The mortgage market collapse and structured sales.

As anyone who reads my blogs here and at The Settlement Channel know i've been warning about the inevitable collapse of the real estate market for over two years now. My most recent post on The Settlement Channel discusses my thoughts on real estate, sub prime mortgage and where we go from here.

As part of those warnings I mention the loose and careless lending practices being promoted by mortgage brokers nationwide, although living in Phoenix I got an up close view over the last 7 years of just how wild and crazy it got. Virtually anyone could get a loan if you really wanted one. College students buying houses on the prospect of sharing the mortgage payment with their roommates, retirees on fixed incomes getting no money down loans to buy condo's, single mom's just out of a divorce and bankruptcy getting a 2% down loan with an ARM at 3% to buy a home in Scottsdale. Those are just some of the one's I know of personally.

So, the inevitable happened. The market slowed down, payments got late, foreclosures rose, home prices dropped, mortgage rates reset at higher levels, and all of a sudden we have a mortgage crisis as all these packaged loans start to go bad and the institutional investors panic about losing their money. We are now in the midst of a classic credit induced sellers panic and it should last at least a full year as the lending community figures out how to start making responsible loans again.

The issue is, what if you have a sale you were trying to make happen and were scheduled to do a 1031 roll over or transfer, and now the new property you wanted to go into can't be financed for what you thought you could get? I have no doubt that there are a lot of transactions right this minute that are blowing up because the property to be rolled into can't appraise for what the buyer needs, the financing has collapsed or other issues have put your purchase at risk.

What do you do if your 1031 roll over is going bad, but you still must sell your property?

You absolutely need to look into using a structured sale annuity to spread out your tax hit and defer the taxation of your gains as the real estate markets go through this correction. If you are lucky enough to have a buyer that can still afford your property, and you want to spread your gains out, to my mind the best option now is to use a structured sale annuity to fund an installment sale over time. Spread out your tax hit, consolidate your assets and debt, wait for a better buying opportunity and then take advantage of it when you see it.

Rolling over into a property that is over valued and sure to decline is never a smart decision no matter what you think you might save in taxes! Take your sale, defer the gains safely and at good rates of interest and then wait for your next buying opportunity.

Contact my office if you'd like to know more.  

Mark Wahlstrom presents on 468b Trusts at the NSSTA annual Conference.

Mark Wahlstrom, President of Wahlstrom & Associates and host of The Settlement Channel will be presenting to the NSSTA ( National Structured Settlement Trade Association) in Toronto on April 24, 2007 on the topic of 468b Trusts in Mass Tort and Multi-Claimant cases, a new approach to an old problem.

One of the leading innovators in the creative uses of structured settlements, non-qualified annuity contracts and settlement trusts, Mark will be sharing his latest innovation that has been designed for multi-litigant and mass tort cases such as the anemia drugs Procrit and Aranesp, as well as on going litigation such as Vioxx and Accutane.

While 468b trusts have been part of the tax and legal community for over 20 years, their use has been hindered by confusion, lack of education, turf battles between settlement professionals and interference from financial institutions hostile to the settlement planning industry.

You may read the outline of this talk, as well as access all of the embedded video and media clips from a wide range of attorneys and experts commenting on this unique approach to mass tort case management and settlement.

Click here to access the outline and media resources.  

Mark Wahlstrom mentioned in Wall Street Journal story on Structured Sales.

Every now and then a business publication really sets out to do a real job of reporting on a topic or concept.

Todays Wall Street Journal article written by reported Rachel Emma Silverman on Structured Sales is really one of the better written and researched pieces of journalism on the structured settlement process, and in particular the structured sale.

You can link to the article by clicking here although you need to subscribe to the WSJ online to read the entire piece.

Failing that get a copy of the March 21, 2007 copy of the WSJ and go to section D1. I'll eventually get a pdf and put it here in the resource section.

Her summary was essentially as follows:

1.  The strategy can be useful for older people wanting a guaranteed income stream.

2. The IRS hasn't opined on the approach, so there's a risk it could be disallowed at a future time.

3. Low capital gains rates might make it better to pay the tax upfront.

I agree with each of these conclusions, and it should be a real spur to Allstate, Prudential and others to GET A PRIVATE LETTER RULING AND GET OF YOUR REAR ENDS AND GET IT SOON!

Everyone out here selling and marketing these knows that a PLR would dramatically accelerate the sale of this product, but it should not be incumbent on my firm or my clients to go get it. The stakeholders with the most to gain are Allstate and Prudential and they need to get on the ball and get this done. 

All in all a very good article.