Walking away??

[HLS]

Who said anything about a toxic loan ?

(There are actually plenty of high score borrowers that did get fooled into toxic loans)

100% financing was brilliant!
Mortgage interest is some of the cheapest money that you can get. There are people with high credit scores who financed 100% just because they could.

Their cash is worth more to them than the rate on a 20% 2nd.

Many people put money down only because they think they should. Others understand the OPM game and put thier cash to better use.

Many people who have paid principal into their homes are losing it all anyway. With an interest only loan, they would be walking away from less out of pocket cash.

The more cash they put down, the more they will be walking away from.

[gary_broker]

There is another major sticking point to non-recourse loans that I do not see getting discussed. I mostly sell real estate however I have done loans as part of my business. With loans I cautioned every client of mine regarding IRS form 8821 (I believe this is the right form no., I do not have a file in front of me to verify). Anyhoo this little gem is included in every closing package and basically gives the lender permission to pull your tax records at a later date.

If the borrower begins to default on payments and the lender surmises that the borrower exaggerated their income on the application then the lender can exercise the IRS form. If their exaggeration suspicions are verified then the lender has a fraud claim against the borrower. At this point I think you can throw the entire non-recourse status out of the window.

[gary_broker]

There is another major sticking point to non-recourse loans that I do not see getting discussed. I mostly sell real estate however I have done loans as part of my business. With loans I cautioned every client of mine regarding IRS form 8821 (I believe this is the right form no., I do not have a file in front of me to verify). Anyhoo this little gem is included in every closing package and basically gives the lender permission to pull your tax records at a later date.

If the borrower begins to default on payments and the lender surmises that the borrower exaggerated their income on the application then the lender can exercise the IRS form. If their exaggeration suspicions are verified then the lender has a fraud claim against the borrower. At this point I think you can throw the entire non-recourse status out of the window.

[gary_broker]

There is another major sticking point to non-recourse loans that I do not see getting discussed. I mostly sell real estate however I have done loans as part of my business. With loans I cautioned every client of mine regarding IRS form 8821 (I believe this is the right form no., I do not have a file in front of me to verify). Anyhoo this little gem is included in every closing package and basically gives the lender permission to pull your tax records at a later date.

If the borrower begins to default on payments and the lender surmises that the borrower exaggerated their income on the application then the lender can exercise the IRS form. If their exaggeration suspicions are verified then the lender has a fraud claim against the borrower. At this point I think you can throw the entire non-recourse status out of the window.

[SD Realtor]

Gary awhile back I heard that the 8821 was basically a formality that was never enforced… until recently. Now I heard that lenders were indeed going to start pulling tax records much more in the underwriting process. This is just second hand where I heard this from but I was wondering if it is true. (I don’t do loans so I have no clue)

SD Realtor

[SD Realtor]

Gary awhile back I heard that the 8821 was basically a formality that was never enforced… until recently. Now I heard that lenders were indeed going to start pulling tax records much more in the underwriting process. This is just second hand where I heard this from but I was wondering if it is true. (I don’t do loans so I have no clue)

SD Realtor

[SD Realtor]

Gary awhile back I heard that the 8821 was basically a formality that was never enforced… until recently. Now I heard that lenders were indeed going to start pulling tax records much more in the underwriting process. This is just second hand where I heard this from but I was wondering if it is true. (I don’t do loans so I have no clue)

SD Realtor

[HLS]

I’ve never used 8821. It’s 4506 and 4506-T that get requested. They should be filled out at signing, especially lines 6, 7 and 9, and limited to the 1040 returns.

When these are dated, the 3rd party only has 60 days to request the tax returns. That is clearly in the instructions. I don’t want my clients signing a blank form.

On a stated income or no doc loan, they cannot check income.
If self employed, they want to confirm that a schedule C was filed.

[HLS]

I’ve never used 8821. It’s 4506 and 4506-T that get requested. They should be filled out at signing, especially lines 6, 7 and 9, and limited to the 1040 returns.

When these are dated, the 3rd party only has 60 days to request the tax returns. That is clearly in the instructions. I don’t want my clients signing a blank form.

On a stated income or no doc loan, they cannot check income.
If self employed, they want to confirm that a schedule C was filed.

[HLS]

I’ve never used 8821. It’s 4506 and 4506-T that get requested. They should be filled out at signing, especially lines 6, 7 and 9, and limited to the 1040 returns.

When these are dated, the 3rd party only has 60 days to request the tax returns. That is clearly in the instructions. I don’t want my clients signing a blank form.

On a stated income or no doc loan, they cannot check income.
If self employed, they want to confirm that a schedule C was filed.

[TemekuT]

The Lender is charged with issuing the 1099 for recourse or non-recourse debt relief. I believe the IRS will step up enforcement and issue guidelines to lenders to “prompt” them to follow the IRS requirements and issue those 1099’s. This is a great revenue opportunity.

In the case of non-recourse debt, refer to IRS Pub. 544, 2006 version, pages 4 & 5 “Foreclosures and Repossession”.

If actually bankrupt per IRS Pub. 908 guidelines, insolvency as calculated by IRS standards will void the tax due on debt relief.

If sleepless still, add IRS Pub 525 for added rules and guidelines!

[TemekuT]

The Lender is charged with issuing the 1099 for recourse or non-recourse debt relief. I believe the IRS will step up enforcement and issue guidelines to lenders to “prompt” them to follow the IRS requirements and issue those 1099’s. This is a great revenue opportunity.

In the case of non-recourse debt, refer to IRS Pub. 544, 2006 version, pages 4 & 5 “Foreclosures and Repossession”.

If actually bankrupt per IRS Pub. 908 guidelines, insolvency as calculated by IRS standards will void the tax due on debt relief.

If sleepless still, add IRS Pub 525 for added rules and guidelines!

[TemekuT]

The Lender is charged with issuing the 1099 for recourse or non-recourse debt relief. I believe the IRS will step up enforcement and issue guidelines to lenders to “prompt” them to follow the IRS requirements and issue those 1099’s. This is a great revenue opportunity.

In the case of non-recourse debt, refer to IRS Pub. 544, 2006 version, pages 4 & 5 “Foreclosures and Repossession”.

If actually bankrupt per IRS Pub. 908 guidelines, insolvency as calculated by IRS standards will void the tax due on debt relief.

If sleepless still, add IRS Pub 525 for added rules and guidelines!

[HLS]

For the borrower that loses a house, a 1099 is known as “adding insult to injury”….

[HLS]

For the borrower that loses a house, a 1099 is known as “adding insult to injury”….

[Author]

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