What is a distressed sale? – The sale of a property whereby the homeowner is in financial distress and can’t afford to pay the mortgage any longer also known as a forced sale. Which is an action taken in a civil court forcing the owners of a piece of real property to sell their property and to divide the profits (usually there aren’t any). A forced sale is generally the result of a petition to partition action such as: foreclosure action or bankruptcy .Distressed HomesHOW TO GO ABOUT BUYING A FORECLOSURE…Please note this is for Charleston county, SC only and that your county and state likely has its own rules and protocol so contact your local office. However I think this is the general gist of most transactions around the country as this has been going on for hundreds of years.Thank you for your interest in foreclosure sales. This page was prepared in an effort to answer the most frequently asked questions about this process. If you have further questions, please contact me at 843.478.8061.
If you are interested in bidding on a piece of property in Charleston County, SC, which has been foreclosed upon and is scheduled to be auctioned for sale in the near future, the following are some things you may find helpful to know:
1.) When real property is ordered to be foreclosed in Charleston County, a judge called the Master-in-Equity will issue an order directing the mortgaged premises (or part thereof as required to satisfy the claims established) be sold by or under direction of the Master.
2.) The judgment (often called a Master’s Decree of Foreclosure) will contain a legal description of the property being sold, a provision for the necessary legal advertisement, the time and location of the sale, and notice of any senior liens, taxes or other rights to which the property to be sold is subject.
Sales are held the 1st and 3rd Tuesday of each month at 11 a.m. at the front entrance of the Charleston County Judicial Center located at 100 Broad Street in downtown Charleston.The judgment also will specify the amount of good faith deposit necessary at the time of the sale, which is usually 5% five percent of the successful bid at the sale. Compliance must be made with the bid by 4 p.m. that same day. This deposit is required to be in cash or certified funds and is not refundable. The plaintiff or any other party may be a purchaser on such sale. You have 30 days to comply with the balance of the bid with cash or certified funds.Some Plaintiffs seek a deficiency judgment against the Defendant. This means the Plaintiff is not only foreclosing its mortgage but is seeking a money judgment too. Unless the pleadings state that no personal or deficiency judgment is demanded or any right to such judgment is expressly waived in writing, the bidding will not be closed upon the day of sale but remains open until the thirtieth day after such sale exclusive of the day of the sale. When the sale is re-opened for final bidding, the highest bid is accepted. The Plaintiff can only bid at the first sale.Short Sale– is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan.If you want a short sale the process is very much like a traditional real estate transaction except in one way. The hassle. For you to take advantage of a short sale, you’ll definitely want a local Charleston area real estate agent on your side. Primarily because the bank is technically the seller. Even though the seller might still be the owner of record, for a short sale to occur the seller’s mortgage lender has to approve it. Unless the seller just sells the home for less than they owe and pays the difference to their lender.If the seller can’t do that then the lender with the mortgage will have to O.K the home being sold for less than is owed on it. The largest problem with purchasing a short sale home is that the bank is not willing to work with you (the buyer) to make the purchase easy or cheap for you. Usually when putting an offer on a home that is approved for a short sale the bank will only sell the home “As Is”, and doesn’t care if there are problems with the home even if you get a home inspection. Secondly, they usually will drag their feet because if you make an offer they probably have a couple other offers on the table that they will work against you so you must make sure you have a large earnest money deposit ready, and no contingencies. Otherwise they will not consider it and/or they will contact the current offers they may already have.When looking to buy a home that is a short sale you must keep in mind that since the home isn’t being sold for profit that there is no room for the seller to pay a buyer’s agent commission. Therefore, be prepared that you may have to pay a buyer’s commission out of your own funds. However, President Obama and HUD have instructed banks that they have to allow agents to be paid when representing a buyer in a short sale, but this isn’t always the case.*Don’t worry. If this seems like too much of a scary proposition, there are plenty of unbelievable cheap homes on the market that are great deals for sale the traditional way.
There are only two common loan programs that offer 100% financing NO money down on the purchase of a new home.
(I AM NOT A LOAN OFFICER & WE DO NOT WRITE OR GIVE LOANS)
1.)VA Loan – First thing and most obvious you must be an active duty service member in the armed forces or be a veteran, and you must be able to meet all the other criteria of eligibility for the VA Loan. Visit this site about Charleston SC mortgages to see if you qualify and to check rates.
2.) USDA -The other way to buy a house in Charleston South Carolina with No money is by going through the USDA. You must meet the certain USDA income criteria and agree to purchase a home in an approved community/city/area. See the local list below. To speak with one of our agents about seeing a home in one of these communities call 843.478.8061 or Contact Me here. See the rules for eligibility for qualifying for USDA loan click HERE.
Charleston Trident Association of Realtors® — (May 9, 2012) – Median existing single-family home prices are firming in many areas of the low-country, while improving sales and declining inventory are creating more balanced conditions, according to the latest quarterly report by the National Association of Realtors®.Last April, preliminary figures showed 776 homes sold at a median price of $175,000, following an almost equal number of property tours.“The number of showings our REALTORS® are completing in 2012 is almost equal to the number of showings we saw in 2009, when the market was significantly depressed, but inventory was much higher. This tells us that the prospective buyers in today’s market aren’t just looking. They are serious buyers, making offers and closing transactions” said 2012 CTAR President, Herb Koger.The national median existing single-family home price was $158,100 in the first quarter, which is 0.4 percent below $158,700 in the first quarter of 2011. The median is where half sold for more and half sold for less. Distressed homes2 – foreclosures and short sales which sold at deep discounts – accounted for 32 percent of first quarter sales; they were 38 percent a year ago.Heading into what is typically the busiest season of the year, year to date figures reflect a market that is in the midst of sustainable, healthy growth. Inventory is 29% lower than it was at this time last year; sales volume is almost 6% ahead and prices have increased a healthy 4% from this time last year.Total existing-home sales,3 including single-family and condo, increased 4.7 percent to a seasonally adjusted annual rate of 4.57 million in the first quarter from a downwardly revised 4.37 million in the fourth quarter, and were 5.3 percent above the 4.34 million level during the first quarter of 2011 when sales spiked. We are seeing more people coming back into the investment and second home market buying homes for sale in places like Isle of Palms and Sullivan’s Island.Mount Pleasant SC custom home builder-owner of Sand Dollar Homes, said there are more opportunities in today’s market. “Historically favorable housing affordability conditions are making it easier for buyers to enter the market despite the unnecessarily tight credit conditions,” he said. “Housing supply and demand are roughly balanced with overall housing supply at the lowest level in six years, putting sellers on an even footing with buyers in most markets.”CTAR REPORT –Berkeley County
170 homes sold at a median price of $154,945 in Berkeley County in April. This represents even sales and an increase in pricing compared with April 2011, when 170 homes sold at a median price of $145,000.Charleston County
476 homes sold at a median price of $228,125 in Charleston County in April. This represents an increase in sales and pricing from April 2011’s 451 sales at a median price of $208,000.Dorchester County
151 homes sold at a median price of $165,000 in Dorchester County in April. This represents a significant increase in both sales volume and pricing, as 129 homes sold at a median price of $147,490 in April 2011.
Now it’s Oct. of 2011… I originally posted this piece below in 2010 in response to this “expert” from the Wall St. Journal who claimed then that home prices would be increasing. Evidently this “expert” was wrong. To further update you as to my opinion I still feel that anyone considering selling should do so now because the housing market is probably only going to worsen. Fast forward to 2012 and I was correct. There is a thing calledshadow inventory that have yet to hit the market up to some say million new homes. What do you think will happen to home prices then?If you have any concerns about selling your home in Charleston you better start to sell it sooner than later, because as the banks begin to trickle out their foreclosed homes, this will keep the market soft. Furthermore, rates are likely to increase in the next few years which will also deter those considering buying homes to get cold feet or be able to afford less.(Below Written 05/2010)It’s been a while since I have posted an opinionated piece because most of my posts are more geared toward news and information for the public and how it pertains to the industry of real estate. However in this case, I couldn’t shake this ludicrous idea by a writer at the Wall St. Journal. I have always respected the Wall St. Journal, but this one has me baffled.
I have been in the real estate industry for going on 14 years now- (12 years in mortgage financing), and 5 years as a real estate agent Considering most of my experience has been financially related I tend to follow those trends the most seeing as there wouldn’t be sales of real estate without money to finance them. Let’s face it, there aren’t that many people liquid enough to pay cash so truthfully it all revolves around money. Even insurance revolves around money and is a great indicator of overall economic health. Each property has to be insured, each business, each profession has to have insurance, and yes mortgages have insurance.With that said, the piece from the Wall St. Journal by James Hagerty goes like this: “U.S. home prices will begin a gradual recovery by next year, according to a survey of 92 economists and other housing analysts by MacroMarkets LLC.” They then go onto write; “The analysts surveyed by MacroMarkets on average expect home prices, as measured by the S&P/Case-Shiller national index, to rise about 12% in the five years ending Dec. 31, 2014. As of Dec. 31, that index was down about 28% from its peak level in mid-2006”. Obviously I am assuming that Mr. Hagerty is just going off research and information given to him by MacroMarkets and these 92 economists, but I can’t believe the editors of the Wall St. Journal let this go to print. I can’t lay all the blame on the Wall St. Journal because they are apparently getting their info from these economists. I am sure out of 92 economists they most likely have many more years then I analyzing data, but let’s look at the facts and you decide for yourself.National Mortgage News (an industry news subscription service) sends me monthly emails about the latest data coming from multiple outlets such as: National Association of Mortgage Bankers, national appraisal companies, commercial finance institutions, etc. Remember financing/economics tell the facts about what’s really happening. Of 11 articles 7 of them were negative, but a few are really telling.I am just going to give you the blurb “gist” of the piece.1.) Residential delinquencies climbed to yet another new high at March 31 with 10.06% of all mortgagors behind on their payments, according to new figures released by the Mortgage Bankers Association. Think about it… If delinquencies are on the rise, as they have been continuously for almost 3 years how are home prices going to go up? When people are having to short sale their homes, get foreclosed on or bank sales increase, then home prices will inevitably continue to fall.2.) Loan applications to buy new or existing homes plummeted 27% last week, reaching a 13-year low, according to new figures released by the Mortgage Bankers Association. If loan applications plummeted on purchases by 27%… Well you don’t have to be a rocket scientist to see that home prices aren’t going to go up if there aren’t any sales.3.) The loan buyback plague continued on unabated in the first quarter with three seller/servicers, accounting for about three-fourths of the industry’s repurchases, according to an analysis done by National Mortgage News.Here is how this works. When I loan is originated by a company, they then sell that loan to a larger institution (usually Bank of America, US Bank, Wells Fargo, just to name a few). If those loans under perform and have too many delinquencies within the first year then the originating company has to buy that loan(s) back. Another scenario is; if the purchaser audits the file after purchasing it and doesn’t like something in the file they can also force the seller to buy it back. Why is this bad? If the buy backs are due to delinquencies then that means those home owners can’t afford their payments, or lost their job, etc. Therefore, eventually their home will have to be sold and most likely for less than they paid for it. Subsequently sending home prices down. My last bit to this post has nothing to do with the news articles written by the National Mortgage News, but about financing, FHA, VA, and FNMA. Our government is currently at a 94% debt to income ratio and can barely pay it’s bills. Meaning the U.S. really doesn’t have money to be buying mortgages from banks, and to decrease their risk of having delinquent loans they will have to increase the amount of money buyers will be required to put down, resulting in less people that qualify to buy. Secondly, the U.S. Fed recently quit buying treasury bonds (security instruments backed by mortgages), and If little to no one is buying mortgage backed securities in large quantities then eventually mortgage rates will increase, subsequently, making it harder for people to qualify for home purchases. The less people qualify the less sales will happen therefore sending home prices down. Simple supply and demand.Yes; there may be some tiny bits of data compared to the rock bottom days of a year or two ago that might lead economists to believe the trend is for prices to go higher, and yes home sales might have been increasing over the last couple months. However, the increase in home sales is due to one reason and one alone. The home buyer tax credit was about to expire so those people that were otherwise too afraid to purchase finally had reason to. Now that the credit is gone, so goes the buyers.The overall picture in my opinion is not good, not good at all. As a whole the real estate market is posed to continue to slide, and as the U.S. economy continues to flounder the housing outlook is sure to follow. I am not a pessimist by nature so don’t get me wrong. Yes, everyone should stay positive and believe we can make a change for the better. Believe me I want nothing more than to be wrong, but being realistic is something I am, and the facts point me in that direction.Follow up: Again I am not sure where the 92 economists where getting their info from..Latest from the Case-Shiller index on 05/25/2010“The housing market may be in better shape than this time last year, but, when you look at recent trends there are signs of some renewed weakening in home prices,” said David M. Blitzer, chairman of the Index Committee at Standard & Poor’s. “In the past several months we have seen some relatively weak reports across many of the markets we cover.”A separate Case-Shiller index that is released quarterly and covers the U.S. showed home prices fell a seasonally adjusted 1.3% in the first quarter of the year compared to the fourth quarter of 2009.If you are thinking about selling your home in Charleston, Mount Pleasant, Isle of Palms, Sullivans Island, Daniel Island, Folly Beach or the surrounding areas please contact me and I will gladly meet with you to discuss your options.
Those of us in the industry as licensed real estate professionals know the difference between the two, but does the public know? That is the question. And, do they really care? Studies show the answer is no. Let me start by saying I am a member of the NAR and it is a good organization that does a great service to their members and the public.
So; what is a REALTOR®? A licensed real estate agent that is a member of a national association that pays yearly dues to say they are a realtor, have legal representation, get education and association power. So in short, it is just a made up word for an organization. Period. There are benefits as a real estate agent sometimes to be a member of the NAR (National Association of Realtors), and little for the public. They would like you to believe there are by trying to convince the public it’s better practice to do business with an agent who is a member, but it’s my opinion it makes no difference. Keep in mind most of the benefits apply to the licensed agent who is a member of NAR. From the public’s standpoint it’s NAR’s stance that an agent who is a member is set to a higher standard than those agents who aren’t a member. You can be the judge of that.
What is a real estate agent? (as defined by wikipedia) a person or organization whose business is to market real estate on behalf of clients, and one who acts as a buyer’s rep in a transaction.
A licensed real estate agent who has gone through the schooling and training necessary required by that state to sell real property as defined by the governing body with which gave them their license. In the state of South Carolina, the LLR or labor licensing board is the governing body that handles the issue of real estate for SC, and the laws pertaining to it.
Does it matter if someone is a REALTOR®? NO, not really. A real estate agent non-member is just as qualified to sell as a “realtor”.
So; next question? What makes a good real estate professional? I guess that depends on the client’s idea of what they feel is acceptable to them.
We must first go through the qualities that best describe the duties necessary to be a great real estate agent. Since, being a real estate agent is more or less just being your own business on behalf of your client, we need to lay out the qualities of a great business or business person. Right?
1.) Marketing knowledge/experience
2.) Negotiation / Sales acumen
3.) Organization
4.) Hard work ethic
5.) People/personality management
6.) Technology knowledge
7.) Business management experience
Granted, these are a bit generic, but they are the fundamentals nonetheless.
So I ask again, does being accredited by a made up organization created for profit really make you more qualified to sell real estate? Not in my opinion. In my opinion having business and professional marketing experience is much more important to me. You can go to real estate school, and take a one day class put on by the NAR and can be 18 years old with no professional or business experience whatsoever to be a member. Do you think that person is going to be better qualified then someone who has run their own company, worked in some sort of professional environment for years? Most likely; not.
