Bush Signs Mortgage Debt Forgiveness Act
With a stroke of the pen, President Bush signed into law H.R. 3648, The Mortgage Debt Relief Act of 2007, and dramatically changed the lives of homeowners across the country who are facing foreclosure, considering a short sale, negotiating a loan workout, or have done any of these since January 1, 2007.
While this bill has been long awaited by homeowners who would be penalized by the potential phantom tax, and real estate agents praying that it will open the flood gates to more business via short sale listings, the goal of the Administration and legislators is to reduce the number of foreclosures and the need for short sales by allowing homeowners to renegotiate their loans without tax consequences.
The President welcomed those in attendance, saying,
"Thank you all for coming. Welcome to the White House. I’m pleased to sign a bill that will help homeowners who are struggling with rising mortgage payments. The Mortgage Forgiveness Debt Relief Act of 2007 will protect families from higher taxes when they refinance their homes. It will help hardworking Americans take steps to avoid foreclosure during a period of uncertainty in the housing market."
After thanking House and Senate members, staff, HUD and the Treasury Department, Bush continued.
"In recent months, our nation’s housing market has faced serious strains. Home values have fallen in many parts of our country. At the same time, many homeowners with adjustable rate mortgages have seen their monthly payments increase faster than their ability to pay. And now some homeowners face the prospect of foreclosure.
"My administration has taken strong steps to help homeowners avoid foreclosure by making it easier to refinance loans. We gave the Federal Housing Administration greater flexibility to refinance loans for struggling homeowners. We helped assemble a private sector group of lenders, loan servicers, investors, and mortgage counselors called the HOPE NOW Alliance. This group has agreed on a set of industry-wide standards to help those with subprime loans refinance or modify their mortgages, so more families can stay in their homes.
"The bill I sign today will help this effort by ensuring that refinancing a mortgage does not result in a higher tax bill. Under current law, if the value of your house declines and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as money that can be taxed. And of course, this makes a difficult situation even worse. When you’re worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it’s a really good piece of legislation. The provision will increase the incentive for borrowers and lenders to work together to refinance loans — and it will allow American families to secure lower mortgage payments without facing higher taxes."
Earlier in the week, the Treasury Department released a statement from Treasury Secretary Henry M. Paulson, Jr. regarding the Congressional passage of the legislation.
"I thank both the Senate and the House for their quick passage of this important piece of legislation. Homeowners who restructure their mortgages to avoid foreclosure should not be hit with a tax bill as a result. This legislation will temporarily exclude homeowners who have restructured their mortgage loans from having to paying taxes on the mortgage debt forgiven.
"Today’s legislation is one piece of a larger plan the President has put forward to help able homeowners avoid foreclosure. I’m also eager to see final Congressional action on the other pieces, including GSE and FHA reform and allowing state and local authorities more tax-exempt bond authority to help homeowners refinance their existing loans.
"Preventing avoidable foreclosures will reduce the impact of the housing slowdown on homeowners, our communities, and our economy."
Also notable was the National Association of Realtors response:
WASHINGTON, December 20, 2007 - “On behalf of the many individuals and families who would have been burdened by a tax after losing their home, the National Assn. of REALTORS® thanks President George W. Bush for signing the Mortgage Forgiveness Debt Relief Act into law. Today the president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home due to a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt.
“NAR has been advocating for such a change to the IRS tax code for nearly 10 years. We have always believed that it is clearly an issue of fairness and of not kicking people when they are down. By making the forgiven debt taxable income, individuals in already unfortunate situations most likely faced IRS actions because they did not have the money to pay the additional taxes. This legislation will relieve that additional burden and may also encourage families to work with their lender to negotiate terms, knowing they will now not be subject to an IRS bill.
“Today’s bill will ensure that any debt forgiven on a mortgage secured for a principal residence will not be taxed. This is very significant legislation. This may also mean that some day in the future these families can once again achieve the dream of homeownership.”
While this bill has been long awaited by homeowners who would be penalized by the potential phantom tax, and real estate agents who pray that it will open the flood gates to more business via short sale listings, the goal of the Administration and legislators is to reduce the number of foreclosures and the need for short sales by allowing homeowners to renegotiate their loans without tax consequences.
