Introduction. After a false start in 2012, the 2013 Oregon Legislature has just passed its “new, improved” version of what was generally known as the Mandatory Mediation Law. Besides tweaking various provisions in the prior law, SB 558 closed a loophole big enough that the Big Banks were able to drive their Foreclosure Bus through it. Until July, 2012, virtually all lenders, except Wells Fargo, were conducting their foreclosures non-judicially, i.e. outside the court room. With limited exceptions, the process, which is found in ORS 86.705 – 86.795, had been the sole method used for residential foreclosures in Oregon for the past fifty years. While lenders have always had the option to judicially foreclose Oregon homeowners who defaulted on their loans, it was rarely used. In fact, in 1959, when the trust deed law was enacted, it was the lenders that lobbied long and hard for it; they knew it was far faster and cheaper than going to court to foreclose. Continue reading “QUERIN LAW: SB 558 – Oregon’s New Mandatory Resolution Conference Law for Borrowers Facing Foreclosure (2013)”
(Disclaimer – The following post is for informational purposes only. I am not a tax lawyer or CPA. In all cases of debt cancellation, readers are strongly encouraged to seek competent advice from a tax professional familiar with their specific situation. The material below is a summary only. For specifics consult your tax advisor.)
One of the basic rules of tax law is that cancellation of debt is a taxable event. For the lay person, cancellation of debt is the same as forgiveness of debt. It makes no difference how the cancellation occurred. It could be voluntary – through a short sale or deed in lieu of foreclosure, or certain loan modifications – or involuntary – through a foreclosure. In the tax lawyer’s lexicon, “cancellation of debt” is referred to as “COD” – like the fish – just harder to swallow.
However, with the housing and credit crisis forcing many people into foreclosure and pre-foreclosure events that resulted in significant debt cancellation, the Mortgage Debt Relief Act of 2007 was enacted. Subject to certain exceptions, this law permits taxpayers to exclude taxable income arising from the discharge of debt on their principal residence. It also applies to certain loan modification events where the debt is either forgiven, or restructured in a significant manner, such that it triggers a taxable event. For many taxpayers, this new federal law was a “codsend,” if you will.
Here are some of its main features: Continue reading “QUERIN LAW: Tax on Cancellation of Debt in Distressed Housing (2013)”
An unfortunate fact of life is that housing and financial problems can metastasize, destroying marriages and families. When this happens, despite the cloud of unhappiness that hovers over a couple’s life during these times, differences should be set aside when it comes to how to dispose of the family home. Continue reading “QUERIN LAW: Distressed Property, Distressed Marriage (2013)”
This set of FAQs is a continuation of a series of Q&As based upon the most current short sale information. The link to Part One can be found here. ~ PCQ
11. Question: What is a HAFA short sale?
Answer: This government program has been around since late 2009, and was touted as one that would “streamline” the short sale process. Initially, it was intended only for borrowers coming out of unsuccessful loan mods. That does not Continue reading “2013 Short Sale FAQs [Part Two]”
The local and national real estate markets have been on the ropes for five years. The third quarter of 2007 was the statistical peak for housing prices in the Portland-Metro area. From that point forward, the real estate market went into a downward spiral from which it has never fully recovered.
However, the third quarter of 2012 was the first time since the third quarter of 2007 that home prices have actually increased over the prior year. Bend, Oregon is experiencing the same resurgence.
So for those homeowners still awash in negative equity, 2013 may be the last and best year to complete a short sale with a minimum of adverse consequences. This is especially true since this year we know that if a home is short sold [or foreclosed, or deeded back in lieu of foreclosure] the seller will not have to pay income tax on the cancelled debt.[1] We don’t know if the forgiveness law will be extended into 2014. The extension for this year was not even announced until early January 2013, causing a lot of anxiety for homeowners who were unable to complete their short sales by December 31, 2012.
