Below is some general information you need to know about this law and cancellation of mortgage debt.

General Rule for Debt Forgiveness
If a lender forgives some or all of an individual’s debts, the general rule is that the forgiven amount is treated as ordinary income and the borrower must pay tax on the forgiven amount. Exceptions apply for bankruptcy, insolvency and certain other situations, including mortgage debt.

Current Law for Mortgage Debt
(Jan. 1, 2007 through Dec. 31, 2012): A borrower can be excused from paying tax on forgiven mortgage debt. The debt must be secured by a principal residence and the total amount of the outstanding obligation may not exceed the original mortgage amount plus the cost of any improvements.

Does the relief apply only to a sale?
No. The provision has broader application. Lenders might forgive some portion of mortgage debt in a short sale (when value at sale is less than the amount owed) or in a foreclosure where the debt is wiped out. In addition, if a borrower still living in the home is able to make an arrangement with a lender that reduces the principal balance of a mortgage, the amount forgiven in that workout will not be taxed.

Can the homeowners in a short sale or foreclosure claim a loss?
No. The loss is considered a personal loss and is, therefore, ineligible for either capital loss or ordinary loss treatment.

What happens to the seller when mortgage debt is forgiven?
Until January 1, 2013, the homeowner will pay no tax on any forgiven amount.

Does this provision apply to a refinanced mortgage?
Only in limited circumstances. The relief provision can apply to either an original or a refinanced mortgage. If the mortgage has been refinanced at any time, the relief is available only up to the amount of the original debt (plus the cost of any improvements). Tax relief is generally not available for second mortgages or home-equity lines of credit where the funds are not used for home improvement. Any amount that is not eligible for the relief provision will be taxed as ordinary income.

How does the homeowner get the correct information to the IRS?
The lender is required to provide the homeowner and the IRS with a Form 1099 reflecting the amount of the forgiven debt. The borrower/homeowner must file a Form 982 to reflect the amount forgiven and to show the reason why the forgiven amount is not taxable. Any taxable portion of forgiven debt will then be reported on the homeowner’s Form 1040 for the tax year in which the debt was forgiven.

What if a property declines in value but the owner stays in the house?
The provision would not apply. The provision applies only at the time of sale or other disposition or when there is a workout (reduction of existing debt) with the lender.

Do all lenders forgive mortgage debt when property values decline or the home is in foreclosure?
No. Some states have laws that allow a lender to require a repayment arrangement, particularly if the borrower has other assets. Forgiveness of debt is always at the lender’s discretion.

RISMEDIA, July 28, 2011—The Pentagon Federal Credit Union Foundation (PenFed Foundation), a nationally recognized nonprofit organization working to meet the unmet needs of military personnel and their families, is offering financial help to eligible first-time home buyers through its Dream Makers program.

Active duty personnel, veterans and retired members of the military, as well as employees of the U.S. Department of Defense and the Department of Homeland Security, qualify for a grant up to $5,000 to use on down payments and closing costs when buying their first home.

“Members of the military often put off buying a home earlier in their careers because they’re moving around the country a lot,” says Kate Kohler, former Army captain and chief operating officer for the PenFed Foundation. “We want to make sure they have resources to add immediate equity into their home when they decide to buy and the Dream Makers program helps make that possible.”

In today’s housing market, the PenFed Foundation has seen a slowdown in the number of veterans applying for the program, so it is redoubling its efforts to help both active duty members and veterans learn about the Dream Makers program.

“Community leaders, REALTORS® and other people working in real estate should know that they can help their clients who are veterans or active duty personnel get assistance in buying their first home,” says Kohler. “And this is a program they could promote that will benefit our nation’s defenders.”

To make a donation or learn more about the foundation, visit www.PentagonFoundation.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Have you heard about RISMedia’s Real Estate Information Network® (RREIN)? RREIN is an elite network of leading real estate companies dedicated to providing consumers and their agents with leading real estate information, and committed to the belief that Information Share Equals Market Share. Having only launched this past June 2010, the RREIN network is already comprised of 40 leading brokerages, which make up 575 offices, 30,000 agents, 167,000 closings and represents over $41 billion in transactions. How can RREIN help your recruiting efforts and differentiate your company today? For more information, email rrein@rismedia.com.

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These potential home buyers are most likely to think it’s a good time to get off the fence—and have strong opinions about the design features their new homes will include.

