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SDEngineer.
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December 9, 2008 at 6:51 AM #14596December 9, 2008 at 7:47 AM #313259
urbanrealtor
ParticipantThe forgiven debt in shorts is not currently taxable by the irs or ftb. The irs change rules like a year ago and the ftb more recently (I actually had to call the office of the sponsoring state senator).
There are some limits on this but basically you’re probably safe.
Fannie Mae (as well as other debt buyers) are coming out with guidelines that indicate 5 year wait on purchasing after foreclosure vs a 2 year wait following a short sale.
They did this because the way it was before meant foreclosure was equivalent or easier on the credit report. This was a really bad incentive structure.
Since the short sale negotiators are now dealing with sellers who are making their payments, that means the collateral damage from a short can be actually rather well contained. For my clients in escrow now, that means that they will have a charge-off and a short sale on their credit report. There will be no delinquency, no non-payment, no default, and no foreclosure.
There will be a 100k+ chargeoff and a 2-year purchase moratorium though.
December 9, 2008 at 7:47 AM #313615ParticipantThe forgiven debt in shorts is not currently taxable by the irs or ftb. The irs change rules like a year ago and the ftb more recently (I actually had to call the office of the sponsoring state senator).
There are some limits on this but basically you’re probably safe.
Fannie Mae (as well as other debt buyers) are coming out with guidelines that indicate 5 year wait on purchasing after foreclosure vs a 2 year wait following a short sale.
They did this because the way it was before meant foreclosure was equivalent or easier on the credit report. This was a really bad incentive structure.
Since the short sale negotiators are now dealing with sellers who are making their payments, that means the collateral damage from a short can be actually rather well contained. For my clients in escrow now, that means that they will have a charge-off and a short sale on their credit report. There will be no delinquency, no non-payment, no default, and no foreclosure.
There will be a 100k+ chargeoff and a 2-year purchase moratorium though.
December 9, 2008 at 7:47 AM #313646ParticipantThe forgiven debt in shorts is not currently taxable by the irs or ftb. The irs change rules like a year ago and the ftb more recently (I actually had to call the office of the sponsoring state senator).
There are some limits on this but basically you’re probably safe.
Fannie Mae (as well as other debt buyers) are coming out with guidelines that indicate 5 year wait on purchasing after foreclosure vs a 2 year wait following a short sale.
They did this because the way it was before meant foreclosure was equivalent or easier on the credit report. This was a really bad incentive structure.
Since the short sale negotiators are now dealing with sellers who are making their payments, that means the collateral damage from a short can be actually rather well contained. For my clients in escrow now, that means that they will have a charge-off and a short sale on their credit report. There will be no delinquency, no non-payment, no default, and no foreclosure.
There will be a 100k+ chargeoff and a 2-year purchase moratorium though.
December 9, 2008 at 7:47 AM #313669ParticipantThe forgiven debt in shorts is not currently taxable by the irs or ftb. The irs change rules like a year ago and the ftb more recently (I actually had to call the office of the sponsoring state senator).
There are some limits on this but basically you’re probably safe.
Fannie Mae (as well as other debt buyers) are coming out with guidelines that indicate 5 year wait on purchasing after foreclosure vs a 2 year wait following a short sale.
They did this because the way it was before meant foreclosure was equivalent or easier on the credit report. This was a really bad incentive structure.
Since the short sale negotiators are now dealing with sellers who are making their payments, that means the collateral damage from a short can be actually rather well contained. For my clients in escrow now, that means that they will have a charge-off and a short sale on their credit report. There will be no delinquency, no non-payment, no default, and no foreclosure.
There will be a 100k+ chargeoff and a 2-year purchase moratorium though.
December 9, 2008 at 7:47 AM #313738ParticipantThe forgiven debt in shorts is not currently taxable by the irs or ftb. The irs change rules like a year ago and the ftb more recently (I actually had to call the office of the sponsoring state senator).
There are some limits on this but basically you’re probably safe.
Fannie Mae (as well as other debt buyers) are coming out with guidelines that indicate 5 year wait on purchasing after foreclosure vs a 2 year wait following a short sale.
