If a lender forecloses on my principal residence or agrees to a short sale, will I owe tax on the deficiency?

The Answer to this question depends on your personal situation and type of loan, please see the following link to a recent California State tax news bulletin for more information.



http://www.ftb.ca.gov/professionals/taxnews/2009/July/Article_9.shtml

Those who lose homes may face state tax hit

By: Kathleen Pender
Published: August 2009

Californians who lose their homes in a foreclosure, short-sale or deed in lieu of foreclosure this year could be hit with a state income tax on canceled or forgiven debt.

To read full article see: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/08/25/BUBM19D2P7.DTL

New blog from TV Station KTEH

You don’t have to face a mortgage crisis alone. KTEH has assembled a group of experts who can offer advice on foreclosure, foreclosure prevention, loan modification, predatory loans, real estate fraud, tenants rights and more. If you need advice, post your question here and an expert will provide an answer or a referral to a trusted resource.
Please note, though, that while KTEH is proud of our team of community partners, any advice they provide is their own and not KTEH’s. KTEH does not assume any liability for any advice provided to you.

Click on this link to go to the blog:

http://blogs.kteh.org/mortgage/2009/07/01/facing-the-mortgage-crisis-together/

Excellent Guide on Foreclosure from USF School of Law

(THIS IS NOT LEGAL ADVICE)

In conjunction with Fair Housing Month, the University of San Francisco School of Law and Community Legal Services in East Palo Alto (CLSEPA) published a 12-page guide to mortgage foreclosure prevention in April.

Full guide is here:
http://www.law.usfca.edu/academics/documents/homeownerguide.pdf

Public television schedules program on local foreclosure crisis.

By Sue McAllister

Bay Area homeowners seeking to avoid foreclosure are invited to be part of a studio audience Sunday at KTEH in San Jose as the public television station devotes a live program to addressing the problems of those in trouble with their mortgages.

The one-hour "Facing the Mortgage Crisis" program will include panelists who are experts in helping homeowners seek alternatives to foreclosure and who know the implications for renters of a landlord's foreclosure.

The show will be broadcast live at 6 p.m. Sunday on KTEH (Ch. 10) and re-aired in the ensuing weeks on Northern California public television stations.

Full article here:
http://www.insidebayarea.com/business/ci_13211524

Servicers receive ratings from JD Power and Associates

Curious about how your bank/servicer was rated? Ocwen is at the bottom of the list.

http://www.jdpower.com/Finance/ratings/home-mortgage-service-satisfaction-ratings

If you are a California tenant with a foreclosure-related question, call the

Tenant Foreclosure Hotline 415.495.8012

http://www.tenantstogether.org/article.php?id=640

Bankruptcy

Please note: This is NOT legal advice. Bankruptcy should not be attempted on your own- consult an attorney.

Foreclosure Fears Drive One in Five Bankruptcies
By JON PRIOR August 5, 2009 11:45 AM CST

One in five people cite avoiding foreclosure as the main reason for choosing bankruptcy, according to the Consumer Credit Counseling Service (CCCS) of Greater Atlanta.
In June, the national nonprofit financial counseling agency found that 21.6% of the 16,744 people who received counseling filed for bankruptcy to keep their home. That figure remained above 20% since April.

Full article: http://www.housingwire.com/2009/08/05/foreclosure-fears-drive-one-in-five-bankruptcies/

Mortgage Servicers

The companies, known as mortgage servicers, are middlemen who collect monthly payments from homeowners and funnel the money to the banks or investors who hold the loans. As the only link between borrowers and lenders, they're in the best position to rework the terms of loans under the government's $50 billion mortgage-modification program. The servicers are paid by the government if the changes keep homeowners from falling behind on payments for at least three months.

Full article here:
http://news.yahoo.com/s/ap/20090805/ap_on_bi_ge/us_mortgage_middlemen

Housing counseling agencies funded through the National Foreclosure Mitigation Counseling Program, administered by NeighborWorks America, can provide you with the information and assistance you need to avoid foreclosure through the Homeowner Affordability and Stability Plan (HASP).

