Short Sale question?????????

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Rene Viloria

1828 Posts

Posted - 08/06/2008 : 5:30:50 PM

When you do a short sale do the client has to pay the difference own in from of judgment or anything like that, 2.-can they go after other assets other than the short sale house(bank acct, 401k, other property etc...?

isitfree

771 Posts

Posted - 08/06/2008 : 6:05:34 PM

quote:
Originally posted by Rene Viloria

When you do a short sale do the client has to pay the difference own in from of judgment or anything like that, 2.-can they go after other assets other than the short sale house(bank acct, 401k, other property etc...?

Depends on a number of factors (recourse/nonrecourse, state law, type of release negotiated, when the money was put in the 401k, etc.), but the answer to each question is 'maybe'.

RANDY P

2828 Posts

Posted - 08/06/2008 : 6:11:36 PM

LOL.

Rene Viloria

1828 Posts

Posted - 08/07/2008 : 10:18:33 AM

quote:
Originally posted by isitfree

quote:
Originally posted by Rene Viloria

When you do a short sale do the client has to pay the difference own in from of judgment or anything like that, 2.-can they go after other assets other than the short sale house(bank acct, 401k, other property etc...?

Depends on a number of factors (recourse/nonrecourse, state law, type of release negotiated, when the money was put in the 401k, etc.), but the answer to each question is 'maybe'.

Thanks, is there a way to find out 100% for sure????My modification co. told me to talk to a lawyer can you believe that, they are handling my client...

slants

4274 Posts

Posted - 08/07/2008 : 10:29:54 AM

quote:
Originally posted by Rene Viloria

quote:
Originally posted by isitfree

quote:
Originally posted by Rene Viloria

When you do a short sale do the client has to pay the difference own in from of judgment or anything like that, 2.-can they go after other assets other than the short sale house(bank acct, 401k, other property etc...?

Depends on a number of factors (recourse/nonrecourse, state law, type of release negotiated, when the money was put in the 401k, etc.), but the answer to each question is 'maybe'.

Thanks, is there a way to find out 100% for sure????My modification co. told me to talk to a lawyer can you believe that, they are handling my client...

Rene, it WOULD be advisable for the client to consult an attorney/CPA regarding all of those potential pitfalls of a shortsale/loan mod. Unless the debt is non-recourse or the lender specifically agrees not to pursue the deficiencies, yes, thier other assets may be subject to being attached by future actions. If their situation doesn not fall under the exemption covered under the Debt Forgiveness Act of 2007, they may incure substantial tax liability from it. They need to consult a tax attorney as you would involuntarily put yourself in a bad position if you dispensed tax/legal advise without licenses and they followed it to their demise. The loan mod company is smart enough not to dispense legal/tax advise and neither should you.

The ONLY way to find out for sure as it pertains to the homeowner's situation is for a tax attorney to review their ENTIRE personal situation, not talking about it in theory without any facts.

gzajdel

46 Posts

Posted - 08/07/2008 : 10:33:43 AM

Do you know hwo to do a short sale? 1st thing. When bank approves your client they check his/her financial situation. If your client has lots of money (assets) there is no way they will grant a short sale. You have to withdraw money from any bank account 2-3 months before proceeding with a short sale. Otherwise they will ( they always ask for 2-3 months of a bank statements)that your client is not in hardship.
How would yuou write you hardship letter to LENDER, if he/she has to show assets?

slants

4274 Posts

Posted - 08/07/2008 : 10:49:32 AM

quote:
Originally posted by gzajdel

Do you know hwo to do a short sale? 1st thing. When bank approves your client they check his/her financial situation. If your client has lots of money (assets) there is no way they will grant a short sale. You have to withdraw money from any bank account 2-3 months before proceeding with a short sale. Otherwise they will ( they always ask for 2-3 months of a bank statements)that your client is not in hardship.
How would yuou write you hardship letter to LENDER, if he/she has to show assets?

But, can't withdraw equity in other properties and 401k's/pensions.

isitfree

771 Posts

Posted - 08/07/2008 : 11:09:36 AM

quote:
Originally posted by Rene Viloria

quote:
Originally posted by isitfree

quote:
Originally posted by Rene Viloria

When you do a short sale do the client has to pay the difference own in from of judgment or anything like that, 2.-can they go after other assets other than the short sale house(bank acct, 401k, other property etc...?

Depends on a number of factors (recourse/nonrecourse, state law, type of release negotiated, when the money was put in the 401k, etc.), but the answer to each question is 'maybe'.

Thanks, is there a way to find out 100% for sure????My modification co. told me to talk to a lawyer can you believe that, they are handling my client...

Rene, the short payoff should make reference to whether or not the lender is giving (1) full remedy release, (2) partial release, or (3) charging off the balance.

gzajdel

46 Posts

Posted - 08/07/2008 : 11:12:18 AM

Other equities got nothing to do with a specific home which is being sold through short sale.
401k pensions ? Of course you can withdraw money and those are you assets.