Here is the full text of The Mortgage Forgiveness Debt Relief Act of 2007
Overview of the debt forgiveness portion - Short Sale and Phantom Tax Debt Relief Overview
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72 Responses to “Bush Signs Mortgage Debt Forgiveness Act”
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I wonder how long its going to take. Maybe 2009.
What recourse, if any, are banks likely to take if you simply let your home foreclose. Arent the banks ultimately responsible for paying taxes, association dues, etc once they take the home back ? What percentage in light of the sheer number of foreclosures are even likely to come after the home owner or can they even do that without a judicial foreclosure ? Aren’t people ultimately better off, aside from credit damage, to just let the house go ?
Good question. I think you have to look at 3 things
Will my credit be hit, will I have to pay more taxes, will the lender be able to collect for the balance of the loan and other fees.
Credit - the lineup of damage may go something like this - foreclosure, deed in lieu, short sale. This is not my legal opinion, only my Realtor opinion, for which I hope you can’t sue me.
Taxes - I feel more comfortable, here, giving my legal opinion, but we have a new law as Bob Wilson pointed out above.
All I can say is watch out for Capital Gains. Particularly if you pulled money out on a refi - Make sure you have a lawyer go over the law with you and an accountant to go over your numbers. As far loan forgiveness taxes on a refi (principle residence) - the language above makes it look like you would be in the clear. But, I prefer to see the exact text of the law and how the IRS and the courts interpret it.
By the way (via email) Bob brought up a good point - how will foreclosure costs and legal fees be calculated.
Deficiency - I will briefly address the issue of a deficiency. This is general stuff, and there are exceptions to the rules. You must seek legal advice from a lawyer who has thought about this stuff - especially if you are still current on your loans. And before you think anyone can do this - I I ask you - what will happen if you do not find a buyer or your lender rejects your short sale. What will you do when you get a Notice of Default, When will it be too late to seek alternative solutions? What will you do if your second is a sold out junior?
Professionals Realtors like Bob probably know the answers - but, they understand you will be better served if you work with a team who is licensed to give you answers and sell your property….
Purchase money loans -
If you have purchase money loans - in general you should not do a short sale unless you have a short sale listing addendum, a short sale purchase and sale addendum. You also need to insert clauses which are designed to protect you in case the lender agrees to the short sale offer from the buyer. Without certain clauses you could be screwed out of hundreds of thousands of dollars - depending on the deficiency. Do not sign a short sale offer unless you know what you are doing.
Remember there are alternatives to a short sale. And in many cases a foreclosure is preferable to a short sale if you have purchase money loans.
If you have recourse loans - don’t even think about doing short sale until you have a workout plan in place. Lenders with recourse loans have been seeking to collect on the balance owed - whether you do a short sale or not. A short sale may actually compromise your financial position.
Sellers have a great protection under California law. But, you have to know how to protect your rights. If you do it wrong you could be out of your house, with bad credit and a very large bill for a deficiency.
Ron,
John is a real estate attorney licensed to practice in Florida and California. Since your question goes beyond my expertise, I asked him to chime in here.
is it ever possible to buy a home after you have done a short sell if so about how long after the sell if no more neg. credit and why don’t the gov have something to help these people get new smaller morgages. after all the goverment did help us get in this perdicament with ecomomy falling
WE are currently selling our home short-sale instead of going foreclosure. If I am understanding the new law correctly then we will not be responsible for the difference (taxes) Currently the 60,000 difference between what is owed and what we sold it for we would be taxed on as income. That has changed in the new law?
delt - It is possible to buy after you have done a short sale. The loan terms will be based on your credit score.
The short sale by definition is charge off of debt. That alone will be a negative hit to the credit score. 30, 60 and 90 days lates each lower the score. If an NOD is filed, the FICO score takes another hit. Every short sale is different, as is the time to repair the credit damage.
The government did do something to help. They passed the law which lessens the financial impact.
Tammy - the answer depends on whether the forgiven debt qualifies as acquisition debt.