At 32% of the population of home-buying age—generally defined as those who are at least 30 years old, the Gen X population cohort isn’t the largest, but it’s the most mobile, said presenter Mollie Carmichael, principal of John Burns Real Estate Consulting in Irvine, Calif. “They are in full force with their careers and they need to accommodate growing families,” she said.

In sharp contrast, even though they constitute 41% of prospective home buyers, Baby Boomers continue to wait for the market to improve, and their decisions to delay retirement also delay their decisions to downsize into a smaller home, Carmichael said.

Most of the 10,000 buyers and potential buyers in 27 metro areas that the consulting company surveyed were optimistic about a new home purchase, with between 85% and 89% saying that it was a good time to buy a home. Only 13% said they thought home prices would continue to fall, further evidence that it’s “not all about price,” she said. “They want something compelling, from a design or personalization standpoint,” said Carmichael.

In addition, though the average home size is shrinking, a majority of prospective buyers said they would like a bigger home than the one they have. “These are first-time buyers or younger families looking for more room to grow,” she said.

Seventy percent said that they were willing to pay $5,000 more for a green home, but those responding to the survey said that they expected new homes to already have many green technology features. They also said they would pay a premium for dark wood cabinets, a separate tub and shower and a fireplace in the living room, and more preferred a great room over formal spaces.

And while community amenities are important to Gen X buyers, 46% said they prefer a home in a large-lot, suburban development, versus the 21% looking for a traditional or “walkable” neighborhood.

Webinar panelist Heather McCune, director of marketing at Bassenian/Lagoni Architects in Newport Beach, Calif., also emphasized that design will be important in generating sales in the emerging marketplace. “The notion of ‘build it and they will come’ no longer works. Design matters,” she said.

McCune said buyers are looking for homes with a connection between indoor and outdoor spaces, even in colder climates, to create the perception of greater home size, even if the space is only usable for part of the year. They also want more storage, an open floor plan and flexibility in the garage.

“While Gen X numbers are smaller than the birth cohorts before and after them, their numbers have been enlarged by steady immigration,” said NAHB Chief Economist David Crowe. “Gen X may wait longer than their predecessors to establish their own household or buy a home because of the recent recession impacts, but the trends are still likely to occur as they have for past generations.”

Being served with a notice of foreclosure is an intimidating situation for any homeowner to deal with. Unfortunately, right now the real estate market is experiencing foreclosures at record highs. Last year over 3,000 homes in Jacksonville alone went into foreclosure. The various terms, timeliness, and deadlines of the foreclosure process are very confusing and intimidating to someone who doesn’t understand the process, and finding a reliable person to explain foreclosure is just about impossible – at least it was until now.
Here at Amalya Realty Group, our consultants are experts in the foreclosure process and will take the mystery out of foreclosure by walking you though the entire foreclosure process, step by step.

While the circumstances that lead to homes being foreclosed upon are mostly out of the homeowner’s control, what happens next is not. If you take action now, The Worst Case Scenario Can Still Be Avoided! That worst case scenario is having your home sold at auction – and that is exactly what will happen if no action is taken.
Call us now at 800.379.0495 or Click Here To Fill Out The Form to have a foreclosure expert personally explain the process to you so you can learn about ALL of your options, which can include:

• Working out a payment plan with your lender or financial institution
• Selling your home
• Refinancing your home
• Declaring bankruptcy (should only be used in VERY SPECIFIC situations)

After we’ve discussed all your options, whatever you decide is the best option for you and your family, we will make it happen you. While Amalya Realty Group has extensive experience and is the local expert in the foreclosure industry, we will make recommendations; but ultimately… you are in control.
If you act now, there is still a chance you can keep your home, and if you do want to stay in your home, we will do our best to try to make that happen. If you do have to move, however, we provide relocation assistance free of charge – we will search high and low to ensure that you find a new place to live that fits your lifestyle and your budget.

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RISMEDIA, November 9, 2010—(MCT)—Josh and Tayla Thomforde thought they had a deal to buy a three-bedroom house with a fenced-in backyard and room for their family to grow. But the nation’s latest foreclosure quagmire scuttled their plans.

Three days before closing on their first home, they learned that the house was being taken off the market. The house is a foreclosure, and banks are suspending or at least slowing down foreclosure sales as regulators examine whether banks filed foreclosure documents without confirming their content.

Now Tayla and Josh aren’t sure what they’ll do when their apartment lease runs out at the end of November. “We’re a little discouraged,” Tayla said. “All the homes in our price range were foreclosures.”