Go to this website and put in your address/zip code:

http://www.findaforeclosurecounselor.org/network/nfmc_lookup/

Short Sales article in Wash Post

By Renae MerleWashington Post Staff Writer Saturday, July 11, 2009

Before attempting a short sale, borrowers should weigh the potential tax liability and prepare for the usual hassles of a sale -- cleaning for open houses and negotiating with bidders -- even though they won't reap the usual cash payoff, real estate agents and lenders said. A real estate agent experienced with short sales can be helpful, they said, but borrowers should also prepare to provide documentation of a hardship that would persuade their lender to accept less than owed.

Lao Family note: It is REALLY important to review any short sale documents carefully (preferably with an attorney) to ensure that the short-sale wipes out ALL of your liability and that your bank can't come after you later for any losses.


Full article here: http://www.washingtonpost.com/wp-dyn/content/article/2009/07/10/AR2009071002115.html?sid=ST2009071003340

Attorney General sues loan modification scam artists

Brown Sues 21 Individuals and 14 Companies Who Ripped Off Homeowners Desperate for Mortgage Relief

Los Angeles - As part of a massive federal-state crackdown on loan modification scams, Attorney General Edmund G. Brown Jr. at a press conference today announced the filing of legal action against 21 individuals and 14 companies who ripped off thousands of homeowners desperately seeking mortgage relief. Brown is demanding millions in civil penalties, restitution for victims and permanent injunctions to keep the companies and defendants from offering mortgage-relief services. "The loan modification industry is teeming with confidence men and charlatans, who rip off desperate homeowners facing foreclosure," Brown said. "Despite firm promises and money-back guarantees, these scam artists pocketed thousands of dollars from each victim and didn't provide an ounce of relief."

Whole press release here:
http://ag.ca.gov/newsalerts/release.php?id=1767

Modifications down, foreclosures up

So Many Foreclosures, So Little Logic

By GRETCHEN MORGENSON
Published: July 4, 2009

Mr. White found that mortgage modifications peaked in February and have declined in all but one month since. While servicers modified 23,749 loans in these trusts in February, they changed only 19,041 in May and 18,179 in June. This is exactly when servicers were supposed to be responding to the government’s loan modification urgings.
Foreclosures, meanwhile, keep rising. In June, 281,560 were in process, slightly above the 277,847 in May. Last January, there were about 242,000 foreclosures in the pipeline among the Wells Fargo trusts.

Full article here: http://www.nytimes.com/2009/07/05/business/05gret.html

90 Day Foreclosure Moratorium- More information

From the San Francisco Chronicle:

The California Foreclosure Prevention Act, signed by Gov. Schwarzenegger in February, adds 90 days onto the time period between when homeowners default on a loan and when their home can be repossessed in foreclosure. Banks can avoid the 90-day holdup by having a comprehensive program in place to make mortgages more affordable by reducing the interest rate, extending the loan term, or reducing or deferring some of the principal. Such programs must be approved by regulators.

Full article here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/06/15/BUIH187NE7.DTL

PLEASE NOTE: 11 banks/servicers have already applied for an exemption to this rule, so don't count on the 90 days- get in touch with your bank/servicer NOW!

Medical issues and foreclosure

Health Care and Foreclosure Connection: From a recent study: (see link at bottom for more info)

Half of all respondents (49%) indicated that their foreclosure was caused in part by a medical problem, including illness or injuries (32%), unmanageable medical bills (23%), lost work due to a medical problem (27%), or caring for sick family members (14%). We also examined objective indicia of medical disruptions in the previous two years, including those respondents paying more than $2,000 of medical bills out of pocket (37%), those losing two or more weeks of work because of injury or illness (30%), those currently disabled and unable to work (8%), and those who used their home equity to pay medical bills (13%). Altogether, we found that about 7 in 10 of our respondents either self-reported a medical cause of foreclosure, or experienced one of these indicia of medical disruptions in the years before foreclosure.

Get Sick, Get Out: The Medical Causes of Home Mortgage Foreclosures
By Christopher Tarver Robertson, Richard Egelhof, & Michael HokeHealth MatrixVol. 18:65 2008

http://www.pnhp.org/blog/2008/10/06/medical-causes-of-home-mortgage-foreclosures/

Servicers Participating in Making Home Affordable Plan

Once you have determined if you are eligible for a Home Affordable Refinance or Modification, the next step is to contact your mortgage servicer to discuss your situation. A wide array of servicers have agreed to participate in the Home Affordable Modification program and have already engaged borrowers and expanded capacity to begin the modification process for eligible homeowners. The following is a list of servicers who have formalized their commitment to the program through a signed contract:

http://makinghomeaffordable.gov/contact_servicer.html

Frequently Asked Questions about the new Housing Plan

What is "Making Home Affordable" all about?