It’s defined here:
Text of bill (I finally found it on this website above) says it only applies to discharges of indebtedness since Jan 1 2007, so no retroactive effect.–Walker
Does the Mortgage Forgiveness Debt Relief apply to land investment? The tax on the difference after the short sell on land can be forgiven?
I just received a 1099 A from OCWEN loan servicing. They foreclsoed on me in Nov 2007. The difference between the FMV and the amount of the 1st note is the exact amount owed to them on a 2nd note. Am I responsible for the difference of 79K? I can not afford an attorney or fancy CPA. I have a huge amount of medical bills from my cancer treatments. My husband just found a job as he was working as a realtor. Any ideas will help.
Kristy, it only applies to a primary residence.
Debbie, can I contact you at the email you entered?
added: Another option may be insolvency.
I had a $150,000 home equity line of credit ( no mortgage) on my 1915 Minnesota home which I used mainly for home remodeling, building a barn and buying a car . In July of 2007 I financed with Wells Fargo, getting a 30 yr fixed rate mortgage, paying off the home equity and getting enough cash to pay off some credit cards. House appraised for $210,000 in August. Mortgage is 177,000.
Lost my job in October. Could not find a job that paid any where near what I had been making and accepted one out of state. I put my house up for sale and moved to Colorado in December. House is not selling, haven’t made a payment since November and won’t be making one in February.
Still making considerably less than before, but Colorado rent is less than half of my old mortgage payment, so I am staying here permanently. Since I had a cash out “refinance”, vacated (but not abandoned) my Minnesota home does this new legislation help me if I short sell it or bank forecloses?? My realtor is pushing short sale, I am not so sure. I have heard I can also “give” the house back to the bank if I am atleast 3 months behind on my payments.
Darla, giving the house back is called a deed in lieu of foreclosure. It cuts out the lender’s need for any foreclosure proceedings.
Refi debt that goes into substantial improvements of the property qualifies.
If the lender has recourse, they can seek a deficiency. With a short sale, they can still seek a deficiency. If you can get them to forgive the debt, you will get a 1099C from the lender. If you are liable for the tax, then you have to weigh the lesser of two evils - owe the IRS or owe the lender. The tax would be the smaller amount.
The other option is insolvency - where the IRS agrees that your debts outweigh your assets. You need a CPA or tax attorney for this.
Should I still pay for the difference under this Mortgage Debt Forgiveness Act if I will result to short sale? I’m worried because the new law doesn’t clearly say that the differenceof the amount I owe and amount resulted from short sale be written of by the lender.How can I be assured that I wil not pay for the difference if they found me I bought a new house right after short sale took place?
Cris, whether or not the the difference is written off by the lender is up to the lender. That is something that has to be negotiated as part of the short sale. Once the short sale closes, there is not much you can do.
My condo dropped in value and I can not refi after my ARM kicked in last July. The service group that has my 1st and 2nd has been draging me along on the modification and now I am 60 days late. My question is. Does the Mortgage Debt Forgiveness Act forgive the difference of a short sell of the condo and the difference of what i owe on the mortgage or just what the IRS can tax me on that difference?
Joe,
The lender has to forgive the debt. The law has to do with the tax on the forgiven debt which is treated as income by the IRS.
Any help insight would be greatly appreciated.
I bought a home in October 2006. I got a jumbo loan with a 30 year fixed interest only for 5 years. I have not had any late payments yet. I am watching my house value diminish daily and don’t know how to handle the situation. Do I get out now?
I heard of the Foregiveness Act and don’t know if I am a candidate for it.
Hi. My name is Alex and i have a question.In 2003we bought a house with adjustable rate morgage for 5 years ARM with
4% and %20 downpayment. On July 2008 our loan will be expired and we have to pay higher monthly payments if do not refinance our loan again. I have heard that President Bush allowed homeowners with ARMs to extend their ARMs with morgage companies. Is that true? What can we do to avoid foreclosure? In our situations we will not afford to pay high monthly payments. Please give us advise what should we do. Thank you very much. Alex
Brie, can you afford to stay in the property and do you want to stay? Many people, including myself, are seeing our equity drop, but will ride out the storm. If you planned on living in the home for a long time, the market will come back. If you only intended to stay in the property for a short period of time, then selling now before it drops further should be considered.
