Help Finally Comes to Struggling Homeowners

by Ted A. Greene on February 3, 2016

The 2007 Mortgage Forgiveness Debt Relief Act has been extended through the end of 2016.
On December 18, 2015, President Obama signed a bill that extended the Mortgage Forgiveness Debt Relief Act through December 31, 2016. The extension also retroactively covers mortgage debt cancelled in 2015.
The Mortgage Forgiveness Debt Relief Act (MFDRA) prevents homeowners who went through a short sale from being taxed on the amount of their home mortgage debt that was forgiven. Believe it or not, but normally, debt that has been forgiven by a lender counts as taxable income.

Originally enacted in 2007, the Mortgage Forgiveness Debt Relief Act allows debt forgiveness of up to $2 million to NOT be considered taxable income if:
•    The house has been used as the principal place of residence for two of the last five years.
•    The debt has been used to buy, build, or make substantial improvements to the home.

Obviously, this is a huge relief to owners of distressed properties who are already facing financial burdens, and it eases many of the concerns they may have had about moving forward with a short sale.

There are other ways to avoid the debt such as insolvency or bankruptcy but you really need to talk to both a legal professional and a tax expert.

If you need help with your mortgage please contact Mr. Greene. He has been a leader in helping homeowners struggling with their mortgage and even has been suing the banks to force them to follow California law. He can be reached at (888) 442-2545 or send him an email at

looking over documents

What can you do with a Chapter 13?

A Chapter 13 bankruptcy is unique in that it offers a repayment plan that can be individually tailored to meet your needs. Within certain broad rules, you can repay some debts on your terms, and discharge debt that you don’t have to pay!

  1. Stop foreclosure, repossession, and harassing creditor calls

A bankruptcy will almost always immediately stop any repossession, foreclosure, or harassing creditor calls. This is true for any chapter of bankruptcy. But, did you know that if you file your bankruptcy as a Chapter 7, you may not be able to switch chapters later on, to take advantage of benefits not available under Chapter 7? Alternatively, if you file under Chapter 13, you have a unilateral right to convert or dismiss your case any time you want. In an emergency situation to stay a foreclosure or repossession, filing a Chapter 13 bankruptcy is the safe way to go.

  1. Get caught up on mortgage arrears

A Chapter 13 bankruptcy is maybe better known as a “reorganization” type of bankruptcy. In a Chapter 13, the court allows you to repay whatever needs to be repaid over a 3 to 5 year period, while still discharging any debt you don’t need to pay.

If you want to keep your house, you will need to get caught up on that mortgage somehow. One way to get current on the arrears is include them in a Chapter 13 Plan. This takes the total amount of the arrears, and breaks them into monthly payments over 36 mos (3 years) or 60 mos (5 years), depending on what works best for you. One of the greatest benefits of using a Chapter 13 to get caught up on arrears is that you will stop incurring late fees and penalties!

If monthly payments on the arrears isn’t a feasible option for you, a Chapter 13 bankruptcy can also buy you time to get a loan modification or sell your house and avoid a foreclosure.

  1. Get rid of that second mortgage!

In some cases, a Chapter 13 bankruptcy can help you wipe out your second mortgage entirely! People used this tool substantially in bankruptcy when property values declined. With values now increasing, it isn’t used as often, but it is still an important tool in the bankruptcy tool box.

  1. Get caught up on your car loan

If you are behind on your car loan, you can get caught up through a Chapter 13 bankruptcy. A Chapter 13 Plan will take the balance left on the loan and break it up into monthly payments over a 3-5 year period. This usually results in the Chapter 13 monthly car payment being less than your current monthly car payment! Filing a Chapter 13 will also immediately stop the financing company from repossessing your car.

Has the financing company already gotten your car? If they haven’t sold it at an auction, filing a Chapter 13 may allow you to even get your car back after repossession!

