Short Sales Get A Reprieve on Debt Foregiveness Taxation

Homeowners who are considering a short sale or are in foreclosure will still be able to reap the benefits of the Mortgage Debt Forgiveness Act. This was to expire on December 31, 2012. As part of the “fiscal cliff” resolution, Congress has extended this until December 31, 2013. What this means to troubled homeowners they will not be liable for any taxes on the short fall on the sale of their homes.

There are still many homeowners who have been hanging on trying to make ends meet, and may be faced with either a foreclosure or having to sell their home on a short sale this year. With the extension of the Mortgage Debt Forgiveness they can breath a sigh of relief as they won’t have to pay taxes on the difference between what the home sells for and what they owe.

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August Sales Activity

Here is a recap of sales activity for the month of August by City. As is noted prices are starting to rise.

Contra Costa August 2012 Home Sales Activity

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Contra Costa June 2012 Market Update

Contra Costa County Market Data Overview – Thru June 2012

Below is an overview of the home sales activity by City. The “Activity” section is number of units in each category. Average Sales Price shows first the results for June, and the year to date figures and how they compare to the previous year.

As is noted by the “active” listings, there are very few houses for buyers to choose from which based on historical data should help to raise prices over the long term. [Read more...]

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California Bill of Rights Relating to Foreclosures

California is the first state to impose the same rules for all mortgage servicer’s in how they manage and handle foreclosures.  On July 11th Governor Jerry Brown signed into law  the “Homeowner Bill of Rights” to help struggling Californians keep their homes.

The purpose of the law is to help individuals avoid foreclosure, specifically when they are involved in a loan modification or short sale transaction. In the past one department was not aware of what the other department was doing and even though someone was working towards a loan modification, the foreclosure process was not put on hold. This resulted in people losing their homes while trying to get help. The same thing happened when someone was involved in a short sale that was in escrow.

The California Homeowner Bill of Rights has four major components:

  • Prohibiting “dual track” foreclosures that occur when a servicer continues foreclosure while also reviewing a homeowner’s application for a loan modification;
  • Creating a single point of contact for homeowners who are negotiating a loan modification;
  • Expanding notice requirements that must be provided to a borrower before taking action on a loan modification application or pursuing foreclosure; and
  • Allowing injunctions against foreclosure until violations are corrected and permitting civil penalties against servicers that file multiple, inaccurate mortgage documents or commit reckless or willful violations of law.

The law is effective January 2013. To read the full test of the bill visit CCAR Realegal

Source of the above information: C.A.R. Newsline.

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Principal Reduction by BofA To Help Struggling Homeowners

Bank of America announced they will be offering offering principal reductions of up to $100,000. The question many are asking -what’s the catch and is my loan one of the lucky chosen.

According to an article in the Los Angeles Times, the only loans currently that are being considered are those that were originated by Countrywide Financial, which was acquired by Bank of America in 2008.

The only loans that will qualify for the principal reduction are those owned by Bank of America or private investors. These also include mortgages originated by Countrywide Financial which Bank of America acquired in 2008. Loans owned by Freddie Mac, Fannie Mae or FHA will not be eligible. The projections are that 200 households will benefit from this program.

Check Here to see if your mortgage qualifies for this program.

Is there an upside for Bank of America to offer this program – I would say so. They own $3.25 billion in penalties from the foreclosure settlement which could be reduced for instituting the principal reduction program.

 

 

 

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Are You A Struggling California Homeowner?

 

At our weekly real estate marketing meeting a representative from “Keep Your Home California” was the guest speaker. The intent was to inform the real estate community of the four programs in place to help Californians keep their homes.

 

This is a federally funded program with $2 billion allocated for Californians. Based on the projections of the agency, they hope to help 100,000 homeowners. The four programs available are designed to help homeowner who are at different stages and need assistance.

  • Unemployment Mortgage Assistance – temporary assistance for those who were laid off. The max is up to $3,000 per month assistance not to exceed $27,000 total.
  • Mortgage Reinstatement Assistance Program – this program is to help those who have gotten behind on their payments and are now able to make the mortgage payments, but need to pay the back payments. This is a one time payment for up to $20,000
  • Principal Reduction Program – helps those who are having hardships, their home is worth less then they owe. The reduction in principal may be up to $100,000. Not all servicers are on board with this program.
  • Transition Assistance Program – this is for those homeowners who are unable to keep their homes and are engaged in a short sale of their home or working with their lender to do a “deed in lieu of foreclosure” and need to relocate. Maximum amount of assistance is $5,000

Some of the requirements are:

  • Must be principal place of residence and you occupy the home
  • Documented hardship
  • Meet the income limits
  • Adequate income to make payments if the loan is modified
  • Mortgage is either delinquent or on the way to becoming delinquent
  • Unpaid principal balance does not exceed $729,750

The agency has a call center in Riverside with counselors who can answer your questions and determine which program is your best option. They will also be able to tell you if your mortgage servicer is participating in these programs.

