There are so many homeowners that faced hard decisions this year regarding getting a load modification on their home, to allow the home to be foreclosed upon, or to try and negotiate a short sale. When in doubt, be sure to check with the IRS regarding what the rules really are regarding your taxes. There isn’t a lot of negotiating you can do with them, but there are some things you need to know regarding what happens when your mortgage debt is considered “forgiven”.
The word was in the beginning that homeowners were able to get special tax treatment because they were doing a short sale, but there is a fine line there. Initially the only way for someone to be able to get a short sale negotiated on the home was if they had been in the home for more than a year. Those who had just recently purchased a home were not good candidates because they wouldn’t have been in a program that put them underwater like those who had purchased within the past five years.
The idea that bankers had in their head is that those who had purchased within the past several years were slaves to the subprime market, and were more than likely in loans that weren’t really a benefit to the borrower, nor were they loans that were affordable. The challenge is that many borrowers were defaulting on loans no matter what loan they were in. The other catch? The money that was forgiven must have been included in the effort to improve the home. How often did this happen?
Nine times out of ten, borrowers were looking to pay off other debt when they refinanced; not looking to do an addition to the home. So, this means that the population by which these standards are met is so limited.
-Mayer Dallal
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