3% Withholding Hurts YOU!

Fast-Growing Coalition Opposing Independent Contractor Withholding

(February 16, 2010) Spearheaded by the California Chamber of Commerce, the coalition opposing a proposal to require businesses to withhold 3 percent of payments to independent contractors is growing rapidly.

In just days after inviting CalChamber members via e-mail to sign onto the opposition coalition, the list of opposing organizations and companies more than quadrupled, topping 800 entities from throughout the state.

Other business and industry associations also are actively participating in an intensive effort to educate legislators that independent contractor withholding will harm millions of companies and agencies, kill jobs and hurt the California economy.

Onerous Mandate

The coalition is warning that independent contractor withholding places a maximum burden on businesses for a minimal return. It will amount to an interest-free loan to the state from small businesses—an onerous, never-ending mandate that is a one-time money-grab. It will not yield new revenue, but merely accelerate income tax payments already owed or bring in monies that will have to be refunded to businesses that don’t owe any income tax.

The Senate Budget Committee was poised to vote on a budget package that included independent contractor withholding. The idea seems appealing to lawmakers who mistakenly believe it can help address the state’s chronic budget deficit.

Who Must Withhold?

Companies, non-profit organizations and local and state agencies all would be required to implement the withholding, the coalition is pointing out in a one-page fact sheet being circulated widely.

Who Will See Money Withheld?

Independent contractors are self-employed individuals and businesses, ranging from small businesses and entrepreneurs to large firms.

Examples of operations that will see money withheld from payments to them include: builders, painters, plumbers, real estate agents, insurance agents, computer programmers, accountants, automotive mechanics, attorneys, doctors and other health care providers, engineers, gardeners, janitors, security guards and entertainers.

As businesses, independent contractors pay more kinds of taxes than employees, such as self-employment taxes and local business taxes; pay income taxes throughout the year through quarterly estimated tax payments; and are subject to penalties for not paying or underpaying.

Because of recent budget agreements, independent contractors already must pay 70 percent of their taxes by June of each year for the next two years.

Threatens Small Business

In a year when the Governor and legislative leaders have indicated that “jobs, jobs, jobs” is a top priority, independent contractor withholding will destroy rather than create California jobs.
CalChamber opposition to independent contractor withholding is based on the following:

  • Independent contractors already have a greater tax burden than employees;
  • Withholding will wrongly force small businesses to loan money to the state, interest-free;
  • Withholding could generate little if any new revenue for the state; and
  • Withholding targets the wrong group of taxpayers—taxpayers who are already compliant. These taxpayers already are providing the state information it can use to target independent contractors who aren’t paying income taxes they owe.
Action Needed

The CalChamber is urging members to call or write their legislators to voice opposition to independent contractor withholding.

Business people can find a fact sheet and sample letter, or look up their legislators or legislators’ telephone numbers at www.calchambervotes.com.

Southwest California 2009 Housing Recap

Welcome to the Realtor Report for January 2010. The attached charts summarize Southwest California housing activity for the year just past and provide some perspective on where we’ve been and where we are today. It’s going to take somebody far sharper than me to figure out where we’re going.

The first chart is always interesting in that it gives us a six year window on the market. One of the first thing you’ll notice is that sales were off 2008 levels – about 20% in Temecula, Murrieta and Lake Elsinore, 40% in Wildomar and Menifee and just 7% in Canyon Lake. However, when you drop down to the Demand Chart you’ll note that we’re still selling 70% of the properties that come on the market and our inventory is still minimal.

What that suggests to me is that even though sales were off, it was primarily a factor of product availability, not a decline in demand. 2008 was a record sales year in most of our cities and that absorbed much of the available housing stock dropping inventory levels from 20-22 months in December 2007 to 2 months or less in December 2009.  A ‘healthy’ market inventory is considered to be 5 – 6 months.