Measuring the consequences of the foreclosure limbo is difficult at this juncture. Although the banks paint it as a temporary, paperwork glitch, no one is sure how long it will last or how many home sales will be affected. Meanwhile, the pause is upending plans of potential buyers like the Thomfordes and adding another layer of anxiety to the still-fragile real estate market.

“Everybody wants to know, can we believe the banks, and the problem is something they can handle, or is this something that’s going to mushroom and become the next big crisis?” said Bill McConnell, a mortgage consultant with Cunningham & Co. and a board member of the Charlotte Regional Mortgage Lenders Association. “Even if it’s not a huge problem, the ripple effect is significant.”

Housing industry groups estimate that foreclosure sales now account for 25-30% of home sales.

“We’re going to see a sharp drop in October home sales as a result of foreclosure sales being put on hold,” said Guy Cecala, publisher of Inside Mortgage Finance. “And as you know, we’re already at anemic levels.”

The pause in foreclosure sales will be especially hard on first-time home buyers, who are the most likely to purchase foreclosure properties, Cecala said. “And basically, first-time home buyers are the No. 1 buyers you need for a recovery,” he said.

Twenty-three percent of Realtors say they have at least one client who is no longer interested in purchasing a foreclosure, according to a survey this month by the National Association of Realtors.

“The housing crisis is not over,” said Rochdale Securities analyst Dick Bove. “It has been extended.”

But Sam Barnett, at Barnett Real Estate in Charlotte, said he doesn’t think the foreclosure delays will have much effect on the market. “There are tons and tons of foreclosures,” Barnett said. “So the fact that there’s not any more coming on the market wouldn’t make a whole lot of difference.”

Regardless of the foreclosure freeze and its effects, parts of the nation, including Mecklenburg County, will still have a record number of foreclosures this year. A foreclosure sale is when a house is actually repossessed and the borrower has to leave; there are many more foreclosure starts, where the bank files initial paperwork to begin the foreclosure process.

Banks are still proceeding with foreclosure filings, though some have put a pause on final sales. Ally, JPMorgan Chase, Wells Fargo and Bank of America are among the banks that have stopped or at least slowed foreclosure sales in the past month as they resubmit documents and tighten controls on their foreclosure processes.

Attorneys general in all 50 states are also probing their practices. The banks maintain that no one has been wrongly foreclosed on, and that they foreclose on homes only as a last resort.

David Millsaps, the Thomfordes’ mortgage lender, said he knows of other families who wanted to buy foreclosed properties but lost out when the freezes were put in place. “We’ve been getting e-mails from Realtors who are saying, ‘We can’t close,’” said Millsaps, who works for New American Mortgage in Charlotte.

As an added problem, real estate lawyers are speculating whether the foreclosure freeze could hurt people who have already bought foreclosure properties, if the previous owners come back with a lawsuit saying the foreclosure wasn’t processed correctly.

A title insurance policy should help protect a buyer who finds himself in that situation, said G. Martin Hunter, a Charlotte attorney who represents borrowers in foreclosure cases. Title insurance is supposed to guarantee that the closing attorney made sure that the seller owned the title to the deed.

Cecala, at Inside Mortgage Finance, said it’s difficult to predict how long the foreclosure-documents controversy will persist. Federal regulators and the White House could decide to give the banks a measure of liability protection as they redo paperwork, to prevent the foreclosure freeze from dragging on and crippling the housing market. Things might also calm down after the midterm elections, he said.

“It’s certainly delayed things for the past two or three weeks,” Cecala said. “Now, is it going to be much more than that? The mortgage industry will tell you no. The lawyers will say, ‘This is going to drag on as long as we can make money.’”

The Thomfordes, who were trying to buy their first house through a foreclosure sale, say they’re not angry, just frustrated. Foreclosure properties are some of the only houses they can afford, but they’re not comfortable looking at any more because of what happened with the house they were about to buy. The house, in the RiverGate community of Charlotte, had a tax value of about $140,000, but the Thomfordes had a contract to buy it for about $107,000, they said. It’s currently listed as “temporarily out of the market,” said Mitch Muller, their buyer’s agent at ProStead Realty.

The Thomfordes had made a to-do list of painting and home-repair projects for the house and were excited about moving. But they say they can’t wait forever to find out if it will come back on the market, especially with their lease running out. They’d saved carefully to pay for the appraisal and inspection and were worried they wouldn’t get the money back.

I don’t have a whole lot of wants,” said Tayla. “I just want a place where we can have people over, and for our daughter Astaire to play in the yard, and our family can come from out of town.”

(c) 2010, The Charlotte Observer (Charlotte, N.C.).