Tag Archives: guidelines

Watch Out for This Law Expiring: the Mortgage Debt Forgiveness Relief Act

If you know someone who is upside down or owes more on their property than it is worth of residential real estate, NOW is the time to really take a close, hard look at the law that has saved millions of homeowners over the past several years: the Mortgage Debt Forgiveness Relief Act that expires on January 1, 2013. Federal and California state guidelines are listed below.

For anyone you know in a modification, I strongly suggest you have your agreement reviewed ASAP with a real estate attorney if you haven’t already.  For a referral, I can help; I keep in contact with several top-quality attorneys and accountants.  The modification agreement in place may circumvent the Mortgage Debt Forgiveness Relief Act–causing liability for the difference of the home loan on your property of what it is worth, whether you let your home go to foreclosure, or sell the property as a short sale now or after this law expires this year. 

mortgage debt forgiveness relief act

Mortgage Debt Forgiveness Relief act

Please do yourself, friends, and family a favor–YOU will always be remembered as the knight in shining armor to them if you help them out.  And I can always help to answer any questions about this Mortgage Debt Forgiveness Relief Act and the effect it will have on you and them once it expires.  Since short sales can take several months to process in some cases, immediate action is necessary, and with that a financial windfall is possible–even if there is no equity in your property.  Call me now for details–(619) 890-3648!

Below you will find some of the details pertinent to the Federal and California government laws, but there are others as well (not noted here) that will also be expiring.  I am here to help!

New law–Taxable years 2009 through 2012

California law conforms, with modifications, to federal mortgage forgiveness debt relief for discharges that occurred in the tax years of 2007 through December 31, 2012.  The amount of qualifying indebtedness is less than the federal amount, and California imposes a state-only limitation on the total amount of relief excluded from the gross income.  The following summarizes the differences between the Federal and California provisions.

Federal provision applies to discharges occurring in 2007 through the end of 2012, and:

  • Limits the amount of qualified principal residence indebtedness to $2,000,000 for taxpayers who file as married filing jointly, single, head of household, or widow/widower, and to $1,000,000 for taxpayers who file as married filing separately.
  • Does not limit the debt relief amount; it only limits the indebtedness amount used to calculate the debt relief amount.
  • See the Federal law: Mortgage Forgiveness Debt Relief Act and Debt Cancellation for more information.

California provision applies to discharges that occurred in 2007 through 2012, and:

Taxable years 2009 through 2012
  • Limits the amount of qualified principal residence indebtedness to $800,000 for taxpayers who file as married/registered domestic partners (RDP) filing jointly, single, head of household, or widow/widower, and to $400,000 for taxpayers who file as married/RDP filing separately.
  • Limits debt relief to $500,000 for taxpayers who file as married/RDP filing jointly, single, head of household, or widow/widower, and to $250,000 for taxpayers who file as married/RDP filing separately.
Taxable years 2007 and 2008
  • Limited the amount of qualified principal residence indebtness to $800,000 for taxpayers who file as married/(RDP) filing jointly, single, head of household, or widow/widower, and to $400,000 for taxpayers who file as married/RDP filing separately.
  • Limited debt relief to $250,000 for taxpayers who file as married/RDP filing jointly, single, head of household, or widow/widower, ad to $125,000 for taxpayers who file as married/RDP filing separately.

You can read more about the Mortgage Debt Forgiveness Relief Act and Debt Cancellation via the IRS website

If you’re confused still about this law, or need help getting the ball rolling NOW–please give me, John A. Silva, a call.  I would love to help sort this all out for you and save you headaches in the future–call me! (619) 890-3648

Top six reasons mortgage applications are rejected

Half of refinance applications are abandoned or rejected, as are 30 percent of purchase mortgage applications, according to the Mortgage Bankers Association. All told, the Federal Financial Institutions Examination Council (FFIEC) says that well over 2 million mortgage applications were rejected last year.

Want to avoid falling into that number? It’s tough — especially in light of the fact that mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash.

Here, as a cautionary tale and primer on what to expect, are the top six reasons mortgage lenders reject applications.FFIEC

1. Income issues. Most failed applications falling into this category have income too low for the mortgage amount they are seeking; often, a spouse’s credit issues can create this problem, too, as the income the spouse plans to actually chip in toward the mortgage cannot be considered by a lender.

But increasingly, the recent vagaries of the job market are also causing this issue, as people who have changed their line of work or have changed from salaried employee to freelancer over the last couple of years can also have their home loan applications rejected based on income.