Making Home Affordable is part of President Obama's comprehensive strategy to get the housing market back on track. Through the Making Home Affordable Program, up to 9 million American families may be eligible to refinance or modify their loans to a payment that is affordable now and into the future.

Click on this link:

http://www.financialstability.gov/docs/borrower_qa.pdf

President Obama's Plan- New, Helpful Website

Are You Eligible?

Please use the self-assessment tools provided on this websiteto see if you are among the 7 to 9 million homeowners who maybe able to benefit from Making Home Affordable.

http://www.makinghomeaffordable.gov/

Does Fannie Mae or Freddie Mac own my loan?

Your mortgage servicer — the company that sends your mortgage statement — should be able to tell you if your mortgage is owned by Fannie Mae. However, if you need further confirmation, please contact Fannie Mae at 1-800-7FANNIE (8AM - 8PM Eastern) or complete our online request form below.

For Fannie Mae:

http://www.fanniemae.com/homepath/homeaffordable.jhtml


For Freddie Mac:
http://www.freddiemac.com/corporate/buyown/english/avoiding_foreclosure/avoiding_foreclosure_form.html

Answers to questions about Obama's Plan

Mercury News
Posted: 03/04/2009 07:26:04 AM PST
Updated: 03/04/2009 07:37:50 AM PST

The following are key excerpts from the federal government's Q&A about the new program that the Obama administration says should cut mortgage bills for up to 9 million Americans who are having troubling making their monthly payments.
The program could provide some borrowers mortgages with interest rates as low as 2 percent and there are also incentives that may pay down principal in some cases.

http://www.insidebayarea.com/ci_11833508?source=most_viewed

Details on the Obama Plan

This release from the US Treasury explains all of the details on the plan:

http://www.treas.gov/press/releases/reports/modification_program_guidelines.pdf

More information on the new plan

More Housing Details Are Pending, but First Some Answers
By TARA SIEGEL BERNARD
Published: February 18, 2009

The Obama administration’s housing plan aims to help millions of homeowners who fall into two categories: either they have been struggling to pay their mortgages or they have been shut out of the refinancing market.

Full article here:
http://www.nytimes.com/2009/02/19/your-money/mortgages/19modify.html?_r=1&em

Loan Modification Companies: Scams?

"I got an interesting email today asking about “loan modification companies.” These have sprung up like crabgrass in the midst of the foreclosure crisis, many of them run by former subprime mortgage brokers or real estate brokers who don’t have much work these days. "

"Mark Hanson, a mortgage expert with the Field Check Group warns, 'It is a disaster of space riddled with fraud…most are very shady being run by flunky mortgage brokers promising things like short refi’s and principal reductions they can never get.'"


Full article here:
http://www.cnbc.com/id/28775207

Firms Charge Thousands To Modify Mortgages

By Renae Merle
Washington Post Staff Writer Friday, December 26, 2008;

A growing industry has emerged to take advantage of the unprecedented wave of foreclosures, charging distressed homeowners for help negotiating better loan terms -- a service provided for free or for a nominal fee by many nonprofits.
Such companies charge $500 to $2,500 or more and are drawing the ire of consumer advocates, regulators and lenders, who say many are just the latest version of foreclosure rescue scams and can make it more difficult for homeowners to get help.

Full article here: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/25/AR2008122501014.html

Advance Fees for modifying loans

The following individual and corporate real estate brokers have submitted Advance Fee Agreements for Loan Modification and/or similar services to the Department of Real Estate for review and have received "no objection" letters regarding their use.

See the whole list here:
http://www.dre.ca.gov/mlb_adv_fees_list.html

Update on Mortgage situation

By MICHAEL CORKERY
Mortgage lenders who wake up Thursday with a New Year's hangover are likely to face another headache soon: The effort to give bankruptcy judges the power to rewrite mortgages is gaining steam.
The banking industry hoped the mortgage "cram-down" measure died when Congress removed it from the $700 billion bailout bill that passed in October. But it has been gathering momentum in Democrat-controlled Washington, as evidence emerges that current voluntary foreclosure-prevention programs are falling short.

