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ajmd77 · Joined: 09 Jul 2009 Posts: 3 2.23 Dollars($)

I have a townhome in maryland , bought in july 2005, with 2 mortgages countrywide ($192,000) and ($36,000)citimortage, total remaining balance $220,000 and the property only worth $130,000. is there any way, so i can walk away from the house and they can forgive the deficiency, without affecting the credit so much? i am behind 3 months payment as now. i just received notice intent to accelerate last month. i was unemployed for 3 months and i will start work again next week, but i don't want to keep the property anymore. Thank you.

savior70 · Posted: Fri Jul 10, 2009 6:10 am Post subject:

Hi

If you walk away, the lender will foreclose on your property. If there arises any deficiency out of the foreclosure sale, they'll come after you. You may opt for a deed in lieu and request your lender to forgive the deficiency. If the deficiency is forgiven, you will have to pay taxes on the forgiven amount. But there is a Mortgage Forgiveness Debt Relief Act which can help you get exemptions from the taxes on this forgiven loan amount. However, a deed in lieu will affect your credit almost as much as a foreclosure. You're behind on your loan for 3 months. So, that's going to drop your scores further.

robertsmith2005 · Joined: 22 May 2009 Posts: 338 -0.48 Dollars($)

Deed-in-lieu of foreclosure. is a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it will help your chances of getting another mortgage loan in the future. You can qualify if:

1) you are in default and don't qualify for any of the other options;
2) your attempts at selling the house before foreclosure were unsuccessful;
3) you don't have another FHA mortgage in default.

When you go for deed in lieu, you may have to pay 2 types of taxes. These are:

Deed tax: Since deed in lieu foreclosure involves transfer of property, the borrower needs to pay state deed tax upon conveyance of property to the lender. The deed tax is $1.65 for no consideration or when consideration is $500 or less.

The tax is calculated on the difference between the fair market value of your property and your mortgage balance plus liens removed from the property due to deed in lieu. It may vary from one county to another.

Income tax on canceled debt: As per Mortgage Debt Forgiveness Tax Relief Act (applicable till the end of 2009), one need not pay tax on canceled debt (unpaid loan balance which is forgiven by lender) resulting from deed in lieu. However, a borrower needs to satisfy certain conditions for mortgage tax relief.

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which one better: foreclosure, short sale or deed in lieu forclosure?