Tuesday, May 31, 2016

The Mayor & his mortgage

What exactly happened to Mayor Tony Yarber's mortgage?  The Clarion Ledger published a story with the headline "Mayor's mortgage vanishes after election".  However, the actual vanishing was a forgiveness of the mortgage by the lender. Anna Wolfe reported the details of his mortgage in a story that was thorough in the actual details.   The article stated the Mayor's mortgage was released by Wells Fargo in April 2014 after he had not paid it for several months.  It even included an audio recording of the Mayor describing his travails at the time during a sermon.  However, Hizzoner responded to the story on Facebook:

It's disappointing that the Clarion Ledger is continuing to allow unethical journalism to happen. Especially with misleading headlines that give the impression that an impropriety has taken place. A headline that states Wells Fargo won't say whether the house was paid for or forgiven is a gross mismanagement of the public trust, especially when the reporter Anna Wolfe was provided documentation by me from Wells Fargo that CLEARLY states it was a FORGIVENESS. In the past, I've allowed all types of things to be printed by both the CL and the Northside Sun that created clouds of mischaracter-ization. But, this is notice that it ends today. Any attempt to steal God's glory is an offense to Him. So, I'll let Him instruct on how to proceed. Stay tuned. TGBTG
 What exactly did happen to his mortgage? Mortgage's are JJ's specialty so this correspondent made a trip to the courthouse last week and dug up the records on the Mayor's home (they are posted below.). 

Mayor Yarber purchased his home in 2002 with a $63,110 FHA loan from Union Planters Bank. It was amortized for thirty years.  It is not known what the payments were but JJ will attempt to provide an estimate through some reverse engineering.  The 30-year interest rates in 2002 were in the range of roughly 5.5% to 6.0% although they fluctuated higher during the year.  The payment would be approximately $380 per month if the interest rate was 6.0% (using the Bankrate.com mortgage calculator). 

A new deed of trust states that the Mayor refinanced the home in 2007 with Wells Fargo for $92,872.  The principal increased by more than $30,000.  The article states it was $40,000.  JJ was not able to independently verify that figure but will assume it is true for the purposes of this post.   Such a substantial increase in principal means the loan was probably a cash-out refinance.  The loan was amortized for forty years.  The loan had a fixed-rate amortization as the box for the ARM option is not checked.   The deed of trust does not state the interest rate nor the amount of the monthly payment.  However, a 40-year mortgage in 2007 was usually considered to be a non-conforming loan. 

Wells Fargo filed a deed of release on May 16, 2014.    Mayor Yarber provided a copy of the letter cited by Ms. Wolfe in her story.  The April 29, 2014 letter states:

We're writing to let you know that due to inactivity on the above mortgage account, we are releasing the lien on your first mortgage with us.  This means we will forgive the unpaid principal balance on your first mortgage loan and release you from any obligation to make payments on the loan now or in the future. 
There was no substitute of trustee notice filed at the courthouse.  A lender files this notice when it is getting ready to foreclose on the house.  A substitute of trustee notice means the lender chambered a round and has the finger on the foreclosure trigger. 

So the nutshell version of the story is the Mayor got a typical FHA mortgage in 2002, refinanced it on a forty year amortization as he cashed out the equity, and then in 2013 stopped making payments for whatever reason.  The bank forgave the loan on April 29, 2014. 

The term "vanishing" was probably misleading as it gives the appearance that the story reports someone paid off the mortgage for the Mayor.  Such a payoff would be highly suspicious and raise more than a few questions.  However, the actual story delves into the details of the transactions and provides more accurate information.  It is about a Mayor whose mortgage was forgiven by the lender, not paid off by someone paying to play.  The term "forgiven" probably should have been used. 

Kingfish note:  That was the reporting on his mortgage, now for some opinion.  The Mayor is a big boy and knew when he ran for office that his public records such as the mortgage would be examined.  His financial judgment and record on matters such as this is fair game for criticism.  If JJ is going to report on Frank Melton and his mortgages, it is only fair to report on Mayor Yarber's mortgage.  However, the lack of a substitute of trustee notice gives credence to the Mayor's statement that the bank forgave his mortgage. 


Anonymous said...

Never met a "forgiving" banker before.

Anonymous said...

