Short Sales and Debt Forgiveness Act

It's the end of 2010 and all the homeowners who completed a Short Sale, Foreclosure or Loan Modification are wondering what to expect in regards to the tax returns. Well, first of all the difference between the loan amount and the sale price will be considered as the income to the homeowners that were involved in Short Sale, Foreclosure or Loan Modification Process. Example:

You borrowed $400,000 and your property is sold for $320,000. There will be a cancellation debt of $80,000. The lender, at the end of the year, will have to send the Form 1099-C (Cancellation of Debt) to the borrower, showing the amount of debt canceled if the forgiven amount $600 or more. The good news is that you may be able to exclude part or all of this income if:

1. The debt was qualified principal residence indebtedness;
2. You were insolvent immediately before the discharge;
3. The debt was canceled in a Title 11 bankruptcy case;
4. You have non-recourse loans.

This exclusion of debt became available after the Mortgage Forgiveness Act was signed in 2007 and extended until 2013. The Act allows you to exclude the income realized as a result of Loan Modification, Short Sale or Foreclosure. However there is a limit on the forgiven debt up to $2 million ($1 million if married, filed separately).

The homeowners will have to file Form 982 with they taxes in order for them to cancel some or all of the forgiven debt. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as result of foreclosure on your principle residence, you only need to complete lines 1e and 2 on the form 982. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2 and 10b. You can get the form by downloading from http://www.irs.gov/pub/irs-pdf/f982.pdf or calling at 1-800-829-3676 and requesting the form to be sent to you by mail (will take 7-10 days).

One more time, please, consult your tax professional or CPA while doing your taxes this year. If you need to Short Sale you property, please, give me a call at 562-334-7393.

Sincerely,

Ihor Pochay
Real Estate Broker/REO & Short Sale Specialist

Team Pochay Realty
Cell: (562)334-7393
ihorpochay@hotmail.com
www.MyRealtorIhor.com
http://shortsaleyourhome.blogspot.com/
DRE# 01772584

Home Owner Affordability and Stability Plan and Short Sales

President Obama signed a plan designed to help homeowners stay in their homes and avoid foreclosure. The three main points of the plan are as follows:

1). It will help homeowners refinance to lower their interest rate. The Loan to Value on the loan should be no more that 105%. So let’s assume the house was bought for $500,000 with the 1st Trust Deed as $400,000 and the 2nd Trust Deed is $100,000. If the value of the home dropped to $420,000 – the homeowner still can refinance as it is 105% of the first Trust Deed. If the Value dropped more than $420,000 – the homeowner will not be eligible to refinance. This section of the plan will help about 7-9 million borrowers refinance their homes.

2). The plan will help homeowners modify their loans. All the loans which were bought by FNMA and FDMAC can be modified (in today’s market it is 60% of all the loans). This section of the plan is designed to help approximately 4-5 million borrowers. The bank will modify the loan in the way that the new PITI (Principle+Interest+Taxes+Insurance) will be 38% and the bank and FNMA will split additional 7% of the costs and bring the PITI to 31%. If the loan is not held by any of the mentioned above investors, the borrower should contact their bank directly and try to work out some options. Borrowers should be aware of the many scammers working in the loan modification field. Make sure you hire someone with a license and do not pay any upfront fees for these services. At the end you can do it yourself.

3). This part of the plan is designed to make more than $200 billion available for people who are buying homes for the first time (first-time home buyers). This provides first-time home buyers with new mortgages that are very affordable, have low interest rates and tax credits that will be available to them at the end of the year – $8000 if they purchase a home between 2009-June 2010, and up to $18,000 – if they buy from a developer.

The borrowers who will not be able to qualify for these programs will still be able and encouraged by the banks to do a Short Sale or a Short Pay Off to avoid foreclosure.

This is just short break down of the plan. If you have any questions or need to see if you qualify to any of these programs or for a Short Sale program, you are more than welcome to contact me.

Ihor Pochay
Real Estate Broker/ Short Sale & REO Specialist
Team Pochay Realty
Cell: (562) 334-7393
ihorpochay@hotmail.com
www.MyRealtorIhor.com
www.shortsaleyourhome.blogspot.com

New Guidance for Short Sales

Beginning April 5, 2010 the lenders (who participate in Home Affordable Modification Program "HAMP") will have new guidance for conducting Short Sales and Deed-In-Lieu. The new guidance is part of the Home Affordable Foreclosure Alternatives Program (HAFA). Under this program the lenders:

1) Will not be able to require a cash contribution or promissory note from borrower;
2) Will no be able to pursue a deficiency judgment against the borrower;
3) Will use the borrower's financial and hardship information, collected in conjunction with HAMP program (the borrower will not have to resubmit these items);
4) Will send to the borrowers the pre-approval of short sale terms before the property is listed;
5) Will not be able to cut the REALTORS commission;
6) Will use standard processes, documents and timeframes;
7) Will provide financial incentives to borrowers, investors and services.

In order for the loan to qualify to the HAFA program, it needs to meet the following criteria:
- The property must be the borrower's principal residence;
- The loan must be the first lien mortgage, and must be originated on or before 01/01/2009;
- The current unpaid principle balance should be no more than $729,750;
- The total monthly mortgage payment should exceed 31% of the borrower's gross income;
- Mortgage is delinquent or it can be foreseeable.

As always, if you have any questions regarding this posting or other Short Sale/Real Estate topics, please feel free to call me or write me a quick e-mail.

Ihor Pochay
Realtor / Short Sale & REO Specialist
Tarbell, Realtors
Cell: (562) 334-7393
Off: (909) 364-9005 Ext. 471
Fax: (909) 364-9262
ihorpochay@tarbell.com
http://www.myrealtorihor.com/
www.shortsaleyourhome.blogspot.com/
Twitter: @ihorpochay