I read an excellent article today on the tax treatment of cancelled mortgage debt by an excellent Real Estate writer, Kenneth R. Harney.
In a nutshell, if debt is forgiven due to a short sale, foreclosure or loan modification, the lender sends the borrower a 1099C at the end of the year. If the debt was forgiven on your principal residence and you have only used the funds to purchase, build or improve your home, it's probably not taxable income. It would be taxable if you refinanced and pulled out money to buy a Tesla. Check out IRS Form 982 and Publication 4681 for more technical details.
The link to this great article is: http://articles.latimes.com/2011/mar/13/business/la-fi-harney-20110313
Enjoy! I have a great real estate attorney and C.P.A. to refer if you need more help. Just let me know.
Judy Clarke
The Clarke Team
Bay Area Real Estate
650-489-5399
sold@clarketeam.com
Showing posts with label loan modification. Show all posts
Showing posts with label loan modification. Show all posts
Friday, March 18, 2011
Sunday, January 17, 2010
GSE loan mods, refinancings rise in November
As of November 2009, Fannie Mae and Freddie Mac implemented more than 405,000 trial and permanent loan modifications under the Home Affordable Modification Program (HAMP), according to a third quarter Federal Housing Finance Agency’s (FHFA) report. The agency also refinanced 4 million loans. The report details the actions each enterprise has taken to prevent foreclosures and help homeowners remain in their homes.
According to the report, as of Nov. 30:
According to the report, as of Nov. 30:
- Fannie and Freddie had implemented 405,700 HAMP active trial and permanent loan modifications.
- Foreclosure starts on loans owned or guaranteed by the GSEs declined 15 percent in the third quarter.
- Loan modifications, excluding HAMP trial loan modifications, increased 14 percent compared with the second quarter.
- Nearly half of loan modifications completed in the third quarter, excluding HAMP trial modifications, resulted in borrowers’ payments decreasing by more than 20 percent.
- Short sales and deeds in lieu increased by 39 percent during the third quarter.
- Loans 60 or more days delinquent increased nearly 20 percent during the third quarter to 1.6 million.
Sunday, October 25, 2009
Governor Signs SB94 Prohibiting Advance Fees for Loan Modifications
No Advance Fee for Loan Modifications:
This new law, which went into effect on October 11, 2009 (and expires January 1, 2013), prohibits any person, including licensed real estate brokers and attorneys who negotiate, attempt to negotiate, arrange, attempt to arrange, or otherwise offer to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower related to mortgages and deeds of trust secured by residential real property containing one to four dwelling units to do any of the following:
No Dividing Services into Phases to Avoid Advance Fee Law:
The new language in California Business & Professions Code Section 10026 that defines "Advance Fee" has been modified to clarify that services may not be divided into phases to avoid the new law: "Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this section."
Lenders and Loan Servicers Are Exempt from Advance Fee Law:
This law further provides that these provisions do not apply to actions taken by a person who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, including, but not limited to, collecting principal, interest, or other charges under the terms of a loan, before the loan is modified, including charges to establish a new payment schedule for a non-delinquent loan.
Fees Already Collected Prior to October 11th Not Affected:
Loan modification agreements entered into and advance fees already collected on or before October 11, 2009 are not affected. Any advance fees collected after October 11, 2009 must be fully refunded to the clients. Even if the DRE issued a "no objection" letter, licensees may no longer collect advance fees despite executed loan modification agreement.
This new law, which went into effect on October 11, 2009 (and expires January 1, 2013), prohibits any person, including licensed real estate brokers and attorneys who negotiate, attempt to negotiate, arrange, attempt to arrange, or otherwise offer to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other compensation paid by the borrower related to mortgages and deeds of trust secured by residential real property containing one to four dwelling units to do any of the following:
- Claim, demand, charge, collect, or receive any compensation until after the licensee has fully performed each and every service the licensee contracted to perform or represented that he/she/it would perform.
- Take any wage assignment, any lien of any type on real or personal property, or any other security to secure the payment of compensation.
- Take any power of attorney from the borrower for any purpose.
No Dividing Services into Phases to Avoid Advance Fee Law:
The new language in California Business & Professions Code Section 10026 that defines "Advance Fee" has been modified to clarify that services may not be divided into phases to avoid the new law: "Neither an advance fee nor the services to be performed shall be separated or divided into components for the purpose of avoiding the application of this section."
Lenders and Loan Servicers Are Exempt from Advance Fee Law:
This law further provides that these provisions do not apply to actions taken by a person who offers loan modification or other loan forbearance services for a loan owned or serviced by that person, including, but not limited to, collecting principal, interest, or other charges under the terms of a loan, before the loan is modified, including charges to establish a new payment schedule for a non-delinquent loan.
Fees Already Collected Prior to October 11th Not Affected:
Loan modification agreements entered into and advance fees already collected on or before October 11, 2009 are not affected. Any advance fees collected after October 11, 2009 must be fully refunded to the clients. Even if the DRE issued a "no objection" letter, licensees may no longer collect advance fees despite executed loan modification agreement.
