Tag Archives: foreclosure

Mortgage Debt Relief Act Extended

The Mortgage Debt Relief Act (“Act”) allows forgiven debt through a short sale, loan modification, or foreclosure to be excluded as taxable income.The Act was set to expire December 31, 2012,  but Congress extended the Act for another year on January 2.

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Bank of America Offering Payments for Short Sales to Eligible Borrowers

Bank of America is offering payments of up to $30,000 to some homeowners, if they sell their homes in a short sale and avoid foreclosure.  The exact amount of these “relocation” payments will be calculated on a case by case basis and range from $2,500 to $30,000.

In short sales, the sale price of the home is less than what the seller owes the bank.

During the final three months of 2011, foreclosures sold for an average of approximately $150,000, according to RealtyTrac, while short sales sold for an average of about $185,000.

To qualify for Bank of America’s short sale “relocation” payments, borrowers must receive pre-approval of the sale prices for their homes and the sale must begin by the end of 2012 and close by September 26, 2013.

Borrowers may call 877-459-2852 to inquire about their eligibility.

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Assessing the Housing Market Today

Discussing the state of the housing market is becoming about as common as watching the morning news or pouring a cup of coffee. With so many homeowners wondering when to sell and home buyers wondering about their options, there is a keen interest in the latest housing market data.  Of course the data varies by state.

Existing Home Sales

Recent economic data indicates that slow progress is being made in reducing the inventory of distressed properties and the pace of reducing this inventory is accelerating.

Despite mortgage rates remaining at near record lows, sales of existing homes are slow with erratic improvement.  The prices of existing homes remain flat, in part due to the downward effect of distressed properties including foreclosure inventory.

New Home Sales

An interesting development is the uptick in new home sales in recent months. Depending on where you live, it is hard to miss the new construction of single family homes and townhomes.  These new homes are selling in select areas and the builders do not feel compelled to offer discounts.

Of course, the economy is still in recovery and many economists report that the housing market recovery depends on the job and income recovery!

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Church Foreclosures on the Rise

Church foreclosures are on the rise throughout the country.

Traditionally, churches were considered solid borrowers with a steady cash flow from donations and tithing. Now congregations are shrinking due to unemployment and the downturn in the economy.  If membership is down and the church has a loan with a large balloon payment, it may be unable to pay and face foreclosure.

Some churches finance through the use of unconventional bonds rather than traditional 30 year mortgages.  The bond underwriters offer up front money if the church will issue compound interest bonds. The bond option typically gives the church an extended term without a payment due.  However, at the end of the term, a very large balloon payment of principal and accrued interest is due. The church may owe as much as double the original amount.

With the value of property down and cash in short supply, many churches will not have the funds to pay off the bonds and will have trouble refinancing.

Nevertheless, Scott Rolfs at Ziegler, an investment bank that helps churches obtain financing says “the easy credit in the mid-2000s” exacerbated church financial problems.  “For 99% of the church-going public in America, their church is coming through the recession just fine.”

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Mortgage Debt Forgiveness Excluded from Taxable Income Until the End of 2012

Under the Mortgage Debt Relief Act of 2007, mortgage debt forgiveness is excluded from taxable income until the end of 2012.

If your mortgage debt has been forgiven after a foreclosure, short sale or loan modification, you may be able to exclude the canceled debt from your taxable income.

If you are currently thinking about having a short sale and it takes over nine months to complete the process, you may end up with tax penalties unless the bill gets extended.

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Scam Artists & Homeowners: What They’re Doing and How to Protect Yourself, Part I

As part of National Fraud Prevention month, I’d like to take this opportunity to speak with you about an unfortunate type of fraud that is challenging desperate homeowners.

Anyone facing the possibility of losing his or her home to foreclosure is distressed and worried. Unfortunately, scam artists look for these opportunities to prey on the fears of desperate homeowners.  This series of posts should help you know what to look for and how to avoid being their next victims.

Tactics of Scam Artists

The companies or individuals involved in an enterprise designed to scam homeowners may use a variety of tactics to find homeowners in distress. One avenue is through public foreclosure notices in newspapers and on the internet or through public files at local government offices. Once the names are located, some scam artists will send personalized letters to homeowners. Others will try to reach homeowners through ads on the internet, radio or television or radio, in newspapers, posters and at bus stops. They may send out flyers and business cards or even arrive at the homeowner’s front door.