  1. Reduce the interest rate on your car loan

A Chapter 13 doesn’t require you to pay the high interest rate you got with your loan. The purpose is to help individuals reorganize debt in an affordable manner, how would an unreasonably high interest rate help you do that? Chapter 13 bankruptcy allows you to set the interest rate you pay on your car loan to the national prime rate, plus 1.5% for risk factor. Usually, the Chapter 13 interest rate is substantially less than your current interest rate.

  1. Reduce the amount you owe on your car loan

Do you owe more on your car than it is currently worth? In some cases a Chapter 13 Bankruptcy plan will allow you to pay only the market value of your car! This will reduce the overall balance of the loan, and results in thousands of dollars in savings to you.

  1. Sometimes, you can even get rid of your car loan completely!

In some specific cases, the Chapter 13 will even allow you to strip the lien on your car!

  1. Repay your taxes – on your terms! Even freeze interest and penalties!

One of the best uses for a Chapter 13 Bankruptcy is to help taxpayers get control of their mounting tax debt. Too many times when we owe taxes, we are unable to easily get them paid off due to the constantly accruing interest and penalties. Even if you enter into a repayment agreement with the IRS, they may be charging you for interest and penalties. This means you are paying the federal government more than you need to!

A Chapter 13 plan will freeze the interest and penalties, and pay the taxes off over the duration of your plan in monthly plan payments. You may even be entitled to a discharge of some of your tax debt.

  1. You don’t make too much money to file

I talk to a lot of people who say they just make too much money to file for bankruptcy, but not enough to keep up with their debt. I understand the frustration and feeling overwhelmed, but this is simply not true. Even if you make too much money to file a Chapter 7 bankruptcy, a Chapter 13 will allow you to pay a portion of your disposable income to unsecured creditors, and discharge the remaining balance of your debt to them. It is very similar to the concept of debt settlement, where you pay pennies on the dollar, but takes the power to accept your offer away from the creditors who got you in this situation in the first place. Because you are proposing the debt settlement within the bankruptcy, it is up to the Bankruptcy Court and the Trustee to accept or reject the plan. And the Bankruptcy Court will never make you pay more than you can afford.

A Chapter 13 bankruptcy is one of the most versatile tools in a bankruptcy attorney’s arsenal. It restructures debt that needs to be paid, like taxes or a house or car you want to keep, while offering all of the advantages of a traditional liquidation bankruptcy.

The important thing with a Chapter 13 is to plan ahead. If you are being charged late fees for a debt now, it is important to talk to an attorney about the advantages of filing sooner rather than later.

Also, if you are facing foreclosure, an emergency bankruptcy can be filed just before the sale, but you may end up paying more in legal fees to get it filed on time. As with all legal matters, planning ahead of time will get you the greatest bang for your buck.

Why you shouldn’t choose the cheapest bankruptcy attorney

If you are a consumer right now looking for an attorney to help you file for bankruptcy, you have almost endless options. Many attorneys practice bankruptcy in conjunction with other areas of law, and some even solely practice bankruptcy. With so many options, it may be tempting to find the attorney who will quote you the lowest price, and feel like you are getting the best bargain for your money. Sometimes, though, the cheapest bankruptcy attorney isn’t always the best bargain! If you don’t carefully choose the right attorney, you could lose out on important legal rights and benefits, and even end up paying back more money than you have to!

Here are some things to consider when you are researching and meeting with attorneys, to make sure you do actually get the best value:

Do you have other legal issues that may impact or help your bankruptcy?
Filing for bankruptcy can be used as a tool to help other legal problems you may have. Most bankruptcies are filed as a result of death, divorce, or disability. If you are getting divorced, it may help your divorce case to file bankruptcy together before the final divorce decree is entered, or separately after. If you are elderly, or have an aging family member, with a substantial amount of debt, it may help probate move more smoothly to file for bankruptcy. If you are being sued for any reason, bankruptcy may be the quickest and cheapest way to resolve that lawsuit, as well as any other debt you may have.
A good attorney will consider how bankruptcy can help or hinder other legal cases you are or may be involved in. It is important for you to discuss these legal cases with an attorney, and equally important for the attorney to consider how the other case will play out with a bankruptcy.