After bottoming out in Oct-Nov 2007, sales have generally posted a gradual increase proscribing a shallow ‘smiley face’ trend line – again with sales volume only constrained by available product. (6 Year Sales Graph)

Another thing to note in our sales  – you’ve all heard recent reports trumpeting housing sales off by 40% or more nationwide in December, the biggest monthly drop since Lincoln was a lad. But not in Southwest County. Our unit sales were actually UP December over November by an average of 25%. 12% in Temecula, 17% in Murrieta, 36% to 40% in Wildomar, Lake Elsinore & Canyon Lake and 5% in Menifee. (24 Month Sales Graph)

The Median Price of homes in the region continued to decline year-over-year in 2009 – down 15%, on average, from 2008. That ranged from dips of 22% and 24% in Menifee and Wildomar, to 14% in Temecula, 11% in Murrieta and just 2% in Lake Elsinore. That brought our peak-to-trough median price down 66% in Lake Elsinore, 58% in Canyon Lake, 52% in Menifee & Wildomar, 49% in Murrieta and 45% in Temecula.  (24 Month Median Price Graph)

Ready for some good news? I mentioned peak-to-trough pricing in that previous paragraph because it appears – appears – that our prices may have bottomed out, or be very close to it. Looking at quarter-to-quarter run rates, we have showed 1st to 4th quarter declines every year since 2006. In 2009, 1st to 4th quarter showed nearly a 5% increase in Temecula, 4% in Murrieta, 24% in Canyon Lake and drops of just 1% in Lake Elsinore & Wildomar and 6% in Menifee for a region-wide median price increase of 4%. If we can just keep that up for the next 10 years we’ll be back to where we started.

The last maps show the current status of pre-foreclosure and bank-owned properties in the region. These numbers could change, perhaps dramatically, during the next 60 days. Banks typically hold off foreclosure activities during the holiday season plus some moratoria and loan-mod efforts are scheduled to expire in the first quarter, so the number of notices of default (pre-foreclosure) could increase significantly.

Similarly, there has been a lag between NOD’s filed and actual trustee sales to the banks. As banks get more aggressive about clearing their books of non-performing assets, we may see the banks taking more properties back followed by an increase in releases to the re-sale market – as has long been rumored. Given our current lack of inventory, the extension of the First Time Homebuyer credit, continuing strong demand and historically low interest rates, this could only be good news for our Valley. Of course that’s just my opinion – I could be wrong. (ForeclosureRadar Maps).

Extend the First Time Homebuyer Tax Credit

  • Congress will soon debate if the home buyer tax credit should be extended beyond the currently scheduled expiration date of November 30th.
  • Conservative estimates of the number of first time homebuyers that took advantage of this program start at 350,000 and go up from there. Needless to say it was a lot of people and the impact on the market was substantial – to the point where the housing market is driving the economy back toward a sustainable recovery.
  • It is estimated that the tax credit extension will cost the government another $10 Billion if it’s extended for a full year. Compared to the $700 billion in TARP funds that went to Wall Street and the $787 billion economic stimulus bill passed earlier this year, $10 Billion seems pretty reasonable – especially when you consider that money went DIRECTLY TO CONSUMERS instead of to banks, insurance companies and other corporate entities.
  • Further, assuming the credit is extended, according to NAR Chief Economist Lawrence Yun, the resulting economic growth and job creation will automatically lead to a rise in federal tax revenue easily covering the cost of the credit.
  • This is where YOU, the Grassroots of our Association, are most powerful. If you haven’t received or responded to the earlier NAR Call-to-Action, please click the button. It will take less than 2 minutes of your time and if it lands you just one more first-time buyer during the next year, it will be the most profitable 2 minutes you’ve ever spent. Please click now.
  • cta

    AG Brown Joins DRE & State Bar to combat Loan Mod Fraud.


    Brown to Join Forces with Department of Real Estate and State Bar in New Round of Legal Action Against Loan Fixers

    Los Angeles – At a news conference Wednesday at 10:00 a.m., Attorney General Edmund G. Brown will announce a new round of legal action against more than 200 Los Angeles and Orange County loan consultants who have not registered with his office and nearly two dozen companies that have made unsubstantiated promises to homeowners.

    This action is part of new collaboration between Brown’s office, the California Department of Real Estate and the State Bar of California to combat loan modification and foreclosure rescue fraud.

    Date: Wednesday, August 12, 2009
    Time: 10:00 a.m.
    Location: 300 South Spring Street
    Los Angeles, Calif.


