Ten Facts About Mortgage Debt Forgiveness...

The IRS has posted Ten Facts About Mortgage Debt Forgiveness in order to provide clarity when mortgage debt is forgiven. Debt forgiveness means the lender agrees to cancel the debt and give up it's rights to collect on the debt. When a debt is forgiven, the IRS requires the lender to file a 1099, since the IRS considers forgiven debt as income.

So keep these the ten facts in mind when negotiating a short sale, loan modification, principle reduction, and/or deed in lieu.

The following is the text from the IRS web pageyour mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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Homeowner is "Unlogged" by Bank of America/Countrywide

When does it end. In a previous post at debthelp.tv I wrote about America's Servicing Company aka Wells Fargo's home retention representative refusing to let a homeowner pre-qualify for a federal government approved modification program. This time, a homeowner was "unlogged"

Recently, I was asked to assist a friend with a Countrywide/Bank of America home loan modification. With my assistance, Mike (name changed for security) was approved for a 3 month pre-trial home loan modification under the Making Homes Affordable aka Home Affordable Modification Plan aka HAMP. The HAMP program let’s homeowners enter into a temporary 3 month lower payment trial period. During the trial period the homeowner sends the lender the required financial documentation in order to get a permanent modification. The application and approval for the 3 month lower payment trial period is given within minutes after a homeowner provides the lender with his or her income and expense info over the phone.

In the middle of January, Mike was approved by Melody, a home retention representative(name changed, however we have her extension and id number). After Mike provided his income and expenses, Melody said he was approved for a monthly trial payment of $2340.50. Mike's original mortgage payment was $3300. Melody explained to Mike that he would receive the HAMP pre-trial package by Fed Ex. The package would contain his approval letter for the pre-trial period and the instructions for submission of the required documentation for a permanent loan modification.

After almost two weeks, Mike decided to call Countrywide/Bank of America's home retention department. Mike never received the HAMP pre-trial package as promised by Melody. Mike spoke with a home retention representative who was obviously based in another country. The rep said that there was no record of Mike's HAMP 3 month trial payment approval. We asked to be transferred to another department. The rep transferred us to another rep from the home retention department. This new rep also said there is no record of Mike's pre-trial approval for HAMP. We gave the rep Melody's information including her extension and id number. We asked this rep to contact Melody to confirm. The rep insisted that there was no information to provide, since there is no record of his conversation with Melody. So I advised Mike to hang up and call back. We called the home retention department number on Bank of America's website. The phone was answered by a nice young lady. We asked if she worked in the home retention department. She said "No, I am a concierge". HUH!?! We both laughed and Mike said "I don't need (no stinkin')concierge, I need a home retention rep." She was a little offended because it was clear Mike was impatient. So she connected us to the home retention department.

Mike spoke with another home retention rep and once again he explained the same story about his approval for the HAMP 3 month trial program by Melody. This time we started to get some answers. The rep said hold on for a minute. She returned to the line and said "I found the details of your conversation with Melody, it looks like that your conversation with Melody was UNLOGGED."

OK...Now let's wait a minute. Unlogged? There can only be one definition of "unlogged" when a lender's home retention rep uses it. This rep unknowingly admitted that Mike's conversation with Melody was taken off the system, so presumably no one would know he had the conversation and thus no immediate record of his approval. Any other homeowner going through this would have given up on the first try. Not I. If there is one rule one must follow when it comes to dealing with a lender, it is "Not all representatives are trained the same, therefore you must speak to more than one representative to make sure you get what you ask for".

This is when I took over and asked the rep to get a supervisor to speak with Mike. Leslie, "the supervisor" picked up the line. This was her story. Apparently, Melody entered Mike's information "manually" because there was an error in the system. Melody made a "manual" referral of Mike's information for a loan modification. Mike was in a "semi-delinquency" status because he was only 2 months behind. Mike should not have been approved for a 3 month pre-trial program until he was reviewed by another department. They had Mike's income and expense information which would be reviewed in the meantime. When Mike asked Leslie about the lower payments ($2340.50) that Melody approved him for, Leslie said "Well you should pay something because we sent a letter of intent to foreclose". She then said "I am not saying he was denied the 3 month trial program, it just that we need to send him the package". When asked about how long it will take to get the package, Leslie said "at least 45 days, you've got to understand we have so many people applying for a modification."