If you are worried about the interest rate, you should call the lender to see what options they offer you. Rates are down again, so refinancing may be a viable option.
Let me know what you decide to do.
Alex, the President’s plan was more of a suggestion than anything else. Your first step is to call the lender and see what they are willing to do in terms of a loan modification. If they won’t do anything, then tell them to send you a short sale package.
If you are current on your mortgage, then the loan modification would be in the best interests of you and the lender. If you decide to go the short sale route, then let me know and I’ll get you in touch with someone in your area who knows what they are doing.
Thank you Bob. I planned on staying in this house for about 5 years thinking I would gain some equity to put into a new home out of state. I don’t know what makes sense. At this point we can afford the payments on a very strict budget. My payments won’t go up for 4 more years when i start paying on principal. We bought the home for $425 and probably can’t sell it for more than $350. My mother keeps telling me to cut my losses and deal with the credit score hit and the tax implications and let them foreclose on me…it just seems to easy to bail out. There must be more serious implications. If there is some mortgage forgiveness act out there, who qualifies? People with an adjustable interest rate? Or someone like me.
Our house in California was foreclosed in 2007.I recently got a 1099C from the second mortgage company with a debt of 183,000 a box6 checked for bankrupcy which we have not done and a fair market value left blank? What does it mean?
Hi my name is Charity and I have a question that I have not found a straight answer to. In Nov. 2007 I signed my home of six years home back to the bank. I was divorced with three children and could not keep up with the payments. I live in the Michigan and the value of homes has dropped so drastically that I could sell it for what I owed or even do a short sale. My question is what are the tax implication for the cancelled debt of the deed-in-lieu forclourser? I remarried Dec. 2007 and we will be filing jointly. My guestion is will I be exempt for any reason on paying taxes on the cancell debt, because of the capital gains tax, the mortage forgiveness act or that I was insolvent?
I was foreclosed upon in May of 2007, and I just recieved a 1099-A from Countrywide. I am not quite sure how to determine how much debt the IRS is going to be treating as income. I took part in an investment through a questionable realtor who is no where to be found now, and now I am facing the probability of loosing my tax return, and possibly having my wages garnished. The realtor assured me that the house was going to be rented out and that his firm would be paying the mortgages on the property. Obviously this never happened. I am more concerned about getting out of this mess with the IRS than I am about any retribution (as I will explore that later), but is there any way to appeal to the IRS as I debt (especially as a result of this 1099-A) far outweighes my assetts?
Brie - it sounds like you would be a candidate for the tax relief on the mortgage forgiveness if he lender is willing to forgive the debt. Their would be a credit hit, but it won’t have the same long term impact of a foreclosure.
Sean, I don’t know. I’ll see what I can find out.
Charity, you need a CPA or tax attorney to answer that question.
VWK, you also need a good tax attorney for this one. I hope you get your man though, and the agent gets his just rewards.
Bob- I bought a house in San Diego in 2004 with a 5yr ARM that will end Sept of 2009. I am current on all my payments but am concerned about the drop in prices. I am considering selling this house but am also hoping that the prices rebound by summer of 2009. Would it be better to wait till then? I know there is a glut of inventory, especially from REO and shorts, which right now seems to be pulling prices further down. I figure, if the glut gets smaller this year due to sales, perhaps prices will improve next year. What do you think?
On January 31st..my home foreclosed. This is the actuall date given on my 1099a form. The first was paid back but the second was not. My ex and I owed still $60,000 to the second but of course never made any more payments on it because we were no longer living there. Until I heard about the new Debt Forgiveness Law of 2007, I figured I would have to pay taxes on it. Now I understand I am covered. It was under one million, it was our primary residence, and it happened in 2007. Based on these conditions, is that debt forgiven? I have heard about recourse and non-recourse loans potentially factoring into this. Does any of that matter. If someone has an answer, that would be great. Thank you.
Beth, I honestly do not believe that prices will be higher in 2009 than today. That would require the drop in prices to stop, which isn’t happening, then urn the other direction. Nothing points to either of those two events happening at the moment. The increase in REO sales is only creating lower comps for later sales.
