Oct. 17, 2007 - The Government To The Rescue

You may or may not know this, but if you should happen to lose your home for any reason and you come up short of what you owe your lender, you will be taxed on the amount of the debt that was forgiven. You can go over that sentence again if you wish, but you read it right the first time. The current tax code is written as such that if a lender forgives a portion of your mortgage debt they have to supply the IRS with a Form 1099 telling the tax man how much they let you off the hook for.

Believe you me, in these trying times there are plenty of people in trouble. The news media is talking about it every day. Adjustable rate mortgages resetting, homes mortgaged to the hilt with equity loans and lines of credit, one hundred percent financing with interest only loans that can't be refinanced due to property value fluctuations and on and on and on. To people in these situation, this "Phantom Tax" is a real slap in the face.

These situations came about in several ways. Some of it was every day bad occurrences like job loss, divorce, illness, etc. Some of it was bad guidance from bad Real Estate Agents. Some of it was fast talking mumbo jumbo from get it done at any cost lenders. Mostly it was just financially under educated people who wanted what they wanted and they wanted it now. Damn the torpedoes.

I regress, however, because what I am really talking about here is The Mortgage Cancellation Tax Relief Act, H. R. 3648. This piece of legislation will effectively wipe out the "Phantom Tax". That's a good thing too, because a person who couldn't pay their mortgage and just got their lenders hooks out of them sure doesn't need the IRS replacing their burden.

So if you or someone near and dear to you is staring into the face of foreclosure I suggest you cozy on up to your elected officials and remind them to get H. R. 3648 onto the Presidents desk for his signature so that the "Phantom Tax" will disappear from the IRS Tax Code. Then call a good, reputable REALTOR® (not the one who gave you bad advice in the first place) and get this thing nipped in the bud.

Oct. 23, 2007 - RE: The Government To The Rescue

Oct. 23, 2007 - RE: The Government To The Rescue

Oct. 23, 2007 - RE: The Government To The Rescue

Oct. 23, 2007 - RE: The Government To The Rescue

You raise one good point here Michelle, but let's start at the beginning.  You ask "How was this the REALTORS® fault?"

If you carefully read what I wrote you will see that I am not putting the blame on every REALTOR®.  I said that some people received "bad guidance from bad Real Estate Agents".  You know as well as I do that they are out there.  They are the ones that care more about getting to the closing table than they do about serving their clients needs.  They are the ones who think that it's somebody else's job to explain the consequences of the decisions that their clients are making.  They are the ones who are hoping and praying for a soft home inspector who will hopefully rubber stamp the property.  They are the ones who can't answer their clients question when asked what a Truth In Lending Statement is, because they don't even know what it is themselves.  They are the ones that you hate to get into a deal with because you have to expend twice as much energy on the deal by doing half of their job as well.  They are the ones who give bad guidance, or worse yet, no guidance.

Now that that is out of the way, you may have noticed that I did, in fact, give some of the blame to some"get it done at any cost lenders".  I went on to say that "mostly it was just financially under educated people who wanted what they wanted and they wanted it now".  Since you didn't seem to be able to look at whole picture, grasp the whole concept and boil it all down to it's lowest common denominator let me help you out.  Tragic human experiences like divorce, job loss, illness, etc., aside, this bad situation has been brought about by GREED.  Greedy Real Estate Agents, greedy lenders and greedy borrowers.

Now to your one good point.  You are absolutely, unequivocally, correct, perhaps each and every scenario should be looked at separately by the IRS.

Any way, thanks for your multiple comments to my blog.  I appreciate your participation.  One piece of advice, however.  You really shouldn't try to out curmudgeon an old curmudgeon in his own house.