Contact information: Keep Your Home California – Telephone #888-954-5337 or check out their website at www.KeepYourHomeCalifornia.org

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Short Sales Debt Relief & Taxes

short salesWhat does the Debt Relief Act of 2007  means to homeowners

For anyone considering a short sale, 2012 may be the time to really decide if this is for you. Why? Because the Debt Relief Act of 2007 will come to an end on December 31, 2012. This applies to any debt forgiven for years 2007 through 2012. Right now based on this law, any debt forgiveness beyond 2012 will be taxable.

The Debt Relief Act was designed for homeowners who lost their homes either to a foreclosure or short sale to have that debt forgiven and not taxed. Debt that is forgiven in normal circumstances is viewed as income and therefore taxable.  It only made sense that if people did not have the money to pay their mortgage, they were also not in a position to pay the tax on the forgiven mortgage by the banks.

Banks Offering Incentives to do Short Sales

Banks such as Citi, Chase and Bank of America are offering homeowners incentives to do short sales rather than let the house go into foreclosure. These incentives range anywhere from $2,500 to $25,000. You need to check with your lender to determine if they are offering any kind of incentive.

Also, be sure to check with your CPA to verify that you qualify for the tax relief.

Short Sales Take Time – Don’t Wait

It can take anywhere from 30 days to 4 months (sometimes longer) to have a short sale processed and closed. Therefore, if you are thinking or believe this is the route you wish to take, now is the time to act. Get your home on the market as soon as possible. Putting off listing your home will not prevent the inevitable and if things turn around you can always take the home off the market and catch up on the mortgage payments.

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FHA Loan Limits Back to $729,500

It is official – Congress has re-enacted the FHA loan limits back up to $729,500.  As of October 1st, the limits were decreased to $625,000. Through lobbying by the real estate community, the law was reversed and was signed on November 18th.

This higher loan limits open the door for more people to purchase a home, especially with the higher home prices in the Contra Costa & Alameda areas. More home, less down payment and somewhat less stringent credit score requirements make it easier to buy–especially for the first time home buyer who may have excellent credit, good jobs, but not 10% to 20% required by conventional loans.

 

 

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Mortgage Debt Forgiveness-Principal Reduction Program

The principal reduction program was introduced several months ago and there had been talk that more lenders would get on board with this program. But to the dismay of many, if either Fannie Mae or Freddie Mac are the investors holding your mortgage, this will not happen, according to an article that appeared in the New York Times.

I am not sure if the reasoning behind their decision makes sense and that is probably because I am out here and not in there. My thinking if the home ends up in either a short sale or forecelosure, in essence the principal is reduced. Once either one of these actions happens, the homes will be sold at market value, which is essentially what the principal reduction program is about.

It would also seem that the expense of either a short sale or foreclosure is far greater than the principal reduction. In either of the above scenarios, taxes are not being paid, homeowners dues where applicable are not being paid. If the home is vacant, then who knows what has been destroyed. The holding costs for the lenders plus any attorney fees are costs that would not be incurred with the principal reduction.

Essentially the mortgage principal reduction program works with homeowners who are current on their mortgage, have good credit, but are upside down on the mortgage, have had some type of hardship and are trying to hang on.

My questions – wouldn’t it be in the best interest of all parties to work with these homeowners? They are in the property, taking care of it, making mortgage payments.

Anyone in this type of situation, should check with their lenders to see if they are willing to participate with the principal reduction-short pay program. The first questions to ask “who is the investor holding my mortgage” – hopefully it is not Freddie or Fannie.

If you are in a distressed situation and would like to find options, such as a short sale, give me a call Linda 925.415.3046 or email

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San Ramon Valley Foreclosure or Short Sale – You Can Now Buy A House

DownPaymentIs there a time frame I must wait to buy a house if I have a foreclosure or short sale?

People looking to purchase a house in the San Ramon Valley  area may qualify to purchase a home even with a Short Sale or Foreclosure on your credit.With this program you do not need to wait the standard two to three years before purchasing a home. If you’ve got the cash you can get a house.

Okay – What’s the Catch

The catch, if there is one, is the amount required for a down payment. If you have 35% to put down you can get a loan to purchase a home. Other than the foreclosure or short sale you must have credit scores in the 700s.

In addition to the down payment requirement, the interest rate may be 1/2 to 1 point higher than current interest rates. Which maybe okay as the interest rates are so low.

There are quite a few people who have had the misfortune of a short sale or foreclosure due to loss of job, relocation or other circumstances that are now on their feet and have the cash to make this work. And what better time to buy with the attractive prices for San Ramon & Danville homes on the market.

Call me to find out more. As a local real estate agent I do my best to stay on top of all the  financing programs for home buyers.

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