It could stabilize later this year, but how much in value will you have lost in the meantime? If I’m selling, I’m cutting my losses now. If I’m buying, it’s for the long term.
The new law doesn’t forgive debt, only provides for no taxation in those situations that qualify.
It is up to the lender to forgive the debt. If the lender has recourse, then until it’s forgiven, they can pursue repayment. There is no potential tax in that case. If your 2nd hasnt forgiven the debt, then no tax yet. At some point if they decide they can’t collect and write it off, then the law could come into effect.
One question that remains is what happens if the 2nd doesn’t forgive the debt for 4-5 years outside the timeframes provided in the new law?
We are in California. Our home foreclosed in December 2007. We had one of those “neg amortization” loans through Countrywide We had a 1st and a 2nd. Anyways, today I recieved a 1099-A for the 2nd which indicated in box 5 that “Yes, I was personally liable for repayment of the debt”. I have 84,000 outstanding on my 2nd and in box4 is states that the fair market value of property was “$420,000″. The 1099-A I recieved for our 1st says that in box2 there is an outstanding amount of “$416,834″ and in box 4 is says the fair maket value is “458,179″ which is more than I owed on the 1st….
I am confused, afraid and can’t afford to pay a tax person or attorney for advice. Help!
April, where are you in CA? There are plenty of places that offer free or discounted tax assistance. Enter those terms into a Google search.
Good luck, I understand that it is a daunting process that never seems to end.
April, I’ll see what I can find for you.
Once we file a deed in lieu of foreclosure, what is the average amount of time we can still stay in the house? Any ideas or suggestions would be greatly helpful - thank you
We purchased our home in September 2005 for $300,000, which was unfortunately during the height of the market in the Southern AZ area. The comps have since dropped dramatically. A home a few doors down, same model, is listed at $190,000. We do not have a subprime loan, we have a VA loan (30-year fixed rate at 5.5%). We are current on all of our payments, but are on a fairly strict budget. With every other utility and gas prices continuing to rise, it is harder and harder to meet the demands, but we are doing it! It makes us sick to our stomachs to think of how much we are paying each month and to see teh value of our home decreasing constantly. Is the loan forgiveness something right for us and how long does it affect your credit score as we have excellent credit. Don’t necessarily want a black mark but don’t want a $290,000 debt hanging over my head when the true value is somewhere near $200,000. Please advise!!!
Ken, the lender has to agree to the deed in lieu. How long you stay depends on how long the process takes with the lender and once they agree, what ever you can negotiate with them.
Bob
I am clueless about this whole thing. Here’s my situtation. We bought our house in April of 2006 in Colorado. Both my husband and I got raises from our jobs at that point and then when we had our baby in June, she was premie and we were in the hospital a total of 21 days. Huge medical bill that we did not expect. We have been behind on most of our bills for awhile and our credit score is shot. We are currently behind 2 months on our mortgage. Does this Mortgage Forgiveness Debt Relief allow us to ask our Lender (Countrywide) to help us out in getting caught up or possibly lowering our monthly payment ($1720) for a certain period of time? Or just renegociating our loan w/o all the fees of refinancing? If so, what is the correct terminology to use with our Lender? We plan of staying in our house for a long time. We owe $224,000.
Cassie, you need to call customer service at CW and ask for a loan modification package. Let me know how things progress via email.
Hope your little girl is doing well.
Laurie, contact Del Sutton.
(520) 622-HOME (4663)
del@masterconsultants.net
we made a misstake and refinc. with amerquest in 2006, we didn’t know that after 24 months are payments would have double 14 months later we found out. We again had to refinc with major penlities. now four months later my wife lost her job an now can only find a part time job, as a result we can’t make are payments we called the lender,they told us to pay half one month an half the next along with our normal payments,how can we when we can’t make the normal payments. we need help to get out from underneath tis loan short sale or give back??
James, what state are you in?
Can anybody explain this to me?
Any debt secured by your principal residence
that you use to refinance qualified principal residence
indebtedness is treated as qualified principal residence
indebtedness, but only up to the amount of the old mortgage
principal just before the refinancing. Any additional debt you
incurred to substantially improve your principal residence is
also treated as qualified principal residence indebtedness
we had refied in 2006, from 110k to 145K what happens to the 35K? House was “worth” 120K. did deed-n-lieu so the 1099 shows loan as 145k and house worth 120K so we have tax on 25K. Am I going to fall into a loophole here? Or is insolvent the way to go?