They did this because the way it was before meant foreclosure was equivalent or easier on the credit report. This was a really bad incentive structure.
Since the short sale negotiators are now dealing with sellers who are making their payments, that means the collateral damage from a short can be actually rather well contained. For my clients in escrow now, that means that they will have a charge-off and a short sale on their credit report. There will be no delinquency, no non-payment, no default, and no foreclosure.
There will be a 100k+ chargeoff and a 2-year purchase moratorium though.
December 10, 2008 at 8:28 AM #313653Hopeful
ParticipantInteresting – I had not seen that anywhere. I thought the income taxes were owed on a shortsale but not a foreclosure and was arguing with a friend who said they were owed on both. I guess that is some good news if they are not owed on either. I am ok with the repurchase restrictions even for 5 years – who would want to buy into this mess again any time soon?
The larger house (3br) next door to mine (2 br) recently sold in a short sale or foreclosure for less than I paid for mine. Based on that closing price I think my home’s value is probably worth $150k less than I paid for it. I don’t really have $150k to bring to the table for a refinancing or traditional sale, even if I cashed out of my retirement savings. And I really wouldn’t want to owe taxes that I would not be able to pay on top of a $150k loss.
(My original “plan” to get funds from the sale of a condo to pay down the loan on the house to get payments down to an affordable level tanked with the value of the condo.)
I paid property taxes (and appealed) and am still making payments, and I have cash flow to continue paying on both the house and condo for about another year, but after that I will be tapped out. I was wondering the best course to take, so would you suggest I start call the lender to request a shortsale approval for the house now or do I have to list the house for sale first, or does it really take defaulting to get their attention? And do they make you run through all the rest of your assets before deciding? If that is the case I may be better off with bankruptcy than depleting retirement funds (less than $100k anyway)? Thank you for the information. I appreciate no I told you so’s since I kick myself already.
December 10, 2008 at 8:28 AM #314010ParticipantInteresting – I had not seen that anywhere. I thought the income taxes were owed on a shortsale but not a foreclosure and was arguing with a friend who said they were owed on both. I guess that is some good news if they are not owed on either. I am ok with the repurchase restrictions even for 5 years – who would want to buy into this mess again any time soon?
The larger house (3br) next door to mine (2 br) recently sold in a short sale or foreclosure for less than I paid for mine. Based on that closing price I think my home’s value is probably worth $150k less than I paid for it. I don’t really have $150k to bring to the table for a refinancing or traditional sale, even if I cashed out of my retirement savings. And I really wouldn’t want to owe taxes that I would not be able to pay on top of a $150k loss.
(My original “plan” to get funds from the sale of a condo to pay down the loan on the house to get payments down to an affordable level tanked with the value of the condo.)
I paid property taxes (and appealed) and am still making payments, and I have cash flow to continue paying on both the house and condo for about another year, but after that I will be tapped out. I was wondering the best course to take, so would you suggest I start call the lender to request a shortsale approval for the house now or do I have to list the house for sale first, or does it really take defaulting to get their attention? And do they make you run through all the rest of your assets before deciding? If that is the case I may be better off with bankruptcy than depleting retirement funds (less than $100k anyway)? Thank you for the information. I appreciate no I told you so’s since I kick myself already.
December 10, 2008 at 8:28 AM #314041ParticipantInteresting – I had not seen that anywhere. I thought the income taxes were owed on a shortsale but not a foreclosure and was arguing with a friend who said they were owed on both. I guess that is some good news if they are not owed on either. I am ok with the repurchase restrictions even for 5 years – who would want to buy into this mess again any time soon?
The larger house (3br) next door to mine (2 br) recently sold in a short sale or foreclosure for less than I paid for mine. Based on that closing price I think my home’s value is probably worth $150k less than I paid for it. I don’t really have $150k to bring to the table for a refinancing or traditional sale, even if I cashed out of my retirement savings. And I really wouldn’t want to owe taxes that I would not be able to pay on top of a $150k loss.
(My original “plan” to get funds from the sale of a condo to pay down the loan on the house to get payments down to an affordable level tanked with the value of the condo.)
