Short Sale Credit: delete short sale or foreclosure http://shortsalecredit.com Wed, 31 Mar 2010 16:39:17 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 Short sale without missing payments/being late? http://shortsalecredit.com/short-sale-without-missing-paymentsbeing-late/ http://shortsalecredit.com/short-sale-without-missing-paymentsbeing-late/#comments Fri, 25 Dec 2009 08:34:31 +0000 admin http://shortsalecredit.com/?p=191 Yet Another Related Posts Plugin.]]> There is a misconception out there that banks won’t approve a short sale if the homeowner is not late on payments.

True, a lot of short sales will have some delinquent payment history in them, but there can be hardships that won’t cause payments to be missed during the short sale process.

Here are some reasons of hardship that will allow a short sale to be approved without being late:

  1. Loss of job
  2. Job transfer
  3. Medical reasons
  4. Military personnel being relocated
  5. Divorce

Keep in mind that some of these reasons may not be a financial hardship, so if there are other assets, the lender may require a cash contribution, a promissory note, etc.

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]]> http://shortsalecredit.com/short-sale-without-missing-paymentsbeing-late/feed/ 0 Understanding foreclosure time lines and how it affects short sales http://shortsalecredit.com/understanding-foreclosure-time-lines-and-how-it-affects-short-sales/ http://shortsalecredit.com/understanding-foreclosure-time-lines-and-how-it-affects-short-sales/#comments Fri, 25 Dec 2009 08:09:13 +0000 admin http://shortsalecredit.com/?p=185 Yet Another Related Posts Plugin.]]> The basics are this: at 31 days at 5pm is 30 days late; at 61 days NOI (notice of intent); at 91 days NOD/Lis Pendens (depending on the state; NOD = notice of default).

In most states you have a 6 month or longer foreclosure time line. This means it takes 6 missed payments or more before a lender can foreclose and then an additional 30-60 days before the occupants are evicted. (eviction can be longer in the case of a valid lease).

In a short sale context it is important to keep an eye on the foreclosure time line: if 5 payments have been missed then it is logical to assume NOD (notice of default) has been filed. It also means that possibly a NOTS (notice of trustee sale) has been filed or soon will be filed.

The sale date is an important date to keep in the back of your mind, especially if no offer has come in after a while on the market. Trustee sale can be postponed close to trustee sale but that’s going to depend on the offer that is being submitted (influencing the numbers on the HUD), the submission itself, wether loan mod was being pursued, etc.

This is where the short sale agent and the seller need to stay realistic. It is still possible to get a deal done at this late hour, but chances go down as the sale date is approached. That doesn’t mean that postponement shouldn’t be aggressively pursued of course. Short sale is still the better option for the bank if the numbers indicate so.

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]]> http://shortsalecredit.com/understanding-foreclosure-time-lines-and-how-it-affects-short-sales/feed/ 0 Taxable Gain on Cancellation of Debt from Loan Modification, Short Sale, Deed in Lieu or Foreclosure http://shortsalecredit.com/taxable-gain-on-cancellation-of-debt-from-loan-modification-short-sale-deed-in-lieu-or-foreclosure/ http://shortsalecredit.com/taxable-gain-on-cancellation-of-debt-from-loan-modification-short-sale-deed-in-lieu-or-foreclosure/#comments Wed, 23 Dec 2009 06:06:38 +0000 admin http://shortsalecredit.com/?p=177 Yet Another Related Posts Plugin.]]> In a loan modification, short sale, foreclosure or deed in lieu of foreclosure, the owner can receive “capital gain or loss” as in any other sale of real property.  The owner will be subject to capital gains taxation on the “forgiveness of debt” or “cancellation of debt” but can also receive a credit for a capital loss (only on investment properties).

Taxable ordinary income is triggered by the lender’s forgiveness of debt of $600 or more.  The lender is required to issue a 1099-C (“c” for cancelled debt) but it is the individual’s responsibility to recognize a capital gain.  

Please consult with a CPA because each situation is going to be different.

