DON’T LOOSE YOUR TAX EXEMPTION
Distressed homeowners considering a short sale as their best way to avoid foreclosure have little time to act. You may not be aware of the fact that normally any mortgage debt forgiven by a lender is taxable income. So, IF you are successful in obtaining approval for the short sale of your, you could be facing a huge tax liability.
Fortunately, in 2007 Congress passed the Mortgage Debt Forgiveness Act, which exempts homeowners who are still occupying their homes from that tax liability. Unfortunately, as things stand, that Act EXPIRES on December 31, 2012. That means that in order for you to ensure that you avoid any potential tax liability for forgiven debt, you will have to sell your home, get short sale approval from your lender(s) and close escrow by the end of this year. That does not give you any time to think about it. You will have to act NOW!
There is always a chance that Congress will extend the Mortgage Debt Forgiveness Act. However, they way Congress has been functioning over the past year or two, delaying a short sale and betting on the chance that the Act will be extended, is like playing Russian roulette with an automatic pistol.
It takes time to complete the short sale process and although most loan servicers have made improvements in their handling of short sale requests, getting to the closing table in less than two months will be a difficult task.
If you have family members or friends who are having difficulty making their mortgage payments and are considering a short sale, usually the best way to avoid foreclosure, help them get in contact with an experienced Realtor who knows how to handle short sales. One way to find such a Realtor is to go to www.CDPE.com (Certified Distressed Property Expert). There is a page on that site that lists CDPE certified agents by city.
Please tell them to HURRY!
For more information about the tax exemption select this link for the New Your Times article. http://www.nytimes.com/2012/10/21/realestate/mortgages-end-is-nigh-for-certain-tax-exemptions.html?ref=realestate&_r=0
If you have any questions about this subject, short sales or real estate in general, feel free to give us a call at (916) 337-0658.
ARE YOU ELIGIBLE FOR A $125,000 REMEDIATION?
If you, or someone you know, are the victim of a mishandled foreclosure, you may be eligible for a payment of as much as $ 125,000. Back in March of this year, when the government announced the National Mortgage Settlement, we wrote a post advising people that they could have their foreclosure reviewed. If the reviewing authority found that the loan servicer had mishandled your foreclosure, the homeowner could be paid.
The Office of the Comptroller of the Currency has extended the deadline for applying for a foreclosure review. The new date is September 30, 2012. More information is available at www.independantforeclosurereview.com .
Specific details are now available. Those who successfully completed a trial loan modification but lost their homes anyway can receive $ 125,000 plus whatever equity they had at the time if the foreclosure or they can get $ 15,000 and their house back when that is possible. That option is also possible for those who lost their homes when they were not in default.
Those whose loan modification were denied in error can get $ 5,000 and their homes back when possible, or $ 15,000 plus whatever equity they had. Homeowners who requested a loan modification but never got a chance to apply can get $ 2000 and those never approached by their loan servicer to be offer a loan modification can get $ 1000.
The foreclosure reviews are not limited to robo signing issues. Homeowners who were anywhere in the foreclosure process in 2009 and 2010 may be eligible, which could include 4.5 million households.
Critics say that the remedies are ridiculously low. The response rate is low and it is imperative that every homeowner who may be eligible apply. We feel that it is about time someone held these loan servicers accountable.
Select this link for the complete San Francisco Chronicle article:
The California Association of Realtors joins law enforcement officials in warning distressed homeowners about the newest scams.
This short video explains a short sale in easy to understand language.
If you have any questions feel free to contact us (916) 337-0658
CANCELLATION OF MORTGAGE DEBT TAX–Tick Tic, Tick Toc
Did you know that if a creditor forgives any debt that you owe, the IRS tax code requires that creditor to issue a 1099 reporting the shortfall? The tax code recognizes the shortfall as income, added to your other income and you must pay income taxes on the total dollar amount.
Unfortunately, those having trouble making their mortgage payments and facing foreclosure can expect their lenders to do exactly that, if the lender ends up selling the property at a foreclosure sale. They will also comply with the tax code if you sell your home in an approved short sale and the lender has to forgive any part of your loan commitment. This is not exactly good news for distressed homeowners. All they need is a huge tax bill after they have lost their home.
Fortunately, the government stepped in several years ago and enacted legislation that provides an exemption for those where their lender cancelled debt on their principal residence. Unfortunately, the Mortgage Debt Relief Act will expire on December 31, 2012. Although there is a possibility of an extension, we would not want to bet the ranch on that happening, given our current economic environment.
For those who plan to let their homes go through the final phases of a foreclosure, there is no way to control the timeline. Homeowners considering a deed in lieu may have a little more control of the timeline.
Those homeowners considering a short sale should start the process immediately. Although many of the loan servicers are making every attempt to speed up the short sale process for qualified borrowers, they are still taking many months to complete. If you started today, and your loan servicer is very slow, you may not get the final approval and be able to close before that December 31, 2012 deadline, looming in the background. It would be prudent to find and Realtor® experienced and trained in dealing with short sales, so that you can get started as soon as possible.
We have included a video made by Alex Charfen, CEO of the Certified Distressed Property Institute (CDPE) to help you understand the situation. Realtors® with the CDPE designation are trained to help distressed homeowners avoid foreclosure.
If you have any questions, of know of someone in need of assistance, please call us at (916) 337-0658. We are here to help.