Upcoming Foreclosures

What is the new law pertaining to foreclosures that passed in december?

I COULD NOT AFFORD MY HOME IN NEW JERSEY AS I WAS PAYING 4000.00 PLUS A MONTH MORTGAGE AFTER MY MORTGAGE RESET. I GOT A GOOD JOB IN FLORIDA AND KNOWING I WOULD NOT BE ABLE TO AFFORD MY HOME IN NJ I BOUGHT AND CLOSED ON A SMALLER MORE AFFORDABLE HOME IN FLORIDA.MY HOUSE IS FOR SALE BUT I HAVE STOPPED MAKING THE PAYMENTS AND AM CURRENTLY LATE. I AM WILLING TO LET IT GO TO FORECLOSURE IF IN FACT IT DOES NOT SELL. MY CHOICE WAS TO GO DOWN IN FLAMES AND RENT.OR BUY A HOUSE WITH AN AFFORDABLE PAYMENT AND STILL BE A HOME OWNER.IF MY HOUSE IN JERSEY GETS FORECLOSED AND SELLS FOR 450000 AND I OWE 500000. WHAT HAPPENS? I UNDERSTAND THERE IS A NEW LAW THAT PASSED IN DECEMBER PERTAINING TO THIS.

Public Comments

1. I believe you are referring to the Mortgage Debt Relief Act of 2007. It doesn't pertain to everyone though. Contact an accountant and ask them for the legislation on it or look it up. In the end, you should probably talk to an accountant to see if you qualify. Good luck.
2. "Before this piece of legislation, cancellation of debt from foreclosure or short sale (sale of a home for less than the amount owed) generally resulted in additional tax liability based on the difference between what the home was sold for and the amount of the total debt. Unfortunately, many foreclosed homeowners will not be protected by this new law. The relief from debt stemming from foreclosure of a personal residence, but only to the extent the debt went into buying or improving the house, will now be left out of taxable income if a foreclosure occurs between January 1, 2007, and December 31, 2009. However, many will still feel the sting of this tax viper unless they file a petition in bankruptcy. ... When calculating the amount of forgiven debt that is covered by this statutory exclusion, any debt not used to buy or improve the principal residence will continue to be considered as income to the foreclosed homeowner. This means that a careful analysis of the loan history and actual expenditures made by a debtor must be made before a foreclosure is permitted. Unfortunately, a byproduct of this legislation could well be a false sense of security for a homeowner facing foreclosure. The failure to act promptly could result in the unfortunate gut punch described above with tax liability on top of loss of the home. The bankruptcy and insolvency exceptions to cancellation of debt income taxation still are available. However, the taxpayer must be insolvent at the time of the foreclosure, or the foreclosure must occur after or during the bankruptcy to qualify for these exclusions. If a bankruptcy is filed too late or the taxpayer has retirement funds or other assets at the time of foreclosure, there can still be an enormous and unexpected tax liability resulting from the foreclosure." http://www.bankruptcylawnetwork.com/2007/12/26/home-loan-foreclosure-no-longer-a-tax-trap/ I wouldn't count on qualifying if you were able to get yet another home--a deficiency judgement for the difference and costs could be in your future. You should consult an attorney.
3. The law would not apply to you because you 1-are not making the payments and 2-do not live in the house, or the state. Reality is that by the time the house sells the bank will add $20,000 or more in additional costs to your mortgage. It is not free to default, legal fees, appaisers, realtors, advertising, serving legal papers, court costs are not free and you will have a huge chunk added to your mortgage. Now, as it stands currently the difference between what you end up owing and what the house sells for will be a loss to your bank and unearned income for you. To get out of the unearned income you have to prove that at the time of repossession your assets were worth less than your liabilities. If you can prove that, then the income could be forgiven. Good luck to you and if I were in your shoes I would go and speak with a tax/bankruptcy attorney to find out what the real deal is. The biggest problem is that you will be dealing with NJ laws. Good luck.
4. sorry u are fubr'd . u have made major mistakes and will pay for decades . visit dave ramsey.com to learn some mistakes from others hard lessons. the 'new law' will not help u. get legal opinions from 3 lawyers to get balanced opinion.
5. It doesn't pertain to forclosures, it pertains to refinancing. For foreclosures, you're still in your own. The government isn't in the business of bailing out people who bought more home than they could afford, at any interest rate. Depending on how your bank characterizes that $50,000 "loss" they took, that could be (and probably will be) considered discharged debt on your part for that tax year and treated by the IRS as income to you. $50,000 taxed at a marginal rate of 15% will add about $7,500 to that year's tax bill for you. OUCH! Wouldn't want to be ya.
6. You are going down in flames no matter how this turns out. You are currently trashing your credit by being late on payments. This means you are going to pay more for everything, credit cards, insurance, anything that takes credit score into account. Next, ask your lender if you can do a short sale. A short sale means the lender accepts less than what you owe so the house doesn't foreclose. Then you lower your asking price accordingly. Do this Monday, don't be bashful or drag your feet on this, get a dialog going with your lender ASAP.