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]]> http://shortsalecredit.com/taxable-gain-on-cancellation-of-debt-from-loan-modification-short-sale-deed-in-lieu-or-foreclosure/feed/ 0 Foreclosure and short sale tax liability http://shortsalecredit.com/foreclosure-and-short-sale-tax-liability/ http://shortsalecredit.com/foreclosure-and-short-sale-tax-liability/#comments Wed, 23 Dec 2009 05:33:22 +0000 admin http://shortsalecredit.com/?p=171 Yet Another Related Posts Plugin.]]> If you are going to choose between a short sale or foreclosure you need to understand the tax liabilities of your decision. There is going to be a certain amount of cancelled debt in either scenario.

You should consult a CPA and/or tax attorney.

The following is general knowledge

  1. The lender will issue a 1099-C in a short sale (unless they pursue a deficiency judgment); C is for cancelled.
  2. The lender will issue a 1099-A in a foreclosure (unless they pursue a deficiency judgment); A is for abandoned.
  3. The 1099 issued is for the amount of the lenders loss from the short sale or foreclosure.
  4. The loss is almost always less in a short sale since there is additional cost when the bank forecloses and then has to sell the property. Short sales typically yield a higher purchase price and a lower loss to the lender.
  5. The homeowner may not be liable to pay taxes owed the IRS on the 1099 in either case with IRS Tax Form 982 (http://www.irs.gov/irs/article/0,,id=179073,00.html).
  6. The homeowner may not be liable to pay taxes owed the IRS per the Mortgage Debt Relief Act (MDRA) (http://www.irs.gov/individuals/article/0,,id=179414,00.html).
  7. State tax law regarding 1099’s on short sales and foreclosures is not necessarily in line with federal tax law.
  8. Generally speaking you won’t owe the IRS taxes on the 1099-C if you acquired the home with a purchase money loan (vs refinance loan)

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]]> http://shortsalecredit.com/foreclosure-and-short-sale-tax-liability/feed/ 0 Short sale reported as foreclosure on credit report http://shortsalecredit.com/short-sale-reported-as-foreclosure-on-credit-report/ http://shortsalecredit.com/short-sale-reported-as-foreclosure-on-credit-report/#comments Wed, 23 Dec 2009 05:07:06 +0000 admin http://shortsalecredit.com/?p=166 Yet Another Related Posts Plugin.]]> Quite few people go through the process of a short sale of their home, but then the lender(s) will report it as a short sale on their credit report!

 If a short sale is not reported accurately on your credit report then the account should be deleted per the FCRA (Fair Credit Reporting Act)

True, a short sale is less damaging to credit than a foreclosure but, unfortunately, short sale information isn’t accurately reported on people’s credit reports.  Short sale reporting per se isn’t what destroys FICO scores, rather its the mortgage late payments that most homeowners have when they do a short sale that hurts their credit. A 90-120 day late payment on a mortgage account negatively affects FICO scores almost as much as a foreclosure. And, late payments negatively affect the opinion of an underwriter evaluating an applicant for new credit.

Starting over is proving to be very difficult in this climate. But, the good news is that the law is on the side of consumers. Inaccurately or erroniously reported accounts can, and should be, removed from credit. 

Removing foreclosures or short sales from credit can be done legally in 6 easy steps. We want people to get a fresh start and not be needlessly hurt by inaccurate credit reporting.

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]]> http://shortsalecredit.com/short-sale-reported-as-foreclosure-on-credit-report/feed/ 0 How long does a foreclosure have to be listed on a credit report? http://shortsalecredit.com/how-long-does-foreclosure-have-to-be-reported-in-a-credit-report/ http://shortsalecredit.com/how-long-does-foreclosure-have-to-be-reported-in-a-credit-report/#comments Fri, 11 Dec 2009 07:27:43 +0000 admin http://shortsalecredit.com/?p=5 Yet Another Related Posts Plugin.]]> As you read the law below (FCRA) you can see that it allows the creditor to report the derogatory item for no longer than 7 Years. This means they can report this derogatory item for 7 years- but not one day more. They can delete it prior to that time period referenced if you can get them to delete it. The bureaus will not delete items for you. But the creditor will!

From the Fair Credit Reporting Act:

605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c] (a) Information excluded from consumer reports. Except as authorized under subsection (b) of this section, no consumer reporting agency may make any consumer report containing any of the following items of information: (1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years. (2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period. (3) Paid tax liens which, from date of payment, antedate the report by more than seven years. (4) Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years. (5) Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years. (c) Running of Reporting Period (1) In general. The 7-year period referred to in paragraphs (4) and (6) of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.

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