Full article here:
http://online.wsj.com/article/SB123068005350543971.html?mod=googlenews_wsj

Hope for Homeowner Refinance Loan Program is a flop

HUD Secretary Steve Preston told today’s Washington Post that the program is a flop: Only 312 people have applied because it’s "too expensive and onerous for lenders and borrowers alike."

Full story here:
http://www.propublica.org/article/foreclosure-hope-for-homeowners-program-still-hopeless-1217

IRS speeding up process of subordinating tax liens

The Internal Revenue Service wants to make it easier for financially distressed homeowners to sell or refinance their residences. The agency said on Tuesday that it will speed up the process of "subordinating" federal tax liens - basically moving them down the line so the primary mortgage holder can take precedence. Otherwise, such liens could block the process of refinancing or restructuring a loan.

Full article here at San Francisco Chronicle:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/12/17/BUL814PEF5.DTL

Lender and Servicer Programs

When you speak with your lender or servicer, ask them if you qualify for their programs. A short list is below which does not include all of the available programs:

Chase's Program:
Click on this link for more information: (Chase now owns EMC and Washington Mutual)http://investor.shareholder.com/JPMorganChase/press/releasedetail.cfm?ReleaseID=344473

Enhanced programs seek to help an additional 400,000 families; With families already helped, total foreclosure preventions projected to top 650,000; $110 billion in mortgages to be modified


Citi's program
http://www.mortgagehelp.citi.com/The Office of Homeownership PreservationPhone: 1-866-915-9417Fax: 1-480-753-7832Email: mortgagehelp@citi.comHours of operation:Mon–Thurs: 6am–6pm PSTFri: 6am–3pm PST
homeownerhelp@citi.com
Phone Number: 1-866-255-3901


Countrywide's Program
Bank of America Announces Nationwide Homeownership Retention Program for Countrywide Customers.Program will systematically modify troubled mortgages with up to $8.4 billion in interest rate and principal reductions for nearly 400,000 Countrywide Financial Corporation customers nationwide.http://my.countrywide.com/media/FinancialAssistanceEN.html


Loans backed by Freddie Mac or Fannie Mae: "Lenders are willing to change the loan terms if homeownership costs exceed 38 percent of gross monthly income — a measure known as the debt-to-income ratio. Lenders use this benchmark for determining the size of a loan."
You can access the full article here: http://www.nytimes.com/2008/11/30/realestate/30mort.html?partner=rss&emc=rss&pagewanted=all

Indy Mac's program:

http://www.fdic.gov/consumers/loans/modification/indymac.htmlIndyMac Federal Bank, FSB (“Indymac Federal”) will implement a new program to systematically modify troubled mortgages. The program is designed to achieve affordable and sustainable mortgage payments for borrowers and increase the value of distressed mortgages by rehabilitating them into performing loans. This in turn will maximize value for the FDIC, as well as improve returns to the creditors of the former IndyMac Bank and to investors in those mortgages. The new program will help IndyMac Federal improve its mortgage portfolio and servicing by modifying troubled mortgages, where appropriate, into performing mortgages.

Working with your lender

"As record numbers of homeowners try to avoid foreclosure, the responses of big lenders and loan servicers like Countrywide are drawing increased scrutiny. While these companies maintain that they’re doing all they can to help imperiled borrowers, critics contend that homeowners routinely meet roadblocks."


http://www.nytimes.com/2008/07/13/business/13mail.html?partner=permalink&exprod=permalink

Options for borrowers who are having trouble paying their mortgages

Guide from Consumer Action on your options when you are having trouble paying your mortgage. Click on this link for an explanation: http://www.housing-information.org/articles/saving_your_home_from_foreclosure#Topic_03

Foreclosure Timeline

Urban Strategies has prepared a guide which explains the foreclosure timeline in California. The guide can be accessed here: http://www.urbanstrategies.org/foreclosure/Timeline/

Guide for renters in foreclosed properties

Housing and Economic Rights Advocates has prepared a guide for renters who are living in a home which is being foreclosed on. You can access the guide here:

http://www.heraca.org/downloads/Tenant_%20Rights_Foreclosed_On_Properties_0808.pdf

Foreclosure Process: Frequently Asked Questions

Housing and Economic Rights Advocates have prepared a guide for borrowers which answers questions about the foreclosure process in California. You can access the guide here:

http://www.heraca.org/downloads/CA_Foreclosure_FAQs_11_08.pdf

Lenders becoming more proactive

From the New York Times: "As a result, the banking industry has taken pre-emptive measures to help borrowers. The best example is an initiative, announced this month, to help those who took out loans backed by Fannie Mae and Freddie Mac, the government-owned companies that buy conventional mortgages from a wide swath of lenders. The companies’ loans make up about 58 percent of single-family mortgages nationwide."

