Friday, July 17, 2009

Upscale home sales lag

Upscale home sales lag as jumbo loans are hard to get - USATODAY.com
More than four months after the Obama administration launched its housing rescue plan, scores of lenders are focused on rewriting mortgage loans to make them more affordable.

But one demographic is being largely ignored: homeowners with higher-price loans.

They don't qualify for mortgage modifications under the Obama plan. They can't get today's low interest rates if they try to refinance. And with newly cautious lenders warier about who they lend to, just try to sell a home that costs $730,000 or more these days. In many cases, finding a buyer who can get financing takes far longer than for lower-price homes, because banks want as much as 30% down and six months of mortgage payments in reserve.

CHART: Troubled jumbo home loans in 370 metro areas


Thursday, July 16, 2009

Foreclosure and Short Sales - Tax in California

Foreclosure and Short Sales: "If a lender forecloses on my principal residence or agrees to a short sale, will I owe tax on the deficiency?

Generally, when there is either a foreclosure or a short sale a taxpayer will receive either (in some cases the lender may issue both) a federal Form 1099-A, Acquisition or Abandonment of Secured Property, or Form 1099-C, Cancellation of Debt, that provide the amount of debt cancelled, information to compute gain or loss, and whether the taxpayer is personally liable for the debt.

If you borrow money from a commercial or private lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purposes, depending on the circumstances. In a short sale, the lender agrees to accept less than full payment, and cancels the unpaid amount.

The most common situations when a foreclosure or a short sale does not result in cancellation of debt (COD) income involve a non-recourse loan. A non-recourse loan means the lender’s only remedy in case of default is to repossess the property the lender cannot pursue you personally in case of default. A purchase money loan (that is, a loan taken to “purchase” your home) is generally considered to be a non-recourse loan in California. Refinances, second mortgages, and “cash out” loans are generally recourse loans.

Although forgiveness of a non-recourse loan resulting from either a foreclosure or a short sale does not result in COD income, it may result in other tax consequences, like a reportable gain from the disposition. Even if the debt discharged is non-recourse, a taxpayer may have a gain to the extent the balance of the mortgage forgiven exceeds their adjusted basis of the property.

The gain, if any, from the foreclosure or short sale may or may not be taxable, depending on whether IRC section 121 applies and the amount of the gain. IRC section 121 only applies to principal residences, and limits the amount of gain that can be excluded from income.

If the loan is a recourse loan, then depending on the facts, you may have COD income, and potentially a reportable gain, in which case you would want to determine if one of the provisions in IRC section 108 would apply, allowing the COD income from the discharge of indebtedness to be excluded.

For 2007 and 2008, California conformed, with modifications to IRC section 108 (a)(1) (E) that allows a limited amount of COD income resulting from the foreclosure or short sale of a qualified principal residence to be excluded. However, this exclusion is currently not allowable for any foreclosure or short sale that occurs on or after January 1, 2009. (Note: There is pending legislation that would extend the California exclusion, SB 97 and AB 111.) One of the provisions available in IRC section 108 that might apply is the insolvency rule, which would apply if a taxpayer has COD income and is insolvent (total liabilities exceed total assets); in that case, the exclusion only applies up to the amount of insolvency, (to the extent, liabilities exceed assets).

More information regarding foreclosures and short sales is available at irs.gov. In particular, you may want to refer to the IRS webpage titled “Home Foreclosures and Cancellations”

If your reporting position is audited by California, you should be prepared to provide documentation and an analysis of your facts in support of your position."

Monday, July 13, 2009

What happens after a foreclosure

How to gain leverage against your lender after a foreclosure sale.

http://www.trulia.com/voices/Foreclosure/My_house_in_SD_was_just_sold_at_auction_My_loan-144574-p_1-recent?answerId=468739&thisanswer=1#left_content

While answering this post. I realized that not only can the california foreclosure consultant act be used potentially undue a foreclosure sale, the same logic could be used for challenging your credit report or a collection on the deficiency after a short sale.

Making Home Affordable - Look Up Your Loan

check to see if you have a fannie mae or freedie mac loan

this information may be useful to short sale specialists and homeowners.


Making Home Affordable - Look Up Your Loan

realtor short sale specialists

Short Sales: The Basics for REALTORS from the National Association of Realtors

Short Sales: The Basics for REALTORS from the National Association of Realtors: "What is a short sale?

A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.

Why is the number of short sales rising?

Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.

A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially."

short sales in orange county and san diego