Maine short sale Expert | Marty Macisso | Mortgage Debt Relief Act 2016
Maine short sale Expert | Marty Macisso | Mortgage Debt Relief Act 2016
Well, what a night on Super Tuesday that saw the Republicans take control of the Senate and House.
What does this mean for home sellers who are considering short sale or have completed one in the last year?
What is the Mortgage Debt Relief Act ?
Quite simply its an act that removes any and all tax liability for any individual who had debt forgiven or cancelled (1099-C) as a result of a Maine short sale.
However, this act expired at the end of 2012.
There have been multiple bills that have died on the Senate floor due to a lack of bipartisan cooperation, meaning there is a bill to extend this Mortgage Debt relief act but it never went to the President for consideration. When the Congress is divided this means its a lame duck and NOTHING gets accomplished.
Now we have a completing controlled Congress, who can at the least move bills forward to the President’s desk where he can sign them. The odds that this bill will be enacted have increased greatly. Republicans are mainly in favor of reducing tax burdens and are in favor of supporting the housing and banking industry so its fair to assume they will include this bill in upcoming legislation.
There is still no guarentee that the bill is enacted again, however this doesnt mean that sellers in Maine who completed a short sale are still stuck with a tax bill, there are ways to get around this with basic tax prep but they would need an accountant.
One this is for certain, Congress can now move from being a do nothing, mud slinging lame duck collection of politicians and finally move legislation forward due to the majority of Republicans being elected on November 4, 2014.
This is good news for struggling families who must make the tough decision to sell their Maine property before a foreclosure judgment while taking advantage of the short sale process, a system that results in selling for less than what is owed on the mortgage and having the remaining debt canceled. Typically, this canceled debt, like all canceled debt, is a taxable event which is complete insult to injury.
Think about it, a homeowner on the brink of foreclosure or job loss or illness must not only sell at a loss, damaging credit temporarily but also get hit with an enormous tax bill? Its not right, which was why the Bush administration enacted the Mortgage Debt Relief act of 2007. One wonders why it was not enacted permanently as it should have been however, when this Act is renewed many feel it will be retroactive to the short sales from the past two years who may have received tax bills.
The Maine short sale process can be complex but it is a Godsend for those behind on their mortgage who can not negotiate a loan modification with their bank. The benefits of a short sale a numerous compared to doing nothing and letting a property go to foreclosure. Once foreclosed and the bank takes it over, the bank wins an automatic deficiency judgment and will sue the homeowner again, a short sale prevents this.
Please consult a licensed tax professional, this article is speculation based on last nights election results it is not tax advice nor legal advice.
In the state of Maine, the real estate market has had its ups and downs no different than any other part of the country. Some parts of Maine are seeing activity pick up while other parts are seeing it fall off due to rising interest rates and slow employment. Once thing is certain, there are still thousands of Maine homeowners still trapped in a negative equity position aka underwater on their mortgage. Below are some common questions that homeowners should ask before entering into a short sale.
Common questions answered
Q: Should I wait for my home equity to return even if I am struggling to make payments?
A: This is a personal decision by each homeowner, however, the likelihood that the market will return to its market values during the peak housing market bubble of 2006 is highly unlikely based on market projections and rising interest rates. That leaves thousands of homeowners across the country in a negative equity position for years to come.
Do you need to be late on your mortgage to qualify for a Maine short sale?
In 80% of situations the answer is yes. Most mortgages are actually owned by the giants Fannie Mae and Freddie Mac, who have a mandatory rule that requiring borrowers to be at least 30 days delinquent before becoming eligible for a short sale.
Do I need a hardship to qualify for a short sale ?
Yes, in every situation you will need to show a hardship. These can range from job loss, illness, divorce and excessive living expenses bases on a declining income.
Will I have to sign a promissory Note to have my short sale approved?
In many cases, the larger the bank or mortgage company, the likelihood you will have to sign an agreement to repay the remaining debt left over is small. If you successfully negotiate and structure your short sale application then they will often waive the deficiency balance, which is the difference between what you owe and what the bank gets when its sold short. However, if your mortgage is with a Maine local bank or credit union then there is a good chance they will want some type of repayment plan but that can be negotiated as well.