You can access the full article here: http://www.nytimes.com/2008/11/30/realestate/30mort.html?partner=rss&emc=rss&pagewanted=all

Negotiating with your lender

This article is from the New York Times:

"There are several prerequisites to consider if you’re a borrower who is paying on time and wants some kind of a break. The home in question must be your primary residence. And the banks generally need to have your mortgage on their books and not have sold it off to Fannie Mae or Freddie Mac or someone else."

You can read the full article here: http://www.nytimes.com/2008/11/12/business/yourmoney/12money.html?partner=rss&emc=rss&pagewanted=all

Sacramento Resources

The Sacremento Housing and Redevelopment Agency is an excellent source of information for homeowners who are having troubles with their mortgages in the Sacremento area:

Their Foreclosure information page: http://www.shra.org/Content/Housing/Foreclosure/ForeclosureTOC.htm

Their Home page: http://www.shra.org/index.html

Foreclosure Scams- Beware!

If you receive a phone call, email, letter, or in-person solicitation from somebody who is promising to modify your loan (for an upfront fee) BE VERY CAREFUL about hiring them. We have heard from borrowers who are paying $1,500, $2,000 or even $3,000 to hire these "specialists." Oftentimes these companies are charging you money to do work you can do yourself and you should be very skeptical of anybody offering these services (especially if they ask you to pay beforehand). More information below:



From the CA Dept. of Real Estate: http://www.dre.ca.gov/mlb_adv_fees.html


Advance Fees and Loan Modification Services
If you are behind in your mortgage payments, you may be contacted by individuals or companies that will offer to help you work out a loan modification with your lender or provide other services to you in order to help you prevent a foreclosure on your home.

You must be very careful if you are asked to pay for any of these services in advance, whether in cash, check or by charging your credit card. First, California Civil Code Section 2945, which regulates "foreclosure consultants", forbids anyone who falls under the definition of a “foreclosure consultant”, as well as a real estate licensee, from collecting any advance fees for these types of services if a Notice of Default has been recorded against your property. If your lender has recorded a notice of default, do not pay an advance fee to anyone. There are non-profit agencies that can assist you without charging you a fee and real estate brokers who can represent you for a fee to be paid after they have completed their work.

If a Notice of Default has not been recorded against your property, it may be permissible for a real estate broker to assist you in working out a loan modification or otherwise negotiate a possible resolution to your problem with your lender or loan servicer and ask you for payment in advance for their services. However, the broker must have you sign an agreement that tells you what services will be performed, when they will be performed and how much you must pay. The broker cannot have you sign an agreement until it has been submitted to the Department of Real Estate for review and the broker has received permission to use it and collect the advance fee.
The following individual and corporate real estate brokers have submitted advance fee agreements for loan modification and/or similar services to the Department of Real Estate for review, and have received “no objection” letters regarding their use. You can obtain information on brokers and their locations by clicking on the “License Number” on the attached list or call (916) 227-0770.

The Department of Real Estate does not approve, endorse, recommend or make any representations about any of the agreements or their terms, or any aspect of a licensee’s business activities. Consumers wishing to contract with a real estate broker for loan modification or any other similar or related services should carefully review the agreement(s) and consider obtaining independent advice before signing an agreement(s) or advancing any fees. Consumers should also consider comparing the services and fees offered by other licensed brokers on the list.

Note: Licensed real estate brokers who provide loan modification or similar services without collecting fees in advance are not required to receive the Department of Real Estate’s permission as long as their services are fully completed before you pay them.
The list is updated on a periodic basis and may not include those which have recently completed the review process.

Before you pay an advance fee to anyone for assisting you, first call the Department of Real Estate at (916) 227-0770 to find out if an advance fee agreement is on file.