SoCalRay

2698 Posts

Posted - 08/07/2008 : 11:16:46 AM

Similar Item

Did you guys see the Fannie Mae update regarding short sales?

Worse then a BK

The borrower has to be 4 years removed from the short sale to be aligible for a Fannie Mae loan.

gzajdel

46 Posts

Posted - 08/07/2008 : 11:19:39 AM

That is not true!!!!!!!!!!!
2 years ONLY! 5 years forclosures, 4 years bk 13

Captain Mortgage

1745 Posts

Posted - 08/07/2008 : 11:19:53 AM

In a short sale they are writing off the difference, so no they cannot collect that money through a judgement. They WILL however send your client a 1099 for any amount that was written off. (anywhere from 30%-100% of the amount)

Just saw a client with 180k short sale income on their tax return.

SoCal I thought it was 2 years

isitfree

771 Posts

Posted - 08/07/2008 : 11:23:08 AM

Beware of advice from anyone who spells judgment as judgement.

gzajdel

46 Posts

Posted - 08/07/2008 : 11:27:30 AM

that's not TRUE! Also. Mortgage Forgivness Act signed in Nov 2007 by Mr BUSH gives that provision that any capital gain ( 1099 difference) it will be not taxable!!!!
Common people. The most important BILL he signed last year!!!!

SoCalRay

2698 Posts

Posted - 08/07/2008 : 12:09:01 PM

quote:
Originally posted by gzajdel

That is not true!!!!!!!!!!!
2 years ONLY! 5 years forclosures, 4 years bk 13

Ok

I was reading Deed In Lieu of foreclosue

Still I think everyone needs to read this

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2008/0816.pdf

gzajdel23

174 Posts

Posted - 08/07/2008 : 12:13:01 PM

yes. Agree.

SoCalRay

2698 Posts

Posted - 08/07/2008 : 12:15:25 PM

They are going to be real strict on that extunating corcumstances

slants

4274 Posts

Posted - 08/07/2008 : 12:44:46 PM

quote:
Originally posted by gzajdel

Other equities got nothing to do with a specific home which is being sold through short sale.
401k pensions ? Of course you can withdraw money and those are you assets.

Sure, if you pay 40% in taxes and penalty. Other equities will definitely affect a taxpayer's ability to offset a 1099 by claiming insolvency - must ahve negative net worth.

slants

4274 Posts

Posted - 08/07/2008 : 12:48:08 PM

quote:
Originally posted by gzajdel

that's not TRUE! Also. Mortgage Forgivness Act signed in Nov 2007 by Mr BUSH gives that provision that any capital gain ( 1099 difference) it will be not taxable!!!!
Common people. The most important BILL he signed last year!!!!

Provided the debt is "acquisition indebtedness" and was the debtor's primary residence for 2 of the last 5 years. If the borrower had cashed out, or had not lived in the home for 2 years, well....

isitfree

771 Posts

Posted - 08/07/2008 : 1:22:24 PM

quote:
Originally posted by slants

If the borrower had cashed out, or had not lived in the home for 2 years, well....

...then the borrower would want to ask his/her tax advisor about the Insolvency Exclusion to cancellation of indebtedness; IRS Form 982.

slants

4274 Posts

Posted - 08/07/2008 : 1:46:19 PM

quote:
Originally posted by isitfree

quote:
Originally posted by slants

If the borrower had cashed out, or had not lived in the home for 2 years, well....

...then the borrower would want to ask his/her tax advisor about the Insolvency Exclusion to cancellation of indebtedness; IRS Form 982.

Then the quote above it would apply: "Other equities will definitely affect a taxpayer's ability to offset a 1099 by claiming insolvency - must have negative net worth (to be insolvent)."

If the borrower does have other assets, he really would be wise to consult a tax attorney to ensure the shortsale agreement does not incur income tax liability on $180,000 like the situation where Captain Morgan's client found himself.

Captain Mortgage

1745 Posts

Posted - 08/07/2008 : 2:37:45 PM

Thank you Paul for pointing out my mistake, is that the spelling bee trophy that you're holding in your picture?

Greg, To my understanding the MortgageFDRA of 2007 is only for people who got foreclosed on purchase money loans.

I have a client who got a significant 1099 for a short refi on a purchase money loan back in 2007. I might need to look into this further.

Also I appologize for my mistake on this. It was not a short sale, it was a short refi. Don't know if there is any difference though.

