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mpadua08 · Joined: 12 Oct 2009 Posts: 1 1.31 Dollars($)

i bought a property in '06 as a second home in nj however due to loss of income iam now behind 7 months mortgage payment. i tried to sell the house but the value doesnt even reach up to the mortgage i owed. iam willing to give the house to my lender. what is the best option in my part to get out of this liability? does the lender consider this as an investment property? what is the tax consequences and do i have to pay the difference of the mortgage sold price?

jenkin7 · Posted: Mon Oct 12, 2009 2:04 am Post subject:

Hi mpadua,

If your second home is sold for less than what you owe on it, you will be responsible for the difference. You can try the deed in lieu option. There is no guarantee that the lender will forgive the difference, but in most of the cases they do forgive the deficiency from deed in lieu.

As far as the taxes owed on this deficient amount is concerned, you will have to pay taxes as the forgiven debt is considered as the borrower's income. However, you may qualify for an exemption from the taxes under the Mortgage Forgiveness Debt Relief Act.

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