Underwater Pimpin'

Although we love our home, BMNB and I are among the millions of Americans who owe more on our home than what it's worth. We are officially underwater. We saw it coming when we bought our home in 2008. We had no illusions whatsoever that the housing market would rebound starting in 2008. That's why we sat across the kitchen table from each other before we bought our home and said, "We better really like this house, because we're going to be stuck with it."

Come to find out, BMNB still loves the house. Being stuck? Not so much. BMNB likes to have options. So since we knew we had to make our annual pilgrimage to our tax guy to hear yet again how much we owed the government -- federal and two states -- BMNB figured, why not ask him whether it would be worth it to just cobble together the difference between what we owe and what the house is worth, jet, and start over in a cheaper house.

First, let me say that we adore our tax guy. He's a gun lovin' southern Republican who doesn't believe in letting us give up any money to the government we don't have to. I call him our "tax shark." To be frank, we tend to owe on taxes because it's our fault, not his. He tells us year after year we make too much money and need to start something on the side to get more write offs. We're slow learners. Plus, I think Republicans take a special joy in making sure you don't pay more taxes than you have to. We give him that challenge every year.

When BMNB asked Tax Shark about making up the difference on our mortgage, his first response was, "Don't you dare give that money to the bank! You put that money in your new house and rent out your old house, but don't you dare give that money to the bank."

I love the way that man thinks.

We're not the only ones who are underwater, and the question for those of us who are underwater becomes, do you get out of your house before the difference between what you owe and what the house is worth becomes so insurmountable that you're stuck? Tax Shark gave us another perspective: Underwater pimpin'.

When it comes to money and investments, I think of myself as a pimp. Yes, indeed, I do. My money and investments need to be out on the track, making me money, so to speak. If they don't, I get rid of them, to wit: RIMM, Leucadia National Corp. and Helmerich and Payne, stocks I sold in my 401(K) to buy Google, Apple, Baidu and Berkshire-Hathaway B instead. I'm much happier, and I've more than made up the losses on those, well, hos that weren't bringing in money.

So how do you pimp an underwater house? You either modify the loan or refi it (you can get FHA streamline refis even if you're underwater, I'm told) to the point that the new mortgage is somewhere near competitive with rents for similar houses in the same neighborhood, save up the difference between your old mortgage payment and your new mortgage payment, buy a new house (preferably with an FHA loan with just 3.5% down) and rent out the old house. You no longer care that you're underwater for your old house because you're not paying for it -- your tenant is. And, assuming rents rise over time, you might even make a tidy profit. Trying to pay off a house that will never, ever be worth what you paid for it? Now, that's just sneaker pimpin'. But getting someone else to pay off your overpriced mortgage? That's underwater pimpin'.

Now, underwater pimpin' assumes a lot. It assumes that you can refi or modify your loan. It assumes that you can get your new mortgage payment down to a level that's nearly competitive with nearby rents. And it assumes that the nearby rents won't plummet. Now, if you get into your new house and can't rent your old house out for enough to cover the mortgage, I can't, as an officer of the court, tell you to walk away from your old house. I know there are many out there who believe a contract is a moral document and that you have a moral obligation to pay what you owe under one. You can imagine how little I think of that opinion after having been unilaterally furloughed for two years and having that little arrangement blessed by the courts.

It's just an option. And BMNB likes options.

Black-eyed Peas for Luck, CitiMortgage for Money

Unlike many black women across the U.S., I am not tasked with making black-eyed peas for luck and greens for money to celebrate the new year. My one and only task to prepare for the coming year is quite simple:

Make a mortgage payment on December 31.

This is no small feat. Banks close early. Call centers are swamped. I can't set up my online bill pay function to do it because the bill pay function starts before my paycheck is deposited. My mission is simple: Pay the mortgage over the phone before CitiMortgage closes for the day on December 31.

