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Company Loan Type APR Est. Pmt.

2nd mortgage charge off /clear title

Posted on: 02nd Jan, 2007 12:40 pm
Hello all, I just had a few questions regarding a 2nd mortgage charge off. Home in foreclosure and approved for refi with a different lender. Both current mortgages with same lender. Of course both mtg\'s need to be pd or \"settled\" to clear title. If current lender will except short refi or even a \"short sale\" would we receive a 1099 for the amount that was forgiven? Also once title is clear, can our lender still request payment of forgiven amount after the fact? I would guess it depends on the lender and the amount forgiven and what will benefit them the most. If we just refi now, we will still be taxed and possibly still be responsible for written off amount? If we just complete the reinstatement with current lender, the 2nd will still be on title when we sell in a couple of years. Could we be taxed on the complete amount of 2nd mtg charge off while in reinstatement period? Would it be better to take care of it now with the refi or complete reinstatement and have to do a short sale later? Home will appraise for 60-65k. Owe approx 84k. Really want to sell in about 2 yrs. Just wandered if anyone else has been in this situation and what was the outcome. We will NEVER put ouselves in this situation again! A hard lesson learned. Any comments or advice is appreciated!!! (I know I will need to consult a tax advisor regading the forgiveness of debt situation).Thanks everyone!! Have a Happy New Year!!
Hi,
"Also once title is clear, can our lender still request payment of forgiven amount after the fact?"
If the lender accepts a short sale then he can not claim the balance amount which is not recovered out of the sale.

Celis
Posted on: 02nd Jan, 2007 02:32 pm
The discounted amount or the difference between the mortgage balance and the short sale, may be declared as income on their income tax return by means of a '1099' form.

The lender can request payment for the difference between the loan balance and the short sale price. This is most often possible on account of the deficiency judgment provided by the court.
Posted on: 02nd Jan, 2007 09:18 pm
Hi Debbie,

Welcome back and Happy New year!

"can our lender still request payment of forgiven amount after the fact? If we just refi now, we will still be taxed and possibly still be responsible for written off amount?"

It depends on the lender as to whether he will agree to forgive the deficiency between the loan balance and the sale price in short payoff.

If you refinance now, you may still have to pay tax on the amount forgiven by the lender. Actually the Internal Revenue Service considers forgiven debt as income and hence charges tax on that amount.

Thanks
Posted on: 02nd Jan, 2007 10:06 pm
If you wish to sell within 2 years, you can currently go for a reinstatement now and do a short sale later on.
Posted on: 02nd Jan, 2007 10:28 pm
Hi debbie,

A charge-off is not considered as forgiven debt. The lender hands over the debt to a collection agency in order to get back the amount he invested.

There can be taxes charged on forgiven debt and not on charge-off amount as the sum is already retrieved from the borrower.

Thanks,
James.
Posted on: 03rd Jan, 2007 03:23 am
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