President Bush signed Mortgage Forgiveness Debt Relief
It appears that I missed this article entirely prior to the holidays, that's what I get for going on vacation. I had heard about this law that was going to be signed to help those that have lost their home due to a short sale, foreclosure or any other similar reason.
The way a short sale worked before this law is let's say you purchased your house for $400,000, but now you can only get $350,000 due to the market and you have no way to pay your payments any longer. For a mortgage company to take a house back and try to then sell it can be more costly than letting people try to sell it and forgive the balance of the mortgage. You would then go to the mortgage company and ask that they allow you to sell the house for $350,000 and forgive the other $50,000. I'm not going to go thru everything that the mortgage companies do prior to approving this, but the homeowner must prove that he/she has nothing of value and no way of coming up with the money. The thing a lot of homeowners didn't realize was that they now got a little letter from the IRS asking them to pay the tax on that $50,000, which was pretty tough at this point since they had lost everything.
This is a good thing for the homeowners that are in trouble, but I'm a little curious where the government is going to stick it to the rest of us as I'm sure they don't want to lose all of that revenue. Below is a portion of the article that the President of the NAR, Richard F. Gaylord, wrote back in December.
The way a short sale worked before this law is let's say you purchased your house for $400,000, but now you can only get $350,000 due to the market and you have no way to pay your payments any longer. For a mortgage company to take a house back and try to then sell it can be more costly than letting people try to sell it and forgive the balance of the mortgage. You would then go to the mortgage company and ask that they allow you to sell the house for $350,000 and forgive the other $50,000. I'm not going to go thru everything that the mortgage companies do prior to approving this, but the homeowner must prove that he/she has nothing of value and no way of coming up with the money. The thing a lot of homeowners didn't realize was that they now got a little letter from the IRS asking them to pay the tax on that $50,000, which was pretty tough at this point since they had lost everything.
This is a good thing for the homeowners that are in trouble, but I'm a little curious where the government is going to stick it to the rest of us as I'm sure they don't want to lose all of that revenue. Below is a portion of the article that the President of the NAR, Richard F. Gaylord, wrote back in December.
WASHINGTON, December 20, 2007 -
“On behalf of the many individuals and families who would have been burdened by a tax after losing their home, the National Association of Realtors® thanks President George W. Bush for signing the Mortgage Forgiveness Debt Relief Act into law. Today the president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home due to a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt.
If you would like to read the entire article you can do so here .
“On behalf of the many individuals and families who would have been burdened by a tax after losing their home, the National Association of Realtors® thanks President George W. Bush for signing the Mortgage Forgiveness Debt Relief Act into law. Today the president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home due to a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt.
If you would like to read the entire article you can do so here .
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