What follows are a series of FAQs based upon the latest information I have acquired while consulting with homeowners on their foreclosure avoidance options. ~ PCQ Continue reading “2013 Short Sale FAQs [Part One]”
I’ve written several blog posts about the mortgage insurance (“MI”) problem. Two of the several posts are found here and here.
In many cases, MI is not purchased by the borrower, but by the lender – without the borrower’s knowledge and after the loan has already been made. This type of MI is technically referred to as “credit enhancement”, and is bought by the originating lender, say Countrywide [now Bank of America] as the loan is being bundled with millions of dollars of similar mortgages, and sold to investors through a process called “securitization.” Since MI insures the ultimate owner of the loan, i.e. the investor, this enhancement makes it more attractive in the pool of securitized loans being sold. And by placing MI on the mortgages bundled and sold, the ratings agencies, such as S&P and Moodys, give the bonds better investment ratings. Continue reading “Mortgage Insurers – Short Sale Shakedown Artists”
Introduction. Now that the market is s-l-o-w-l-y returning to a semblance of normalcy, perhaps it’s time to go back and revisit some real estate basics. For the last several years, with the market dominated by short sales and bank-owned REO sales, many practices that were considered ‘SOP’, fell by the wayside. For example, even though the statewide OREF Sale Agreement form was chock full of seller representations, when an offer was made to a bank in an REO sale, the bank would ‘counter’ with an addendum that effectively scrubbed all the seller reps out of the document. Buyers were on their own when it came to protection. Similarly, although most contingencies retained some semblance of meaning in short sales, the condition of the property was presented on almost a take-it-or-leave-it basis in short sales, since most banks declined to spring for most repairs unless they were of such a magnitude as to require the concession.[1] Continue reading “Representations and Contingencies in Oregon’s Statewide Sale Agreement Form”
The online newsletter Mortgage Servicing News carried an interesting article that Realtors® should reprint and carry around in their pocket or purse. It was titled: “Servicer-Realtor Exchanges Can Boom or Bust Short Sales” and can be found online here. The premise of the article is smart, short and simple: Servicers should work closely with good real estate agents who specialize in short sales.
To quote:
- “By most industry estimations and feedback from insider reviews, the short sales market will continue to grow in 2013 and at least an additional couple of years beyond. In many ways, Realtors are the foot soldiers of the mortgage marketplace. More often than not have the ear and the trust of current and future homeowners—hence servicers need them on their side.”
- “Realtors who really know what they’re doing during a short sale are a blessing,” Ed Fey, CEO of Fey Servicing, told this publication. “A good relationship with Realtors is very important.” Continue reading “The Importance of Servicer-Realtor® Relationships in Short Sales”
January 29, 2013 was a very bad day for Diane Hathaway. That was the day she pled guilty to bank fraud, committed in the course of securing her lender’s consent to a short sale of her Michigan manse in Gross Pointe Park. The home reportedly carried a $1.4 million mortgage with online bank, Ing Direct,[1] and was short selling for $850,000. Apparently, fearing that the lender would pursue them for the entire deficiency[2], she and her husband decided to claim financial hardship by concealing and shifting assets, including a second home in Florida. Continue reading “Short Sale Fraud – Hard Time For A Bogus Hardship”
“To be forewarned is to be forearmed.”
The term “deficiency” arises in the context of a borrower’s default to their lender. It refers to the difference between what the lender/servicer recovers, e.g. through short sale, deed-in-lieu-of-foreclosure (“DIL”), or foreclosure, and the total debt owing. Let’s go through each one, and see how and when the issue is likely to arise:
1. Short Sales. This is a sale of the distressed property where the net sale proceeds [after deducting costs of sale, such as real estate commissions, escrow, title insurance and recording fees] are insufficient to pay the total indebtedness due, i.e. principal, interest, late fees, and lender advances, such as property taxes and insurance. The difference between the amount recovered and the amount due is the “deficiency.” Continue reading “Borrower Exposure to Deficiency Risk”