One wonders whether hizzoner properly documented his '14 tax return with accompanying 1099 from wells fargo establishing the "mortgage debt forgiveness?" After all, such "debt forgiveness" is deemed income to the debtor, is it not? I'm sure hizzoner properly accounted for that "deemed income" on his '14 return and, like all those other social justice warriors out there, paid his "fair share."

Anonymous said...

No way that bank gave up this money maybe rules or regs that to not allow for it. Is a forgiven loan considered a gift by the IRS? We all know that something not right went on.

Anonymous said...

a debt that is "forgiven" is indeed taxable income.

Anonymous said...

Rotten to the core---

Anonymous said...

Anyone who would basically refinance a home for FORTY years has no business managing a city of any size. This speaks volumes about Jackson's fiscal condition. No wonder Wells Fargo makes a lot of money.

Anonymous said...

Its not "income" unless the bank notifies the IRS via a 1099 or other form.

WF made a lot of mistakes with mortgages all over the country.

This mortgage forgiveness could have been a part of a settlement with AGs.


Anonymous said...

Why are people so suspicious. Everyone knows any bank or mortgage company is in the habit of forgiving many loans. Happens all of the time. I can't understand how they stay in business when they forgive so many loans. Bless their heart.

Anonymous said...

This is so freakin crooked.

Anonymous said...

Someone had a burr under their blanket for the mayor. I wish someone would shed some light on Lumumba, Horhn, and others.

Anonymous said...


Anonymous said...

No surprise the City's finances are also in shambles. If he cannot keep his own house in order, what else would you expect?

The "leadership" in Jackson is a total joke. We are all doomed.

Anonymous said...

if WF kicks him out, who is buying the house? no one. better to get it off the books rather than try to maintain and sell

ill gladly pay a House not to NOT live in a neighborhood near this house...

Anonymous said...

Accountants !!!!!!

Please shed some light on whether, or not any tax liability would be triggered only if a 1099 was issued by the lender who forgave the debt.

Seems to me the tax is the tax is the tax. 1099, or not??????

I've never seen the IRS forgive taxes because of a paperwork error on the part of anyone.

Bet he won't live there very long.

Anonymous said...

How could anyone argue that the public shouldn't know about this?
Yarber is apparently incapable of making a modest house payment. If the man can't take care of his personal business he can't be trusted to manage a large city. He was also dumb enough to boast about it. Wells Fargo must have realized they deserved to take a loss on this one for granting the loan in the first place.
I wish that I could stop paying my house note and the lender would just forgive it. Then I wouldn't have to work so damn hard.

Anonymous said...

I would be looking at the local branch manager who signed off on refinancing with an additional $30k, quickly followed by defaulted payments, getting elected, and the whole thing being scratched.

Oh, forgot! God singled him out for His Glory. What a crock.... was Kishia a banker last year?

Anonymous said...

WF should have issued a 1099-C for the cancellation of the debt since it was not a foreclosure. There are certain exceptions such as foreclosure or debt forgiven through restructure, as provided by The Mortgage Debt Relieft Act of 2007. Someone might want to forward the screen shot of the letter and download Form 3949-A (Information Referral) to the IRS if they believe he has not reported. You can anonymously report suspected tax fraud. IRS will take it from there.

Kingfish said...

Mortgage was issued in 2007. It was not "quickly followed by defaulted payments" as those apparently did not take place until 2013.... 6 years later.

Anonymous said...

If Yarber was struggling to pay what is probably a small monthly mortgage payment as compared to most - doesn't that make him much more susceptible to bribes and the like?

I am not saying that Yarber did anything inappropriate - but it simply does not look good for an elected official to have such circumstances.

Anonymous said...

Folks..if WF does not report it as income, it is not income. Its that simple.

The settlement WF reached with the AGs over loan structuring and how they applied payments to the escrow (or not) probably included WF not reporting this as income to the "victims" of the transgressions.

Its not an accounting issue as much as it is a legal issue.

Now "should" Yarber be held accountable from a hypothetical perspective? That is up for debate. Can you be jealous that he seemingly got a windfall (even though you don't know any of the facts and just assume the worst)? Sure....be jealous all you want...and hateful..goes right along with this blog.

F mickns said...