You see, BMNB and I have been in income tax hell for the past three or four years. When we moved to California and were waiting out the overpriced housing market, we no longer had a primary residence for purposes of mortgage interest and property tax deductions. As a double-income, no kids professional (albeit civil service professional) couple with few tax deductions, we were getting taxed out of the behind and coming up short every year. We re-jiggered our withholding, increased our deferred comp contributions, even increased our charitable contributions, but to no avail. We still owed. Big time.

Finally, BMNB got to the end of his rope and decided we had to pull the trigger and buy a house, no matter how much it cost. So last year we did, but late in the year. And, desperate for the mortgage interest deduction and having made only one mortgage payment, I sprang into action on December 31, making our January 1 mortgage payment one day earlier for the sole purpose of getting the mortgage interest deduction for our 2008 tax year. It helped. We still owed, but it definitely helped.

This year, with me being furloughed and given the availability of mortgage interest and property tax deductions to us for the entire year, we're looking at a much better outcome for tax year 2009. Having been in income tax hell for so long, BMNB and I don't make any major money moves -- or even some minor ones -- without consulting our accountant and taking into consideration the tax consequences of any move we make. Oh, and we got a new accountant. I prefer to think of him as our personal tax samurai. He's aggressive on our behalf and gives us helpful tips throughout the year to make sure we're not "surprised and ambushed" by the IRS and FTB as we've been in the past.

So, in order to maximize our mortgage interest deduction, my one and only task was to make a mortgage payment today before CitiMortgage's customer service phone lines shut down. I prepared the night before, having my checkbook, our mortgage statement, and, most important, CitiMortgage's customer service number sitting by the phone. It was the first thing I did when I woke up this morning. I got kicked out of the customer service phone que once, but I promptly got back in the game and made our payment with the assistance of a customer service rep with a lilting East Indian accent. We wished each other a Happy New Year.

So, in our household, it's not greens for money -- it's CitiMortgage for money.

Happy New Year, Y'all. May you enjoy a healthy, peaceful, and prosperous 2010.

BWB

No Budget? No Taxes! No Problem! (Somebody's Gotta Feel This)

The California state budget stalement is allegedly coming to an end after more than 80 days, the longest the state has gone without a budget.

In the meantime, appointed officials and legislative staff have gone without pay. Retired annuitants, temporary employees, and student interns have been laid off from general fund agencies. Vendors have not been paid. Schools have not received funding. Health services programs that rely on state funding have suffered, as have the people who rely on those services.

To quote Kid Rock, "Somebody's Gotta Feel This."

So, here's my proposal to prevent this from happening again: A ballot measure enacting a constitutional amendment that would prohibit the state from collecting any taxes or fees without a budget. And I don't mean some stop-gap spending measure. I mean a budget, signed, sealed and delivered.

This measure would also prevent the state from collecting those taxes and fees retroactively, or from raising taxes and fees for a two-year period after a late budget in order to make up the difference.

So, while the lawmakers and the Governor fail to perform, the citizens of California would get a tax holiday.

Fees to enter Yosemite? Not collectible without a budget. Flash a peace sign to the bears on your way out from your free weekend up there.

Car registration due while there's no budget? No problem. You get free car registration. Roll on up to the DMV and demand your free tags. And give the public counter folks as much attitude as they give you when you do pay on time.

State income tax? Payroll tax? Not when there's no budget enacted. Consider it an early Christmas present to employees and employers alike.

Property taxes due? Not when there's no budget enacted. Pocket that money and go get that 52 inch flat screen. Think of it as a stimulus package from your lazy leaders.

Thinking of buying a car? Wait until after July 1. No budget, no sales tax. Go ahead and upgrade to the touring package on your new ride. Or put those rims on, courtesy of your legislature and the Governor. Doesn't the Governor's Hummers ride on rims? Well, hell, when a budget isn't on time, maybe your Yaris should, too. Courtesy of the State of California.

There is no excuse for the seventh largest economy in the world to be governed so poorly, with a structural deficit to boot.

Somebody's Gotta Feel This.