Mortgage Debt Forgiveness
Any debt discharged after Jan 1, 2007 for a qualified principal residence will not be taxable. This could have two fold effect on the housing market. By saving the tax, it will help troubled homeowners to get back on their feet so they can go on with life. On the other hand it could further stimulate the wave of foreclosures, for people who now do not wan to keep their house as the prices have dropped making owning a house a sour investment.
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Default can turn into foreclosure, if it is not taken care in limited time that is allowed. From the time of recording of default notice, home owner have one hundred and six days to save it from trustee sale. Events happen in a following sequence:
- Recording of notice of default
- Every month trustee will send a notice for three months
- After that they will schedule a trustee sale in twenty one days and publish the sale in major news papers for 3 weeks.
- Home owner have the right of redemption of the property up until five days before the trustee sale.
If you are behind in payments, their in nothing like acting in a timely manner. Their are many avenues to stop the foreclosure. We can educate you and give you the information so you are guided to the right path. Contact us as soon a s possible.
Before loosing the property to foreclosure, one must think about the following options:
Forbearance: If you have certain emergency where you are unable to make payments for certain number of months, if is possible to get a postponement for partial or all payments for a few months.
Note Modification: A note is a signed instrument that acknowledges a debt and a promise to repay. Some times a lender forgives certain amount of money in order to put home owner on the normal track of payments. Although the criteria for this are very strict and are dependent upon the beneficiary's approval, it is worth trying.
Short Sale: This is one of the options, for people who owe more than the property value and are unable to make payments or to find any other resolution. It may cause a 1099-C IRS tax consequences but will give an option to settle with the lender called "paid as agreed status". Homeowners must consult with their tax consultant. If some one have a mortgage payment of $5,000 a month and are unable to keep it up due to some hardship in life, moving to an apartment or a rental home at half the price could be the best option.
Repayment plan, mortgage protection plan, reverse mortgage, extension-if scheduled for trustee sale are some of the other options. One must start to think and act on the available options as soon as the circumstances change. Most people are afraid to take the next step and lost time cost more than the original loan. It is important to be proactive.