Real Estate Information Archive

The Mortgage Debt Forgiveness Act, originally passed in 2007, was extended three times to protect homeowners from paying income tax on debt that was relieved due to foreclosure, short sales or deed in lieu of foreclosure.  

The law expired on December 31, 2016 and unless it is extended again, homeowners with debt relief in 2017 may be subject to tax.

A homeowner might feel a sense of relief without the obligation of a delinquent mortgage but just because the payments are no longer due doesn’t mean that there isn’t another obligation that replaces it. If a lender cancels or forgives debt, a taxpayer must include the cancelled amount in their income for tax purposes depending on the circumstances. The tax significance could be serious.

This previously allowed relief only applied to a taxpayers’ acquisition indebtedness of their principal residence which did not include second homes and investment property. The maximum amount was limited to $2 million of mortgage debt forgiveness or $1 million if filing separately.

Due to the serious consequences involved in short sales and foreclosures, it is advised that homeowners faced with this possibility should seek expert advice from their legal and tax professionals.

Many people have weathered through some tough times over the past few years. But now, as things begin to look a little brighter, it's time to consider starting over the right way and with a plan.

As a member of the Top 5 in Real Estate Network®, I am well versed in credit and lending issues and can offer some great tips and information on taking the steps to once again qualify for a mortgage.

Here are some tips for getting your credit back on track:

Pay your bills on time: The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time.

Review your credit report: You're entitled to a free credit report once every 12 months from each of the three national credit bureaus -- Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies. To get your free credit report, go to http://www.annualcreditreport.com.

Check your mortgage: You want to be sure that you don't still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren't enough to cover what's owed on the mortgage, which would leave you owing the difference.

Apply for credit: In particular, apply for different varieties of credit. Credit-scoring models value having different types of credit, so apply for everything from a credit card to a car loan but don't apply for too much credit at one time. Too many inquiries on your credit report will look poor.

Don't fall prey: Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job -- after paying a fee for the service. "The truth is, that no one can remove accurate, negative information from your credit report," according to the Federal Trade Commission. "It’s illegal." Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.

Unfortunately, there are no quick credit fixes; however, with a little education and patience, you can begin to walk the road back to homeownership. If you would like more information on this topic, please contact me. Also, please pass this information along to anyone you feel may benefit from it.

Having a hard time making those mortgage payments and are you fearing foreclosure in your future?  Here are some helpful tips to try to avoid foreclosure.

1.  Do not ignore the problem - it won't go away if you put it out of your mind.  The more you become behind on your loan, the harder it will be to reininstate the loan and the more likely it will be you will loose your house.

2. Contact your lender as soon as you realize that you have a problem.

Believe it or not but Lenders do not want your house. They have options to help borrowers through difficult financial times.  Don't hesitate giving them a call.  

3. Open and respond to all mail from your lender immediately.

The first notices you receive will offer good information about foreclosure prevention options that can help you withstand your financial problems.  Some mail may include important notice of pending legal action.  Telling a judge in foreclosure court that you didn't open your mail won't be a good excuse.

4. Know your mortgage rights.

Read your loan documents so you know what your lender can do if you can't make your payments.  Learn about the foreclosure laws and timeframes in your state (every state is different) by contacting your State Government Housing Office.  


5.  Contact a HUD-approved housing counselor.

The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling throughout the country.  These counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need help. Find a HUD-approved housing counselor near you or call (800) 569-4287.

6. Prioritize your spending.

After your healthcare, keeping your home should be your first priority.  Review your finances and see where you can cut spending in order to make your mortgage payment.  Look for optional expenses-cable TV, gym memberships, entertainment, anything that you can eliminate.

7. Use your assets.  

Do you have assets-a second car, jewelry, that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in that needed extra income?  Even if these efforts don't significantly increase your income, they proove to your lender that you are willing to do what it takes in order to keep your home.  

8. Avoid foreclosure prevention companies.

You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage. Many for-profit companies will contact you promising to negotiate with your lender.  These may be legitimate businesses, but they may charge you a hefty fee for information and services your lender or a HUD approved housing counselor will provide free if you contact them.

Don't wait to recieve that dreaded letter from your lender.  If you are having financial difficulty and are unable to make your mortgage payment, contact a HUD Approved counselor today!!!

Do you need to speak to a real estate professional about further foreclosure questions?  Contact Mike Parker/HUFF Realty via email at mike@mikeparker.com or phone 859-647-0700.  The Mike Parker Team would be glad to answer any questions we can.

The following article was in the Columbus Dispatch on Saturday, May 31, 2008, written by Sarah Pulliam.  It was forwarded to us by an attorney Terrance R. Monnie.  He explains that if the buyer mentioned in this article "had purchased a title insurance policy the loss would not only have been covered but the insured buyers would have been provided with legal counsel to defend the claim."

Clerk's error jeopardizes family's home

Undetected lien against seller haunts buyer

Zanesville, Ohio - A spelling error by a government worker might cost Andy Mateja his house. 

