Mortgage debt relief extension should help distressed home owners
One measure tucked into Congress’ action to avert the Fiscal Cliff will help distressed home owners by approving the one-year extension of the Mortgage Debt Relief Act.
Since 2007, that law has given homeowners an exemption on federal taxes when they obtain debt forgiveness on their primary home. For example, a family with a short sale for $100,000 less than their mortgage would otherwise have to pay taxes on that difference as if it were income. It also applies when lenders forgive a portion of mortgage principal without the home changing hands.
Without a tax exemption, some homeowners might chose to lose the home to foreclosure instead of facing a large tax bill.
The Mortgage Debt Relief Act will last until Jan. 1, 2014.
“This extension will help struggling homeowners take full advantage of the assistance offered them by the national mortgage settlement and other foreclosure relief programs.”
9 Ways to Avoid Foreclosure:
REINSTATEMENT: Bring the loan current
FORBEARANCE: Temporary repayment plan
REFINANCE: New loan with reduction in monthly payments
LOAN MODIFICATION: Modify original loan terms
SELL THE PROPERTY: Use equity to payoff or pay difference
RENT THE PROPERTY: Must make loan current
SHORT SALE: Negotiate with bank to accept sale under loan amount
DEED IN LIEU OF FORECLOSURE: ”friendly foreclosure:
BANKRUPTCY: Will stall foreclosure but not prevent it
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