Does the attorney only handle one type, or Chapter, of bankruptcy?
Many attorneys only do Chapter 7 bankruptcies. This is because a Chapter 7 is generally very easy, and the attorney doesn’t need to have a detailed understanding of bankruptcy law. This can result in the attorney filing a Chapter 7 for you, when there may be better options! Other chapters of bankruptcy allow a person to reduce interest rates on some loans, get caught up on delinquencies through payment plans, and sometimes even discharge the loan completely. While you may technically qualify for a Chapter 7, you may benefit more from exploring other types of bankruptcy filings. An attorney who doesn’t handle other types of bankruptcy likely doesn’t have the necessary knowledge to determine which chapter is the best fit for your individual financial situation.

How many years’ experience does the attorney have practicing bankruptcy specifically?
Some attorneys practice in different areas of law and pick up bankruptcy as a secondary area. This can be an advantage, especially if you are using bankruptcy as a tool to help another legal situation, but beware attorneys who lack substantial experience or assistance to determine the best chapter of bankruptcy for you. A bankruptcy attorney with experience will be able to help you take full advantage of the bankruptcy laws to get the maximum benefit and help you get your fresh financial start!

Distressed Outlook: Big Banks Continue to Whittle Down Legacy Loans

Editor’s Note: This story is part of National Mortgage News’ 2015 Outlook coverage. Click here for more stories previewing the industry’s biggest trends for 2015.

The nation’s largest banks have attacked their delinquent loan portfolios with gusto, but they may hit barriers in 2015 as they try to further whittle down their distressed assets.

Some industry experts are predicting a new wave of delinquencies and foreclosures in the coming year if interest rates rise, causing home prices to decline.

Many of the largest banks continue to sell off nonperforming loans. Hedge funds and private-equity firms have bid up the prices of distressed loans as they seek to profit from recent home price increases, which could abate in the coming year.

Bank of America has made the greatest strides in whittling down its distressed assets afterselling off more than $1 trillion in nonperforming loans since 2009. The $2.1 trillion-asset bank in Charlotte, N.C., held 221,000 delinquent loans on its balance sheet in the third quarter, a 44% drop from a year earlier.

About three-quarters of its nonperforming loans are legacy assets from its 2008 acquisition of Countrywide Financial. B of A held roughly $10 billion in nonperforming residential mortgage loans at the end of the third quarter, and $32 billion in delinquent loans inherited from Countrywide. Those totals exclude home equity loans and lines of credit.

B of A has estimated that it will get back to a normal level of delinquent loans by 2016. Some analysts think that is an optimistic assessment, since some loans probably cannot be sold, and working out problem loans — especially those at the bottom of the barrel — is notoriously slow and labor intensive.

Meanwhile, Wells Fargo held roughly $10.7 billion of loans that were 30 days or more delinquent in the third quarter, according to the bank’s 3Q14 earnings. It also holds $46.4 billion in legacy loans in its Pick-a-Pay mortgage portfolio acquired from its 2008 purchase of Wachovia.

Overall, the seven largest banks and one large thrift saw an improvement in the number of seriously delinquent loans held on their balance sheets at the end of the third quarter, as of Sept. 30 according to a December report from the Office of the Comptroller of the Currency.

Roughly 5.2% or 117,673 residential mortgages were seriously delinquent at the end of the third quarter, down from 5.5% a year earlier, the report found. The reporting banks include Bank of America, J.P. Morgan Chase, Citibank, HSBC, PNC, U.S. Bank, and Wells Fargo, while OneWest Bank is the largest thrift.

But the report also noted that about 8% of mortgages held in bank portfolios lack credit scores at origination and are a mix of prime, Alt-A, and subprime mortgages.

“Since 2009, mortgages owned by the servicers have performed worse than mortgages serviced for (Fannie Mae and Freddie Mac) because of concentrations in nontraditional loans, weaker markets, and delinquent loans repurchased from investors,” the OCC said.