If any of the $35k you pulled out went toward improving the property, then that amount is covered under the new law. beyond that, you need to speak with a CPA or tax attorney.
fla
bob regarding 2-14-08 fla
I purchased a condo on Feb 2007 $205,000. and now it’s barely worth $130-140,000. I can’t afford the payments anymore and wanted to see about doing a short sale.
I haven’t missed a payment but I was thinking of not paying from now on until the condo sells if it sells.
Can my wages be carnished for the difference if they don’t forgive the loan?
I purchased a condo in Florida on Aug 2006 $222,000. and now it’s barely worth $140-160,000. i have a half owner who lives in wisconsin ,we see it droping fast and wanted to see about doing a short sale.
I haven’t missed a payment and we have a tennet ,the developer /management (vista)of the condos went bottoms up and it is in limbo until the bank takes over from them ,What are the tax impacts and credit impacts,can they put a lien on our homes
Can my wages be carnished for the difference if they don’t forgive the loan? thanks for the help
We purchased our home Aug 2004 for 310k then refied in Jan 2006 for 364k. Due to circumstances we did a short sale in Dec 2007 for 335k. I got a 1099 for the 70k diffrence. It says the debt was canceled. It also states FMV is $0. Will we have to claim the 70k that was forgiven as income? I’m not sure about the whole refi clause. The majority of the refi was used for improvements.
Hi Bob,
we purchased our house in St. petersburg, Fl in July 2004 as primary residence. May of last year, we relocated to Aliso Viejo, CA because of my husband’s job. We have a renter but his lease is up in 2 months . Since we bought a house here in CA last December , we can no longer sustain 2 mortgages because i am going on maternity leave in 2 months and our income is not enough to cover the difference. We want to short sale the property in Florida and have spoken to 3 realtors, 2 of whom have short sale experience but has not returned my call since. The only realtor who wants to list my house on short sale has no experience but has a collegue that can help her. Im not very confident knowing that theres going to be a lot of negotiations involve and i feel like im doing a lot of leg work for her. She doesnt even know what a completed HUD1 requirement from the lender and wants me to ask the lender. Do you know anyone in Tampa, clearwater, St. Pete are who specializes in short sale?
Also, we took out 70k for HELOC with BA, first is american home. We used the money to pay off credit card debts. DO we qualify for the loan forgiveness act? The house is 330k and the last comp sold was 247k.
Thanks a lot
I don’t know anyone in that area, but Glenn Ginsburg is a broker in the Naples area (click on his name to go to his website).. He may be able to refer you to someone. More importantly, he should be able to give you the names of some attorneys and tax experts. Start with the legal and tax guys BEFORE you hire an agent, especially in a recourse state like Florida.
The 70k HELOC wouldn’t qualify, but a tax pro could tell you if you have other options available.
Kelli, I don’t know how one deals with refi debt used for improvements on a tax return. That is a question for the tax guy.
Nate, same advice - talk to an attorney who is well versed in Florida real estate law.
Lisa, the lender can seek a deficiency judgment if they don’t forgive the debt or agree to not do so as terms of your short sale agreement if it isn’t a purchase money loan in California.
What I’m wondering is if I’m going to be able to refinance my home loan at a lower rate even if it doesn’t appraise at the price I need the mortgage for? Not that I’m not willing to pay the price I bid for the home. I just want a lower interest rate.
I had claimed bankruptcy 2 1/2 years ago (8-05) when my exhusband and I divorced. Neither of us could afford the house by ourselves, so we had to let it go. My mortgage broker, at the time, told me to come back to have him refinance the mortgage after my bankruptcy was a year old (8-06). Well, I called and got no reply. So I went to another guy. He said, “Let’s wait until after your bankruptcy is two years old and then you’ll get a better rate.” Not really what I wanted to hear.
