Will walking away turn into an epidemic?

[gnome]

Quote from 5Pillars:

New Motto - "Good enough for JP/BSC good enough for me!!!" :eek:

Since WHEN?

 

[5Pillars]

Quote from gnome:

Since WHEN?

Your kiding, right? FED is in the bail out business now, remember!

 

[gnome]

Quote from ElCubano:

yes that is correct...but we are talking about walking away from the loan....and honestly if enough people do it...the IRS might not be able to do shit...you cant squeeze blood out of a stone...the internet is slowly changing politics...the people are starting to have a bigger voice...

The "way it works" is that the bank writes off the difference between what the property brings at sale/auction and the mortgage owed.

For the bank to be able to "write off the loss", he in effect 1099s the mortgagee for the difference.. and the defaulting mortgagee has to pay taxes on it like it was "income received".

There is legislation proposed which would allow certain mortgagees to NOT be "1099-ed" for the differential. Should that pass, however, somebody else pays for it. Can you guess who?

BTW... debt always, ALWAYS, gets accounted for by SOMEBODY... And under current U.S. Economic Facism, the wrong person(s) often unfairly pay for the greed and mistakes of others.

 

[GTS]

http://www.mortgagereliefformula.com/recourse/

These are all the mortgage walkaway trustee sale states, meaning they are non-judicial foreclosure states.

In those states, generally, when they foreclose on you, they cannot pursue you for their financial losses.

Many, such as California, do in theory allow a lender to choose judicial foreclosure but in those cases the lenders only do so if a borrower has significant other assets. This is the "one action" rule that lets the lender either pursue non-judicial foreclosure, at lower cost and less time, or judicial foreclosure that costs more money and takes more time but lets them go after you for their financial losses.

Going after someone who doesn't have any assets isnt going to get the lenders anywhere - that will just rack up the legal fees.

 

[5Pillars]

Quote from gnome:

The "way it works" is that the bank writes off the difference between what the property brings at sale/auction and the mortgage owed.

For the bank to be able to "write off the loss", he in effect 1099s the mortgagee for the difference.. and the defaulting mortgagee has to pay taxes on it like it was "income received".

There is legislation proposed which would allow certain mortgagees to NOT be "1099-ed" for the differential. Should that pass, however, somebody else pays for it. Can you guess who?

BTW... debt always, ALWAYS, gets accounted for by SOMEBODY... And under current U.S. Economic Facism, the wrong person(s) unfairly pay for the greed and mistakes of others.

Yes that is absolutely correct.

 

[ElCubano]

Quote from gnome:

The "way it works" is that the bank writes off the difference between what the property brings at sale/auction and the mortgage owed.

For the bank to be able to "write off the loss", he in effect 1099s the mortgagee for the difference.. and the defaulting mortgagee has to pay taxes on it like it was "income received".

There is legislation proposed which would allow certain mortgagees to NOT be "1099-ed" for the differential. Should that pass, however, somebody else pays for it. Can you guess who?

BTW... debt always, ALWAYS, gets accounted for by SOMEBODY... And under current U.S. Economic Facism, the wrong person(s) unfairly pay for the greed and mistakes of others.

unfortunately, that sounds more like what will happen....peace

 

[gnome]

Quote from GTS:

http://www.mortgagereliefformula.com/recourse/



Going after someone who doesn't have any assets isnt going to get the lenders anywhere - that will just rack up the legal fees.

If the defaulting mortgagee has other assets, the lender can strive to collect. If there are no assets, the defaulter gets "1099-ed", then has to deal with the IRS for income tax due. Bankruptcy would be the only true relief.

 

[GTS]

Quote from gnome:

If the defaulting mortgagee has other assets, the lender can strive to collect. If there are no assets, the defaulter gets "1099-ed", then has to deal with the IRS for income tax due. Bankruptcy would be the only true relief.

Read the linked article again ... you seemed to have missed the concept of the two different foreclosures.

http://en.wikipedia.org/wiki/Nonrecourse_debt

A nonrecourse debt or non-recourse debt or nonrecourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the lender is simply out the difference.

http://www.realestateinvestingtax.com/shortsale.shtml

How are foreclosures (and deeds in lieu of foreclosure) taxed? An important consideration in the results of a foreclosure (or a deed in lieu of foreclosure) is whether the debt is "recourse" or "nonrecourse". If the debt is "recourse", the debtor is personally liable for the debt. If the debt is "nonrecourse", the debt is only secured by the property, and the debtor is not personally liable for the balance.

You should consult with an attorney to determine the status of your mortgage. In California, most mortgages that are used to purchase a residence are nonrecourse, but mortgages from refinancing a previous mortgage are usually recourse.

 

[blackjack007]

Quote from gnome:

For the bank to be able to "write off the loss", he in effect 1099s the mortgagee for the difference.. and the defaulting mortgagee has to pay taxes on it like it was "income received".

There is legislation proposed which would allow certain mortgagees to NOT be "1099-ed" for the differential. Should that pass, however, somebody else pays for it.

it already passed.

Mortgage Forgiveness Debt Relief Act of 2007

H.R. 3648 would amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income.

http://www.washingtonwatch.com/bills/show/110_PL_110-142.html

 

[5Pillars]

Another important fact to remember, ONLY the Clinton's get full "no recourse" loans (from Madison Guarantee S&L for $300,000) - never a payment made and never a ding to the credit report!!!