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Update On Ca Mortgage Forgiveness

Sometimes in a short sale or a foreclosure, you may have to pay tax on the debt that was forgiven. There are many exclusions to this, so many people DON’T pay this tax. Several years ago, the federal government passed a law call the Mortgage Forgiveness Debt Relief Act which added even more exclusions to existing law, which meant that MOST people don’t pay this tax. The State of California mirrored that law. When the federal law first expired, they renewed it through the end of 2012, and the State of California also renewed theirs. When it expired again at the end of last year, the federal law was again renewed through the end of this year, but the State of California has NOT renewed theirs yet.

A bill (SB 30) was put forth to have California law again mirror federal law and it looked likely to pass. However, another bill was recently linked to this bill that now puts doubt on that. This new bill (SB 391) implements a $75 fee on many standard real estate documents that get filed, but not those associated with the sale of a property. So this fee would apply if you were to file a quit claim deed, lot line adjustment, do a refinance, etc. Something other than a sale.

Most real estate trade groups and consumer groups are very much IN FAVOR of SB 30 passing because it helps distressed homeowners and can help our real estate recovery, but are AGAINST  SB 391 because it raises the cost to consumers to do routine real estate activities. Look for this to be hotly debated and hopefully they’ll work it out. If you don’t agree with these two bills being linked, and you want them to pass SB 30, be sure to let them know. You can contact the CA legislature at http://www.legislature.ca.gov.

I AM NOT A TAX EXPERT, PLEASE CONSULT A TAX EXPERT FOR ADVICE FOR YOUR SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

401(k) To Stop Foreclosure

First, let me make clear that what I am about to describe is NOT the best course of action for most distressed homeowners. But there may be a few people where this COULD be a viable solution, so I wanted to make sure they were aware of the option.

If you have money in your 401(k) plan and you are about to lose your home, you may be able to take a “hardship withdrawal” from your 401(k) to stop the foreclosure. You will likely have to pay the income taxes due on this money but you may or may not have to pay the 10% penalty on the withdrawal. There was a bill put forth to Congress to make this process even easier, but I couldn’t find verification if it ever passed. So if it didn’t, then it’s up to your employer and/or their plan administrator if they will allow such a hardship withdrawal.

Be sure to weigh all the pros and cons carefully. Everyone’s situation will be different, so there are no cookie-cutter rules here. If you are horribly upside-down on your home, you can’t afford the payments, and there is no relief in sight, I’d tell you to think long and hard before you withdraw your retirement funds to put towards that mortgage. I’ve heard that retirement funds can possibly be protected in a bankruptcy if your situation is really that dire, so be sure you consider that before you take this drastic step. But let’s say you have equity in the home, and you are only facing foreclosure because you’ve been off work for a while, and you are SURE you are going to be back to work again soon and able to make the monthly payments, but it won’t be in time to stop the foreclosure, AND you really want to “save” the house. Then in that case you may want to consider this option.

I AM NOT AN ATTORNEY OR TAX EXPERT. PLEASE CONSULT EXPERTS IN REGARDS TO YOUR OWN SITUATION. If you have questions on any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

Another Foreclosure Moratorium?

Back in 2010, the Federal government ramped up their investigation of many lender’s foreclosure practices due to widespread abuse (you can do a Google search on robosigning, “show me the note defense,” the MERS problem, etc.). This lead to all kinds of foreclosure moratoriums, both official and voluntary. Most lenders stopped foreclosing seemingly overnight while they were being investigated. Then the National Mortgage Settlement came out and lenders started foreclosing again.

Well, all of a sudden foreclosures at certain lenders have drastically slowed down again. This is reported to be in response to some new directives released by several Federal agencies that spell out how lenders are supposed to be foreclosing. Seems like several lenders have decided to stop most of their foreclosures until they review all their policies to make sure they are in compliance. They do NOT want a repeat of the problems they had last time.

It’s too early to tell if this will be another prolonged moratorium like last time, or just a brief pause, and then they’ll resume foreclosing at the same pace as earlier this year. When asked, all the lenders say that they are “confident” that their processes are correct, they just wanted to double-check. BoA is one lender that is NOT slowing down their foreclosures in response to these new directives because they believe they are foreclosing correctly now. Citibank and Wells Fargo are two that have really slowed down. Chase slowed down drastically, but there are reports that they’ve picked up foreclosure activity again just recently.

So if you are trying for a loan mod or short sale but your lender turned you down because they were about to foreclose, give them one more call to request another postponement, even if they’ve turned you down before!

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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