Large bank lenders have opted to sell defaulted loans to avoid the high costs of servicing and holding the debt. Large banks in particular have relied on sales of mortgage servicing rights, as well as servicing transfers, pay-downs and payoffs to reduce their holdings of nonperforming loans. An estimated $60 billion in nonperforming loans is expected to have changed hands in 2014.

Senate Passes Tax Bill That Includes Key Mortgage Deductions

The Senate approved a bill late Tuesday that would retroactively extend over 50 expiring tax provisions for one year, including one that shields distressed homeowners from paying taxes on any mortgage debt forgiven in a short sale.

The Senate approved the bill 76 to 16, which extends the provisions until Dec. 30 of this year (the one-year extension is retroactive). The House passed the bill 387 to 46 on Dec. 3.

At one point, House and Senate lawmakers were close to a deal on a two-year extension. But the White House objected because key business tax provisions were given permanent status while others affecting low- and moderate-income households would still have had to be extended each year.

“In my view, any agreement on permanent tax policies must be balanced between support for businesses and support for working families. A deal that only makes corporate policies permanent — or one sharply skewed in that direction — would have failed the test of fairness,” said Sen. Ron Wyden, chairman of the Senate Finance Committee.

Under the bill, homeowners can deduct the cost of mortgage insurance premiums on their 2014 tax forms. This tax break covers private mortgage insurance premiums as well as premiums paid on Federal Housing Administration, Department of Veterans Affairs and Rural Housing Service guaranteed loans. The U.S. Mortgage Insurers welcomed the extension.

“USMI commends passage by Congress last night of a one year extension of vital homeowner tax relief. We are especially pleased that the legislation includes the tax-deductible treatment of mortgage insurance premiums for low and moderate income borrowers. We look forward to working with Congress towards permanent enactment of this important tax relief for homeowners,” according to the private mortgage companies.

About 3.6 million taxpayers claimed the mortgage insurance deduction in 2009, according to analysts at Compass Point Research and Trading LLC.

The bill also ensures underwater borrowers that sold their homes in a short sale in 2014 will not be penalized.

Prior to the housing bust, troubled homeowners had to pay taxes on any mortgage debt that was canceled or forgiven by a lender. The amount of forgiven mortgage debt was treated as ordinary income and taxed accordingly.

The “Mortgage Forgiveness Debt Relief Act is crucial to foreclosure mitigation efforts such as principal forgiveness and short sales,” said Isaac Boltansky, an analyst with Compass Point.

In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act so that distressed borrowers would not be penalized for doing a short sale. Congress extended this tax relief in 2009 and 2012, but failed to pass a tax extender bill at the end of 2013.

Since 2008, more than 800,000 distressed homeowners have taken advantage of this tax break, according to Rep. Charles Rangel, D-N.Y., an original sponsor of the debt forgiveness bill in 2007.

Short sales have been declining over the past few years due to an improving economy, lower foreclosures and the uncertainty over the tax consequences of a short sale or deed in lieu transaction, where the homeowner simply signs over the deed to the house to the bank and vacates the property.

Fannie Mae and Freddie Mac servicers completed 27,800 short sales during the first eight months of this year, compared to 87,740 in 2013 and 125,232 in 2012.

Boltansky noted that the retroactive reauthorization for 2014 also gives Federal Housing Finance Agency Director Mel Watt a shield to resist Democratic pressure to permit principal reductions on Fannie and Freddie loans.

Watt “will have additional political cover to reject calls to embrace the principal reduction through HAMP as the tax consequences could limit borrower participation” he wrote in a Dec. 2 report.


source  Brian Collins

DEC 17, 2014 12:27pm ET

House OK’s Short Sale Tax Break, On to Senate

Daily Real Estate News | Monday, December 08, 2014

looking over documents The U.S. House passed a bill last week that would extend key tax breaks to financially distressed home owners who went through a short sale. The bill now goes before the Senate for consideration, where housing analysts hope for action during the final week of the Lame Duck session of Congress.

The National Association of REALTORS® has been calling on members to urge Congress to renew the Mortgage Debt Forgiveness Act, an income exemption on mortgage debt forgiven in a short sale or a workout for principal residences.

