Short sale Bank will not put in writing the Def Forgive

Guest 0.10 Dollars($)

Hey I had a post about Foreclosure in Michigan ASAP that disappeared and I can't find it. I was hoping to update all of you on our home situation.

WE GOT AN OFFER! The bank countered and the buyer accepted and now we are moving fwd with the short sale. We are in Michigan by the way.

Loan 150K Offer 110K with all the fees and the 3 months of non-payment the deficiency forgiven will be any where from 55k to 60K. When we talked with the bank and I asked them will they ever sue us for the deficiency they said NO! That they would just write it off as a loss and we would get a 1099C and have to pay taxes on the "ghost income".

NOW when we are asking for them to put that in writing they said NO! They said that they will give us a 1099C and they will write it off as a loss for the bank, but they will NOT assure us in writing that in one day (like ten years) they won't sue and come after us for the deficiency of 55K - 60K.

Does anyone have any insight??? I am awaiting a call from a real estate lawyer to ask him. My realtor says that he has never heard of the bank coming after the people for the deficiency when 1099C has been issued.

Also has anyone ever negotiated with the bank about the points that would be lost on our credit score?

Any info would be great.
thanks
Danielle

Guest 0.10 Dollars($)

Hi Danielle,

The bank does not sue the people for the deficiency, once the bank issues a 1099C form. The forgiven deficiency will be counted as their loss and your income. That is why they told you that the forgiven deficiency is your "ghost income" and you have to pay tax on that amount.

larry · Joined: 27 Jun 2007 Posts: 3328 473.40 Dollars($)

Hi Danielle,

Welcome to this forum.

If the bank issues a 1099c form, they will not sue you for the deficiency. You will just have to pay tax to the IRS on the forgive debt, because the forgiven money will be regarded as your income.

For Short sale your credit score will be dropped around 50 to 80 points. You can even get approved for another loan in about 18 months after the Short Sale.

Feel free to ask if you have any further questions.

Thanks,
Larry

livinginnky · Posted: Tue Dec 04, 2007 1:17 pm Post subject:

Are they willing to put in writing you will get a 1099c?

You cannot negotiate your score. The mortgage lender has no control over it.

Let us know what the real estate attorney says.

Guest 0.10 Dollars($)

I didn't ask if they were putting in writing that they were issuing a 1099C they just said they were. hmmmmm.... I guess I have to call again to the bank. still waiting on the lawyer return call.

Some guy (sumpter's his name) keeps posting in various locations and many people are adopting it as well

"Here is an important note. The lender, if they issue a 1099 cannot then sue for a deficiency judgment. The lender can only pursue one or the other. In other words, Mary can’t receive both a deficiency judgment and 1099 from the lender."

I hope that is a true statement for Michigan and I will call about getting the 1099c put in writing.

Just once, someone just Affirm for me that we are doing the right thing with the short sale with the bank and not letting it go into forclosure....

Sorry I am nervous Smile

Danielle

livinginnky · Posted: Tue Dec 04, 2007 3:04 pm Post subject:

You are definately doing the right thing. And difficult situations are never easy. But you may be able to get an exemption for the taxed amount for the remainder of the year. I am not a tax pro so you would need to talk to one. But the way I understand it is if you do a short sale by the end of this year and there is a 1099c , you can claim an exception and not have to pay the taxes.

Plus a foreclosure will be viewed worse than a short sale on your credt report and in my opinion is worth the extra effort.

Guest 0.10 Dollars($)

So I talked with the lawyer and he said banks never put anything in writing and we really have no leverage over them to persuade them either, so we are stuck and should be happy that they are working with us.

He is going to review all the documents before we sign because we don't want to get ourselves in another bad situation.

They stated that they will give us a 1099c so I guess we have to take their word on it. I forgot to ask him about if that "statement" was true in Michigan law. I guess I was so surprised he called me back so late in the evening. This lawyer has been great and has been offering free phone counsel to us!

B/w the two of you I really am starting to understand the process.

Thanks so very much!

I will keep you posted!
Danielle

Caron · Posted: Tue Dec 11, 2007 5:36 am Post subject: RE: short sale and 1099-C form

Ok I understand Danille, even I thought the lender needs to give it in writing that they won't sue you. But if it's the industry practice that they'll just issue the 1099-C form, then that's fine.

Short sale is a much better option to choose rather than let your house into foreclosure. And, if the lender is ready to issue you a 1099-C form, then that's ok because it implies they won't sue you for the deficiency. Rather they'll use the form so that they can report to the IRS that they've suffered a loss whereas the IRS will charge you tax on the cancelled debt or the deficiency as you say.

I hope you understand and please don't be nervous about it. And, by the way, you were looking for a post that you've done intially. I think you'll find it in the discussion on Foreclosure Question Please help ASAP.

Good luck

evolovik26 · Posted: Thu Dec 13, 2007 8:08 am Post subject:

Cool info thanks for update and good luck

scherzeroni · Joined: 05 Jan 2008 Posts: 51 18.77 Dollars($)

I would say to go ahead with it. Im sure they wont come after you. And if they are willing to accept the short sale, it's a better deal for you.

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