WHAT IS YOUR LIABILITY FOR RE-PAYMENT OF

WHAT IS YOUR LIABILITY FOR RE-PAYMENT OF HOME LOANS?ShortSaleQuestions.com : 

WHAT IS YOUR LIABILITY FOR RE-PAYMENT OF HOME LOANS?ShortSaleQuestions.com Joy Elliott, Realtor Your “Joy” in Real Estate People’s Choice Brokers joy@joyelliott.com www.joyelliott.com 510-326-2716

Who is Joy Elliott, Realtor® : 

Who is Joy Elliott, Realtor® Joy Elliott is a San Francisco Bay Area native and has extensive knowledge of all the best neighborhoods in the East Bay Area ; San Leandro, Castro Valley, Hayward and Hayward Hills, and the Tri-Valley ‘s 680 Corridor communities of Pleasanton, Dublin, San Ramon and Danville/Alamo areas. Joy also practices in some areas of Oakland, Montclair and Piedmont 2. Joy Elliott has been licensed to sell real estate since 1990 and has experienced both good and bad markets and is very familiar with the short sale and foreclosure process and the ever-changing legislation regarding this process 3. I am an experienced Short Sale Realtor® who aligns myself with the Realtor® Code of Ethics. I belong to the Bay Area Multiple Listing Service and is a member of the National Association of Realtors® and the California Association of Realtors® 4. As a Realtor with People’s Choice Brokers I sell residential and residential income property and financing or re-financing saving you money by discounting loan closing costs.

F.Y.I : 

F.Y.I Joy Elliott is a Realtor®, not a tax accountant or a lawyer. Joy is a member of the National Association of Realtors® and the California Association of Realtors® and follows a strict Code of Ethics and licensed by the State of California Department of Real Estate #0188147 Joy is a member of Bay East Association of Realtors Multiple Listing Service with access to most all of California You should discuss any particulars of tax consequences with a consultant of your choice Bankruptcy should always be handled with the aid of an attorney.

What loans are eligible for the new Obama Guidelines : 

What loans are eligible for the new Obama Guidelines If your mortgage loan is owned by Fannie Mae or Freddie Mac, you may be eligible for a Home Affordable Refinance to take advantage of lower interest rates. Only loans owned or guaranteed by Fannie Mae or Freddie Mac are eligible. Your mortgage company can tell you who owns your loan, or you can contact Fannie Mae and Freddie Mac directly by clicking on the links below and completing the forms for each company. Your mortgage servicer can also provide more information. Find their contact information Fannie Mae 1-800-7FANNIE (8am to 8pm EST) www.fanniemae.com/loanlookup Freddie Mac 1-800-FREDDIE (8am to 8pm EST) www.freddiemac.com/mymortgage

Guidelines…Not Law! : 

Guidelines…Not Law! It is important to remember that the Home Affordable Modification Program (H.A.M.P.) Homes Affordable Foreclosure Alternatives Program (H.A.F.A) 2nd Loan Lien Modifications Program(2MP) ARE GUIDELINES AND NOT LAW…LENDERS MAKE THE FINAL DESCISION TO PARTICIPATE MORTGAGE FORGIVENESS DEBT RELIEF ACT IS ONLY APPLIED Purchase Money Loans, not lines of credit or 2nd deed of trusts that are not purchase money

How can you avoid personal liability for the forgiven debt? : 

How can you avoid personal liability for the forgiven debt? YOUR LIABILITY IS VIEWED IN TWO PARTS. 1. Taxation by IRS on the amount forgiven and treated as income. 2. Personal liability of debt owed to lenders who are not required to release you of the commitment to repay the loan

Mortgage Forgiveness Debt Relief from IRS Taxation : 

Mortgage Forgiveness Debt Relief from IRS Taxation Generally, if you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable The Mortgage Forgiveness Debt Relief Act and Debt Cancellation for years 2007-2012 is now in effect. Most , but not all, forgiven loans will not be taxable for this period of time The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

Avoid Personal Liability : 

Avoid Personal Liability You should sell your property in a Short Sale with an experienced short sale Realtor® Your lender in first place is for the purchase money loan you took out to buy the property or refinanced without cashing out. Your second place lender could be a 2nd mortgage and would be considered purchase money loan if both loans closed at the same time of the purchase Another second or third place lender is for home equity lines of credit. You can be held responsible for this portion of the loan. Have an experienced Realtor®, such as Joy Elliott, negotiate on your behalf to get them to release liability in writing if allowed by lender

Short Sale with TWO Lenders or more…. : 

Short Sale with TWO Lenders or more…. Your Realtor® must submit a package to each lender for consideration Your Realtor® will negotiate with the First Place Lender Your Realtor® will negotiate with the Second lender to accept a small token (generally $3000-$6000 from the First in order to sign off on the second position loan allowing a sale and negotiating a release of liability, if possible.

2nd Loan Lien Modifications (2MP) : 

2nd Loan Lien Modifications (2MP) Many homeowners may be struggling to make their monthly mortgage payments because they have a second lien.  Even when a first mortgage payment is affordable, the addition of a second lien can sometimes increase monthly payments beyond affordable levels.  Second liens often complicate or prevent modification or refinancing of a first mortgage. The 2nd Lien Modification Program (2MP) offers homeowners a way to lower payments on their second mortgage.  2MP offers homeowners, their mortgage servicers, and investors an incentive for modifying a second lien.  Servicers and investors may also receive an incentive for extinguishing a second lien, forgiving all of the debt a homeowner owes. Homeowners must provide consent to share their first lien mortgage modification information with their second lien mortgage servicer, if they are different. Since 2MP is meant to be complementary to the Home Affordable Modification Program (HAMP), a homeowner must have their first lien modified through HAMP before the second lien can be modified under 2MP.