    Attorney General Edmund G. Brown
    Jeff Davi, Commissioner of the Department of Real Estate
    Suzan J. Anderson, Supervising Trial Counsel, State Bar of California
    Bryan Batiste — an employee of the LA County Fire Department who paid $2,895 upfront to a loan modification company for services never provided.

    Brown will also unveil a new website that provides homeowners tips to avoid loan modification fraud, allows them to determine if a company is registered with his office and makes it easier to file complaints.

    Brown has made it a top priority to combat loan modification fraud. As part of a nationwide sweep last month, Brown filed suits against 21 individuals and 14 companies who ripped off thousands of homeowners seeking mortgage relief. In total, Brown has sought court orders to shut down 32 companies and has brought criminal charges and obtained lengthy prison sentences for deceptive loan modification consultants.

    Be Somebody’s Angel This Saturday

    We’ve got an urgent challenge right now which requires big vision for change.  Each week 4,250 of our families are seeking help from Murrieta, Temecula and Menifee food banks, and 14,800 of these are our children – every week. During summer, school breakfasts and lunches are not available to the children. Demand on our food banks has increased 83% since 2007.  Last year the tons of food collected by our Realtor & Affiliate Food Drive was gone in weeks. The need in our community is skyrocketing.

    Massive change requires massive action. That’s why your food banks have come together in a collaborative effort to partner with every household in our community to respond to this emergency at hand.  The need hit crisis levels this time last year.  This year, the need has risen higher. You, your neighbors and co-workers will make a huge impact this week by participating in the Heaven on Earth Food Drive, Saturday, August 8th.
    Can you imagine the impact of every household responding with just one box on Saturday?

    The time is now to bring your influence, your impact, your choice for change, to your community.  This week, I’m personally asking you to focus with me on things that really matter, and embrace the vision of “each one, reach one!” Will you reach into your cupboards to impact your neighbors with just one box of food? Will you lead your co-workers and neighbors to join you?

    Have you caught the vision? Vision + Action = Impact! The details are on the attached flyer (drop-off locations, list of food banks benefiting, items needed). Print the flyers and pass ’em out to your neighbors, colleagues, clubs, youth groups, everyone.

    And please…cast the vision wide by forwarding this important message on to everyone you know in this special community!  I’d love to hear from them.

    Please view the attached Heaven on Earth Food Drive flyer for more details, drop-off locations and a list of most needed items.

    Remember, our neighbors are hungry…

    but together we will change that!

    Thank you.

    food drive

    Living Last Supper @ Old Town Temecula Theater

    At one time or another I think everybody has seen Leonardo da Vinci‘s famous painting of ‘The Last Supper’. But have you ever seen it live? I don’t mean the painting itself – but the actual Last Supper portrayed live?

    Well now’s your chance. Now thru Saturday, you can catch this brilliant depiction of Jesus and the Apostles at the Old Town Temecula Community Theater at 7:30 each evening.

    The show presents a full scale reproduction of da Vinci’s masterpiece featuring life-size actors portraying everyone at the table that fateful evening. What you don’t see is a lot of action or dialogue between the characters. The set-piece is introduced by Leonardo himself and the actors are frozen ‘en tableau’.

    The scene begins right after Jesus has disclosed that one of his Disciples will betray him before the rooster crows. One by one we disengage from the painting and make our way stage front to share our personal experiences with Jesus during our travels with him. Each soliloquy concludes with the common question “Is it I”.

    The Living Last Supper was dramatically adapted from a 1950’s West Point graduate thesis with backdrop and lighting effects to dramatize the event. Our cast consists of ‘actors’ ranging from high school students to long retired folks so there is a great diversity of experience and stagecraft. This not only makes for a lot of fun but provides a realistic cross-section of Jesus’ merry band of travelers. Our Jesus, whom you might actually confuse with the real deal if you ran into him on the street, moved to Indiana this year but flew back just for this series.

    But when the curtain comes up, the fun is over. Being frozen in place for up to an hour is no easy task. Phantom itches, muscle cramps from maintaining strained positions and numb-butt from sitting in one spot on wooden stools are just a few of our challenges. Gotta cough? Fugedaboudit. Fly on your nose? Enjoy. Leg go to sleep before your speech? Incorporate the limp into your character.

