If you are a Corn Belt farmer, and have corn or soybeans covered by crop insurance, there is a strong possibility you may have a claim to file for either loss of production or revenue.
With an estimated $20-30 billion to be paid this year in crop insurance indemnity checks, both the USDA’s Risk Management Agency and the crop insurance companies have to ensure that all claims are valid, and have made it well known that anyone with a claim of more than $200,000 will be subject to an audit.
But how do you prepare for an audit? What records do you need? Here are answers to your questions.
The auditing process should not be considered as a witch hunt, and anyone audited should not consider themselves as being suspected of financial shenanigans. The audit is something required by law and is part of the crop insurance process as much as signing and dating your application for coverage.
Additionally, it might be said that anyone farming for multiple landowners, and under the scrutiny of a farm manager, may already have all of the required information at hand. For many farms with good record keeping systems, those documents and data will likely satisfy the audit process.
Different companies may handle the audit in different ways, but the following information comes from one of the largest crop insurance providers and will be close to what the others require as well.
The audit will come after your harvest, and possibly after you have either used or disposed of some or all of your grain. Subsequently, data will depend on where the grain remains or its means of disposal: farm stored, commercially stored, sold to another end user, or fed on the farm. Data will be needed from the 2012 crop, along with that of the prior two years.
Data needed for farm stored grain:
Measurement of grain in bins will help determine total production, and measurement can be done by FSA staff or a third party approved by your insurance company. Your insurance company may have a worksheet which will be handy in completing that process. The data will need a measurement of the structure, the insurance units involved, the FSA farm numbers that produced the grain, and a legal description of the field.
If the grain was weighed before it was stored on the farm, a certified scale must be used and the scale tickets will be handy. Such scales should be non-portable farm scales or commercial elevator scales.
A grain cart with a scale can be used, if the scale prints a ticket, and if the integrated display panel shows the weight, and if the grain cart is available for inspection to determine its capacity. Since the tickets fade over time, they should be photocopied to help with the permanency of the information.
Acceptable weight tickets from each load must be provided. Federal Crop Insurance Corporation requires:
Load Number or Ticket Number
Net Weight of Production
Field Identification from which the production was harvested for correlation with the unit number of the stored crop.
Identification and/or Location of farm-storage structure in which the load(s) are stored and/or satisfactory explanation of disposition of the production, if any or all of the production is no longer stored at the time of inspection.
The copies of the scale tickets must accompany the information about the storage structure or the settlement sheet, showing total production.
There are also some other acceptable records that can be used to help sort out the correct information. Those include records from combine monitors or load records that can be used to pro-rate measured production. Many data books carried by farmers can also be used if they show regular updates of daily information and identify the unit and field number, date of harvest, truck or wagon used to haul the grain and the estimated bushels on the load.
Load records can be adjusted for moisture, but that calculation will be compared by the adjustor to the calculated production.
If you use combine monitor records, they should be printable, and showing the location of the field, field identification and unit numbers, the name of the crop and the date, along with bushels.
Data needed for grain commercially stored or sold:
If your grain went to the elevator, production records must reflect all of your production. If you sold your grain to a feed lot or other end user it must reflect the weight from either the buyer or from a third party such as an elevator or commercial scale operator.
Grain that was either stored or sold to an elevator must be accounted for on storage sheets or settlement sheets, which include the name and address of the buyer, the name of the insured producer, and information for each load that identifies the crop, the gross weight, the tare weight, and the date weighed.
Also the sale or settlement sheet should include the unit number and farm serial number which can be handwritten, as well as percent of foreign material, moisture percentage, and test weight. If any load information is missing, those loads will not be credited.
Loads of grain cannot be split between insurance units, since that is considered co-mingling. Individual scale tickets must be supported by other documentation, such as a third party ledger or settlement sheet from a buyer or commercial warehouse.
Data needed for grain being fed on your farm:
A formal written record system of insured grain that is fed to livestock must be maintained. Your crop insurance agent will have a suggested record system from the USDA’s Crop Insurance Handbook, and that completed record must be submitted with a claim.
If the fed grain was stored on the farm, and bin measurements were taken by your adjustor, those will need to be included with the claim. It must indicate the insurance units involved, the FSA farm numbers involved and the location of the fields where the grain was harvested.