Lastly Questions for Rene. Is this regarding a purchase money loan or have your clients refi'd? And have they ever taken an equity line on the house?

gzajdel23

174 Posts

Posted - 08/07/2008 : 2:48:13 PM

MortgageFDRA of 2007 is not only for people who got foreclosed, but also for those who did short sale, loan modifiaction .Does not have to purchase money!
Link to IRS http://www.irs.gov/irs/article/0,,id=179073,00.html

slants

4274 Posts

Posted - 08/07/2008 : 2:53:39 PM

quote:
Originally posted by gzajdel23

MortgageFDRA of 2007 is not only for people who got foreclosed, but also for those who did short sale, loan modifiaction .Does not have to purchase money!
Link to IRS http://www.irs.gov/irs/article/0,,id=179073,00.html

It's "acquisition Indebtedness" which is your tax basis as established by the original cost to purchase a "qualified principal residence" - primary residence during 2 out of last 5 years. Purchase money or rate & term refi without any increase to the tax basis is covered. Any amounts cashed out over and above original tax basis/home equity line not used toward major home improvement will not be forgiven. Shortsale/short refi are no different.

eh6794

697 Posts

Posted - 08/07/2008 : 2:54:52 PM

quote:
Originally posted by isitfree

Beware of advice from anyone who spells judgment as judgement.

LMAO!!!!!!!!!

gzajdel23

174 Posts

Posted - 08/07/2008 : 2:58:09 PM

that's right slants!!!!!

eh6794

697 Posts

Posted - 08/07/2008 : 2:59:23 PM

http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html

Today, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which will help Americans avoid foreclosure by protecting families from higher taxes when they refinance their home mortgages. This Act will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.

This Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes.

slants

4274 Posts

Posted - 08/07/2008 : 3:00:47 PM

quote:
Originally posted by gzajdel23

that's right slants!!!!!

Do I get a prize?

gzajdel23

174 Posts

Posted - 08/07/2008 : 3:14:32 PM

GOLD MEDAL! Slants

slants

4274 Posts

Posted - 08/07/2008 : 6:46:03 PM

Rene, to help narrow down your answer, has your client done a cash out refi or taken out a home equity line that's over and above his original purchase loan amount? Also, what was the date of purchase, has it been 2 years or will it be 2 years soon?

bestbet123

1577 Posts

Posted - 08/07/2008 : 6:51:44 PM

I was gonna try to start some kind of trouble in this thread....but alas...Helen is here and i wouldn't stand a chance.

slants

4274 Posts

Posted - 08/07/2008 : 6:56:51 PM

quote:
Originally posted by bestbet123

I was gonna try to start some kind of trouble in this thread....but alas...Helen is here and i wouldn't stand a chance.

You do seem restless today. You've been stirring the pot all over the place ;-). Be nice. I like Rene. I find him earnest and endearing. He deserves help! He is hard working.

bestbet123

1577 Posts

Posted - 08/07/2008 : 7:05:18 PM

Your right as usual,i'm not sure why......i'm in secondary now and i don't like it that much,10 times the work for 1/4 the pay,that will put anyone in a bad mood.Rene is great,i wish i had something to offer,but i just bought back a loan for 140k today.I agree that not making payments is a bad idea,even with a loan mod,his credit is shot.

slants

4274 Posts

Posted - 08/07/2008 : 7:11:16 PM

quote:
Originally posted by Captain Mortgage

I have a client who got a significant 1099 for a short refi on a purchase money loan back in 2007. I might need to look into this further.

I just noticed this Joel. I think a taxpayer can cancel out the 1099 on their tax return by filling out form 982 for Reduction of Tax Attributes Due to Discharge of Indebtedness, provided they hadn't stripped the equity and had lived in the house for 2 years. Perhaps your client didn't meet the requirements? Ouch, how big was their tax bill on $180,000 additional income and could they afford to pay it?

hpmfinancial

1555 Posts

Posted - 08/07/2008 : 7:11:30 PM

quote:
Originally posted by slants

quote:
Originally posted by Rene Viloria

quote:
Originally posted by isitfree

quote:
Originally posted by Rene Viloria

When you do a short sale do the client has to pay the difference own in from of judgment or anything like that, 2.-can they go after other assets other than the short sale house(bank acct, 401k, other property etc...?

Depends on a number of factors (recourse/nonrecourse, state law, type of release negotiated, when the money was put in the 401k, etc.), but the answer to each question is 'maybe'.
Very well put, Rene loves to use the outpost as his free attorney.

Thanks, is there a way to find out 100% for sure????My modification co. told me to talk to a lawyer can you believe that, they are handling my client...
Rene, it WOULD be advisable for the client to consult an attorney/CPA regarding all of those potential pitfalls of a shortsale/loan mod. Unless the debt is non-recourse or the lender specifically agrees not to pursue the deficiencies, yes, thier other assets may be subject to being attached by future actions. If their situation doesn not fall under the exemption covered under the Debt Forgiveness Act of 2007, they may incure substantial tax liability from it. They need to consult a tax attorney as you would involuntarily put yourself in a bad position if you dispensed tax/legal advise without licenses and they followed it to their demise. The loan mod company is smart enough not to dispense legal/tax advise and neither should you.