    Support your local community theater. If you haven’t been before, our 3 year old theater is a state-of-the-art facility that is acoustically superb and built so there isn’t bad seat in the house. Bring the family – stop by one of our many fine dining establishments in Old Town, then come on over to the theater for a great evening of live entertainment.

    Tell ’em, St. Peter sent you. That’s me – 5th from the left.

    last supper

    ENDANGERED FECES! What? Oh never mind.

    So I’m reading an article in the Obama TIME Magazine a week or so ago (formerly just TIME Mag, now it’s Obama TIME all the TIME), and I’m reading an article by Richard Stolley about a crisis facing the residents of the tiny town of Cloudcroft, New Mexico.

    Cloudcroft is facing a crisis because of another type of resident, the Sacramento Mountains Checkerspot Butterfly. Seems the biological clock is ticking down on the butterfly and ‘the usual suspects’ blame mankind. The towns main industry, timber, was shut down in 1993 in response to environmental demands to save the Mexican Spotted Owl. Now the only industry they have left in Cloudcroft (9,000 feet elevation) is tourism  because it sounds like a glorious place to hike, fish & camp in the gorgeous Sacramento Mountains south of Albuquerque.

    sacramento-mountainNow I’m looking at the picture of the wee beastie and it’s like I recognize an old friend, the equally famous and supposedly nearly extinct Quino Checkerspot Butterfly.  The Quino brought development in our area to a virtual standstill a decade ago when enviro’s demanded that any and all  potential habitat be spared. Trouble is, for an endangered species, they live everywhere – or darn near.

    quino I remember many a day accompanying Paul, the local Quino Checkerspot butterfly expert, out on a hunt to determine if they were mating in a given area. See, they loved to hang out in the plentiful Chaparral Scrub and Coastal Sage and if you caught them mating there would be no building permit for that parcel. Trouble is they only mate for about 6 weeks a year in the spring and even then only if it’s a reasonably wet spring. If we had a dry spring you couldn’t get a permit because you couldn’t tell if they were there or not because mating conditions weren’t ideal. So you had to wait a year and hope next spring was wetter. Our local expert had been tracking them for 6 years and, aside from the occasional small empty champagne bottle and the teeny tiny cigarette butts, he had yet to see one but he remained optimistic (not to mention, voyeauristic).

    Some locals resorted to surreptitiously torching their parcels. Hey – no Chaparral no butterflies Mr. Inspector. Others found a loophole where they’d register a complaint with the County Fire Department that the parcel was a wildfire hazard. The County would  order them to clear the weeds off. Hey – no Chaparral no butterflies Mr. Inspector. It all got pretty silly.

    I swear to God I’m not making this stuff up. You can Google it or whatever you want and you’ll find the truth whereof I speak. Just ask Jack Henz or Jerry Jeffries or some of the old land hands.

    Finally after a few drought years where there was no butterfly mating to speak of, Realtors, developers and private property advocates raised enough hell that reason prevailed. If you had a 5 acre parcel even if it was rife with scrub and mating butterflies, you could still build on at least one acre if you left the rest alone. Over time that too has been relaxed so that man and butterfly now peacefully co-exist and each is free to mate on their own land with impunity.

    But as I researched this post (because I would never just go off on a tangent half-crocked), I realized there are numerous members of the Checkerspot Butterfly family. I’ll bet you didn’t know that. And you k now what? They’re all the same and there’s billions of them. I don’t think they’re endangered at all. It’s just that if they live in SoCal they’re called Quino and they’re endangered. If they live in NorCal they’re called Bay Checkerspot and they’re endangered. If they live in New Mexico they’re called Sacramento Mountain and they’re endangered. There are numerous other family members including one that’s the state bird of Maryland – I
    found 8 in about a 30 second search.

    It’s kinda like saying the Smith family is endangered because on this one block there is only one family named Archibald V. Smith, and down in this bar there’s only one Maria Angelina Smith and up in Cleveland there’s just a single Rooney Alexander Smith. Ya think I’m onto something here or am I just whistling in the dark? And does it even matter?