The information needed by the adjustor will include the amount of grain fed daily, the bin from which the grain was removed, the number and specie of livestock, the estimated average weight of the livestock, as well as the location and identifier of their pen, the number of the insurance unit from which the grain was fed, and whether the grain was fed in previous years, and whether it was fed from the bin or from directly from the field.
The drought and its impact on crop production mean that many farmers will be filing claims, and many of those will involve large indemnity payments. Payments over $200,000 will be audited as a matter of recourse by insurance companies. Many farmers will already have the necessary records that will be needed to verify production and their claim, whether the grain is stored, sold to an end user, or fed to livestock on the farm. Insurance companies will provide worksheets, but supplemental documents such as scale tickets, settlement sheets, and even reports produced by combine monitors and grain carts can all be used for the audit.
Source: FarmGate blog
Statistics: Posted by yoda — Mon Aug 20, 2012 9:05 am
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Morgan reportedly returns $600 million in MF Global customer funds
Submitted by cpowell on Sat, 2012-06-02 06:07. Section: Daily Dispatches
By Aaron Lucchetti
The Wall Street Journal
Friday, June 1, 2012
J.P. Morgan Chase & Co. has returned roughly $600 million that was ensnared at the bank when MF Global Holdings Ltd. collapsed in October, people familiar with the matter said.
Most of the payments haven’t been disclosed publicly, and a bankruptcy trustee representing customers of the failed securities firm might pursue J.P. Morgan for as much as several hundred million dollars in additional claims, according to a person familiar with the investigation.
Still, the New York bank’s payments are a sign of progress in efforts to fill the estimated $1.6 billion hole left in customer accounts at MF Global. Money recovered by the bankruptcy trustee, James Giddens, eventually will be passed along to customers, though the amount depends on the outcome of continuing legal squabbles and negotiations.
A spokesman for Mr. Giddens said in a statement that "substantive discussions" are under way with the nation’s largest bank in assets for "the resolution of other claims" made on behalf of the former customers. J.P. Morgan continues to cooperate with the investigation, the spokesman added.
J.P. Morgan was one of MF Global’s biggest creditors and handled many of its trades as the New York securities firm scrambled to save itself in late October. MF Global also transferred $175 million to fix an overdraft in one of the firm’s accounts at the bank, according to congressional testimony.
Bank officials have said J.P. Morgan never intentionally accepted or held on to money that belonged in segregated customer accounts at MF Global. In May, the trustee announced that J.P. Morgan agreed to hand over $168 million that came from collateral held at the bank when MF Global filed for bankruptcy.
Bank officials contend that J.P. Morgan isn’t holding more MF Global money, according to people familiar with the matter. Mr. Giddens hasn’t reached the same conclusion and could demand additional payments, claiming that money passed through J.P. Morgan on its way elsewhere, according to a person familiar with his thinking.
If that happens, J.P. Morgan might counter that its repayments to date have exceeded $600 million, not including the losses suffered by the bank as a creditor to MF Global. While that $600 million could help lower the $1.6 billion shortfall, much of that money already had come back to MF Global before the shortfall estimate was made.
Mr. Giddens is expected to disclose in a report Monday details about where the money in customer accounts went, including the portions that are believed to have gone to J.P. Morgan.
The trustee also is expected to disclose more information about how the money went missing. It isn’t clear how detailed the report will be, partly because other investigators have expressed concern that too much disclosure by Mr. Giddens could hurt their continuing probes.
MF Global moved money out of customer accounts to cover margin calls and meet other obligations. No one has been charged with wrongdoing.
Jon S. Corzine, the former MF Global chief executive, and other officials at the firm have told lawmakers that they didn’t realize customer money had been tapped until employees told them the day before its bankruptcy filing about an apparent shortfall.
J.P. Morgan and MF Global had close ties. The bank facilitated trades on behalf of MF Global and in the firm’s final weeks, J.P. Morgan officials spoke to Mr. Corzine and other senior MF Global executives about liquidating assets and dealing with ratings firms, according to people close to those discussions.
J.P. Morgan even considered buying MF Global, but then backed away amid questions about money transfers that came up three days before the securities firm filed for bankruptcy.
MF Global officials never provided written documentation that J.P. Morgan asked for on two transfers. The bank wanted to know if the money moves were in accordance with Commodity Futures Trading Commission rules. A J.P. Morgan lawyer later told lawmakers that the bank received verbal assurances from MF Global that the transfers were proper.
