Update:
many Americans have been going through the hardest times of their
lives. Owning a Home is supposed to be the American dream, not
a nightmare. Findlly, there is some relief in sight.
The
National Association of Realtors® praised the U.S. House of
Representatives for passage of the Mortgage Cancellation Tax Relief
Act, H.R. 3648, by a vote of 386 to 27. Since the early 1990s,
NAR has advocated for repeal of the current law, which forces
individuals to pay an income tax when they have had a loan forgiven
or have had to foreclose because of their inability to pay their
mortgage.
"Congress
made a good decision that will affect many Americans who find
themselves in a truly bad situation," "Changing the
IRS code is an issue of fundamental fairness. It would relieve
a tax burden at a time when an individual or family has experienced
a true economic loss arising from the sale or loss of their home.
These families are already in financial distress and are most
likely unable to pay additional taxes."
We expressed our commitment to continue efforts to make the horror
of losing a home less burdensome for families. "This is not
only about the subprime turmoil we are currently experiencing.
This is also about families who have lost their home or a need
to sell that home for less than the amount owed on their home
mortgage because of job loss, divorce, health issues, a decrease
in the value of the home or other unfortunate circumstances. Clearly
it is unfair to tax people on phantom income when they most likely
have no cash with which to pay the tax. The current tax code requires
a lender who forgives debt to provide a Form 1099 to the IRS stating
the amount the borrower has been forgiven. This disclosure applies
whether it is 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 the property is sold at
foreclosure or is sold for less than was borrowed, that difference
is considered income and is subject to the tax.
H.R.
3648 would ensure that any amount forgiven on mortgage debt secured
by a principal residence will not be taxed. The legislation has
a provision to safeguard against abuses. That provision is similar
to one that already exists for commercial real estate owners and
would treat commercial and residential property equally.
Lender
recourse: In some states and with certain types of loans, lenders
can pursue a court decision called a “deficiency judgment”
making you personally liable for the remaining amount owed to
them above the short sale price. In some cases, the lender may
ask you to pay a portion of the difference back in the form of
an IOU.
The
lender has sole discretion whether to pursue a deficiency judgment
in those instances when a deficiency judgment is permitted. Unlike
other loss mitigation companies that offer “basic”
and “premium” services, at We, as a matter of course,
we diligently apply ourselves to every short sale case with the
goal of negotiating with the lender to eliminate a deficiency
judgment and to consider your debt as settled.