Saturday, March 21, 2009
Scam Artists Using Forged Letterhead To Con Californians
California Attorney General Edmund G. Brown Jr. is warning consumers that scam artists are using the forged letterhead of major lenders to con worried Californians into paying thousands of dollars for non-existent loan modification services.
"Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home," Brown said.
Steps consumers can take to protect themselves from loan modification fraud are available at http://ag.ca.gov/newsalerts/release.php?id=1697.
Complaints may be filed with the Attorney General's Office at: Office of the Attorney General - Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244, or online at http://ag.ca.gov/consumers/general.php.
"Californians should be deeply skeptical of anyone who demands money up front and makes extravagant promises that they can save their home," Brown said.
Steps consumers can take to protect themselves from loan modification fraud are available at http://ag.ca.gov/newsalerts/release.php?id=1697.
Complaints may be filed with the Attorney General's Office at: Office of the Attorney General - Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244, or online at http://ag.ca.gov/consumers/general.php.
Saturday, February 21, 2009
Homeowner Affordability and Stability Plan announced
The news is full of information on the new plan to help homeowners in trouble. Click here for a link to a great chart of who will qualify per a New York Times article.
We received the update below from the National Association of Realtors that discusses in detail the latest help planned for homeowners in trouble:
On February 18, 2009, President Obama announced his Homeowner Affordability and Stability Plan, designed to help up to 7-9 million families avoid foreclosure by restructuring or refinancing their mortgages. There are three main elements.
1. GSE Refinancing for Responsible Homeowners Suffering from Falling Home Prices.
Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs) will refinance the mortgages for 4-5 million homeowners with loans owned or guaranteed by the GSEs. The streamlined refinancing program is designed to help borrowers with loan-to-value ratios above 80 percent up to 105 percent.
2. $75 Billion Homeowner Stability Initiative to Reach up to 3 to 4 Million At-Risk Homeowners
The goal of the 3-year Homeowner Stability Initiative is to reduce the monthly payment of homeowners to affordable levels using $75 billion from TARP and the GSEs. The program will be available for home owner-occupants “at risk of imminent default” even if they are current in making mortgage payments, as well as those already delinquent. It will only apply to mortgages at or below the GSE conforming loan limits.
Key elements of the plan:
· The lender world first be required to reduce rates, without assistance, so the monthly payment does not exceed 38 percent of borrower income (debt-to-income ratio of 38 percent). After that, federal assistance would be used to match, on a dollar-for-dollar basis, further reductions to bring the debt-to-income ratio down to 31 percent.
· After 5 years, the rate could increase gradually to the loan rate in effect at the time of the modification.
· Lenders may reduce monthly payments by reducing principal. Federal assistance would share the cost (up to the amount the lender would receive for reducing interest rates).
· As an incentive to loan servicers, they will receive $1,000 up front for each qualified loan modification. For borrowers who stay current on the modified loan, servicers will receive a monthly “pay for success” fees up to $1,000 a year for 3 years.
· As an incentive to borrowers, borrowers will receive a monthly reduction in their mortgage balance, up to $1,000 a year for 5 years.
· As an additional incentive to help borrowers avoid going into delinquency, servicers will receive $500 and mortgage holders will receive $1,500, if they modify at-risk mortgages before the borrower becomes delinquent.
· As an incentive for lenders to modify more mortgages, the Obama plan—together with the FDIC—has developed a partial guarantee initiative. The Treasury Department will establish an insurance fund of up to $10 billion to discourage lenders from foreclosing on mortgages, by limiting their lose if home prices decline more than expected. Mortgage holders of modified mortgages could receive a payment on each modified loan, linked to home price index declines.
· Treasury will establish uniform guidelines for loan modifications, working with bank regulators and the FDIC. All financial institutions receiving Financial Stability Plan assistance will have to agree to follow the guidance. The GSEs will use the guidance for their loans, and the government will work to apply them “when permissible and appropriate” to all federally owned or guaranteed loans, including Ginnie Mae, FHA, Treasury, Federal Reserve, FDIC, VA and Agriculture loans.
· The plan includes other elements, including:
o Strong oversight .
o “Allow Judicial Modification of Home Mortgages During Bankruptcy for
Borrowers Who Have Run Out of Options.” Only mortgages under GSE loan limits would qualify. Homeowners must first seek a loan modification. Legislation is needed. The plan also anticipates legislation to give FHA and VA authority to pay partial claims if there is a bankruptcy or voluntary loan modification so holders of FHA and VA guaranteed loans are not hurt.
o Funding for displaced renters and neighborhood stabilization.
o Improving Hope for Homeowners and other FHA programs.
3. Supporting Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac
The Obama Plan beefs up the current support for the GSEs.
· The Treasury Department is doubling, from $100 billion to $200 billion for each GSE, its pledge to invest money to make sure that the GSEs maintain a positive net worth. This will further assure that the federal government is committed to maintaining the mission of the GSEs. In a statement issued today, Director Lockhart described this mission as “providing much-needed liquidity, stability and affordability to the housing market at this time.” He went on to say that doubling the commitment “should remove any possible concerns debt and mortgage-backed securities investors have about the strong commitment of the U.S. Government to support Fannie Mae and Freddie Mac.” He expects the increased commitment to help keep interest rates low, which will help both current and future homeowners. The additional $200 billion is from HERA in connection with the conservatorship, not from the Financial Stability Plan or TARP.
