The headlines are in the papers daily. It's impossible to open a paper or log onto a news website and not hear all the "doom and gloom" of the housing market. The reality is that thousands of people in this country are in danger of losing their homes because their ARMs are coming into the adjustment period and interest rates (and therefore mortgage payments) are rising--in some cases significantly.
This situation is forcing many people into foreclosure. Some try to sell at a bank-approved loss (a short sale or a deed in lieu) in order to avoid foreclosure. Keep in mind that any forgiveness of debt by a lender, even though you have experienced an economic loss, is treated as income by the IRS. The lender is obliged to complete a 1099 for the amount of the forgiveness, and that amount will be taxed at ordinary rates in the tax year in which the debt is forgiven. Please contact a tax professional or attorney if you have questions about how short sales, deed in lieu, foreclosures, or any similar situation may affect your taxes.
If you, or someone you know, is in danger of losing her home, then please contact me. I will e-mail you a copy of a brochure published by the National Association of Realtors (NAR) titled "Are You Having Problems Paying Your Mortage? Learn how to avoid foreclosure and keep your home." The brochure provides information on pending legislation sponsored by the NAR as well as contact information for government agencies and counseling services that can help you through this difficult period.
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