Then came the moment of truth: Mike asked Leslie "Why was my conversation with Melody 'Unlogged'? What does that mean?". Leslie paused, then said "Well the conversation with Melody was not put into the 'notes', because Melody must have forgotten to do it." Then the obvious question was "Well, how did you now Melody talked with Mike". Leslie said "We have a separate report log that is more detailed...and like, this has all the details, like when Mike made a payment, but it wasn't in the notes".

Blah Blah Blah...

There are a few rules one must follow when it comes to asking a lender for a modification:

First, "Lenders pass the buck to the front line of overworked, overwhelmed, underpaid, poorly trained, international and national representatives who are not prepared for the homeowner assault"

Second, "None of it will ever makes sense, just focus on the prize and get a letter agreeing to a modification"

Third, "Ask questions, after questions, and take notes after notes. A diary is essential"

Fourth, "A supervisor is normally another representative sitting next to another rep in an adjacent cubicle...or whoever is not on the phone and available."

Fifth, "Fight hard, be patient, don't give up and make sure you're not UNLOGGED"

At the end, Mike is still not approved under HAMP.

By the way, new rules for each new day when dealing with lenders.

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Accidental Landlord's : A Good Solution For Tough Times

People all over are looking for ways to survive during this economic crunch. What can property owners do if they can't sell their house? They can rent out the house or rooms in the house. Often these homeowner, now accidental landlords, end up moving into a cheap apartment while there home is rented.

Time magazine has a good introductory article on this phenomenon. The author notes that this can save homeowners' in a cash crunch.

Even though being a landlord is not an easy path, in times like this it can make perfect sense.

Our future posts will talk more about Accidental Landlords and give tips for the best strategies.

Read the entire article here: Accidental Landlords: Renting What Won't Sell

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Take Active Control and Put It All Back On Track - Holiday Edition

The beginning of this blog said "WELCOME ONE WELCOME ALL". I wrote:

This site is the populist fight back by ordinary people and small businesses against all kinds of scams, programs, giveaways, and bailouts that use your money and assets.

Well, this holiday season helped me realize why a blog like this is important. The holidays are usually a time for collective activity with family, friends, or even time by yourself. It's also a time of giving to those who you care about and to those who need help. It's a time for reflection on your position in life. For myself, I am thankful that there is support from my wife, family, friends, clients and readers of my words. It is the support that is most important. We all need it.

Yet, I am in deep reflection right now. Through a series of self-made choices, I find myself in a very difficult position. A position that requires accepting full responsibility for my actions. I am constantly asking “How must one accept responsibility for one’s actions?” Perhaps I could lower my head, beat myself up, be angry and full of regret. Rack my mind with "Why? Why? Why did I do what I did” and “How could I have let this happen”. Living in fear of the future. The feeling of being chained to the problem with no escape. This weird feeling of dread because I want to bury my head in the sand. Well, to tell you the truth, I TRIED IT and WENT THROUGH IT. I played into self-pity, disappointment and loathing. I became irritable and angry. LET ME TELL YOU FIRST HAND…IT DOESN'T WORK. It left me breathless and weak. I WAS FROZEN AS TIME WENT BY.

What I did find that worked was… TAKING ACTIVE CONTROL AND PUTTING IT ALL BACK ON TRACK. I committed to real action to make things better. It required a deep breath, a confident posture, and the knowledge that it can and will get better because I wanted it to. I did my LIFE MATH and found that the good was greater than the not-so-good. It required daily prayer, meditation, strong words from wise people, and the belief that I can get up from any fall. It also demanded complete honesty about my mistakes to those who love and depend on me and to myself. It required a discipline and commitment to the right action. The right action that would improve my position.

It demanded a show of strength so grand, that even I could not believe it at first. I am a believer now.

There are some many people I have counseled and talked to who are taking their personal financial problems painfully. For many, it becomes an internalized personal failure. It has left some desperate and depressed. It has left all stressed. It has created this air of defeat…this idea of…”How Could I Have Let This Happen To Me”. It has frozen so many in time.

You are not the first or the last person to have financial problems. Especially now. I have worked with doctors, lawyers, policeman, business owners, teachers, accountants, financial advisors, retirees, the unemployed, real estate professionals, mortgage brokers, and other workers and professionals. I have counseled family, friends, and even acquaintances at events. I have worked with all types of people representing various races, ethnicities, and spiritualities. all spanning the socio-economic spectrum.

What I am trying to say is “You are not alone. We are all in this together. There is way forward.”

Everything you find on this blog and other blogs referenced here, are intended to keep you moving the right way on your financial path with confidence and the knowing that you can TAKE ACTIVE CONTROL and PUT IT ALL BACK ON TRACK. You are in control of your life.