    So here’s a public service. Below are the names and photos of several varieties of Checkerspot Butterfly. If you or your favorite environmentalist can match the names to the appropriate photos and correctly identify which ones are endangered, I’ll send you a fully mounted (photo) of your favorite (well it would hardly be PC to send a real one since they’re about to disappear and all.) Be honest and don’t pass your cursor over the photo to see what the tag says. That’s cheating and qualifies you for a Cabinet level position in the Obama government.

    Based on my extensive research, I’m seriously questioning the  endangered nature of Familiae Checkerspottium. It’s my hypotenuse that they just have a good press agent and that I’m the first one in the country to connect the spots pointing out the phallusy of their endangerment & demise.

    Of course that’s just my opinion. I could be wrong.

    1. Bay Checkerspot Butterfly

    2.Taylors Checkserspot Butterfly

    3. Quino Checkerspot Butterfly

    4. Chalcedon Checkerspot Butterfly

    5. Sacramento Mountains Checkerspot Butterfly

    6. Baltimore Checkerspot Butterfly

    7. Anicia Checkerspot Butterfly

    8. Texola-Elada Checkerspot Butterfly


    Now wasn’t that fun?

    The opinions in this commentary are strictly Gene Wunderlich’s personal opinions. While any reasonable and/or rational indivdual should agree wholeheartedly,
    the opinons reflected herein may not necessarily be those of the Southwest Riverside County AOR, or any local or state government or other mental institution.

    Recognizing Real Estate Fraud – Day 3

    Final series from the MortgageFraudBlog Seminar with reference to a variety of frauds.

    Last blog I started a list of fraud schemes covered in Rachel Dollar’s MortgageFraudBlog Conference held in Miami. We started the list with The Classic, The Straw Buyer, Air Loans and Double Sales. Here’s a few more:

    • Affinity Fraud – where the perpetrator looks to specific groups for victims. They will recruit ringleaders who have contacts at a church group, within ethnic groups, senior groups and professional groups like nurses or teachers. By virtue of the fact that they are already part of that group, they are more readily accepted and after making sure the first couple victims are treaty like royalty – the rest fall like dominoes.
    • Soliciting Investors – you’ve seen the signs by the side of the highway – ‘We Buy Houses for Cash’, ‘Investors Needed’ that sort of thing. By and large they are looking for people to act as Straw Buyers and while we can’t say with 100% certainty that these are ALL scams, in some counties in Florida, Code Enforcement is directed to confiscate these signs. In some cases, law enforcement have called the numbers on the signs and set up stings for illegal operations.
    • Builder Bail-Outs – Increasingly common in some areas where builders have large sitting inventories. By offering incentives like cars and vacations, together with inflated appraisals, they entice buyers (sometimes using straw buyers) to purchase their inventory of homes. The buyer then defaults and keeps the car but the builder has gotten another home off their inventory.
    • Buy & Bail – sometimes referred to as ‘Borrowers Revenge’ has already been discussed in other posts in this section. Basically it involves a homeowner who is upside-down in a property. They owe $400,000 on their home but they can now buy the identical place for $250,000 down the street. They qualify for a new loan by providing fraudulent rental papers showing their current home will be leased. They get into the new place and immediately bail on the old one. Often times they will actually rent the old place for the few months until it goes into foreclosure, pocketing the rent and deposit and leaving the renter twisting in the wind when they get evicted. 
    • Flipping – not in and of itself fraudulent. Many people have successfully and legally purchased properties over the years that are in  less than ideal condition, invested a little sweat equity and sold the resulting home for a tidy profit. However, there is a whole subculture of illegal flipping involving fraudulent appraisals & straw buyers. Sometimes these scams take the form of ‘investor groups’ who buy several houses in a neighborhood and then re-sell them to each other several times at ever inflating prices. While the first few sales will involve inflated appraisals, after 3 or 4 times, they create their own microcosm of appraised value within that neighborhood. After running the sales prices up significantly, they simply pocket the gains, bail on the neighborhood and start over in another area. 
    • Foreclosure Rescue Scams – the newest addition to the genre. I know in our area of SoCal we are seeing some of the same people who ran the kiting scams coming back into the market as ‘foreclosure specialists’ to help people avoid losing their home. They have a ready made clientel because all the people they screwed getting them into a predatory loan or inflated value home, now they can screw them again on the way out by promising miracles and delivering doo-dah. Whether it’s a Foreclosure Rescue Scam,  a Loan Modification Scheme or a ‘Payment Assistance Scam’, it’s the same principle. These perpetrators are catching homeowners at their most vulnerable, when they have already made one bad decision and are about to lose their home. Almost every one of these cases involve the homeowner transferring or deeding the property over to the fraudster to ‘avoid foreclosure’. The fraudster will tell them they can make minimum payments to them until they’re back on their feet while the fraudster will make the full payment to the lender and then deed it back to the original homeowner once the default is caught up. Of course they don’t actually do this. Instead they pocket the payments from the homeowner, make no payments to the lender and typically take the deed and use it to refi the house using a fraudulent appraisal (and without the original homeowners knowledge). By the time the homeowner starts getting the NOD’s, the fraudster is long gone with their money and the home is encumbered for even more than the owner originally owed. They have also learned a valluable (and costly) lesson that there is a significant difference between having your name off the deed to the house and having your name off the mortgage loan. They still owe the money,  their credit is shot and there is no recourse.
    • Rental Property Scam – I’ve written about this one before. In it’s simplest form somebody owns a home, maybe in a buy & bail, maybe a legitimate owner. They rent the house out collecting first & last plus a deposit. Then they quit making their payments to their lender and just pocket the monthly rent from their tenant. Some months later the tenant is leaving for work one morning and sees the Notice of Trustee Sale tacked to their front door. Even if they immediately stop making payments to the owner (and there’s some legal issues there in the owners favor), they are still likely to be out at least a months rent plus the deposit which they will never see and they get to move their family again paying for the move and a new series of first & last & deposits. 
    • Rental Property Scam II – even nastier. A perpetrator gets the combination for a bank owned home and runs an add in the newspaper or Craigslist offering the house for rent. They get to the property and take the ‘For Sale’ sign down and then  meet the prospective tenants, showing them through the property like everything’s legit. They sign the papers on the spot taking first & last plus a deposit and give the new tenant a set of keys. Next day the tenant shows up with their moving truck and discovers the keys don’t work and the phone number for the ‘owner’ is disconnected. In the worst local case I’ve heard about, 14 people were snared by one perpetrator to the tune of $3,400 each. They discovered the hoax when multiple families started showing up with their moving trucks a couple days later. 