More 2MP guidelines : 

More 2MP guidelines Under 2MP, with their investor’s guidance, a mortgage servicer may: Reduce the interest rate to 1% for second liens that pay both principal and interest (amortizing) Reduce the interest rate to 1% amortizing or 2% interest-only for interest-only second liens Extend the term of the second lien to 40 years If the principal was deferred (through forbearance) or forgiven on the first lien, a servicer must forbear the same proportion on the second lien; although a servicer may, in its discretion, forgive any portion or all of the second lien and receive incentives for doing so

Guidelines cont’d : 

Guidelines cont’d A second lien is eligible for 2MP if: The corresponding first lien has been modified under the Obama Administration’s Home Affordable Modification Program and the second lien servicer is participating It was originated on or before January 1, 2009 It does not have an unpaid principal balance (at consideration for the modification) of less than $5,000 or a pre-modification scheduled monthly payment of less than $100 It has not yet been modified under 2MP It is not subordinate to a second lien or is not a home equity loan in first lien position; It is not a second lien on which no interest is charged and no payments are due until the first lien is paid in full (silent second usually used with City first time buyer loans) The second lien servicer is in possession of a fully executed 2MP modification agreement or trial period plan by December 31, 2012; or the second lien is not insured, guaranteed, or held by a Federal government agency (e.g. FHA, HUD, VA, and Rural Development)

List of Participating Servicers as of April 5, 2010 : 

List of Participating Servicers as of April 5, 2010 Link to Banks and Servicers participting in Obama's Home Affordabe Programl

What is Cancellation of Debt ? : 

What is Cancellation of Debt ? If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

CANCELLATION OF DEBT CONT’D : 

CANCELLATION OF DEBT CONT’D Is Cancellation of Debt income always taxable? Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve: Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners. The State of California Franchise Tax Board also has a program to the federal program. Bankruptcy: Debts discharged through bankruptcy are not considered taxable income. Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets. Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.

What are Recourse and Non-Recourse loans? : 

What are Recourse and Non-Recourse loans? Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences. These exceptions are discussed in detail in IRS Publication 4681.

What is a Recourse Loan? : 

What is a Recourse Loan? Recourse loans get their name from the fact that lenders have power. They are allowed to go after you for amounts that you owe - even after they’ve taken collateral. If you default on a recourse loan, the lender can bring legal cases against you, garnish your wages, and try to collect the amount you owe. Most Recourse Loans are home equity loans, any loan not used as purchase money a principal residence. Investor Properties are normally considered recourse loans and not subject to protection

What is Non-Judicial or Judicial Foreclosure? : 

What is Non-Judicial or Judicial Foreclosure? Debtors may reinstate up to five days before non-judicial foreclosure sale. No deficiency judgment is permitted after a non-judicial foreclosure or for a foreclosure on a purchase money loan. If the foreclosure is judicial, a deficiency judgment is allowed if the foreclosure was not a purchase money loan. California’s one-action rule requires the lender to foreclosure and sues for a deficiency at the same time. If the lender elects to foreclose only, it can’t elect to sue for a deficiency later on (again this is applicable only to judicial foreclosures). Starting June 15, 2009 lenders must give homeowners an additional 90 days to modify their loans. There are a number of conditions that must be met. (1) The loan must have been recorded between January 1, 2003 and January 1, 2008. (2) It must be a first mortgage or deed of trust. (3) A notice of default must be filed. (4) The lender must not be exempt. You can find out whether your lender is exempt here. (5) It must be the homeowners principal residence. The law states you must be living in the property at the time the loan becomes delinquent. A lender to be exempt, basically, must have had an existing loan modification program in place that meets certain requirements. You can read the entire bill here. (The law expires on January 1, 2011 unless extended.)

California has a ONE ACTION RULE : 

California has a ONE ACTION RULE Both judicial and non-judicial foreclosure are available, but the non-judicial deed of trust sale is overwhelmingly preferred. California has a one-action rule, in which a lender must elect one action to take against the borrower if the borrower defaults. If the lender forecloses the deed of trust in court (judicial-foreclosure), the lender has chosen one action and may not bring a lawsuit to recover a deficiency on the note;, which would be a second action. The one-action rule is not applicable to trustee sales because the court is not involved. California has non-judicial foreclosures . California lenders rarely elect judicial foreclosures. You can expect two legal notices: Notice of Default and Notice of Sale. After the notice of default is published, the lender cannot proceed further with a foreclosure for at least 90 days. The Notice of Sale will arrive by registered or certified mail at least 20 days before the date of sale The minimum number of days a foreclosure can take: 135 (non-judicial)

Avoiding 1099 IRS income : 

Avoiding 1099 IRS income Cancellation of Debt Income Exception #1: is this your personal residence? Exception #2: Are you technically insolvent? Add up everything you owe Add up everything you have except your retirement If your debts exceed your assets, you are probably technically insolvent If you are insolvent you DO NOT OWE on cancellation of debt income.

Will they come after your other assets? : 

Will they come after your other assets? They will want you to pay cash if you have it. You can refuse to touch retirement accounts You can get a realistic (low) brokers price opinion on other properties you own If you have assets you will want to retain a law firm to negotiate with you You can claim bankruptcy and avoid all liabilities.

Thank you for visiting…hope it was helpful : 

Thank you for visiting…hope it was helpful 510-326-2716 or email joy@joyelliott.com or visit my website at JoyElliott.com BestofEastBay.com