2. Muddled money matters. If the mortgage for which you’re applying plus your monthly payments on credit card, car and student loan debts will comprise more than 45 percent of your total income, you could have problems qualifying for a home loan. You might also run into problems if you rely too heavily on bonuses, overtime, cash wages or rental income — all of these can be difficult or impossible to get a mortgage bank to consider, and if they do, they might not take all of it into account.

3. Credit issues. Today, the mortgage-qualifying FICO score cutoff falls somewhere between 620 and 660, depending on which lender and which loan type you seek. More than one-third of Americans, by some numbers, have credit scores too low to qualify for a home loan. Even if your credit score is high enough to qualify, if you have any late mortgage payments, a short sale, a foreclosure or a bankruptcy in the last two years, loan qualifying could be difficult to impossible.

4. Property didn’t appraise. Since the whole industry had its hand smacked for allowing home values to skyrocket in a very short time, appraisal guidelines have tightened up — some would say, even more than overall mortgage guidelines. So, it is increasingly common to have the property appraise for a price lower than the sale price negotiated between the buyer and seller.

This is especially common in the refinance realm, as well over a quarter of U.S. homes are now upside-down, meaning the mortgage balance owed is greater than the value of the home.

5. Condition problems. With all the distressed properties on the market, and with most non-distressed sellers barely breaking even, more home-sale transactions than ever are falling apart due to condition problems with the property. Many lenders will not extend financing on homes where the appraiser points out problems like cracked or broken windows, missing kitchen appliances, electrical problems, or wood rot.

And in the world of condos and other units that belong to a homeowners association, if more than 25 percent of units are rented (rather than owner-occupied) or more than 15 percent are delinquent on their HOA dues, new applications for refinance or purchase mortgages on units in the development are likely to be rejected.

6. Technical difficulties with application. The days when lenders just took your word for it are long, long gone. Applications with incomplete or unverifiable information are doomed.

If any of these mortgage loan application glitches arise in your homebuying or refinancing process, it’s critical that you connect with your mortgage professional, be it your banker or mortgage broker, to determine what course of action to take.

In some cases, it might be as simple as buying a stove you find at Craigslist and installing it before escrow closes; but with income issues your mortgage pro will need to help you determine whether it makes sense to pay some bills down, get a co-signer, or even wait six months so your income documentation will qualify.

Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.

Mortgage aid open to more Calif. borrowers

A state-run program that helps homeowners struggling to pay their mortgages now has broader eligibility guidelines, opening up help to borrowers who did “cash-out” refinances and own multiple properties, said California Housing Finance Agency officials on Monday.

The mortgage-aid effort, called Keep Your Home California, so far has helped close to 8,000 low- and moderate-income households that are behind on loan payments or close to default, according to agency leaders.

Keep Your Home California“This expanded eligibility will allow more families to qualify and receive greater assistance,” said California Housing Finance Agency Executive Director Claudia Cappio, in a statement. “We are continuously evaluating our experience so far and making adjustments like these based on the initial results of the Keep Your Home California program.”

Keep Your Home California has four parts that include: mortgage help for the unemployed, mortgage aid for homeowners with documented financial hardship, relocation help for those in the midst of a short sale or deed-in-lieu of foreclosure, and reduction of principal. The programs, paid for by the U.S. Treasury Department’s Hardest Hit Fund, is costing taxpayers $2 billion.

Monday’s announced changes include:

–Allowing homeowners who completed “cash-out” mortgage refinancing to take part in the four programs. Such borrowers were excluded before.

–Allowing borrowers who own more than one property to apply. Program officials said this will be particularly helpful to those who co-signed on properties for family members.

–Offering mortgage aid to unemployed borrowers for nine months, instead of six. Such homeowners can get up to $3,000 a month. To qualify, you must receive unemployment benefits.

–Reinstating up to $20,000 in past-due mortgage payments instead of the previous $15,000 cap.

To qualify, your mortgage servicer must take part in Keep Your Home California. Click here for the list of servicers.

Info: Call 888-954-KEEP(5337) between 7 a.m. and 7 p.m. Monday through Friday, and 9 a.m. to 3 p.m. on Saturdays. Visit: www.KeepYourHomeCalifornia.org or www.ConservaTuCasaCalifornia.org.

This article is from SignOnSanDiego: “Mortgage Aid Open to More Calif. Borrowers.”