When the Debt Forgiveness Act ends in December, will Short Sales also end... or not?

We aren't hearing much about this act expiring in December.  http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief...-

If it is not renewed - what is the incentive for people to follow through with a short sale?  When the sellers are taxed on the debt forgiveness, that can mean paying tens of thousands of dollars in income tax.  Kind of like kicking someone when they are already down! 

For the most part, sellers who are coming out ahead when they sell are not being taxed on their gains....

Also, if short sales come to a screeching halt, will that mean that banks are going to wind up with more inventory as folks fall into foreclosure...?  Will that affect the strength of the banks again as they will have so much inventory on their books?

When I was in D.C. last spring, our legislatures were looking at this act just as a benefit for a few people.  It appeared they did not know how this could ultimately affect the foreclosure rate.

Thoughts? 

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I have done work in 41 states and the tax issues vary from state to state. I do not know what "conclusion" you are referring to. I have never lost a tax case on this issue. The credit and judgment issues are pretty standard too. Credit is Federal anyway and most states are pretty uniform on judgments.

trust me, I know this stuff...in most states, judgments last at least eight years but many are automatically renewed. A 10 year judgment that automatically renews for 20 years is effectively a 20 year judgment. Other states allow a judgment to be extended upon application that is automatically granted. 20 years on judgments is a good guide because of this

Is a foreclosue classified as a judgment? What state are you based in?

Paddy,

In your example you state Green tree was the first and was only permitted to receive *8%. Did you mean to say Green tree was the second? If Green tree was the first, can you explain why they were only permitted 8% and where the 8% was dictated from? HAFA is 6%. Is the 8% what was left after the first was paid off?  If there is a way for me to get over the 6% I would live to learn about it.  

NationStar was the first and Green Tree was the second. It was a non-HAFA deal...I always have clients opt out of HAFA

This conversation went off the rails several pages ago.  The Mortgage Debt Relief Act of 2007 has NOTHING TO DO WITH DEFICIENCY. It has to do with TAX LIABILITY to the seller.

lol Joe - I needed a pick me up giggle...ty :)

My 2 cents - None of us has a crystal ball. The Act is set to expire. Most of the public is unaware of the ramifications.

It is our job to explain the huge potential tax hit.

I heard that it basically has been extended but won't get formally signed off by congress until AFTER the election....

but OF COURSE!!! duh.... they want to keep everyone in limbo til the last second....

imagine if this DID NOT extend????  hmmmm

Just in case that it does not get extended, I also heard a rumor that the higher up people are trying to fight the fact that "Taking Action" before the year ends will still qualify you for this Relief instead of having to "Complete the Sale" before the year ends, anyone heard of such thing?

This is off of Chase's website:

 

How long will the government HAFA program be offered?

This program will accept eligible borrowers until December 31, 2013.

They will accept until Dec 31, does that mean that as long as you apply before then, you are eligible for the relocation money?

They are replacing HAFA with the new GSE guidelines.  Basically the same thing....

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