The ONLY way to find out for sure as it pertains to the homeowner's situation is for a tax attorney to review their ENTIRE personal situation, not talking about it in theory without any facts.

Rene Viloria

1828 Posts

Posted - 08/07/2008 : 9:53:53 PM

Thanks guys for your help, as sometimes happens in the outpost, i am more confused than when i originally posted, but thanks again...

slants

4274 Posts

Posted - 08/07/2008 : 10:03:18 PM

quote:
Originally posted by Rene Viloria

Thanks guys for your help, as sometimes happens in the outpost, i am more confused than when i originally posted, but thanks again...

Yea, that happens around here Rene ;-). It's best for them to ask a tax attorney anyways. If you give them advice based on what we post (without law degrees or CPA licenses), we could provide erroneous info and hurt them instead of help them.

BrokerCA

2425 Posts

Posted - 08/08/2008 : 12:09:25 AM

Short sales are not easy to come by:

CA showed that between Sept 2007 and the end of March 2008, 2700 short sales were applied for and 77 approved.

http://mrmortgage.ml-implode.com/2008/08/07/pending-home-sales-number-actually-worse-explained/

BrokerCA

2425 Posts

Posted - 08/08/2008 : 12:09:39 AM

slants

4274 Posts

Posted - 08/08/2008 : 12:32:03 AM

quote:
Originally posted by BrokerCA

Short sales are not easy to come by:

CA showed that between Sept 2007 and the end of March 2008, 2700 short sales were applied for and 77 approved.

http://mrmortgage.ml-implode.com/2008/08/07/pending-home-sales-number-actually-worse-explained/

< 3% approval? Can't be that low? I think it's gotten higher, can't say how much.

bauvil2003

30 Posts

Posted - 08/08/2008 : 04:44:17 AM

You are very funny and you make me laugh.I would be aware more of people who cares that much about little details like that.Those can't be count when it comes to knowledge.Above, when people are typing, they are in a rush and they may not pay too much attention to little mistake like that.You are funny.I came in America at 30 year old and I am now 35, do you think, I will ever speak a good english.However, people are born smart any where in the world, despite my english, I close most deals than many like you at my office.Can you imagine me making 203k for a year.Knowledge is what I need not a such details like may of you are paying attention too.

quote:
Originally posted by isitfree

Beware of advice from anyone who spells judgment as judgement.

bauvil2003

30 Posts

Posted - 08/08/2008 : 04:58:35 AM

I know very well about short sales and may banks agree to do it.I heard people say about short refinance and I understand the concepts.It will be so good if all banks agree to do short refinance.It will be faster than short sale and will aloow many people to keep their own house.
My question is; which banks agree to do short refinance because all of those I know never heard about short refinance and those who know just do not do it?.Thanks in advance.

quote:
Originally posted by Captain Mortgage

Thank you Paul for pointing out my mistake, is that the spelling bee trophy that you're holding in your picture?

Greg, To my understanding the MortgageFDRA of 2007 is only for people who got foreclosed on purchase money loans.

I have a client who got a significant 1099 for a short refi on a purchase money loan back in 2007. I might need to look into this further.

Also I appologize for my mistake on this. It was not a short sale, it was a short refi. Don't know if there is any difference though.

Lastly Questions for Rene. Is this regarding a purchase money loan or have your clients refi'd? And have they ever taken an equity line on the house?

isitfree

771 Posts

Posted - 08/08/2008 : 09:21:16 AM

quote:
Originally posted by bauvil2003

You are very funny and you make me laugh.I would be aware more of people who cares that much about little details like that.Those can't be count when it comes to knowledge.Above, when people are typing, they are in a rush and they may not pay too much attention to little mistake like that.You are funny.I came in America at 30 year old and I am now 35, do you think, I will ever speak a good english.However, people are born smart any where in the world, despite my english, I close most deals than many like you at my office.Can you imagine me making 203k for a year.Knowledge is what I need not a such details like may of you are paying attention too.

quote:
Originally posted by isitfree

Beware of advice from anyone who spells judgment as judgement.

Lejeune, if you reread the post above the one I made then you will see that grammar is the least of the errors made in that post.

The individual who made the post above mine stated that:

"In a short sale they are writing off the difference, so no they cannot collect that money through a judgement."

Please be advised that shorting lenders frequently agree to release the lien and maintain their ability to pursue the homeowner for the deficiency.

So it is not a matter of spelling 'judgment' correctly, it is more a matter of spelling estoppel, writ of execution, bank levy, garnishment, et al. And if you've read this far and still think I'm talking about spelling, well then you're not as smart as yew theink.

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