I paid property taxes (and appealed) and am still making payments, and I have cash flow to continue paying on both the house and condo for about another year, but after that I will be tapped out. I was wondering the best course to take, so would you suggest I start call the lender to request a shortsale approval for the house now or do I have to list the house for sale first, or does it really take defaulting to get their attention? And do they make you run through all the rest of your assets before deciding? If that is the case I may be better off with bankruptcy than depleting retirement funds (less than $100k anyway)? Thank you for the information. I appreciate no I told you so’s since I kick myself already.
December 10, 2008 at 8:28 AM #314063ParticipantInteresting – I had not seen that anywhere. I thought the income taxes were owed on a shortsale but not a foreclosure and was arguing with a friend who said they were owed on both. I guess that is some good news if they are not owed on either. I am ok with the repurchase restrictions even for 5 years – who would want to buy into this mess again any time soon?
The larger house (3br) next door to mine (2 br) recently sold in a short sale or foreclosure for less than I paid for mine. Based on that closing price I think my home’s value is probably worth $150k less than I paid for it. I don’t really have $150k to bring to the table for a refinancing or traditional sale, even if I cashed out of my retirement savings. And I really wouldn’t want to owe taxes that I would not be able to pay on top of a $150k loss.
(My original “plan” to get funds from the sale of a condo to pay down the loan on the house to get payments down to an affordable level tanked with the value of the condo.)
I paid property taxes (and appealed) and am still making payments, and I have cash flow to continue paying on both the house and condo for about another year, but after that I will be tapped out. I was wondering the best course to take, so would you suggest I start call the lender to request a shortsale approval for the house now or do I have to list the house for sale first, or does it really take defaulting to get their attention? And do they make you run through all the rest of your assets before deciding? If that is the case I may be better off with bankruptcy than depleting retirement funds (less than $100k anyway)? Thank you for the information. I appreciate no I told you so’s since I kick myself already.
December 10, 2008 at 8:28 AM #314134ParticipantInteresting – I had not seen that anywhere. I thought the income taxes were owed on a shortsale but not a foreclosure and was arguing with a friend who said they were owed on both. I guess that is some good news if they are not owed on either. I am ok with the repurchase restrictions even for 5 years – who would want to buy into this mess again any time soon?
The larger house (3br) next door to mine (2 br) recently sold in a short sale or foreclosure for less than I paid for mine. Based on that closing price I think my home’s value is probably worth $150k less than I paid for it. I don’t really have $150k to bring to the table for a refinancing or traditional sale, even if I cashed out of my retirement savings. And I really wouldn’t want to owe taxes that I would not be able to pay on top of a $150k loss.
(My original “plan” to get funds from the sale of a condo to pay down the loan on the house to get payments down to an affordable level tanked with the value of the condo.)
I paid property taxes (and appealed) and am still making payments, and I have cash flow to continue paying on both the house and condo for about another year, but after that I will be tapped out. I was wondering the best course to take, so would you suggest I start call the lender to request a shortsale approval for the house now or do I have to list the house for sale first, or does it really take defaulting to get their attention? And do they make you run through all the rest of your assets before deciding? If that is the case I may be better off with bankruptcy than depleting retirement funds (less than $100k anyway)? Thank you for the information. I appreciate no I told you so’s since I kick myself already.
December 11, 2008 at 11:01 AM #314257SDEngineer
ParticipantAnother potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.
Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.
December 11, 2008 at 11:01 AM #314614ParticipantAnother potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.
Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.
December 11, 2008 at 11:01 AM #314647ParticipantAnother potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.
Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.
December 11, 2008 at 11:01 AM #314668ParticipantAnother potential pitfall of foreclosure I think is the potential for the banks to come after their losses. While I believe in CA “purchase money” loans are only secured by the asset held as collateral (in this case, the house, so on a “purchase money” loan the bank can only foreclose and can’t chase you down later for the difference), many people re-fi’d their loans, opened HELOCs, etc – and these loans are not “purchase money” loans, and so the banks can come after the defaulter and attempt to obtain judgements which would allow them remedies like attaching bank accounts, garnishing wages, etc.
Pretty sure in a short sale, none of this can occur since it’s essentially a negotiated settlement.
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