1099-C and deficiencies....
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Replies to This Discussion
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Permalink Reply by Jeff Payne on
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Paul, agreed. I agree with you too about the 1099C but Harry has some good thoughts on this too. Tough part is that there are no cases that we know of to support either side
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Permalink Reply by Paul Jones on
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Paul Jones said:yep "refining your trade" is going to kill whats left of your business. telling clients things that will never happen to them is not good for business.just to make another point, in most cases the bank is just the servicer for a loan that the gov't is taking a loss on (a fannie/freddie loan). the bank if they go after money would just have to give it to fannie and freddie anyway. it's not worth their time and effort.
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Permalink Reply by Justin on
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still waiting for the list of cases where the seller was pursued. seriously.
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My point, which seems to be misinterpreted to be 'telling clients things that will never happen to them' is that telling your clients that they need to report their financial position truthfully and as far as is known, deficiencies are being pursued in very select situations. Could you imagine the courts going from being clogged with foreclosure proceedings to deficiency pursuit proceedings?
Agents must take a greater underwriting curiosity in their seller's financial position to determine whether the seller has any business being concerned. Is the seller selling an investment property? Do they have multiple investment properties? Those sellers have reason to be concerned.
However, a seller making $70,000 per year drowning in credit card debt, auto loans, child care, child support, alimony, college tuition for themselves or their kids and bills of every other imaginable stripe is going to be pursued so that the gov't can try and get what out of this dry stone? You MUST inquire and beg the seller to swallow his/her/their pride and be truthful with you as to whether they are behind on this mortgage ALONE or behind on any other items that will appear on their credit report. People tend to not want to be honest answering this question. You need to make sure they are honest so you can help determine where they stand. If they are screwing everyone and his brother, credit cards are late, utilities, medical, whomever, this is actually very good for them. If the mortgage alone is late and they generally have good credit and are paying credit cards and everything else on time, that's not so good.
Despite that, it's still not the primary residence people who are in the crosshairs. You MUST be much more careful with people who own 3 or more investment properties. They are coming up way higher on the radar than even the most strategically defaulting primary o-o mortgage.
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harry what is the statute of limitations on this in your state?
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Permalink Reply by Kimberley Kelly on
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Initially, I agreed with Jeff...and still do. In California, debt is forgiven on primaries and now the secondary notes, and the 1099C is one choice..Lenders cannot do both. I loved reading Harry's points though. The Banksters can and will figure a way to go after people with lots of assets if they can. In California, I feel we have made it very difficult for them to go back on their approval letters releasing the right to pursue, the laws in place, and the 1099's erasing the option.
But...I am not a legal person, and I am a cynic so Harry may have a leg to stand on..time will tell.
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California is a non-deficiency state.
I assume from the original poster's profile that the property is in Idaho:
Idaho: Lawsuit for deficiency must be brought within 3 months of the public auction. Deficiency limited by fair market value as of the date of the sale.
That FMV being the case, how much deficiency would he be liable for in reality? And he has 90 days to worry if this is accurate.
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Permalink Reply by Richard Zaretsky on
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The IRS Instructions on the 1099C set forth their policy.
I also wrote on this years ago (nothing changed). Your issue has to do with what the heck does the letter (poorly drafted) mean?
You say the letter says nothing about the deficiency. Well, the negotiator says plenty. The letter does not USE the word deficiency, but the negotiator says plenty about it. First the report "debt settled for less than owed" is indicative of a waiver of deficiency because of the credit bureau lingo and it says it is "settled" as opposed to "open". Don't confuse this with "charged off", which means "we don't think we are going to be able to collect it, but we are going to keep trying".
You need to get what the negotiator to put his / her represenations in writing.
As far as the 1099C, some lenders are trying to collect after doing 1099C reports, but that is an issue to my knowledge not yet resolved by the courts. My bet is that the lender cannot have it both ways -- see the instructions.
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Permalink Reply by Wendy Rulnick on
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Richard - Thank you for stopping by! We appreciate your presence on the site!
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Permalink Reply by Julie Cendejas on
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Thank you Richard! I have her emails in which she explained things - not sure I'm going to be able to get much else.....as hard as I keep trying!
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