Foreclosure University Blog

Question:  We had 2 investment properties – 1 foreclosed in 2009 and we just got a 1099 C for the second (which was part of the 80/20 purchase money. We also got a 1099 C for the second on the second property that foreclosed in March of 2010 again purchase money. How do we report this? Is this income? If so and we owe a crazy amount to the IRS what can we do when we have little reserve?

Answer:  - This is reported as income on your taxes. Your accountant will help you through all this. In many cases, you can claim insolvent which means your liabilities exceed your assets or if it was a personal residence because of the new laws you won’t have to pay taxes on this amount. Have your accountant help you with all this, it makes it much easier.

Question:  Maybe I just didn’t find the answer. BUT, my husband and his daughter own a home in Atlanta which is underwater on an equity credit loan but no first mortgage. He also owns a home in Las Vegas. We just learned that she has not paid property taxes for six years and the house is to be sold for the taxes. If we stop paying the loan doesn’t the bank treat the loan as if it is a first mortgage and just foreclose on it?

Answer:  - This is something you don’t want to take lightly… especially if there is equity in the home because you could lose the home for just the back taxes if the home is paid off. If the line of credit is attached to the home, many times the bank will forward money to pay the back taxes so they don’t lose their lien position or interest in the property. Georgia is a tax deed state with a 1 year redemption period. The penalty is 20%, meaning the homeowner has to pay an additional 20% to the investor who buys the deed for the back taxes. If nothing is done within the redemption period, the investor keeps the property. So depending on what the house is worth, if there is any equity, you might want to find a way to pay the property taxes unless your don’t want the property.

Question:  I had rented my house out and thought I could never save it but about 8 months of no payments they said lets do a loan mod. Took another year before I got it. In the meantime they knew I did not live in it and had rented it (told them) and I was working 100 miles away. They insisted that it be owner occupied and told them I would have to quite…no cares here so I did hoping I get could work here. So now I am not making enough to pay the mortgage with the modification. With the terms I will never pay this house off. the mortgage is $200 more than its worth.
If I stop making payments now do they have to go thru
foreclosure all over again. Read my mod agreement and nothing has addressed that question. HELP…thank you

Answer:  - Yes they will start the foreclosure process all over again.

Question:  I just purchased my first home using a VA Loan and will receive the First Home Buyers tax credit some time in the next 12 to 16 weeks. I would like to make some repairs and improvements to the home now. How long must I have my loan in order to obtain a HELOC?

Answer:  -You can take out a HELOC anytime as long as you qualify. Anymore it’s becoming extremely difficult to get a HELOC on your home because of what’s happened to the real estate market. Not only do you need stellar credit and financials to back it up, your home must have a good amount of equity in it. The days of taking out a HELOC up to 100% LTV are long gone.

Question:  My husband and I own a condo in Florida. We paid $163,000 and it is now worth $30,000. It costs us about $20,000 to keep up yearly. We are really struggling to make the payments and are thinking that we just can’t anymore. I am really worried. We own a house in New York and it has some equity (maybe $100,000). Can they come after my house in NY and put a lien or judgement on it if we foreclose? We didn’t use the house or anything from NY for the mortgage in Florida. Thanks. Also, our only income is from SS Disability and a pension.

Answer:  - This is unfortunate. You like many others have had the same thing happen to them. It’s hard to suggest what to do in this case… all you can do is all you can do. If you can’t afford it, then you can’t afford it. Yes, the lender can a file deficiency judgment against you for the loss, but most homeowners will file bankruptcy which wipes out the judgment. In this case where you have equity in your personal residence, it would be in your best interest to work out something with the bank to avoid the judgment altogether. Make sure when you work out your agreement, you settle on a “satisfaction” of the loan, that way the worst they can do is 1099 you for the amount they lost.