I thank you for reading this holiday post and thank you for being an outlet for some of my feelings. The New Year is upon us. I am confident it will be good for you too.

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Strategic Defaults : It's Time You Learn More!!!

I've been working with people regarding strategic default for years. Even though it seems to apply to real estate loans, it actually applies to any loan. Let me state my position right now: I believe that Strategic Defaults are an effective means of cash and wealth preservation. Of course before a decision can be made the benefits and risks must be made. It is our experience that after careful consideration of each persons' unique circumstances the rewards can outweigh the risks.

In any event I have decided to provide a link to the BEST strategic default articles all over the web. These articles best highlight the growing phenomenon, the reward and the risk. You will learn the different perspectives and recognize that Strategic Default is here to stay.

For the next twelve months, I will provide up to date, relevant information about Strategic Defaults. If you want to learn more about it then this is the place to come. Also make sure you bookmark this link, there will be fresh updates:


An Honest Look At Homeowners Who Decide Not To Pay (Even Though They Have The Money) & The Real Risks. While looking at the real life decisions to Strategically Default, this article reminds those who decide to do it that there are risks. The biggest risk being that a lender can still sue for any deficiency if the property does not satisfy the entire debt. In fact, the same lender will probably sell the right to the deficiency to a third party. Read More from The Wall Street Journal: Debtor's Dilemma: Pay the Mortgage or Walk Away: In Down Real-Estate Market, Homeowners Are Deciding to Abandon Their Loan Obligations Even if They Can Afford the Payments

Morgan Stanleys Intentionally Defaults On A $6.5 billion Dollar Loan Obligation. When explaining the reason for a Strategic Default on 17 million square feet of office buildings acquired for $6.5 billion in 2007, a spokeswoman said “This isn’t a default or foreclosure situation...We are going to give them the properties to get out of the loan obligation.” Read More from Bloomberg: Morgan Stanley to Give Up 5 San Francisco Towers Bought at Peak

NYC Attorney Consults with Clients Who Intentionally Stop Paying Their Mortgage To Protect Their Savings Or To Make Money. NYC Attorney Augustine Diji advises his clients on how to property consider a strategic default. In some instances, his clients strategically default in order to make money. Read More from the Real Deal: Investors defaulting to make money, Some NY investors go into foreclosure on purpose

USA Today Reports on the Growing Trend of Strategic Default. This report begins with a recently laid off homeowner who decided NOT to use all of her savings to pay her mortgage. Instead she decided to stop because it did not make sense since her house was worth less than the mortgage. This continues to confirm that Strategic Default is a growing trend. Media, banks, and government officials are beginning to take notice. Read More from USA Today: More walk away from homes, mortgages

A Law Professor Effectively Argues Why It's in the Best Interest of A Homeowner To Strategically Default When Necessary and Not Feel Guilt or Shame. Brent White, an associate law professor at the University of Arizona has written the best and most comprehensive argument regarding Strategic Defaults. He strongly argues that property owners should make the decision on whether to continue mortgage payments based on their own interests that are “unclouded by unnecessary guilt or shame.” He says "strategic default might not only be a viable option, but also the wisest financial decision". He correctly points out that lenders do the same thing, when they “ruthlessly seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility.” So it's TIME FOR TO BE RUTHLESS ABOUT YOUR FINANCIAL CONCERNS. Read Brent Whites Paper: Underwater and Not Walking Away.

The Moral and Social Issues of Deciding NOT To Pay A Mortgage (Even If The Property Owner Can Afford Payments) Can Keep A Property Owner From Using A Strategic Default. This research paper explores the moral and society norms factor heavily when deciding to strategically default. Essentially, the researchers found there is a correlation between people who believe it is immoral to strategically default and amount of negative equity in their property. The greater the value of their property is below the mortgage balance, the more likelihood the property owner will use a strategic default. Read More from Luigi Guiso, Paola Spaienza, & Luigi Zingales, Moral and Social Constraints to Strategic Defaults on Mortgages

Please bookmark this page. This will be updated constantly.

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A Brief Intro about Strategic Default

At this point of time, there is a financial crisis facing millions of people and businesses in the United States. The crisis is not limited to a specific socioeconomic group of people. Across the income spectrum, the primary financial problem is debt. What is unique about this current economic crisis is that the debt contagion has also infected financial institutions and has affected local, state, and federal government.