· Treasury will continue to buy GSE MBSs, as announced when the GSEs were placed into conservatorship.
· The GSEs will be able to increase their portfolios by $50 billion to $900 billion, and increase their outstanding debt.
· The Administration will work with the GSEs to support state housing finance agencies.
We received the update below from the National Association of Realtors that discusses in detail the latest help planned for homeowners in trouble:
On February 18, 2009, President Obama announced his Homeowner Affordability and Stability Plan, designed to help up to 7-9 million families avoid foreclosure by restructuring or refinancing their mortgages. There are three main elements.
1. GSE Refinancing for Responsible Homeowners Suffering from Falling Home Prices.
Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs) will refinance the mortgages for 4-5 million homeowners with loans owned or guaranteed by the GSEs. The streamlined refinancing program is designed to help borrowers with loan-to-value ratios above 80 percent up to 105 percent.
2. $75 Billion Homeowner Stability Initiative to Reach up to 3 to 4 Million At-Risk Homeowners
The goal of the 3-year Homeowner Stability Initiative is to reduce the monthly payment of homeowners to affordable levels using $75 billion from TARP and the GSEs. The program will be available for home owner-occupants “at risk of imminent default” even if they are current in making mortgage payments, as well as those already delinquent. It will only apply to mortgages at or below the GSE conforming loan limits.
Key elements of the plan:
· The lender world first be required to reduce rates, without assistance, so the monthly payment does not exceed 38 percent of borrower income (debt-to-income ratio of 38 percent). After that, federal assistance would be used to match, on a dollar-for-dollar basis, further reductions to bring the debt-to-income ratio down to 31 percent.
· After 5 years, the rate could increase gradually to the loan rate in effect at the time of the modification.
· Lenders may reduce monthly payments by reducing principal. Federal assistance would share the cost (up to the amount the lender would receive for reducing interest rates).
· As an incentive to loan servicers, they will receive $1,000 up front for each qualified loan modification. For borrowers who stay current on the modified loan, servicers will receive a monthly “pay for success” fees up to $1,000 a year for 3 years.
· As an incentive to borrowers, borrowers will receive a monthly reduction in their mortgage balance, up to $1,000 a year for 5 years.
· As an additional incentive to help borrowers avoid going into delinquency, servicers will receive $500 and mortgage holders will receive $1,500, if they modify at-risk mortgages before the borrower becomes delinquent.
· As an incentive for lenders to modify more mortgages, the Obama plan—together with the FDIC—has developed a partial guarantee initiative. The Treasury Department will establish an insurance fund of up to $10 billion to discourage lenders from foreclosing on mortgages, by limiting their lose if home prices decline more than expected. Mortgage holders of modified mortgages could receive a payment on each modified loan, linked to home price index declines.
· Treasury will establish uniform guidelines for loan modifications, working with bank regulators and the FDIC. All financial institutions receiving Financial Stability Plan assistance will have to agree to follow the guidance. The GSEs will use the guidance for their loans, and the government will work to apply them “when permissible and appropriate” to all federally owned or guaranteed loans, including Ginnie Mae, FHA, Treasury, Federal Reserve, FDIC, VA and Agriculture loans.
· The plan includes other elements, including:
o Strong oversight .
o “Allow Judicial Modification of Home Mortgages During Bankruptcy for
Borrowers Who Have Run Out of Options.” Only mortgages under GSE loan limits would qualify. Homeowners must first seek a loan modification. Legislation is needed. The plan also anticipates legislation to give FHA and VA authority to pay partial claims if there is a bankruptcy or voluntary loan modification so holders of FHA and VA guaranteed loans are not hurt.
o Funding for displaced renters and neighborhood stabilization.
o Improving Hope for Homeowners and other FHA programs.
3. Supporting Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac
The Obama Plan beefs up the current support for the GSEs.
· The Treasury Department is doubling, from $100 billion to $200 billion for each GSE, its pledge to invest money to make sure that the GSEs maintain a positive net worth. This will further assure that the federal government is committed to maintaining the mission of the GSEs. In a statement issued today, Director Lockhart described this mission as “providing much-needed liquidity, stability and affordability to the housing market at this time.” He went on to say that doubling the commitment “should remove any possible concerns debt and mortgage-backed securities investors have about the strong commitment of the U.S. Government to support Fannie Mae and Freddie Mac.” He expects the increased commitment to help keep interest rates low, which will help both current and future homeowners. The additional $200 billion is from HERA in connection with the conservatorship, not from the Financial Stability Plan or TARP.
· Treasury will continue to buy GSE MBSs, as announced when the GSEs were placed into conservatorship.
· The GSEs will be able to increase their portfolios by $50 billion to $900 billion, and increase their outstanding debt.
· The Administration will work with the GSEs to support state housing finance agencies.
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