Love where you live!
More Relief For Troubled Homeowners
LA MESA -- Opinions about the last-minute wrangling that resulted in legislation to avoid sending the federal government over the so-called "fiscal cliff'' have been mixed, but there was one little-discussed element of the legislation that will be good news to struggling homeowners.
The legislation passed January 1 included a provision to exclude borrowers from paying taxes on debt forgiven through a short sale, foreclosure or loan modification. Known as Mortgage Debt Relief Act of 2007, the act was scheduled to expire December 31, 2012, but has now received an extension for another year.
Industry experts and political leaders from all sides expressed support for extending the act.
In November, 41 state attorney generals wrote a letter urging U.S. House and Senate leaders to extend the act, arguing not extending the act would take away from the effectiveness of the national mortgage servicing settlement. In that settlement, state and federal officials reached an agreement with five of the largest servicers to provide mortgage relief over charges related to foreclosure practices.
As of September 30, a report from settlement monitor Joseph Smith found servicers provided 21,833 borrowers with $2.55 billion in relief through first lien principal reduction modifications, which averages to about $116,929 in debt forgiveness for each borrower.
If the act did not receive an extension, borrowers who received relief in the form of forgiven debt would be liable to pay taxes on the debt.
La Mesa and East County were hit by the real estate decline and many homes purchased or refinanced at the market's high point, remain "under water.'' This legislation is good news, particularly for those who face a job change and are forced to sell before the market value can recover.
The other good news on the housing market as 2013 finds its legs, is that prices are rising again and demand for homes on the market remains strong as mortgage interest rates remain at or near record lows.
The author, Gina Garcia , is a licensed real estate professional who specializes in "short sale'' transactions.