Many people are heavily indebted and are seeking a way out. Financial institutions are not extending credit unless the borrower meets a strict set of criteria. In order to obtain a loan, one must have excellent credit, verifiable income, and substantial cash reserves. This is a tall order for many people and business alike.

One of the greatest forms of wealth comes from real estate ownership. It is now estimated that trillion dollars of real estate wealth has been lost. Furthermore, individuals and investors own properties with unaffordable mortgages payments that have principle balances greater than the value of the property.

There are many people who have decided to “intentionally” stop making mortgage loan payments, even if they can afford to do so. They have decided to make a so called “strategic default”. Generally, the primary rational for a strategic default is economic. Currently, strategic default is associated with home mortgage loans. However, strategic defaults is a tool used for credit card debt, business loans, home equity lines of credit, and personal loans.

There are moral and social issues that arise when making a decision to stop making loan payments even if the money is available. These moral and social issues intersect with an individual’s “rational” decision to stop losing money. Our society general places a strong taboo against breaking an agreement. Furthermore, there are social costs to consider when an individual decides to abandon a property and stop making mortgage payments.

What is a Stategic Default?

Generally, it is considered, a property owner’s decision to stop making mortgage loan payments even if the property owner can afford to make the payments. A property owner normally considers a strategic default when the value of the property is below the mortgage balance due a lender. Furthermore, there is a concern that monthly mortgage loan payments will become a permanent drain of available cash savings with little chance of recovering the loss. The rationale is that it does not make economic sense to make mortgage loan payments on a property that has no equity or any hope of gaining equity.

Strategic defaults are generally associated with individuals who stop making mortgage loan payments. However, we are finding that strategic defaults are being used for credit card payments, business loans, and various personal loans.

I will be discussing strategic defaults in depth in later entries. I am an advocate of stategic defaults when properly considered and effectively implemented.

For now think about it. You may decide to use it yourself.

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Debtor's Revolt...We Love It

So it started with a woman posting a You Tube video. She was angry at Bank of America for continuing to victimize her. The bank raised her credit card interest from 17% to 30%. Like most people who don't understand that BANKS ARE DESPERATE & WILL DO ANYTHING TO GET MONEY, she believed she could speak to the bank and ask them to reduce her interest rate. By the way, did I mention she never missed a payment. She also had a checking and savings account with Bank of America. In her you tube video post she said she will not make a single payment until Bank of America agreed to lower her interest rate. She also said she is closing her checking and savings account immediately (Thereby following our rule: Never Keep All of Your Money In the Same Bank). It's these following words from her video that should have us all crying for joy...

"There comes a time when a person must be willing to sacrifice in order to take a stand for what's right...Now, this is one of those times, and if I'm successful this will be the proverbial first shot fired in an American debtors' revolution against the usury and plunder perpetrated by the banking elite, the Federal Reserve and the federal government...You are evil, thieving bastards...Stick that in your bailout pipe and smoke it."

Ann Minch of Red Bluff, Calif

Read more at: http://www.huffingtonpost.com/2009/09/14/debtors-revolt-woman-refu_n_285394.html

And so it begins. The idea of a video Debtor's Revolt is catching wildfire. And by golly, it sure worked. Not long after Bank of America contacted our heroine and offered her a deal. That's good, however it's to late. The cat is out of the bag. Why...

Because the front line (customer reps) of banks have to deal with faceless customers demanding a reasonable settlement to their debt issues. The managers, officers, and executives could sip their lattés without having to speak to, hear from, or face unhappy customers who were ignored and disrespected. Customer complaints can be posted on You Tube for the world to see. No more will full ignorance by the top brass at banking institutions. No blind eye.

Let's face it, the Debtor's Revolt theme is slowly becoming the rage because 1.) It can work because a bank is not looking for negative publicity, especially thru viral videos 2.) It's a great way to vent, to be seen. To be heard. 3.) IT CAN WORK...

It is an excellent technique for those of you who do not mind putting your business out there. And may I say again...It Can Work. Trust me. I will be sure to tell clients about this method, so they can get a deal if a bank is unwilling to be reasonable.

There is nothing wrong with Public Shame. I believe that it's been a method used by every society on this planet to get a "just" result. Of course, justice is in the eye of the beholder.

So let's thank Ann Minch of Red Bluff, California for taking a stand. We love it. So let's introduce her video for all to view - DEBTOR'S REVOLT

ead more at: http://www.huffingtonpost.com/2009/09/14/debtors-revolt-woman-refu_n_285394.html

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