Yesterday, The Mortgage Foregiveness Act of 2007 was passed effectively getting rid of the question, “will I be taxed on a short sale?”
Prior to this action, the forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure was potentially taxable to the borrower. As agents we always have had to warn our clients in short sale positions about the potential of receiving a 1099 from the shorted mortgage lender, thus triggering a potential tax. In one situation I’m involved in, the potential deficiency is 1 million and the tax hit would have been devastating.
Now however, those owners in that situation, at least until 2009, are having their taxes waived, too (at least up to 35%). For those in this situation, this is really great news and likely the best holiday present they could hope for.
On their behalf, thank you congress [photopress:applause.jpg,thumb,alignright]
Why does the mortgage business seem so insane and unreliable?
Well, there are a couple of reasons. One reason is there are a tremendous number of loan officers who have no experience but who are pretending they do. As loan officers, our job is to make your loan work. When we look at a loan application, we examine all possible reasons we can find that could be a problem. These are things like properties under construction, borrowers who are out of work, too much debt, not enough income, complex income situations, low credit scores, title problems, and much more. Loan officers with lots of experience have seen so many different situations with such complex problems they know how to evaluate a new loan and spot potential problems. Where we run into trouble is with the underwriters. These folks work for the lenders and they review all of the information sent to them from the loan officer. They have guidelines and matrices which tell them what’s acceptable and what’s not. Underwriters will ask, or what we call “condition