In one type of scam companies or individuals make promises to the homeowner stating that they can change the terms of the loan, reduce the monthly mortgage and save the home from foreclosure.  Such companies actually tell homeowners that they are able to save their homes and even may offer a money-back guarantee. Some companies have their employees call and tell the homeowner that they are affiliated with the lender or the government and offer the help of attorneys or real estate agents. This is just another way these con artists promise relief and fail to deliver, leaving the homeowner in a worse financial state.

Some scam artists tell the homeowner to pay them a fee for negotiating  a deal with the lender to reduce mortgage payments and prevent foreclosure. Some may claim to be attorneys or representatives of a law firm. They may tell the homeowner not to contact their lender, lawyer, or credit counselor based on a promise that they will handle all the details once they receive the fee. Once the homeowner pays the fee, the scam artist stops returning the homeowner’s calls and disappears with the money.

Another tactic is the use of telephone calls initiated by people pretending to be credit counselors.  These people often insist that mortgage payments be made directly to them while they negotiate with the lender. They may collect a few months of payments and then disappear.

Pretending to Be an Auditor

Some scams involve people posing as loan auditors or foreclosure prevention auditors (for example), and requiring an upfront fee for an attorney or other expert to review mortgage documents to determine if the lender complied with the law. These so called auditors may tell the homeowner that they can use the attorney’s report to avoid foreclosure, facilitate a loan modification or reduce the amount of the loan.  Inevitably, the scammer’s promises do not materialize, and the fraudster disappears with the money.

Other Schemes

Scam artists may use a rent-to-buy scheme and tell the homeowner to give up the title to his house as part of a deal that allows the homeowner to stay in the home as a renter and buy it back later. The con artist will say that surrendering the title will actually benefit the borrower with a better credit rating, qualify the homeowner for new financing and save the home.   Ultimately, the homeowner loses the house, and the scam artist disappears with the money the homeowner paid.  This scheme leaves the homeowner without a title to his home and more likely than not, facing eviction. In a similar hustle, the scam artist raises the rent over time so the homeowner cannot afford it. The homeowner starts missing payments, is evicted and the scam artist sells the house.

Some schemes involve an offer to find a buyer for the homeowner, but only if the homeowner signs over the deed and moves out. The con artist promises to pay the homeowner a portion of the profit when the home sells. After the homeowner transfers the deed, the fraudster rents the home and pockets the proceeds and the homeowner’s lender proceeds with foreclosing on the home. The homeowner loses the home and is responsible for the unpaid mortgage because the homeowner transferred only the title but not the debt.

Bait and Switch

In a bait-and-switch scam, con artists give you papers they claim you need to sign to get another loan to make your mortgage current. But buried in the stack is a document that surrenders the title to your house to the scammers in exchange for a “rescue” loan.

In Part II of this series, I’ll share a variety of FTC recommendations, what you should watch out for and how to make sure that you’re getting what you bargained for.

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Complications Surrounding Loan Defaults

Lenders continue to experience a large number of loan defaults. After all, the economy has been in an extended period of “recovery” and many homeowners are unable to repay their loans.

Facing the possibility of foreclosure is a scary experience. Many borrowers are panic stricken and gripped by fear and may become increasingly vulnerable to promises and solutions from companies offering impractical solutions that do not include working directly with the lender holding the defaulting loan.

For example, Bella Homes, LLC, a company with an Atlanta presence, is being sued for its ‘foreclosure rescue’ practices. Allegedly, Bella Homes, LLC (“the Company”) would convince homeowners to convey the title to their homes to the Company and thereafter the homeowners would rent or lease their homes from the Company. The Company promised homeowners they would retain an exclusive option to buy back their homes.

The lawsuit alleges that the Company never assumed the mortgages for the properties on which they collected rents and the money never made it to the homeowners’ lenders.

This alleged fraudulent scheme to prey on desperate homeowners indicates a risk for lenders, as well, as the lenders try to resolve defaulting mortgage accounts.

Have you seen anything like this occurring in your area or have you been solicited for similar practices?

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