The act expired at the end of 2013. That means distressed home owners could be responsible for paying pay taxes on “phantom income” from any forgiven debt once the properties are sold. That is, if a lender sells a property for less than the amount owed on the mortgage, the home owner will then have to report that forgiven debt as taxable income to the IRS. The tax on a 2014 short sale or workout would be due April 15 of next year if Congress fails to extend the measure. If the Mortgage Debt Forgiveness Act extension is granted, taxpayers will be able to continue to exclude the forgiven debt from their annual income calculations.

The House included a one-year extension of the Mortgage Debt Forgiveness Act in the Tax Increase Prevention Act of 2014, which passed the House on Wednesday in a vote of 378-46.

In the first three quarters of this year alone, there have been more than 170,000 short sales, representing a total bill of $8.1 billion in mortgage debt forgiveness, according to estimates from RealtyTrac. But the lapse in the extension has caused some home owners to avoid short sales and workouts. Still, more than 5 million home owners remain underwater, owing more on their mortgage than their home is currently worth. Also, nearly 1 million households are seriously delinquent on their mortgages or are in foreclosure.

“Unless Congress acts, hundreds of thousands of American families who did the right thing will have to pay tax on ‘phantom income’ – money they never see,” read an ad issued by NAR last week that ran in select Capitol Hill publications.

Source: “Short Sale Tax Break Passes House,” HousingWire (Dec. 5, 2014)

10 financial tips for young people

If I could go back in time, I would do certain things differently. I’m not saying I have a lot of regrets. But when I was younger, I tended to have myopic vision. For instance, it was hard to imagine that one day I would be older. Even today, sometimes I look in the mirror and wonder, who the hell is that?

I wish that, when I was younger, someone had sat me down and told me a few things. Or else I wish that I’d listened when someone attempted to do this.

If you’re young, take a seat and listen up. These gems will help you on your quest for financial success.

  1. Go to college.You may want to do something that doesn’t require a college degree. For instance, you may dream of playing professional golf or running a barn and training horses. But give serious consideration to enrolling in college anyway. Yes, it’s a major investment, but if your parents are unable to help you pay for it, makes it happen yourself, even if it means taking out loans. One way to save on costs: Go to a community college first; then transfer to a four-year university after two years.

It’s easier to get a degree when you’re young than when you have a home, family and all the adult responsibilities that go with these things. Your earnings potential increases significantly with a college degree — which will come in handy if your other dreams don’t materialize. Plus, you will likely experience a love of learning that you will never outgrow.

  1. Find your purpose.If you’re having trouble figuring out what you want to do with your life, look within. You were born with certain talents and natural abilities. You know which subjects you excel in and which ones you struggle with. Choose a career that enables you to maximize your gifts in a way that fulfills you or helps others. As you grow, your career may change along with your desires. But for now, gravitate toward a field that feels like home.
  2. Begin retirement planning with your first job.This tip is so important. If the company you work for offers a 401(k) plan, sign up at your first opportunity. If there’s no such plan, divert some of your paycheck into an IRA. Believe it or not, if you’re lucky, one day you’ll find you are older, so it’s best to be prepared. Setting up automatic contributions to either one of these retirement vehicles at a young age will help you build wealth painlessly.

Just as an example, let’s say you invest $200 a month beginning at age 25, and you earn 7 percent annually on that money. By the time you turn 65, you will have about $525,000 saved up. If you wait until you’re 35 to begin saving, assuming the same monthly investment and rate of return, you’ll have amassed less than half that amount — about $244,000. This illustration simply shows the impact that a 10-year head start can make on your savings, thanks to the magic of compounding.

By Barbara Whelehan •
Read more:

Wells Fargo, U.S. No Longer Optimistic on Mortgage Pact

Lawyers for the U.S. and Wells Fargo & Co. told a judge they doubt they can reach a settlement in a government lawsuit accusing the bank of home-mortgage fraud, a person familiar with the matter said.

The U.S. sued San Francisco-based Wells Fargo in 2012, claiming it made reckless mortgage loans that defaulted and cost a federal insurance program hundreds of millions of dollars. The government said the bank’s misconduct spanned more than a decade while it participated in the Federal Housing Administration’s program.

