based on the estimated “fair market value” of the vehicle being donated. But, concerned about inflated valuations and excessive deductions, the IRS tightened the rules last year.

Because most charities sell donated vehicles at auction, the IRS now uses the gross auction proceeds as the best estimate of fair market value. For most donations, that’s the maximum amount you can claim as a deduction. If the value is more than $500, the charity will send you a Form 1098-C, or an equivalent statement, showing the gross proceeds.

You must attach this form to your tax return.

In some cases, the charity will keep the vehicle for its own use or will give or sell it to a needy individual. They should still send you a Form 1098-C though, and that’s what you use to calculate your deduction.

The IRS has warned taxpayers about abusive actions by some charities. These charities sell donated vehicles at auction but claim the sales are to needy individuals at below market value. The donor is then told that he or she can take a larger tax deduction than the sales proceeds. The IRS has stated that this practice is not permitted and will subject the charity to penalties.

If your donation is worth $500 or less, you’ll generally have to estimate the fair market value yourself. You can use a guide to used car prices, classified ads, or the Internet to arrive at a value. If you use a price guide, use the “private sale” value, not the “dealer retail” value. And make sure you pick a value that matches the age and condition of your vehicle. Keep a copy for your records. You might even want to take a photograph to support your valuation. You’ll also need a written acknowledgment from the charity if you claim a value of $250 or more.

Use updated numbers for your 2006 tax planning

Take these tax law changes and inflation adjustments into account as you do your 2006 tax planning.

1. The standard mileage rate for business driving decreases from 48.5¢ to 44.5¢ per mile, effective Jan. 1, 2006. The rate for medical and moving mileage decreases from 22¢ to 18¢ per mile. The rate for charitable mileage remains at 14¢ per mile unless the work is related to the 2005 hurricanes. Then the mileage rate is 32¢ a mile for deduction purposes and 44.5¢ a mile for reimbursement purposes.

2. The first-year expensing limit for the purchase of business equipment increases from $105,000 to $108,000. The expensing election phases out once total purchases for 2006 exceed $430,000.

3. The maximum earnings subject to Social Security tax increases from $90,000 to $94,200.

4. The “nanny tax” threshold increases to $1,500 for 2006. If you pay household workers more than this amount during the year, you’re responsible for payroll taxes. The “kiddie tax” threshold increases to $1,700. If your child under age 14 has more than $1,700 of unearned income in 2006 (e.g., dividends and interest income), the excess will be taxed at your highest rate.

5. The maximum individual retirement account (IRA) contribution you can make in 2006 remains unchanged at $4,000, but if you are 50 or older, the catch-up contribution you can make increases from $500 to $1,000.

6. The maximum amount of wages employees can put into a 401(k) plan increases from $14,000 to $15,000. The maximum allowed for SIMPLE plans remains at $10,000. If you are 50 or older, you can contribute up to $20,000 to a 401(k) and $12,500 to a SIMPLE plan. 7. The estate tax exemption increases to $2 million, and the top estate tax rate drops from 47 percent to 46 percent.

Kamlesh H. Patel, CPA, can be reached at (813) 289-5512 or (813) 846-5687 or e-mail

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