LEGAL ISSUES IN FORECLOSURE · After Foreclosure/Short Sale, Mortgage lender may send a 1099-A...
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LEGAL ISSUES IN FORECLOSURE
April 5, 2011
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OBJECTIVE
Foreclosure in NVNevada Foreclosure Mediation Program Tax Issues – Foreclosure/Short SalesStrategic Default
Pending LegislationBankruptcy
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The Players
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The Servicer Collects $ from you Acts on behalf of the owner Contract (PSA) Foreclosing Trustee
OWNER
SERVICER
HOMEOWNER
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Nevada Foreclosure Timeline
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111 Days
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After the Trustee Sale
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TimelineNew OwnerLease
EvictionProcess
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FORECLOSURE ALTERNATIVES
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Nevada Foreclosure Mediation Program
Short sale Fannie Mae – 2 years
Deed in lieu
Bankruptcy
Deed for lease Fannie Mae
Cash for keys
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Strategic Default
Fannie MaeThreatening lawsuits7 years
Congress – 2010 Bar government backed loans Allow banks to sue, even in non-deficiency states Passed House, Not Senate
“Strategic Default” is not clear
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DEFICIENCY
Current Law: Lender has up to 6 years to pursue a deficiency
judgment following a short sale, but only 6 months following a foreclosure/trustee sale. On 2nd
unsecured loans, the time period remains 6 years.
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TAX IMPLICATIONS
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After Foreclosure/Short Sale, Mortgage lender may send a 1099-A (foreclosure) or 1099-C – ‘forgiveness’ Still taxable income Check for accuracy (amount forgiven/ value of home)
Mortgage Forgiveness Debt Relief Act of 2007 Mortgage debt forgiven – Form 982 Only Primary home Re-finances must be for home improvement In effect until 2012
Insolvency
See Tax Advisor for More Information
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Credit Implications
Approximate Credit Score Damage Late Payment – 80-100 Trial Plan for Modification – 100-140 When considered negative
Short Sale 120-130 Foreclosure – 140-150 Permanent Modification – no change Bankruptcy – 200-365
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Pending Foreclosure Bills
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AB 284SB 307 – Packet 30 days before Notice of
DefaultSB 346 – Deficiency JudgmentsCurrent: non-deficiency after Oct. 2009
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WHAT IS MEDIATION?
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Mediation allows an unbiasedthird party (the mediator) to assist you and your lender to resolve the foreclosure.
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THE LAW
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NRS 107.086 and 107.087 http://www.leg.state.nv.us Click on Law Library Click on Table of Contents Find Chapter 107 . . .
Or go to: http://www.leg.state.nv.us/75th2009/Bills/AB/AB149_EN.pdf
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61%
Agreements
74%
Still in Home
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Mediation Reality
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270 - 300 MediatorsLack of consistency
Documents should matterAssembling a book makes a
difference
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Required and Suggested Documents
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Sent to the Mediator & Trustee: Financial Statement Housing Affordability Worksheet Signed Tax Return, Last 2 pay stubs, Last 2 months of Bank Statements
Also exchange: RMA 4506-T Utility bill, HOA statement/bill Dodd Frank Hardship letter & Explanatory letter
To the MEDIATOR ONLY you proposal for resolving the mediation
At Least 10 business days in advance!!
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Pending Mediation Bills
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AB 300Mediator FindingsPetition for Judicial ReviewRebuttable Presumption
AB 445 Continuation of the Mediation
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BANKRUPTCY
Generally does not save the homeChapter 7walking away from the home
Chapter 13 Reorganization Strip the 2nd mortgage
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SCAMS
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LEGAL AID CENTER OF SOUTHERN NEVADA
Free Community Service Classes Foreclosure Mediation Bankruptcy
Judgment Proof
Family Law Small Claims Paternity/Custody
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RESOURCES
SELF HELP CENTERASK A LAWYER
PRO BONO
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“AMERICAN DREAM”
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What does it mean to own your own home?
• Pride of home ownership.• Cheaper to own than rent
because IRS gives tax breaks.• You can retire off the profits of your house.
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