According to many experts in housing and economics there will be a few place in the next coming years where buying real estate is a good investment, and Charleston, South Carolina is one of them. Read the recent article by MSN.Home prices of course, are variable and depend on many factors, each of which is difficult to predict. Still, average home prices will drop by 7.9% nationwide in 2010, according to Moody’s Economy.com. In the few areas where there could be positive price growth, the projected increase is modest. “These areas will essentially be flat next year,” says Steve Cochrane, managing director at Moody’s Economy.com.The top 5 cities for home prices
Smaller areas across the Southeast are expected to fare well in 2010 primarily because they fared relatively decently during the housing crisis, says Jeannine Cataldi, a senior economist at IHS Global Insight. “They didn’t have such a big run-up, and they have a diverse economic base that enabled them to stay stable,” she says. Home prices in Charleston, South Carolina didn’t get out of line with household incomes; also, Boeing is investing in a fairly large manufacturing plant there, which could create some potential for income and job growth, says Cochrane.In short; these pockets of the country share a few important characteristics. One is that they are starting with a limited supply of housing stock. Another is that throughout most of the decade, prices basically stayed in sync with household income, says Cochrane.
Due to the economic and housing crisis Fannie Mae and Freddie Mac have had to unfortunately foreclose on millions of homes in Charleston and across the United States. The good new about this is you can capitalize on this misfortune. Before considering buying a house directly from Fannie Mae you need to talk to a Charleston, SC Fannie Mae approved realtor. Fannie Mae has devised a new program for prospective homebuyers called the HomePath program. This special program has many incentives that make it very enticing to say the least.
Closing Cost Assistance and Appliance Incentive for Fannie Mae Homes
Fannie Mae is offering a 3.5% incentive* for buyers who purchase and close on a Fannie Mae-owned home between January 28 and April 30, 2010. Buyers purchasing properties listed on this site that are closed within this period may receive up to 3.5% of the final sales price for:
Closing costs;
The purchase of new Whirlpool® appliances by Fannie Mae; or
A mix of closing costs and appliances, at the buyer’s discretion, up to the maximum 3.5%.
To be eligible for this incentive:
Offers must be accepted on or after January 28, 2010
This special financing is available on Fannie Mae homes with the following logo:The benefits include:
Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
You may qualify even if your credit is less than perfect
Available to both owner occupiers and investors
Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
No mortgage insurance*
No appraisal fees
To learn more about this program feel free to contact me directly at 843.478.8061
Well it goes without saying that we are in tough times economically as a country, and even more so as it pertains to real estate. With all the bad news we hear about real estate and the economy there is some good news to report. Even though our government is has made many mistakes with our money recently it appears as if those in the white house are doing their best to help homeowners.There is a new program to help those who can’t afford their homes any longer quickly sell their homes (that’s relative) without being forced into foreclosure. It’s called (HAFA) or HomeAffordableForeclosureAlternatives program.You can read the pasted details of the program from RISmedia.com website:HAFA is designed to simplify and streamline the use of short sales and deeds-in-lieu of foreclosure by improving the process. Specifically, HAFA will:• Complement HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Use borrower financial and hardship information already collected in connection with consideration of a loan modification under HAMP.
• Allow borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibit the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6%). This is to ensure the seller/borrower can still utilize the expertise of a real estate agent.
• Require borrowers to be fully released from future liability for the first mortgage debt and if the subordinate lien holder receives an incentive under HAFA, that debt as well (no cash contribution, promissory note, or deficiency judgment is allowed).
• Use standard processes, documents, and timeframes/deadlines.