Many U.S. customers have recovered 72 cents of every $1 from their MF Global accounts. They are expected to get another eight cents per dollar soon.
The $1.6 billion shortfall also includes about $700 million stuck in the U.K. bankruptcy process and is affected by money being held back by the trustee for potential legal claims. On Friday, a U.K. court scheduled a trial for April 2013 on the trustee’s issues in that country.
Statistics: Posted by DIGGER DAN — Sun Jun 03, 2012 3:31 am
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Latest wave of financial industry cuts could eliminate 21,000 jobs, rivaling the financial crisis.
FORTUNE –Perhaps the only thing more broken than Wall Street’s business model is its staffing strategy.
After adding thousands bankers in the past two years, financial firms again appear to be on the verge of cutting that many positions and then some. Consultants and Wall Street recruiters say banks could eliminate nearly 21,000 jobs from their securities divisions in New York alone. Worldwide cuts could be even larger. Recruiters say big banks are in the process of finalizing their downsizing plans, and that layoffs could start soon.
The latest round of job cuts could rival those that happened during the financial crisis. Back then, which was less than four years ago, Wall Street eliminated 28,000 positions. But that round of downsizing included the collapse of Bear Stearns and Lehman Brothers, and the biggest crisis in the financial markets since the Great Depression. By comparison, the stock market is up this year, and just last week banks reported better than expected earnings for the first quarter. What’s more, at the same time large firms are firing, many smaller investment banks have been staffing up. As a result, overall employment on Wall Street might not drop as much as it did after the financial crisis.
"Hiring is going on, it’s just not by the big banks," says a top Wall Street recruiter Gary Goldstein, who runs Whitney Partners.
Nonetheless, consultants say the big Wall Street firms are coming to the conclusion that they have more workers than they need. Last week, Boston Consulting Group released a report that predicted banks would eliminate 12% of their workforce in the "short-term." Recruiters say those numbers sound similar to what they are hearing from the large firms.
"The estimate is possibly low," says veteran financial industry recruiter Steve Potter at Odgers Berndtson. Potter says not only are the firms competing for few deals, but with their clients. More and more large firms are adding investment bankers to their staffs to save on Wall Street fees. "Large layoffs are a virtual certainty."
Perhaps the biggest problem at the banks is that they didn’t cut enough jobs last time around. Mergers and acquisition activity also has not bounced back as expected, leaving a number of high paid bankers idle. What’s more, new regulations appear to already be significantly curtailing the banks’ trading operations. Also weighing on the banks is the fact that debt watchers Moody’s and Standard & Poors say they are likely to soon downgrade the bond ratings of the firms. The nation’s five largest banks have estimated that the downgrades could cost them $22 billion in additional costs or collateral requirements.
"There hasn’t been enough action on the cost front to keep up with the revenue short falls," says Chandy Chandrashekhar, a partner at BCG who helped to produce the recent report. And unlike other rounds of layoffs, Chandrashekhar says many of the people who lose their jobs this time around could be senior bankers. For those that remain, compensation is likely to be down this year as well. In all, BCG expects Wall Street compensation expenditures to drop by as much as 30%. "Banks need to revisit whether they need all of their management layers."
Recruiters say one of the firms likely to cut the most is Credit Suisse. The firm’s investment banking division has struggled recently. Last year, Credit Suisse said that it plans to eliminate 3,500 jobs, across the whole bank, not just its Wall Street business. About 2,000 of those job cuts have already been completed. Sources say a majority of the remaining cuts will come from the firm’s investment bank, and that the bank may end up cutting more workers than earlier announced. Credit Suisse declined to comment.
Other firms that sources say are likely to make deep job cuts in their investment banking divisions are Bank of America, which bought Merrill Lynch during the financial crisis, and Barclays, which acquired the U.S. investment banking division of Lehman Brothers out of bankruptcy. But recruiters say that all of the big banks, including Goldman Sachs, appear to be on the verge of making cutbacks.
"Banks haven’t come up with a model that makes up the profits they used to get from propriety trading, CDOs and other structure deals they used to do," says Goldstein. "I have heard about a lot of people who didn’t get the promotions they were expecting. That’s usually a sign that banks are getting ready to get rid of people."