    Well, that about covers the major scams. If you hear of something happening in your area, please feel free to post it here as a caution to the rest of us. These scams have a way of showing up in more than one area and in slightly different forms. The perpetrators who pulled off The Classic in our area with over 128 homes, pocketed over $12 million dollars over a 2 year period and left lenders holding the bag on about $70 million in foreclosed houses. They had already been busted for pulling the same scheme in Pennsylvania but were not prosecuted, paid a small fine and headed to California, where they learned from their mistakes and lived the high life for several more years.

    There’s only one way to head these schemes off early and that’s for Realtors to communicate. Law enforcement often doesn’t find out about many of these scams until they’ve already cleaned house and left. Lenders often don’t find out until their risk management teams notice patterns of losses but by then it’s usually to late. Realtors are frequently in the front line and see these things develop. If you see something fishy or something doesn’t quite pass the smell test – let your Broker know. Talk to others in your association to see if they’ve experienced the same thing. Talk to your Board Counsel or a good real estate attorney and bring it to the attention of your local law enforcement, your District Attorney, U.S. Attorney, Department of Real Estate, Attorney General, Securities and Exchange Commission and FBI. Most will ignore you but this has become such a high profile issue that sooner or later someone will listen.

    MortgageFraudBlog Conference – Day 1
    MortgageFraudBlog Conference – Day 2

    Realtors are part of the solution – not part of the problem. Make it so.

    Visit the Mortgage Fraud Group and post your experiences. We learn from one another.


    ‘Recognizing Mortgage Fraud – Day 3’


    The opinions in this commentary are strictly Gene Wunderlich’s personal opinions. While any reasonable and/or rational indivdual should agree wholeheartedly, the opinons reflected herein may not necessarily be those of SRCAR/GADBLOG, ActiveRain, The Valley Business Journal or any local or state government or other mental institution.