Home  ABQnewseeker News Latest ASK AP: Mortgage Insurance, Taxes on Social Security
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ASK AP: Mortgage Insurance, Taxes on Social Security |
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Written by Associated Press
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Friday, 25 April 2008 |
 How did lenders get stuck in this mess?
It sounds like a foolproof system for lending institutions: When
someone's house is mortgaged to the hilt, the borrower has to get
mortgage insurance, protecting the lender in the event of foreclosure.
So how did those lenders end up getting sucked into the mortgage mess?
That's one of the four questions being answered in this installment of
"Ask AP," a weekly Q&A column where AP journalists respond to readers'
questions about the news.
If you have your own news-related question that you'd like to see
answered by an AP reporter or editor, send it to
newsquestions(at)ap.org, with "Ask AP" in the subject line. And please
include your full name and hometown so they can be published with your
question.
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Have Social Security benefits always been subject to federal taxes?
Ralph B.
Omaha, Neb.
A: When Social Security began in 1935, benefits were not taxed. Congress
first passed a law in 1983 allowing Social Security benefits to be taxed
and President Reagan signed it.
Whether you pay a tax on the benefits depends on your income from other
sources, including wages, interest, other pension benefits and
withdrawals from 401(k) and IRA accounts.
A single person claiming less than $25,000 and married taxpayers
claiming less than $32,000 in income from other sources are not subject
to the personal federal income tax on their Social Security benefits.
Taxpayers with incomes above those thresholds will find that the
personal income tax applies to some percentage of their benefits.
The original amount of benefits subject to federal income tax was 50
percent. Congress in 1993 raised the amount subject to tax to 85
percent. President Clinton signed that into law.
The Social Security Administration says about one-third of people who
get Social Security have to pay income taxes on their benefits.
Jesse J. Holland
Associated Press Writer, Washington
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At least in my part of the country, when someone gets a mortgage loan to
purchase a home, and the loan amount is more than 80 percent of the
home's value, the borrower is required to pay for a private mortgage
insurance policy. This ensures the lender that it will receive all that
is due in the event of a default and foreclosure.
If that is also true across the country, it would seem that subprime
loans should not be an issue, and investors holding securities backed by
these loans shouldn't be in such financial trouble.
Can you explain why mortgage insurance hasn't prevented the mortgage
meltdown?
Richard Gualano
Downers Grove, Ill.
A: While lenders typically require home buyers to pay for mortgage
insurance when they contribute less than 20 percent of a home's value to
a purchase, that wasn't the case during the housing boom, when lending
standards were lax. In addition to their first mortgage, many borrowers
took on second mortgages, or so-called "piggyback" loans, that would
cover the 20 percent down payment and allow them to avoid making
mortgage insurance payments.
J.W. Elphinstone
AP Business Writer, New York
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Why the difference in spelling between "al-Qaida" (AP style) and
"al-Qaeda" (the style in many other American publications)?
Harry Moskos
Knoxville, Tenn.
A: Al-Qaida and al-Qaeda are transliterations of the Arabic word for "the
base."
In Arabic, "Qaida" or "Qaeda" is a three-syllable word: KAH-i-da.
Pronunciation is governed by a short second vowel that sounds somewhere
between the "i'' or "e'' in "bit" or "bed." Arabic speakers sometimes
elide the word into two syllables, rather like "KAH-da," according to
Lee Keath, AP Cairo news editor.
"Al-Qaida" first appeared in AP stories in September 1998 in the
aftermath of terrorist bombings of U.S. embassies in Africa. Other news
accounts used "al-Qaeda." Following 9/11, AP settled on "al-Qaida,"
which has been listed in the AP Stylebook since 2003.
David Minthorn
AP Manager for News Administration
"Ask the Editor" columnist, APStylebook.com
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The buying of crude oil is based on the U.S. dollar. Would there be any
advantages or disadvantages to the U.S. consumer if the buying and
selling of oil were based on a different currency (for instance the
euro)? And what would the advantage or disadvantage be for other
countries if that was the case?
Thomas McAfee
Little Rock, Ark.
A: The relationship between the price of oil and the value of the dollar is
a complex one, but the bottom line is that a change in the currency used
for oil trading wouldn't likely make much of a difference.
Right now, oil is traded in dollars, even on commodity markets based
outside the United States. Whenever the dollar falls against the euro -
as it has for much of the past year - oil becomes cheaper to Europeans.
When Europeans take advantage by snapping up oil futures, the demand
pushes up the price of oil for Americans.
What if oil were priced in euros? Again, if the dollar fell against the
euro, oil would get more expensive to Americans - in this case, simply
because it would take more dollars to buy the same barrel of oil.
So either way, when the dollar weakens, the price of oil usually goes up
for Americans.
Some analysts explain it another way: It's the value of an investor's
currency that matters, not what currency is used to price the item being
invested in.
"The ultimate price to American consumers would be the same," said Tom
Kloza, an analyst at the Oil Price Information Service, a company that
tracks petroleum prices for oil producers, government agencies and other
clients.
John Wilen
AP Energy and Transportation Writer
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