When the time came, he looked over my paperwork and informed me there was a 2 year prepayment penalty fee of $8,500.00. So it really wouldn’t benefit me to refinance at that time. I would have to wait yet another 8 months (4-08).
Now the time has come. This Monday, I am to meet with the mortgage guy. I am not late on my payments. My credit score is right around 700. But if I’d known I’d be paying this house payment ($1,863.00) a month for 2 years, I would’ve never bought the house. I was only led to believe I’d be able to refinance with No problems after only 4 months of this payment by my original mortgage broker…My bad.
What I want to know is if there are any plans for me in this situation. I only want a lower interest rate on what I owe already. My payments are scheduled to go up $350.00 a month in April. I can barely afford the payment I make now. I sometimes wonder how I do it myself. I don’t want to refinance at what my interest is now. I want a lower interest rate along with a lowered payment.
If I can’t get refinanced by another company, I’m planning on going back to the company I have my mortgage through now. I’m going to tell them I cannot afford the increase and I want them to refinance me at a lower rate. They will still be getting the money owed. They will just not be making as much off me as they were.
If they can’t help me, I will have to walk away. This past year, only $500.00 went towards the principal, so it’s not like they haven’t made any money off me. I know that’s what they are in business for, but like I said, if I’d known I’d be making this payment for 24 months instead of 4, I would’ve never signed the papers. I’m only thankful I do make decent money. But my goals are not to work only to get by.
So, are there any recent laws signed into effect that will help me in my situation? ARM that is about to go up; current on payments? I thought I heard something about that. But I could be wrong. I’ve been working too much to pay attention! lol Thanks for reading and letting me vent.
Quick question I haven’t seen addressed yet (but, please forgive any oversights or redundancy on my part)…
Can you please clarify the difference between a 1099A and 1099C. As I understand it, the ‘A’ already received following a Dec ‘07 foreclosure is reporting acquisition of the property by the bank, which should then be treated on taxes as normal for the sale of a home (?); and if REO is subsequently sold for less than what was owed on the ‘A’, a ‘C’ may would be issued at that time? Is this correct.
Lastly, both the first and second lienholder issued 1099A for different FMV’s. Why would the second issue a 1099A if they are not the ones to acquire the property through a foreclosure.
Much appreciation for any assistance with this question. Thanx
Maureen - if the property doesn’t appraise, your chances of refinancing or slim. If it were me I would go to the current lender and ask for a loan modification package. There are no current laws that require the lender to do this though.
Van - The following IRS publication is the most complete resource I have found:
http://www.irs.gov/instructions/i1099ac/ar02.html#d0e124
Hi, my name is Christine. Not too long ago I put my primary residence and my rental property for short sale. I just realize that I will be paying taxes on the difference on my rental property and I cannot not qualify for deed in lieu of foreclosure for that property as well since it was purchased for investment only. My question is, is there any way to avoid bankrupts and not being hit to pay taxes on the difference on my rental property when I have a purchaser.
Christine, insolvency may be an option.
What do you mean by that. Also I forgot to tell you that I leave in Florida.
I owe 60 grand in taxes because I had to include the 1099a income for my rental property that I lost due to foreclosure. I make 32K a year and have no way to pay this balance nor to I have any assets. I was in the mortgage business and loss my job where I amde pretty decent money at all. I also lost my primary residence and filed for chapter 7 bk. I have no idea what to do. I am so scared right now. The government has got to do something. I am not the only one who is going to be dealing with this . If anyone has any insight to give, please do. I am in and out out of the hospital and having i am getting ready to have my third surgery. My debt will probably outlive me. I am so sick behind all of this. Someone help me please…
I applied for a deed in liue on Aug 2007, the bank rep. told me in december the deed in liue had been approved, but so far we have not heard from the bank…Can the bank just come one day and ask us to move out, one day to another???
We have an adjustable rate that was due to change in January. We called our mortgage company and told them we would not be able to afford the new rate (10.5%) and our house had lost so much equity and we lost a portion of our income that we were not in a position to refi. So they have re-worked our loan to a 6.06% rate and gave us a new principal balance of 366,000 from 487,000. Does the portion that they forgave (121,000) qualifty under the Debt Forgiveness Act? Is the Debt Forgivness Act in place yet? Any info is appreiciated.
