H&R Block stops offering short term loans against tax refunds

Peter Stone — Tue, 28 Dec 2010 23:16:56 +0000

H&R Block won't be offering any short term loans against tax refund checks this year. Image: MoneyBlogNewz/Flickr.com/CC-BY

This year, H&R Block will not be offering any short term loans against tax refunds. Refund Anticipation Loans, or RALs, are loans lent by a preparer against a potential refund, less a fee. The banking partner of the company was forced out of offering the loans by regulatory bodies.

No more short term loans from H&R Block

The nation’s largest tax preparation service, H&R Block, previously offered a credit product to customers called a Refund Anticipation Loan. The loans, RALs for short, are offered by many tax preparation services. It’s a short term loan against an anticipated tax refund, with a fee subtracted from the refund total. The preparer cuts a check or dispenses instant cash, and the refund check is turned over to the preparation service. In other words, if a person should hypothetically get an $800 tax refund, but needs money now, he or she can get an RAL for $725 against the $800 return. The return check goes to the preparer, if the return is accepted. Recent regulatory action has forced H&R Block to stop offering the loans.

HSBC forced out of bankrolling the loans

According to USA Today, the former partner of H&R Block in funding the cash advances against tax refund checks was HSBC. HSBC was ordered not to proceed with funding any of this type of quick loan to customers by the Office of the Comptroller of the Currency, part of the Department of the Treasury. This forces HSBC to withdraw from its agreement with H&R Block. H&R Block tried to sue to keep HSBC in the agreement, but was not successful. H&R insists it will have alternatives, but there is likely to be some loss in business as customers from Kansas City to Chicago to San Diego will have to seek RALs from other preparers.

IRS cautions against using RALs

The Internal Revenue Service has long cautioned people not to take RALs against tax refunds. The IRS recommends that people use e-filing, as e-filing through the IRS or affiliated E-file programs is free for some taxpayers, and refund checks can be direct deposited in a couple weeks.

Source

USA Today

Fewer people are under water on mortgage bank loans

Peter Stone — Fri, 17 Dec 2010 00:04:38 +0000

The number of people underwater on bank loans for homes they bought is declining, but not fast enough. Image from Wikimedia Commons.

Fewer people are getting under water on the bank loans on their homes. Underwater is when a person ends up owing more to the mortgage company than the home is worth. However, part of it is thanks to the number of foreclosures.

Fewer bank loans are getting underwater

The number of people under water on their homes — owing more in bank loans than the home is worth — is diminishing, according to USA Today. Underwater mortgages have become a problem for a lot of American homeowners, who went out to get a loan for a home, only for the value to plummet. Recreational and retirement hot spots like Nevada, Arizona and Florida were hit hard, with greater numbers of foreclosures and real estate values dropping through the floor.In some urban areas, such as Chicago, the rate of foreclosures has’t been as bad as in other cities, especially in metro areas that are still heavy industrial centers.

Foreclosures played a part

The decline in underwater mortgages has been slight, only 0.5 percent. A large portion of the reduction in people paying installment loans for more than a home is worth is likely due to the sheer number of homes that have been foreclosed, taking numerous mortgages off the books. There have been some incentives offered from the government, but talking loan lenders into reducing debt when many a loan company is struggling is a tough sell.

Home values likely to stay down

It is likely that the housing market is not going to be at its best for some time. Record number of foreclosures, and fewer people confident enough to purchase a home or able to qualify for the financing due to tougher restrictions on credit, will work against the housing industry’s favor. However, growth has been slowly taking place, and a slower recovery than desired has appeared to be the most likely scenario.

Sources