When he bought a home worth at least $400,000 for $320,000 in 2001, he thought it was a good deal.  He moved in with his family of six and paid his mortgage on time, according to his records.

So he couldn't understand why the Muskingum County sheriffs office served him with foreclosure papers in August 2007.

"My wife literally broke down and cried.  She thought we were going to lose the house," Mateja said.  "If we were going to be evicted, I didn't know where we were going to turn."

When Mateja bought his house, he paid for a title search that found no liens on his property.  It turns out what wasn't true.

JPMorgan Chase had placed a $150,000 lien on the house in 1998, when it was owned by Dr. Subbarayudu Koppera.  But the lien was mistakenly entered into the public record under the name Koppera, so it did not not show up when the title company searched for liens by the owner's last name.

Muskingum County Recorder Karen Vincent, whose office made the spelling mistake, testified that a correction was made in 2006.  Vincent told the Dispatch that to her knowledge, it was the first time an error has been made, but she declined to comment further.

In buying the house, Mateja did not take out title insurance that would have protected him from claims against a previous owner.

Now JPMorgan Chase is going after the Matejas' house.  The Matejas have countersued the bank and Koppera.  The case is scheduled to go to court June 19.

Tom Kelly, a spokesman for JPMorgan Chase, said that if the lien is paid off by Koppera, the bank will not pursue foreclosure.  He declined to check how much Koppera has paid or whether there is an agreement to pay back the money, citing privacy issues.

"Our goal for all of this is to be paid what we're owed, and the security to that is the mortgage lien on that property," Kelly said.  "Our preference is to be paid the money, not to own the house."

Former homeowner Koppera, 61, modified the lien in 2004, even though he no longer owned the house.  Koppera, who bought a $682,000 house in New Albany is 2000, said he is paying the bank $2,000 each month on the lien of his former home.

"We are paying now.  Somehow they got mad and they want everything."  Koppera said of Chase.

Koppera, a kidney specialist, and his wife have faced numerous civil judgments for unpaid debts and federal, state and county tax liens for unpaid taxes.

He believes the title company made a mistake.  "They should've known it and stopped right there so the lien was clear.  Instead of me taking the cash, I would've paid the lien," Koppera said regarding the sale of the house.  "They didn't do their job, and they should pay for it."

Koppera declined to comment further.

Mateja, a 53-year-old father of four, moved to his Zanesville home from Chicago.  The four-bedroom, red-brick house sits on a manicured hill in a quiet neighborhood northwest of Zanesville.

He has incurred mounting costs since he left his job as vice president of sales for Robinson Ransbottom Pottery before the company went out of business in 2005.  He worked as a consultant for two years before getting a full-time job in October with Gale Pacific.

Because he was struggling financially, he refinanced his mortgage in May 2007 at a higher interest rate in a loan that gave him extra cash.  His lender would not give him an equity loan.

Then, he was hit with foreclosure papers, and he has incurred about $10,000 in legal bills since.

"My first inclination was, 'Do we just let them pull the plug and go rent?'  We didn't want to try to rent, but we couldn't buy again if we had been foreclosed on," Mateja said.  "It definitely put me into shock and put my wife into deep despair."

This was originally posted by Ralph Roberts but we thought it was such great information, we just had to share it. 

If you or someone you know is currently facing foreclosure, you have options, including:

1.    You are not alone. Foreclosure knows no geographic, racial, ethnic, or socio-economic boundaries. We have seen real estate agents, attorneys, and others face foreclosure. Michael Jackson recently filed for bankruptcy. Foreclosure is much more prevalent than you think.

2.    Most people facing foreclosure have at least a dozen options. (Many people falsely believe that they have only two options – pay up or move out.) You can reinstate the loan, refinance (consolidate debt), list the home for sale with an agent, sell to an investor (if you have insufficient time to list the property), offer a deed in lieu of foreclosure, declare bankruptcy, negotiate forbearance or a mortgage modification, to name several of the most common options.

3.    Banks and other lending institutions do not want to foreclose. They make more money if you can make your payments. When they foreclose, they not only lose your monthly payments, but they also have the expense of foreclosing, rehabbing the home, and then selling it. In today’s market, there’s a good chance they’ll have to sell the home at a loss. This is all good news for you – it means the bank is highly motivated to make a deal with you.

4.    Given the current mortgage crisis and resulting foreclosure epidemic, the federal government, your state government, and consumer protection advocacy groups have put more pressure on mortgage lenders and provided them with additional resources to help homeowners in distress. In a way, people facing foreclosure now may be in a much better position to avoid it than they would have been, say five years ago.

5.    If you own the home with your spouse or life partner, tell them immediately. Far too many people try to keep their partner in the dark. Eventually, the person will find out. It’s always better if they find out from you earlier rather than from someone else when they have little or no time to do anything about it. Couples that work as a team almost always see much better results.

6.    Call your lender – the sooner, the better. As soon as you stop making payments, the foreclosure clock starts ticking. The earlier you know your options, the more time you have to pursue those options.