Underwater homeowners could face extra tax burden in 2014

By Amrita Jayakumar, Published: December 25
REPOST

Struggling homeowners could be hit with an unexpected tax bill in the new year.

A law that spared people who owe more than their homes are worth from being saddled with extra taxes when their banks provide mortgage relief is expiring next week. Congress hasn’t extended it.

Those hardest-hit by the housing crisis will be taxed more in 2014, unless Congress extends a law.

Underwater homeowners often try to negotiate with their bank so that they can sell their homes for less than they owe in a short sale or have their mortgage balance reduced. But the difference between what the homeowner owes and the lower sales price approved by the bank is considered income for the homeowner and subject to tax by the Internal Revenue Service.

For example, someone with a $100,000 mortgage who is allowed to sell their house for $80,000 is supposed to pay taxes on the remaining $20,000.

But a law known as the Mortgage Forgiveness Debt Relief Act saved such homeowners from the tax burden. Last year, Congress rushed to extend the law during negotiations about the fiscal cliff but only through the end of 2013. Now it’s down to the wire again.

Lawmakers and housing advocates argue that the rule hurts those who are already financially strapped. Since 2009, more than 220,000 homeowners have sold their houses for less than they were worth through a short sale with help from a government program. There are more than 6 million homes still underwater across the country, according to a third-quarter report from research company CoreLogic.

That is down from more than 11 million homes during the peak of the housing crisis in 2009, but it shows that despite the sector’s strong recovery, many homeowners aren’t out of the woods.

“What you’re looking at is people who have lost their house,” said Marceline White, executive director of the Maryland Consumer Rights Coalition. “And then to have them hit with this [tax] just boggles the mind.”

Maryland — which has more than 214,000 homes with negative equity — plans to extend a measure exempting its residents from state taxes even if the federal law expires. The state took the same step last year and was one of the few to do so.

Virginia and the District of Columbia, which have a smaller share of underwater homes, do not have similar measures.

“We saw that thousands of Maryland homeowners would be suddenly getting this tax burden,” said Del. Craig J. Zucker (D-Montgomery).

Zucker is among a group of Maryland lawmakers, including Gov. Martin O’ Malley (D), who are pushing to get the measure extended as soon as the state legislature returns to session in January.

At the federal level, there are three bills — two in the House and one in the Senate — that call for the law’s extension. One of the House bills enjoys strong bipartisan support, with 29 Democrats and 23 Republicans on board. The Senate bill — which would extend relief through 2015 — is sponsored by Sens. Debbie Stabenow (D-Mich.) and Dean Heller (R-Nev.). Stabenow sponsored the extension last year.

But it is unclear whether Congress will make the law a priority next year.

Last week, another group of lawmakers, led by Rep. Elijah E. Cummings (D-Md.), sent a letter urging Congress to pass the bill as soon as possible.

A separate letter from the National Association of Attorneys General made the same request.

“We’re far from out of the foreclosure crisis,” White said. “We hope that policymakers look at longer-term solutions.”

Source: www.washingtonpost.com

Closing Disclosure Form (HUD1) – FORM

New forms, new ways for Fort Myers and Cape Coral Closings. The Consumer Financial Protection Bureau (CFPB) has issued new rules nationwide for closing loans. The new rules and forms will allow consumers to better understand what they are getting into in terms of the loan and obligations.

The new  form will now have to be given to the client three business days before they close on the loan. This replaces the HUD1/settlement statement.

Take a look at the new CLOSING DISCLOSURE FORM for changes.

The new rule and forms go in to effect as of August 1, 2015.

Still time to review and get to know these so you feel comfortable. Call Jennifer Ferri at Title Junction today for a FREE review – 239-415-6574.

Loan Estimate Form (GFE) – FORM

New rules across the board even for Cape Coral and Fort Myers closings. The Consumer Financial Protection Bureau (CFPB) has released a new rule regarding disclosure for loans. This rule produced new forms that will replace existing ones to help consumers make clearer decisions before closing on a loan.

This form will now be given to clients by their lender within  three business days after a loan application is submitted.

Rule Effective starting August 1, 2015.

The new LOAN ESTIMATE FORM is available to view here.

Need assistance navigating through the rules, the process or the document, call Jennifer Ferri today @ 239-415-6574.

The NEW Loan Estimate Form and Closing Disclosure Form

Just when you thought you knew everything, it all changes again. This will effect those who are in Cape Coral or Fort Myers as well. On November 20, 2013, the Consumer Financial Protection Bureau (CFPB) issued a rule to replace existing federal mortgage disclosures with new ones that are easier to understand.

The rule improves the way consumers receive information about Cape Coral or Fort Myers mortgage loans, both when they apply and when they’re getting ready to close. When you apply for a mortgage, you get disclosures that explain the terms. The new mortgage forms will help you understand your options and avoid costly surprises at the closing table.

The rule states that consumers must receive their Closing Disclosure three business days before closing on the loan so they have time to review it. The final rule also limits the circumstances in which consumers will have to pay more for settlement services than the estimate they received.

The Final Rule includes the new Closing Disclosure Form that will replace the current HUD-1 & Closing Statement.

This rule is effective August 1, 2015. The final rule applies to transactions for which a  mortgage broker/lender receives an application on or after that date.

Have a look at the new Loan Estimate Form and the Closing Disclosure Form.

Title Junction is here to answer any questions you have and guide you along in the process. Call me today for the answers you need most!