Do I have to live at the property to qualify as a Maine short sale?
Its always better and you have more rights in foreclosure defense if the short sale is being done on a primary residence. Some mortgages will not allow a homeowner to sell a vacation property or a residence they have moved out of for more than 18 months. However, there are many ways around this policy.
Will my credit be hurt with a short sale?
The short answer is yes. However, most borrowers who are over extended in debt and are missing some payments have already done the damage to their credit scores. The short sale is a negative or derogatory item, however, its long term (2-3 years) affect is very positive. It allows a homeowner a way out of a mountain of debt and facing foreclosure an opportunity to rebuild their financial lives. Credit score models are designed to give people a second chance and over time their scores season and go up to conventionally acceptable levels which will allow the borrower to obtain a mortgage again.
For more specific questions contact Marty Macisso | Maine short sale expert at 207-400-4413.
Disclaimer – This is not legal advice, consult the advice of an attorney if you can afford it
Too many Maine property owners are unnecessarily allowing their homes to become the property of the big banks by simply ignoring the reality of their situation. They are not taking action. They are putting their heads in the sand.
Foreclosure is the result of falling behind on your mortgage payments. Perhaps they have lost a job, took on massive debts or increases to living expenses and no longer qualify for a new loan refinance. They may have also applied for a loan modification as a result of their bank making them false promises, and after months of phone calls, lost paper work and frustration – they get a denial letter.
How do you stop the Maine foreclosure after all of the other options of keeping your home have been expended? The Short Sale.
The short sale is an option for avoiding foreclosure that offers the homeowner a glorified way of transitioning to a new residence while avoiding all the devastating affects of a foreclosure judgment and sale.
The foreclosure will stay on your credit and negatively impact your life for up to 7 years. A foreclosure judgment will enable the bank to not only repossess your home and evict you in the process at their terms, it will also award the bank a Deficiency Judgment, which allows them to capture the remaining mortgage balance, penalties, interest and legal fees after the bank charges off the loan. For example – a mortgage at the foreclosure sale date is $300,000 but the bank only sells the home for its current as is value of $150,000 , the deficiency that the former home owner IS STILL $150,000 after the foreclosure. Talk about insult to injury. The bank IS GOING to come after the homeowner for this remaining balance in a separate law suit in district court and collect its money. IT DOESN’T PAY TO IGNORE YOUR PRESENT SITUATION.
So how do you stop the Maine Foreclosure process without having to pay for an expensive attorney? Hire a Maine licensed Real Estate agent who is a Short Sale specialist.
A short sale can be initiated at any point in the Maine foreclosure process up to the Public Sale date. After this date – its too late. However between the first missed payment and the public sale date – the Short Sale can happen in the State of Maine, which means the homeowner will hire a Realtor specializing in short sales and list and sell the property – all on their own terms while attaining the benefits of a short sale and stopping the foreclosure sale dead in its tracks.
What are the benefits of a Maine short sale?
First – rebuilding credit faster than a foreclosure or bankruptcy. In as little as 1 year a person who undergoes a short sale may qualify again for a home mortgage as long as they meet other credit and income criteria.
Second – A deficiency waiver. The bank will agree to allow the short sale to process, and give the homeowner a waiver of all their rights to pursue them for a deficiency judgment. This is huge. This is an enormous financial windfall for homeowners who are WAY UNDER WATER on their mortgages. This may result in a tax liability for certain investment properties but for primary residences they can uses their accountant’s help to qualify for a waiver of tax liability.
Third – CASH. In many instances home sellers in a short sale will be given money for relocation assistance. Usually up to $3000 in some programs. Although this is not guaranteed and is not a huge amount – its better than nothing and will help towards a new rental.
In summary, don’t let your emotions get the best of you. Don’t panic and simply walk away out of indifference. Take action and be responsible if you have no other options in retaining your home, a short sale is the best answer. And it won’t cost you anything.