Deed in Lieu

Tax Consequences
The Mortgage Debt Relief Act of 2007 only applies to purchase money and doesn’t apply to cash out refinances unless you have proof that it went back into remodeling the home. Purchase money used to buy second homes or investment
properties is not eligible.

Borrowers who's refinances do not qualify for  the Mortgage Debt Relief Act of 2007 can turn to tax negotiators such as Tax Masters to help negotiate taxes after they have received a 1099C, help with proving insolvency for tax form 982, or any other debt cancellation from tax on the unpaid debt the servicer has written off. For more short Sale FAQ visit the

How the Credit Agency Reports Short Sales

Most credit reporting agents have been reporting short sales as "settled less than full".  Many agents tell their clients that it won’t affect their credit and/or it is reported differently, misrepresenting how the deficiency judgment  is expressed on the approval letters.

• Have you ever told your clients, “Don’t worry, they won’t pursue the debt”?
  
• How about, “You can negotiate it on the back side”. This is true, but make sure they do their homework and find a company that can do this before they blame you later for giving them false information.
  

How Secondary Debt is Treated

• Most seconds reserve the right to collect the debt at a later time, so do not tell your clients that all of the remaining debt will be forgiven.
• If they do not plan to collect the debt, they will 1099C the client.
  
  
  

WSJ:
We told you that the (financially troubled) state of California is poised to offer home buyers up to $10,000 to get off the fence and to the dotted line. The $200 million program, split between first-time buyers of existing homes and new units, should keep the Golden State’s sales moving along post spring-selling season.

But, it might not get off to a peaceful start on May 1: Get ready for a stampede early on as some buyers rush to overlap with the federal tax credit that’s dangling as much as $8,000 to buyers. (Yes, that’s up to $18,000 for buying a house.)

For the federal incentive, contracts must be inked by April 30, while closings have to happen by June 30. The California credit covers closings on existing or new homes on or after May 1, leaving a short window for double dipping. “We already anticipated increased contract activity in March and April due to the federal tax credit with scheduled closings in May and June,” writes Credit Suisse builder analyst Dan Oppenheim. “These buyers will now be eligible for both the federal and state credit and will likely consume a significant piece of the state credit given the first-come, first-serve allocation.” To seach the MLS in San Diego www.TheLaJollaLife.com

   Bank of America Corp. said it would offer more borrowers reductions in their mortgage-loan balances in the latest twist on efforts to avert foreclosures.

The plan is the mortgage industry's boldest move yet to address the plight of the millions of U.S. homeowners who are "underwater," owing more than the current values of their homes. It enhances an agreement Bank of America reached 18 months ago with state attorneys general to settle claims they made over certain high-risk loans made by Countrywide Financial before Bank of America acquired that lender in mid-2008.

Reductions of as much as 30% in loan principal will be offered to struggling borrowers who have subprime or so-called option adjustable-rate mortgages, known as option ARMs. (Option ARMs, no longer available, allow borrowers to start with minimal monthly payments and face steep increases later.) Also included will be certain loans that have a fixed interest rate for the first two years before starting to adjust annually.

Amid the worst wave of foreclosures since the 1930s, banks generally have been reluctant to reduce principal. Instead, most loan modifications—including those under the government-subsidized Home Affordable Modification Program—involve reducing interest rates to as low as 2%. Some also extend loan terms to 40 years to shrink monthly payments.

But banks are finding that many deeply underwater borrowers aren't willing to keep making even reduced payments because they believe they have little hope of ever having equity in their homes and would be better off renting and perhaps buying a cheaper home later. The Bank of America program is aimed to give such borrowers more hope by reducing their loan balances to current estimated home values.

Bank of America said the program might eventually be extended to other types of loans. The U.S. Treasury, which runs the HAMP loan-modification program, also has been considering ways to encourage more principal reduction but has indicated that any such steps were likely to be modest.

Under the Bank of America plan, the maximum decrease in principal will be 30%, and borrowers will have to "earn" the lower balances in stages over five years by keeping up on their new, lowered payments.

By cutting principal, Bank of America said, it will reduce the risk that these borrowers will default again later. "We believe this could become an industry model for principal forgiveness," the bank said.

The program also addresses the woes of option ARM borrowers whose loan balances have increased over the years because they made minimal payments that deferred part of their interest due. Some of these borrowers will qualify for a reduction in their principal to as low as 95% of the home value.

To determine the market value of a home under the program, Bank of America plans to use computer models that estimate those values or, in some cases, opinions from real-estate brokers. Those estimated values will then be adjusted annually using metropolitan-area price indexes, Bank of America officials said.

First American CoreLogic, a real-estate data provider, has estimated that 11.3 million U.S. households, or 24% of those with mortgages, were underwater at the end of 2009.

Bathrooms, Kithcen, Siding and window replacements and wood decks had among the highest return of project costs upon resale, according to a report prepared by research company Hanley Wood LLC in cooperation with the National Association of Realtors' Realtor Magazine.

The 2008 Remodeling Cost vs. Value Report found that the average upscale fiber-cement siding replacement project cost about $13,177 and recouped about $11,424 of that cost -- or 86.7 percent -- upon resale.

Wood deck additions, which cost an average of $10,601 per project, recovered an average $8,676, or 81.8 percent of the cost upon resale, the report found.

Midrange vinyl siding replacement projects returned about 80.7 percent of project cost, followed by upscale foam-backed vinyl siding replacement at 80.4 percent, minor kitchen remodels at 79.5 percent and upscale vinyl-sided window replacements at 79.2 percent of project costs. Wood and vinyl window replacements and major kitchen remodels followed on the list of projects

NAR noted that it was the second year in a row that exterior projects recouped the highest percentage of project costs.

The report compares construction costs with resale values for 30 midrange and upscale remodeling projects -- including additions, remodels and replacements -- in 79 markets across the country, NAR reported.

The least profitable remodeling projects in terms of recouped costs include home-office remodels, sunroom additions and backup power generators, according to the report, which return from 54.4 percent to 57.1 percent of project costs, on average, according to the report.

In some cities, homeowners can recover all of their costs on projects, the report found -- some projects in Charlotte, N.C., as an example, can net more than they cost at resale, and Seattle, Jackson (Miss.) and Billings (Mont.) also topped the list of cities with a high rate of return.

The Pacific region (Alaska, California, Hawaii, Oregon, Washington); the West South Central region (Arkansas, Louisiana, Oklahoma, Texas); the East South Central region (Alabama, Kentucky, Mississippi, Tennessee); and the South Atlantic region (Washington, D.C., Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia) generally had higher recouped costs for projects than other regions in the U.S.