Statistics: Posted by yoda — Mon Apr 30, 2012 6:18 am
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Loan owners with big incomes believed house prices were going up forever. They bought houses they could barely afford because they believed the additional cost of ownership over renting would provide them with a return on their investment. Buying a house was part utility through providing shelter and part investment through capturing rapid appreciation. Of course, the actions of buyers willingly overpaying for houses drove prices higher in a self-fulfilling prophesy. Like all Ponzi schemes, it went on until the supply of greater fools was exhausted and lenders stopped enabling the insanity.
Now that high-end loan owners are accepting the fact that their brilliant investment was folly, many of them are choosing to dump their investments. When the investment no longer provides the return they are looking for, loan owners quite rationally decide to exit their positions. In the stock market when bulls turn bearish, they sell their shares, prices crash, and life goes on. Unfortunately when it comes to single-family homes, it’s not quite so simple. The loan owner must give up the property, an emotional hardship for many who become attached to their cash cows. For lenders the loan owner exodus means widespread strategic default on a home mortgages and millions of foreclosures.
Most of the news coverage of the crash of the housing bubble has focused on the role of subprime borrowers. They were decried as deadbeats who couldn’t make their payments. For some this was certainly the case, but for many, they were given loans they should never have been given, and their implosion was a foregone conclusion. In any case, subprime borrowers defaulted first, and their properties were pushed through the system. Wherever subprime was concentrated had a devastating market crash.
Lenders learned from the collapse of prices in subprime dominated markets, so when the more affluent borrowers faced the same problems of insolvency from excessive debt, lenders allowed them to squat in their homes rather than see catastrophic price crashes in every market. The policy of amend-extend-pretend was put in place, and lenders accumulated a huge number of delinquent mortgage squatters in shadow inventory. The buildup of shadow inventory helped sustain bubble-era pricing in many neighborhoods, but it did nothing to solve the underlying problems with valuation. Prices were simply too high. Withholding supply has caused sales volumes to plummet, and prices have been inching downward for the last five years.
Many high wage earning loan owners came to believe their neighborhoods were special. Prices didn’t fall where they lived because the properties were so desirable. In reality, prices didn’t fall because lenders withheld the inventory through both holding REO off the market and allowing delinquent mortgage squatters to stay in place. Although this policy has kept the declines to a minimum in high-end neighborhoods, it hasn’t caused prices to go up. It never could. Prices were too high and needed to fall based on affordability alone.
Since prices stopped going up for five full years, and since high-end loan owners realize prices won’t be going up in their neighborhoods for a very long time, the borrowers who overborrowed to capture appreciation have given up hope. When denial turns to fear and finally acceptance, loan owners want to get out. Many try to sell, but those who don’t or can’t simply stop paying the mortgage — they strategically default.
‘Strategic Defaults’ by the Rich
By TIM REID, Reuters
February 16, 2012
… A sprawling, Spanish-style estate, fringed by majestic pine trees and located near the boutiques of Santa Monica Boulevard, its former owners were served with a default notice in 2010; they were $205,000 behind in their payments on mortgages totaling $6.9 million.Welcome to foreclosure Beverly Hills-style.
First, I would like to point out that rich people do not get $6.9M loans. Rich people pay cash. Posers and Ponzis take out $6.9M loans.
Second, loans that large are not being underwritten today. Banks aren’t that stupid anymore. Since such large loans are so scarce, the air that inflated house prices has been removed. Only the low sales volumes has keep prices at such artificial levels.
Third, the HELOC abuse and excessive debt is a huge problem in these supposedly rich neighborhoods. Remember, HELOC abuse Hollywood Style? Or perhaps HELOC abuse Newport Coast Style? Or HELOC abuse Laguna Beach Style? The behavior of the loan owners in those posts was not that of rich people. It was the behavior of entitled fools who deserve to lose their houses.
Some 180 houses in Beverly Hills, the storied Los Angeles enclave rich with Hollywood stars and music moguls, have been foreclosed on by lenders, scheduled for auction, or served with a default notice, the highest level since the 2008 financial crash, according to a Reuters analysis of figures compiled by RealtyTrac, which tracks foreclosures nationwide.
As in the default-ravaged suburban subdivisions of Phoenix, Arizona, and Tampa, Florida, plunging real estate prices are the root of the problem in Beverly Hills.
But the dynamics of the residential real estate collapse are very different in elite neighborhoods such as this. The majority of delinquent homeowners here owe more than $1 million. Many are walking away not because they can’t pay, but because they judge it would be foolish to keep doing so.
