Many thanks to Richard Zaretsky, Florida real estate attorney, for writing this blog post on the upcoming sunset of the Mortgage Forgiveness Debt Relief Act of 2007. If it's not extended by Congress by December 31, 2012, then homeowners who transfer ownership of their home through short sale, foreclosure or deed in lieu, will have to pay income tax on the difference owed (shortfall) between the sales price and the amount owed on the mortgage.
Please alert your Representative and Senators about the negative impact this will have on our economic recovery, and ask them to support an extension of this mortgage debt relief plan.
The NAR has put out a CALL TO ACTION regarding the expiration January 1 2013 of the Mortgage Forgiveness Debt Relief Act of 2007. Every Realtor should take a stand, voice their concern and get Congress and the President to work on this immediately after Election Day.
The Foreclosure Relief Act expires naturally at the stroke of 11:59:59 PM December 31, 2012 which means any short sale closings, deed in lieu of foreclosure, mortgage modifications with principal forgiveness and foreclosures with waivers of deficiency, that occur (that means it closes, or is signed off by the lender) on or after January 1, 2013 will likely incur ordinary income tax on the borrower. The Act was discussed in my blogs, MORTGAGE RELIEF ACT - CHRISTMAS PRESENT TO PRIMARY HOMEOWNERS, and Mortgage Forgiveness Debt Relief Act of 2007- Another Look, and SHORT SELLER STILL MUST DECLARE INCOME ON SALE!.
The failure to act to extend the tax relief will surely increase the amount of bankruptcy filings (a bankruptcy before the forgiveness of the debt makes the forgiveness moot, since the bankruptcy wipes out or reduces the debt, therefore there is nothing to forgive, and therefore no income). Bankruptcy filings increase the likelihood of the borrower walking away from the overleveraged home, etc., etc., etc.
Here is a video by NAR President Moe Veissi – check it out and make your vote count.
© 2012 Richard P Zaretsky, Esq.
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.
See our easy to find articles at TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES