Thursday, September
9 2010
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Thursday, September
9 2010
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Announcing a new acquisition!!
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What's New at Forte for the year 2007 February 2007 - Lenders, Uncle Sam & Mortgage Debt By Forte News Department Lenders May Give You a Break on Debt,
But Uncle Sam Might Not Be So Forgiving There’s a
good news/bad news story if you’re a borrower in trouble with mortgage debt.
The good news is that your lender might be willing to renegotiate your loan to
give you a break on your payments or even forgive a portion of the debt.
Foreclosure is expensive and it’s also bad publicity throwing people out of
their houses – lenders simply don’t like to do it. The bad
news? The IRS is watching. Lenders
are required by law to report to the Internal Revenue Service (IRS) any amount
of debt forgiven to customers. That means that unless you file bankruptcy or
are otherwise declared insolvent in court, you’ll very likely owe federal tax
on the amount forgiven. Also, the IRS is watching if you’re a homeowner
benefiting from something called a “short sale” – a quick, speedy sale of your
home to avoid foreclosure. At the present time, those full proceeds would be a
target for a bill from Uncle Sam as well. There is
no question that thousands of Americans are in trouble with mortgage debt,
particularly those who might have gotten low- or no-down payment loans that
have actually raised monthly payment amounts as interest rates have risen. Some
of these loans were structured in a way that as rates have gone higher that the
loans were sent into “negative amortization” – where any equity is erased and
the borrower finds they actually owe more on the loan than the amount they
originally agreed to. Add a
potential tax debt to that situation and you see an entire class of borrowers
risking the loss of everything they own. Congress
is trying to deal with the problem. Right now, a bill in the U.S. House of
Representative entitled “The Mortgage Cancellation Tax Relief Act of 2007” (HR
1876) would amend the tax code to exempt debt forgiveness on principal home
mortgages from being treated as income. The legislation would also help another
class of troubled borrowers who negotiate pre-foreclosure "short
sales" or deeds in lieu of foreclosure, or whose foreclosure proceeds are
insufficient to pay off their mortgage debt. If you
think you’re running into this kind of trouble, it’s essential to speak with a CERTIFIED FINANCIAL PLANNER™ professional or a tax professional
not only to estimate your tax risk, but also to find out if there might be
other approaches to your individual situation. It’s not wise to count on a
guaranteed break from Congress, particularly since the bill is in the early
stages. Some
things you might want to discuss with your tax expert or financial planner: Is refinancing an option? If you haven’t made a late payment
and your credit is in relatively good shape, you may still have the option to
refinance instead of going for loan forgiveness. Make sure you’ve checked your
credit reports for accuracy before you make this application. Selling the house quickly. If you have some equity in your
home and your credit is still in relatively good shape, it makes the most sense
to get out from under your house payments before you risk default or your
payments go higher. You’ll be able to pull out some of your equity to put in
savings to reinvest in another home or condo someday. Set a budget, rent cheap and rebuild
your savings. There’s
no shame in getting rid of a massive loan and starting over. Granted, renting
doesn’t have the same tax advantages as owning, but with proper planning, you
can pick up the pieces and start again. February 2007 — This column is
produced by the Financial Planning Association, the membership organization for
the financial planning community, and is provided by David W. Henion , a local
member of FPA | ||||||||||||||
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