• Provide financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 match for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis; up to 3% of the unpaid principal balance of each subordinate loan).HAFA is a complex program with 43 pages of guidelines and forms. To help everyone better understand the process, below are some frequently asked questions that address the basics.What is HAFA?Initially announced on May 14, 2009, with guidance and standard forms issued on November 30, 2009, the program will help owners (referred to below as borrowers) who are unable to retain their home under the Home Affordable Modification Program (HAMP). A borrower (the current owner) may be able to avoid a foreclosure by completing a short sale or a deed-in-lieu of foreclosure (DIL) under HAFA. The guidance and forms released on November 30 do not apply to loans owned or guaranteed by Fannie Mae or Freddie Mac. Those enterprises will issue their own HAFA guidance and forms.Who is eligible for HAFA?
The borrower must meet the basic eligibility criteria for HAMP:
• Principal residence.
• First lien originated before 2009.
• Mortgage delinquent or default is reasonably foreseeable.
• Unpaid principal balance no more than $729,750 (higher limits for 2 to 4 unit dwellings).
• Borrower’s total monthly payment exceeds 31% of gross income.How is the program being implemented?
Supplemental Directive 09-09 (November 30, 2009) gives servicers (those who process payments) guidance for carrying out the program. All servicers participating in HAMP must also implement HAFA in accordance with their own written policy, consistent with investor (lender) guidelines. The policy may include such factors as the severity of the loss involved, local market conditions, the timing of pending foreclosure actions, and borrower motivation and cooperation.A short sale agreement (SSA) will be sent by the servicer to the borrower after determining the borrower is interested in a short sale and the property qualifies. It informs the borrower how the program works and the conditions that apply. After the borrower contracts to sell the property, the borrower submits a “request for approval of short sale” (RASS) to the servicer within 3 business days for approval. If the borrower already has an executed sales contract and asks the servicer to approve it before an SSA is executed, the Alternative RASS is used instead. The Servicer must still consider the borrower for a loan modification.What are the steps for evaluating a loan to see if it is a candidate for HAFA?
1. Borrower solicitation and response.
2. Assess expected recovery through foreclosure and disposition compared to a HAFA short sale or DIF.
3. Use of borrower financial information from HAMP. (May require updates or documentation.)
4. Property valuation.
5. Review of title.
6. Borrower notice if short sale or DIL not available (to borrowers that have expressed interest in HAFA).What are the HAFA rules regarding real estate commissions?
The guidance states that a servicer may not require a reduction in the real estate commission below the amount stated in the SSA. The SSA states that the servicer will pay the commission as stated in the listing agreement, up to 6%. If the servicer has retained a vendor to assist the listing broker, the vendor must be paid a specified amount from the commission. Neither buyers not sellers may earn a commission in connection with the short sale, even if they are licensed real estate brokers or agents. They may not have any side deals to receive commission indirectly.What else should I know?
• The deal must be “arms length.” Borrowers can’t list the property or sell it to a relative or anyone else with whom they have a close personal or business relationship.
• The amount of debt forgiven might be treated as income for tax purposes. Under a law expiring at the end of 2012, however, the tax may not apply. Forgiven debt will not be taxed if the amount of forgiven debt does not exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Check with a tax advisor.
• The servicer will report to the credit reporting agencies that the mortgage was settled for less than full payment. There will be a negative effect on credit scores.
• Buyers may not reconvey the property within 90 days after closing.When does the program end?
Short Sale Agreements must be executed and returned to the servicer no later than December 31, 2012
If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.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.This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:
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.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.
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.
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 Publication 4681.What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.What does exclusion of income mean?
Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?
No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filing
separately.Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?
Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.How long is this special relief in effect?
It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.If the forgiven debt is excluded from income, do I have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and this form must be attached to your tax return.Do I have to complete the entire Form 982?
No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.Where can I get this form?
If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.How do I know or find out how much debt was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.Can I exclude debt forgiven on my second home, credit card or car loans?
Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.If part of the forgiven debt doesn’t qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?
Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent. You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.I lost money on the foreclosure of my home. Can I claim a loss on my tax return?
No. Losses from the sale or foreclosure of personal property are not deductible.If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?
Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case. An exclusion is also available for the cancellation of certain nonbusiness debts of a qualified individual as a result of a disaster in a Midwestern disaster area. See Form 982 for details.
If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence?
Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.
