LifeSteps Financial Briefing | June 2019
Henry's Take
Summer has arrived and from our local traffic, we can tell that school is out and vacations have started. While the market and investment funds typically don’t take a ‘vacation’, summer seems to have lower volume and brings higher volatility . With trade talks, interest rates and other factors still in play, we should expect swings this summer.  
We have recently had several inquiries from business owners about investments in Opportunity Zones. While these can provide tax benefits, there are also requirements. We’ve asked Michael Kouyoumdjian, Managing Shareholder from RP&B CPAs in Riverside, CA, to provide information on commercial investments in Opportunity Zones and how they can be good tax strategies. His article provides insight into Opportunity Zones and how the tax benefits work.

We really enjoy giving back. If you are interested, you can join our efforts at Hope for Housing. See the video of me talking with kids about earning interest and an opportunity to participate in a school supply drive. 
As always, we’ll keep you apprised of any changes or swings in the financial landscape. Feel free to contact us, if you have questions. Happy Summer!

?Henry Ford, Principal
Managing Financial Wellness
Opportunity Zones
 by Michael J. Kouyoumdjian, RP&B CPAs
When the Tax Cuts and Jobs Act (TCJA) was introduced, primary focus was placed on the decrease in tax rates, qualified business income deductions and changes to the itemized/standard deductions.  Now that these have been addressed, a closer look suggests several “opportunities”. Once such, “opportunity” is The Opportunity Zone program .

The Opportunity Zone program was created to encourage economic developments and job creation in select distress communities by providing attractive tax incentives (includes tax-free treatment of capital gains) for those who invest in (property) the zone.

Opportunity Zone Designations
The TCJA allows for the designation of certain low-income community population census tracts as Qualified Opportunity Zones (QOZ) (as described in Code Sec. 1400Z-1).

Investing in an Opportunity Zone
By investing in an Opportunity Zone, capital gain taxes are deferred or reduced by rolling in the capital gain from a sale into a Qualified Opportunity Fund, set up for investing in eligible property located in a QOZ.
The Facts

40% of US homeowners own their home free and clear of any mortgage debt or home equity loan . Of the 60% of homeowners with an outstanding debt balance, the median debt total is $126,000.

Source: American Housing Survey
Used with permission from By the Numbers

The month of June has had the greatest number of existing homes sold during each of the last 5 calendar years (2014-2018). 570,000 existing homes were sold in June 2018, an average of 19,000 a day nationwide.

Source: National Association of Realtors
Used with permission from By the Numbers   

President Lyndon Johnson created mortgage-backed securities when he authorized the 1968 Charter Act. It also created Fannie Mae. He wanted to give banks the ability to sell off mortgages. That would free up funds to lend to more homeowners. ( How Mortgage-Backed Securities Worked Until They Didn't, KIMBERLY AMADEO Updated January 31, 2019 )

Mortgage Backed Securities are investments backed by mortgages. The bank makes mortgage loans to individuals or businesses. Instead of holding these loans for 15, 20 or 30 years, they have the ability to bundle large groups of mortgages together and sell them to an Investment Bank or group of investors. This new group will then begin receiving the interest payments, along with the premium payments, from the loans and can distribute a portion of its proceeds to its investors. Since the mortgages are no longer under the bank’s asset list, the bank is then free to create more mortgage loans. This ability to continually make new loans added to the 2008 financial crisis.

Mortgage-Backed Securities are still sold today. The creditworthiness of the mortgages within the bundled group of mortgages is very important when considering your investment dollars in these securities.
Giving Back
This month's featured charitable organization is  Hope through Housing .
Hope through Housing Foundation's mission is to break the cycle of generational poverty by advocating for policies and implementing programs that empower individuals and change communities. 

Henry Ford recently spoke to local children enrolled in Hope through Housing's after-school program. The organization hosts "Career Conversations," exposing children and teens to different career paths and giving them an opportunity to hear success stories from local business leaders. Henry's goal was to inspire financial awareness and plant the seeds towards financial independence. Check out the video from the event!
LifeSteps Financial is participating in Hope through Housing's  Back 2 School Supply Drive . We will price match all donations dollar for dollar up to $500. To participate, please make a check out to Hope through Housing and mail the check to LifeSteps Financial. We’ll collect the donations, match them and send them over to Hope through Housing. Thanks, in advance, for your participation!
This report is for information purposes only and is not a recommendation for any particular security. Mention of individual securities should not imply that we own the security or have owned it in the past. In addition, the information provided here should not form the basis for investment decisions. Past performance is no guarantee of future results. This information should not be used in any transaction without the advice and guidance of your Tax Professional. LifeSteps Financial has not independently verified, or attested to the accuracy or authenticity of the information, including any investment performance measurement.