I know nothing about the Yarber situation, however I do know that financial INDUSTRIES caught by the Feds with unlawful practices do "forgive" debt. The credit card industry, owned by the banks, have made billions of dollars of forgiveness on credit card accounts due to a consent decree agreement in the 90's

Anonymous said...

This mortgage was likely made by a mortgage broker and sold to WF. These 40 year mortgages were abusive and were target of the Obama admin push to forgive principle. In 2012, Obama began putting the big squeeze on the banks, because up to that point, they had been dragging their feet on helping out underwater homeowners. I'm sure that WF looked at a 100K house underwater in a bad part of Jackson on a 40 year mortgage and decided that they would net zero on a foreclosure and simply wrote off the balance as part of the settlement, since the Feds directed them to forgive billions in principle.

Me personally, I took out a "stated assets, stated income" loan from Chase before the crash. I tried to get it refinanced starting in 2011, but was always told no because I was 1)not underwater, 2) current on payments, and 3) Had a home equity loan on the property. And anyway, my credit got shot and I told Chase that they would have to refinance with no income or asset verification and a credit score around 600. But after the Feds started putting the squeeze on Chase, I got a call one day in late 2012 where Chase said they were refinancing my loan at no cost, no verification of anything, don't worry about the Home Equity line, credit score at 600 no problem. Next day my rate dropped from 5.25 to 3.50. They sent a guy over to my office to sign paperwork and the whole thing occurred in 1 day. I didn't initiate any of it. So I believe Tony Yarber when he says that Wells just wrote his loan off in the blink of an eye - it was happening to others like me.

My house payment was cut $600 per month. It gave me a tremendous amount of cash flow help when I needed it most, and gave me the room to pay off other stuff and get my credit score above 720. So I too was thankful for the divine intervention on my behalf.

From 2009 to 2011, the banks put the screws to everyone who was vulnerable. They canceled credit lines, raised interest rates, and made it impossible for the little guy to borrow. I don't have any sympathy for them, and as far as I'm concerned, the financial penalties should have been greater.

Anonymous said...

It's a shame the remainder of the Wells Fargo is not available. One suspects that a notification of the tax implications of the "forgiven debt" is contained on page 2 along with a statement that WF would be providing a 1099 at year's end. Perhaps a complete copy of the letter can be obtained and posted?

Anonymous said...

My mortgage is with Wells Fargo. How do I get mine forgiven?

Anonymous said...


The government required 75% of 20 billion in relief to happen in 2 years time...so lots of folks were "forgiven."

Thank you for sharing.

JJ, the self proclaimed "mortgage expert," should probably have taken the Bar exam and practiced a little law before he started writing incendiary rhetoric about the Mayor and his finances.

This blog post is actually part of a larger picture. Without any facts or questions about the underlying facts, people post on here about how evil, corrupt, bad the Mayor.

Do you not see anything wrong with this?

Its vile and destructive.

Yall need to quit automatically assuming the worst in people.

Anonymous said...

@4:53 PM, apparently if you are black just stop making your payments and all is good.

Anonymous said...

5:16 PM

Your sheets and hoods are ready to pick up at the cleaners.

Anonymous said...

Sheets and hoods. Hell no, I am putting in an order for black power t shirts. I don't see any white person being forgiven a home loan.

Anonymous said...

3:53 PM above is a white guy....bet you a house.

Anonymous said...

With few exceptions, debt cancellation is income, regardless of whether it's reported on a 1099 or not. However, if someone is insolvent immediately before the debt is forgiven, then you can reduce the taxable portion to the extent of insolvency. Insolvency is basically adding up the fair market value of every thing you own, and then subtracting your total debt immediately prior to the forgiveness. If it's a negative number, that's the amount of debt forgiveness you can exclude from income. Signed, a CPA in tax practice for over 30 years.

Anonymous said...

The IRS would have a very hard time pressing their case in court without proof...ie the 1099.

Net result - not income


Anonymous said...

Somebody receives $92k cash but no 1099? No income! Itz awwwwwlll good.

Anonymous said...

Hey lawyer - when it comes to taxes, burden of proof is on the taxpayer. Stick to what you know, whatever that is - or isn't.


Anonymous said...

3:53pm Thanks for trying to explain.
Unfortunately, few read the story and the comments .
And, some are too young or too inattentive to remember more than a few other CL stories from the late 70's and early 80's of state politicians' loans ( not mortgages) being " forgiven".
But, I guess if you liked the guy and voted for him, you thought forgiving campaign debt was OK.
Here's a news flash for some of you, some folks get lower rates for bank loans even when their credit score is the same as yours.

