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As part of the fiscal cliff deal, Congress extended the cancellation of mortgage debt relief provision, also known as the Mortgage Debt Relief Act for one year, through the end of 2013. President Obama is expected to sign the legislation into law shortly.

The law – which was set to expire at the end of 2012 - is crucial to foreclosure mitigation efforts such as principal forgiveness and short sales. Normally, U.S. law decrees that when a lender forgives all or a portion of a borrower’s debt, the forgiven amount is considered taxable income for the borrower. This is known as Cancellation of Debt (COD) Income and must be included in a taxpayer’s gross income.

This Act, however, created an exception to this rule under the U.S. Tax Code. The Mortgage Forgiveness Debt Relief Act allows homeowners who received principal reductions or other forms of debt forgiveness to not pay taxes on the amount forgiven. The amount extends up to $2 million of debt forgiven on the homeowner’s principal residence.

For homeowner’s to qualify, their debt must have been used to “buy, build, or substantially improve” their principal residence and be secured by that residence. The law, which was passed in 2007 with a five year sunset provision, will now be in effect until January 1, 2014.

If you're facing foreclosure you're facing some very important  decisions. We want you know you're not alone and we are here to help  with any questions you may have to assist you in making the best decisions for  your situation. There is no charge for this service and we are happy to help! We  offer confidential and professional real estate advice.

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short  Sales in; Bexley Columbus Delaware Downtown Dublin Gahanna Grandview Heights Granville Grove City Groveport Hilliard Lewis Center New Albany Pickerington Polaris Powell Upper Arlington Westerville Worthington

“Walking away from my property” is a phrase often used by struggling homeowners who are considering allowing their homes to fall into foreclosure. However, the phrase does not accurately depict what negative effects a foreclosure actually has on a borrower’s situation yet many believe that it is as simple as letting your home fall into foreclosure and walking away. That is certainly an understatement and I will tell you why.

Think about the basic situation. You borrowed money from X (lender one) and Y (lender two assuming you have 2 liens) and later you tell both X & Y you are unable to repay your debt. So you “walk away” from the situation. Would X & Y just accept the loss and wave their hands while you leave the situation? No. Here is what they will do.

Recourse & Non Recourse State
There are different foreclosure laws in every state. This determines what the lender can legally do in the event a borrower doesn’t pay the owed amount. In a recourse state, both X & Y are able to pursue you for the remaining balance even after your home is foreclosed on. In a non-recourse state, X is not able to pursue you legally BUT Y can and probably will come after you for the remaining balance. In other words, if you have a second mortgage (2nd lienholder) on your property, they can still get their money back.

Credit Reporting
If you “walk away” from your home and debt owed to X & Y, don’t you think they will tell A,B,C, and all other future lenders of what you did? However you handle your debt owed now will put on your credit report for future lenders to see. You will have either a “foreclosure” stamped on your report which means you really did just walk away from a bad situation or you can have a “paid for less than original amount” aka a short sale on your report which shows to A,B,C that you put effort in settling your remaining debt with X & Y rather than walking away from them.

What you decide to do now will be put on paper either way. If you “walk away,” it may be easier now but harder later in various ways such as not being able to obtain another mortgage and/or a possible lawsuit.

Keep in mind that lenders WANT you to do a short sale. You may be wondering, “well I can’t afford to do a short sale…” This is a myth my friends. If you work with the right short sale agent, you shouldn’t be paying a penny. In fact, lenders typically pay YOU for doing a short sale and it can be up to $30,000 if you do.

In this 2012 year with all of the laws and lender practices now supporting homeowners who take the time to short sell their home, simply walking away from your home will make a strong statement to all who take a look at your credit report (future lenders, bosses, apartments for rent and etc.)

If you live in Washington state, our short sale experts will show you how you can settle with your lenders and walk away with little to no liability. Connect with us HERE and we will contact you within 24-48 hours.

Hope this helps

Peter

7 Reasons to Avoid a Foreclosure

Families who typically end up foreclosing on their home often didn’t understand the foreclosure process or simply just gave up because they no longer cared or could handle the stress. The foreclosure process is typically an emotional rollercoaster and it’s not uncommon for us to hear they simply wanted to “wash their hands of the headache”. In situations like this, we urge homeowners to become aware of their options and really understand what a foreclosure means.

We’re prepared a quick list of foreclosure consequences that will help you understand exactly what a foreclosure means.

1)      If your property forecloses, you will be required to disclose this on all future mortgage applications, and on many job applications. This can have an adverse effect on your future mortgage rates.

2)      According to Fair Isaac Corporation, credit scores will be lowered by 300 or more points. A foreclosure is considered the most devastating credit issue in relation to future credit availability and if coupled with bankruptcy can be very hard to recover from.

3)      A foreclosure is very difficult if not impossible to have “repaired” on your credit report.

4)      It could open up the possibility for your mortgage lender to seek a deficiency judgment and attempt to collect the difference not accounted for from the sale of the home.

5)      A foreclosure can put a new job in jeopardy, as many employers are now running credit checks on potential hires.

6)      A current job could be in jeopardy. There are many employers who run credit checks annually to make sure employees are not underwater in their finances.

7)      Government jobs can be jeopardized with a foreclosure showing on a credit report, especially those with security clearances.

With these points in mind, if you find yourself underwater and unable to make a mortgage payment, it’s important to seek out options. One option that will allow you to still exit the home is called a short sale.  A short sale is often the better route and provides a more favorable outcome for both you and your mortgage company. The ability to find experienced short sale team with a proven successful track record will help you protect yourself from a diminished credit score and the possibility of losing employment opportunities.

We are here to help – call us today – 888-746-7820. 

www.shortsaleapprovals.com

Short Sale Tax Consequences

After a short sale, there is still one more type of paperwork that the seller has to accomplish and it pertains to income tax after a short sale. Ordinarily, a debt that has been forgiven is still treated as taxable income. However, because of the Mortgage Forgiveness Debt Relief Act of 2007, homeowners may qualify to exclude the forgiven debt from the net taxable income but what is considered as a forgiven debt and what makes a homeowner qualified for debt relief? It is important for a homeowner who just went through a short sale to fully understand the provisions under Mortgage Forgiveness Debt Relief Act of 2007 since not all types of debt forgiven can be excluded from the net taxable income. By doing so, a homeowner can avoid paying for unnecessary taxes or being penalized for excluding a taxable income. Here are the common questions that relate to income tax after a short sale.

What is forgiven debt?

A forgiven debt is an amount you owe your lender but have been waived usually as a result of a request backed by a very valid reason. In the case of a short sale, a forgiven debt is the difference between the selling price and the mortgage which the lender or bank has waived because of your valid hardship situation.

What is exclusion of forgiven debt or income?

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