The suit by Manhattan U.S. Attorney Preet Bharara is part of a larger effort to recoup losses from defaulted mortgages insured by the FHA. It follows cases against lenders including Citigroup Inc. and Deutsche Bank AG.

At a hearing yesterday, attorneys for both sides told U.S. District Judge Jesse Furman they no longer thought a settlement was within reach, said the person, who wasn’t authorized to speak publicly about the case and asked not to be identified. Both sides had halted the pre-trial exchange of evidence for four months to engage in settlement talks, according to a court filing.

Furman warned lawyers that he wouldn’t give them a four-month extension to collect evidence because they’d agreed on their own to pause the process. The judge said he considered a two-month extension a “gift” to the parties.

“I’m going to give you two months,” Furman said, according to a transcript of the hearing. “You did this at your peril, as far as I’m concerned. And had you asked me four months ago for leave to do this, I might have had a different view, but having taken this upon yourselves, you took the chance and you’re going to suffer some consequences.”

Tom Goyda, a Wells Fargo spokesman, said the bank will continue defending itself against the allegations.

“Our good-faith efforts to work with the federal government on a possible resolution of the complaint have not yet resulted in a settlement,” Goyda said in a statement. “We will move forward with presenting our case in support of our prudent and responsible FHA lending practices.”

Furman last year dismissed some claims because the government filed them too late. The bank had sought dismissal of the entire case.

The FHA program enabled the bank to certify loans for government insurance without prior agency approval.

Jim Margolin, a spokesman for Bharara, declined to comment on the case or the bank’s statement.

In 2012, Wells Fargo agreed to pay $5 billion as its share of a settlement of U.S. and state suit probes into abusive foreclosure practices.

CFPB Proposes to Expand Foreclosure Protections

The Consumer Financial Protection Bureau (CFPB) proposed on Thursday an additional set of measures designed to expand foreclosure protections for mortgage borrowers.

In an announcement Thursday afternoon, CFPB detailed the latest additions to its mortgage servicing rules, which first went into effect earlier this year. Since that time, the bureau says it has continued to engage in outreach with consumer advocacy groups, industry representatives, and other stakeholders to develop additional provisions to protect consumers and make it easier for companies to comply with the rules.

“The Consumer Bureau is committed to ensuring that homeowners and struggling borrowers are treated fairly by mortgage servicers and that no one is wrongly foreclosed upon,” CFPB Director Richard Cordray said in a statement. “Today’s proposal would give greater protections to mortgage borrowers.”

Chief among the proposed rules would be a requirement that servicers must provide additional foreclosure protections to borrowers who have already worked through the loss mitigation process previously and recovered.

Under the current rules, servicers are already required to provide certain protections, including the right to be evaluated under CFPB requirements for foreclosure avoidance options, once during the life of the mortgage.

The proposed rule would require servicers to offer those same protections again for borrowers who have brought their loans current at any time since the last loss mitigation application. The bureau says the rule is largely designed to protect those who obtain a permanent loan modification and then later suffer an unrelated hardship that could create additional struggles, such as a job loss or the death of a family member.

This is a developing story. Check back later for more details.

No Foreclosure During Short Sale

In a recent California case, the judge ruled in favor of homeowners saying it is illegal to foreclose while a short sale is being negotiated. The Court opined: Most dual tracking claims involve a borrower’s application for a loan modification and CC 2923.6.

Dual tracking is also prohibited, however, if a borrower and servicer agree to a non-modification foreclosure alternative, like a short sale.

If a short sale agreement is in writing, and if the borrower submits proof of financing to the servicer, a servicer may not move forward with the foreclosure process. CC § 2924.11(a)-(b). Here, servicer was still reviewing borrower’s short sale application, but had already received proof of financing when it foreclosed.

Even without evidence of a final, approved, short sale agreement, the court found borrowers to have stated a viable dual tracking claim under CC 2924.11 and overruled servicer’s demurrer.

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