Archive for the ‘Foreclosures’ Category

Incentive Payments and Short Sales – Reprint from Lowell Sun 3/10/2012

James Haroutunian writes a column for the Lowell Sun.  This is great information about the ever changing short sale market. 

Last week I discovered the holy grail in the world of short sales: My office performed a short-sale closing where the lender paid a $20,000 incentive payment to the seller. That’s right, the seller got out from her loan and got paid for it at the same time.

Industry rumors rang in the new year, as lenders indicated 2012 would be a big year for short sales. High foreclosure volume in hard-hit states such as Florida motivate lenders to use the collaborative process as an alternative to legal action. Some lenders claimed to begin using incentive payments in 2011, though infrequently.

Last week, I bore witness to this phenomenon, as a very happy seller walked away from her mortgage with $20,000 cash. The lender further agreed to waive any deficiency obligation by the seller.

Will this become the norm with short sales? Local real-estate agents are hopeful incentive payments will continue because they will help clear housing inventory. But they remain skeptical it will actually happen.

USA Today reports the following major lenders providing certain programs:

* JPMorgan Chase went national with short-sale incentive offers last year, paying up to $35,000 in some cases.

* Bank of America is testing incentives from $5,000 to $25,000 in Florida to see if it should be expanded to more states.

* Wells Fargo’s incentive offers range from less than $3,000 to $20,000, according to a company spokesman.

Attorney James Haroutunian practice includes real-estate and estate planning law. Contact him with questions at the Haroutunian Law Office at 630 Boston Road, Billerica, 978-671-0711 or email at james@hlawoffice.com.
Read more: http://www.lowellsun.com/rss/ci_20145775#ixzz1rRjluVhM

10 Things To Know About Mortgage Debt Forgiveness – A Reprint from Inman News 3/7/2012

This article was written by Stephen Fishman who is a tax expert, attorney and author who has published 18 books, including “Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants,” “Deduct It,” “Working as an Independent Contractor,” and “Working with Independent Contractors.” 

Anyone who has gone through foreclosure, refinancing or shortsales or will be should read this. 

10 things to know about mortgage debt forgiveness

 

Over the past several years, millions of homeowners have had billions of dollars in mortgage debt forgiven, either through foreclosure, refinancing or short sales. It’s important for real estate professionals and homeowners to understand that mortgage debt forgiveness has significant tax consequences.

Here are 10 things the Internal Revenue Service says you should know about mortgage debt forgiveness:

1. Normally, when a lender forgives a debt — that is, relieves the borrower from having to pay it back — the amount of the debt is taxable income to the borrower. Thus, a homeowner who had $100,000 in mortgage debt forgiven through a short sale would have to pay income tax on that $100,000, as an example.

Fortunately, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from your taxable income up to $2 million of debt forgiven on your principal residence from 2007 through 2012. This means you don’t have to pay income tax on the forgiven debt.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude from your taxable income debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. The Mortgage Forgiveness Debt Relief Act applies to home improvement mortgages you take out to substantially improve your principal residence — that is, they also qualify for the exclusion.

6. Second or third mortgages you used for purposes other than home improvement — for example, to pay off credit card debt — do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness , and attach it to your federal income tax return for the tax year in which the debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax-relief provision. In some cases, however, other tax-relief provisions — such as bankruptcy — may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated, you normally will receive a year-end statement, Form 1099-C: Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

The IRS has created a highly useful Interactive Tax Assistant on its website that you can use to determine if your canceled debt is taxable. The tax assistant tool takes you through a series of questions and provides you with responses to tax law questions.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, see IRS Publication 4681: Canceled Debts, Foreclosures, Repossessions and Abandonments. You can get it from the IRS website at irs.gov.


How Important is Owner’s Title Insurance?

THE FOLLOWING ARTICLE IS A REPRINT FROM OCTOBER 22, 2011 IN THE LOWELL SUN written by Attorney James Haroutunian (Billerica MA).  With the spring market already off and running and with so many foreclosures out there, this is a reminder to ALL buyers to consider purchasing owner’s title insurance as par t of the closing process on your new home. 

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A new chapter unfolds in the foreclosure saga

This week, the commonwealth’s highest court substantiated the long-term negative effect of a defective foreclosure on subsequent owners.

 

Last year, the infamous Ibanez-case ruling identified why foreclosures can be defective if a lender forecloses without proper documentation proving its ownership at the time. This week, the Supreme Judicial Court applied that ruling against a subsequent buyer of a defectively foreclosed property. The ruling effectively stated the new owner’s title is null and void, despite his paying for and improving the property.

 

These are amazing times in property-law history. The Bevilacqua case sets a new precedent for owners seeking proper channels to prove their title through Massachusetts Land Court. Yes, there is a Land Court, which deals primarily with land legal issues.

 

One method the Land Court offers is a lawsuit to “try title.” This action is brought against known or unknown potential adversary parties who may claim to own your land.

 

The tool provides everyone in the world an opportunity to step forward and fight for a claim to your title. Most cases result in default plaintiff victories, when nobody appears to challenge ownership. However, plaintiffs must first prove they own the property.

 

In Bevilacqua, the court ruled the plaintiff had no standing to file the case (i.e., no ownership of the property he paid for), due to a defective foreclosure in its title history. This new case proves a practical effect to the Ibanez ruling. Other big cases are in the court’s pipeline, which will hopefully soon direct the method by which Bevilacqua can clear the title to his property.

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In the meantime, remember to buy owner’s title insurance when you purchase (or maybe even when you refinance). Take advantage of the protection title insurance provides.

 

THE COST FOR PURCHASING OWNER’S INSURANCE IS MINIMAL COMPARED TO WHAT MIGHT HAPPEN IF YOU DON’T HAVE IT.

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