Mike’s Real Estate Show

President Bush signed into law Thursday a bill creating a temporary tax break for homeowners who are able to persuade lenders to forgive part of their debt, and extends a tax deduction for some families with private mortgage insurance.

The last time we had a market going south for an extended period of time and when “Short-Sales” strode the landscape it was 1989. We had Sellers going to lenders to work out “Short-Sales” and the “Debt Forgiveness” was the double whammy for homeowner’s defaulting on their home loans. The politicans at that time decried this horrible state of affairs, beat their chests, promised “relief” and did Nuttin Honey! So here we are back to the “Double Whammy” days of Seller’s defaulting on loans but since this is the “Steriods Era” we have a defaulting/foreclosure market ON STERIODS!

  But this time the Legislators have come through and given the Homeowner who is defaulting on his loan and trying to work out a “Short-Sale” RELIEF!! For the next three years, the IRS won’t count as income debt forgiven by lenders when our defaulting borrowers negotiate short sales or workouts on their primary residence that involve forgiveness of part of their debt. The amount goes up to $2,000,000! (portend of things to come??!!) but only runs for 3 years.

HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, also extends for three years a tax deduction allowing families earning $109,000 or less to deduct all or part their private mortgage insurance premiums from their taxable income. Savings? How about an average of $350 a year? Not great but hey, it helps! Many feel this will give incentive for a Seller to stay put. The Seller can try and work out a deal with their lender and keep their home. Getting the loan amount changed and reduced is the reason this bill now exists. Others think it now opens the flood gate for Seller’s to walk! Don’t have to now worry about getting nailed by debt relief so why not just let it go to foreclosure and put it up for sale as one of the hundreds of “Short-Sales” now flooding the market. Time will tell.