Anonymous said...

7:14 is correct - 3:53 is a white guy. This isn't a racial thing.

One other note from my post @ 3:53 - one reason Chase was so quick to refinance besides the govt. pressure is that the going rate for conforming loans with good credit when I got my gift refinance was 2.90. So chase turned around with my new 3.50 loan and sold it to a mortgage pool for about a 7% profit. Banks needed to get these non-conforming loans off of the books. They were wrapped up in CDO's which were sinking, and investors like PERS of Mississippi (which had tens of millions of this junk in their portfolio) were asking to be made whole. If you haven't seen the movie "The Big Short", it is worth renting on your dish/cable/directTV. The whole mortgage finance industry had gone crazy.

Anonymous said...

9:54 PM

No info to begin audit because no document exists to trigger it.

It never begins.

If you need an example...look no further than the Mayor.

Anonymous said...

So 6:40 PM

Since the "victim" above is indeed a white guy...there goes your silly theory that the perks are only for black people.

Go get your hood and sheets....you have a rally to attend soon....

I hope you dont have kids

Anonymous said...

7:33 - The question was whether some or all of the debt forgiveness is taxable, and the answer is yes, as adjusted for possible insolvency. Period. The question of whether he will have to pay may be decided by an audit, which is a remote possibility these days. However if he doesn't report it at all and gets audited, he'll probably be subject to various penalties, in addition to the tax. I'm fairly certain that WF sent him a 1099, as they're required to do. That being the case, he'll have to deal with it sooner or later.

No need for examples, I deal with this kind of thing regularly. My strong sense is that you do not, as your ignorance with respect to this area is very obvious.

Anonymous said...

11:08 AM

The issue was whether or not the Mayor's receipt of a free house was a taxable event to him.

In his case it was not a taxable event.

The answer is no but not because of conventional rules but by way of statute and independent settlement by and between the parties. If WF does not submit a 1099 (and they did not in this case and in 20 billion dollars worth of other cases) then its not taxable. WF did not send the 1099s because the relief act applicable said it was permissible/required for them to so proceed. In other words the law protected the Mayor and similarly situated "victims" of mortgage fraud. (40 year loan refi, fees, etc.).

So your claim that this event under normal circumstances is a taxable event is probably correct. In this case however, due to the law and agreement of the parties allowed under that law, it is not taxable income.

CPA said...

Aren't there situations where the 1099-reported amount is NOT taxable if the debtor is insolvent?

Anonymous said...

Did everyone forget about the Mortgage Debt Forgiveness Act of 2007. These were not taxable 2007-2014: https://www.irs.gov/uac/home-foreclosure-and-debt-cancellation

Anonymous said...

Why not call and ask the major to clarify? Surely he would gladly want to clear this up by simply stating his mortgage was one caught up in the mess
these lenders ended up in after the Clinton admin made the banks loan to people who could not afford the loans.
VERY simple for him to clear all the talk.

Anonymous said...

11:34, are you talking about the same mayor that wouldn't even explain to the city council about spending all of the city's money, including emergency funds?

Anonymous said...

That is the very one 2:41. I was being sarcastic. I just read the story in the clarion and it read like yarber thought his situation of not paying his mortgage was funny.
His comments were unbelievable--the cavalier way his statements came across shows to me
how much so many of "our leadership" in Jackson have no shame in the corrupt why they do business--private or public. Far worst to me is that the majority, apparently, of the citizens of Jackson DO NOT CARE and/or do not understand the consequences.
I got the impression Yarber and/or the reporter was implying that Wells Fargo was at fault for making this loan in the first place WELL Yarber had to know at the time he could not pay the loan back and was getting in over his head yet he went ahead anyway.
It paid off in a big way for HIM not so much for the rest of us who end up having to pay more to make up for his and others defaulting on loans. Yet another example of the ALL RIGHT I got something for free mentality.

Anonymous said...

1:45, that is the mind set of most of the people in Jackson. Anything they can do to get something for nothing is what they understand best, especially if it may be white people they are getting it from.
Yarber isn't any different than Stokes. It is always the fault of others, never anything they may have done.

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