They view their house as an investment, and when the returns aren’t there, they dump them.
“It’s a business decision, not an emotional one which it is for normal people,” said Deborah Bremner, owner of the Bremner Group at Coldwell Banker, which specializes in high-end properties in the Los Angeles area. “I go to cocktail parties and all people are talking about is whether it is time to walk away, although they will never be quoted in the real world.”
Remember the cocktail parties in 2004-2006 when every conversation revolved around how much their house was worth and what they were spending the money on? I do. ~~ giggles to self ~~
She said she had seen in Beverly Hills a big increase in “strategic defaults,” in which owners who can still afford to make their monthly mortgage payment choose not to because the property is now worth so much less than the giant loan used to buy it during the housing bubble.
Strategic default is an especially appealing option in California, one of only a handful of U.S. states where primary mortgages made by banks are “non-recourse” loans. That means the loan is secured solely by the property, and banks cannot go after a delinquent owner’s wages or other assets if they default.
Bremner said she helped a client buy a Beverly Hills mansion last year that the prior owner had bought for over $4 million. He decided to stop paying his $3 million mortgage – even though he could easily afford it – when the value of the property had dropped to $2.5 million.
“They were able to comfortably cover the loan,” Bremner said. “They were just no longer willing to see the value of the property drop.”
The investment didn’t pan out. They are wise to dump the property because prices aren’t going up in those neighborhoods any time soon.
A huge “shadow inventory” is building of elite homes that are in default but have not been put on the market. Of the 180 distressed properties in Beverly Hills, only 12 are up for sale.
And the longer lenders wait to clear out this inventory, the worse their losses will be.
The backlog reflects the pent-up flood of foreclosed properties of all price ranges that are expected to hit the U.S. market this year, especially after five major banks reached a $25 billion settlement last week with the U.S. over fraudulent foreclosure practices.
It isn’t clear that these houses will all hit the MLS. Lenders will sell many as parts of bulk portfolio deals. Since these high end properties make no sense as cashflow properties, the discounts on those will be enormous.
Defaults on ‘Jumbo Loans’ Soaring
Across the United States, the largest increase in foreclosures and delinquencies, compared with 2008 levels, is with “jumbo” mortgages – loans too large to be insured by Fannie Mae and Freddie Mac, the government controlled mortgage finance providers. Foreclosures on jumbo loans are up 579 percent since 2008, greater than any other form of loan, according to a report last month by Lender Processing Services, Inc.
High end loan owners have long denied they would get their comeuppance. They were wrong.
Strategic defaults are now more likely among jumbo loan-holders than any other type of borrower, according to a report issued late last year by JPMorgan Chase & Co. Nearly 40 percent of delinquencies among non-governmental mortgages, which are mostly jumbo loans, are strategic defaults, the report said.
“Now that these homeowners with jumbo loans are finding out you can do this, more and more are doing strategic foreclosures,” said Jon Maddux the CEO of YouWalkAway.com, which advises homeowners who are “underwater,” the term for those whose loans exceed the value of their home.
The gentleman profiled below has an amazing case of cognitive dissonance.
Nathaniel J. Friedman, a Beverly Hills lawyer, insists he is not a strategic defaulter – that he never missed a mortgage payment in his life. But he stopped making payments on his five-bedroom, six-bathroom Beverly Hills house on Schuyler Road three years ago.
Friedman, who had mortgages totaling $3 million with the now-defunct Countrywide Home Loans, returned home one evening in January 2009 to find a letter from Countrywide freezing his $150,000 line of credit, which was linked to his second $900,000 loan. His primary loan was $2.1 million. The property is worth about $2 million today.
Friedman says he decided to stop paying out of a sense of vengeance from the moment he received that letter. He has been in negotiations for months with Bank of America, which took over Countrywide after its collapse, to modify the loan.
“I thought to hell with it,” he told Reuters. “Why should I keep feeding a dead horse if the bank has no confidence in me?”
“I was able to maneuver things my way because of the inertia of the banking sector,” Friedman said. He believes the bank will blink first, and eventually modify his loan.
For as much as I enjoy seeing the banks get reamed, I hope they boot this delinquent mortgage squatter.
Although, he isn’t the worst offender….
Statistics: Posted by yoda — Wed Feb 22, 2012 2:22 pm
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