Will I receive notification of cancellation of debt from my lender?
Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.What if I disagree with the amount in box 2?
Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.How do I report the forgiveness of debt that is excluded from gross income?
(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2. Any remaining canceled debt must be included as income on your tax return.(2) File Form 982 with your tax return.My student loan was cancelled; will this result in taxable income?
In some cases, yes. Your student loan cancellation will not result in taxable income if you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation.Are there other conditions I should know about to exclude the cancellation of student debt?
Yes, your student loan must have been made by:
(a) the federal government, or a state or local government or subdivision;(b) a tax-exempt public benefit corporation which has control of a state, county or municipal hospital where the employees are considered public employees; or(c) a school which has a program to encourage students to work in underserved occupations or areas, and has an agreement with one of the above to fund the program, under the direction of a governmental unit or a charitable or educational organization.
Can I exclude cancellation of credit card debt?
In some cases, yes. Nonbusiness credit card debt cancellation can be excluded from income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See the examples in Publication 4681.How do I know if I was insolvent?
You are insolvent when your total debts exceed the total fair market value of all of your assets. Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts.How should I report the information and items needed to prove insolvency?
Use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you were insolvent immediately before the cancellation. You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation.To claim this exclusion, you must attach Form 982 to your federal income tax return. Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately prior to the cancellation. You must also reduce your tax attributes in Part II of Form 982.
With the USDA loan program, no down payment is required and you are able to finance up to 102% of the property’s appraised value. With the elimination of the down payment assistance programs in late 2008, the USDA loan program is one of the only 100% loan programs available. However, there are income requirements, rules, and only certain communities, and areas are eligible for qualifying for a USDA loan.
USDA Loans: No Upfront or Monthly Mortgage Insurance
With the USDA loan program, there is no upfront or monthly mortgage insurance required. With the FHA loan program, you have both up front mortgage insurance premium and monthly mortgage insurance as well.
With no mortgage insurance required, the USDA loan program can save you hundreds (possibly even thousands) of dollars each year that mortgage insurance would cost with a different type of loan.
USDA Loans: No Credit Score Required
For the USDA loan program, officially, there is no credit score required… but unofficially, the minimum credit score that you will need to get approved by an investor is 620. This is relatively recent and may change back to the official answer — but for now, you need a 620 mid FICO score to qualify for the USDA loan program.
USDA Loans: No Loan Limit
The USDA loan program will allow you to finance “as much as you can afford”. There is no official loan limit with the USDA loan program, but the amount of money that you can borrow depends on your ability to repay the loan.
USDA Loans: Seller Concessions Are Allowed
With the USDA loan program, you can get the seller to pay as many of your closing costs as you can. There are no limits on “seller concessions” so negotiate the best deal that you can! Many loan programs limit the amount of seller concessions that you can have, but the USDA loan program doesn’t put a limit on them.
The USDA loan program is a great option for people who are looking to buy a house with little or no money down. The only “bad” thing about the USDA loan program? The only thing that I can think of is that you will have to find a property that can qualify – and sometimes you may have to drive a ways to get there.
If you are interested in bidding on a piece of property in Charleston County, SC, which has been foreclosed upon and is scheduled to be auctioned for sale in the near future, the following are some things you may find helpful to know:
I am sure out of 92 economists they most likely have many more years then I analyzing data, but let’s look at the facts and you decide for yourself.National Mortgage News (an industry news subscription service) sends me monthly emails about the latest data coming from multiple outlets such as: National Association of Mortgage Bankers, national appraisal companies, commercial finance institutions, etc. Remember financing/economics tell the facts about what’s really happening. Of 11 articles 7 of them were negative, but a few are really telling.I am just going to give you the blurb “gist” of the piece.1.) Residential delinquencies climbed to yet another new high at March 31 with 10.06% of all mortgagors behind on their payments, according to new figures released by the Mortgage Bankers Association. 
know? That is the question. And, do they really care? Studies show the answer is no. Let me start by saying I am a member of the
You must be logged in to post a comment.