I lost my home to foreclouse, I ask Countrywide for a loan mofication, to reduce put what I owe at the end of the loan and extended to 40 years, the my real estate agency had a short sale i process Countrywide denied. Countrywide did not want to reduce the price of the home, it was not worth what their appraiser stated, there about $100,000 worth of good work to be done on the home, I live here for 13 and half year, I don’t want to leave my home. I think the forgiveness loan is only for certain people.
I think a homeowner should know approximately how big a nut he or she has to come up with on a monthly basis.On the same token it all ties in with [CREDIT] which we all know is a bunch of CRAP!!! BANKS ARE BANKS,What F___en amazeses me is, how the big guys pay the smaller percentage of taxes and larger income people dont.IF YOU PEOPLE REALLY WANNA SEE AND HEAR ABOUT THE FUCKEN SHITHEAD THIEVES IN GOVERNMENT???? LOOK UP theguyfromboston and listen to the 535 employee skit /// IT WILL BLOW YOUR MIND.!!!///!! AND IF YOU TRULY BELIEVE THAT YOUR VOTE REALLY MATTERS ,YOU:VE OBVIOUSLY BUMPED YOUR KNOGGEN.
Can one of you VA home loan experts answer this one….
I had a VA forclosure on a home about 10 years ago due to some bimbo with 3 kids that sucked me completely dry after a long 12 month marriage. The Judge , a backwoods TN hick, decided that she should get the home despite the fact that she didnt have a job or any source of income to pay for it. I believe he must have been banging her on the side. What other reason for such a brilliant decision? Needless to say, the the home was predictably forclosed upon a few months later due to non-payment!!
I contacted the VA a few years ago and they informed me that the bal owed to them from the sale was 27,000. I was told that I could not get another VA loan unless this debt was paid in full. Recently, a Realtor ran some sort of online VA loan approval to see if I was eligible. The result was I passed and the Realtor told me we could go VA up to 417,000 despite what I told her about my past.
Does anyone know if I am in for a BIG dissapointment or does that 27,000 eventually drop off the VA system?
PLEASE HELP!!!
Thanks
Jeff
Jeff, I would call your local VA office, but I would expect that they will tell you that you still owe the $27K and ineligible until its paid off. That said, the VA isn’t the most efficient operation around, so they could screw up in your favor.
I have my home on the market for a short sale. If the bank accepts the offer of a short sale, will I be responsible for the difference. If I sell the house for $250,000 and I pay off of mortgage is $369,000. Do I have to report that as income and pay taxes on it, Or does the Debt Relief Act appy in this case.
Help!
I am working with Chase Bank and a wonderful realtor in Lodi Calif. My situation/question is as follows..I got stuck in a neg amr. loan that had a 3 year pre-payment penalty so i couldn’t sell when I forsaw the market a year ago..I contacted the bank and they would not let me out of the agreement so i could try and sell my property before the market crashed any more. I took out 2 seperate loans with Chase a month apart initially .I took some equqity out of my primary to buy the second property as an investment to help pay for kids in college…I am in forclosure now(past 90 days on both) and my realtor is working on a short-sale..My question is will I be forgiven by IRS on both properties if I choose to forclose because they canot sell or should I chance working with the bank on a short -sale? Because I re-fied and got a second loan with the same bank, I hoping if I forclose I will be eligible for the forgiveness act..Thank’s..Donna
Karen, if the bank agrees to forgive the debt, then you will receive a 1099. if the debt forgiven is acquisition debt, then you shouldn’t have to worry about the Fed tax hit. Make sure you get legal advice on the terms of the short sale approval.
Donna, the debt forgiveness only applies to a primary residence.
Bob, thank you for taking the time to answer all these concerns. Just wanted to update my situation. My house appraised for what I bought it for (good for me.) I did roll my closing costs into my initial mortgage, so I’ll have to come up with the closing costs, a year’s taxes and insurance (mine were separate initially), closing costs and about 3% of the value of the house so I can refinance FHA. Luckily I have a 403B to borrow from for this. I do make decent money, so it will be nice to have some of to keep in my pocket from now on. Thank you again for your time. Have a great summer!