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Category Archives: Housing Law

Tax consequences of foreclosure in Minnesota

Posted on December 10, 2013 by Elizabeth Rosar Chermack

When someone meets with me because their home may end up being foreclosed on, one of the things that I tell them is that they should meet with an accountant – a good one – sooner than later. Last year, people were concerned about whether the Mortgage Forgiveness Debt Relief Act would be renewed. The Mortgage Forgiveness Debt Relief Act applies to federal income taxes. In 2013, again, people are concerned about whether the federal act will be renewed. Uncertainty abounds.

Unfortunately, there is one thing that we are certain about at this point in time: a foreclosure in 2013 could be very painful on your Minnesota state taxes. According to this MPR article:

If you’ve recently been in foreclosure, the state may tax you. That’s because many people technically receive income when their lender sells the house for less than is owed on the mortgage. 

 If you think that you might be in that situation, my advice to you is to contact your accountant as soon as possible. You also might want to consult with an attorney.

 

 

 

Posted in Bankruptcy Law, Housing Law | Tags: foreclosure | Leave a comment |

Get it in writing!

Posted on March 28, 2012 by Elizabeth Rosar Chermack

In Wentzel v. CitiMortgage, Inc., the Honorable Michael J. Davis, of the United States District Court, District of Minnesota, provides us with a reminder of why it is SO important to “get it in writing.” In this case, the Plaintiffs (Richard & Debra Wentzel), experienced financial difficulty and contacted CitiMortgage to see whether they qualified for a loan modification.

(Sidenote: Plaintiffs contacted CitiMortgage because they had received notice that their loan was being transferred to CitiMortgage, but later on CitiMortgage told the Plaintiffs that they were waiting to receive an Assignment from the previous company. So, the Plaintiffs made an unjust enrichment claim against CitiMortgage based in part on Plaintiffs’ allegations that CitiMortgage had not demonstrated that it is assignee of their mortgage and note.)

In August 2008, Plaintiffs were told they qualified for an adjusted payment of $832.58/month. In July 2009, Plaintiffs spoke with a CitiMortgage representative who told them they were not in danger of foreclosure, but the next week they were told by someone else that they had to pay $1,332 in July and August to avoid foreclosure. In February 2010, Plaintiffs were told they qualified for a lower payment of $1,250.74, and that the paperwork for the loan modification would arrive by UPS. Plaintiffs made those payments in March 2010 through November 2010, but they never received the promised paperwork. When Plaintiffs sent in their December 2010 payment, CitiMortgage refused to accept it, and allegedly told Plaintiffs that they were waiting for an assignment from Harmonic Mortgage (who Plaintiffs originally obtained their loan from in April 2006) before proceeding further.

In February 2011, CitiMortgage wrote to Plaintiffs and told them that they had been pre-approved for a modification in February 2010, but that the modification was closed in April 2010 due to not receiving a response from the Plaintiffs. Plaintiffs claimed that they responded to ALL of CitiMortgage’s requests.

On March 17, 2011, when CitiMortgage refused to accept their monthly payment, CitiMortgage told them, “As you know, your loan is in foreclosure.”

Plaintiffs sued CitiMortgage for breach of contract, promissory estoppel, fraud and misrepresentation, consumer fraud pursuant to Minn. Stat. 325F.69, and unjust enrichment. CitiMortgage moved to dismiss, using Rule 12(b)(6) – failure to state a claim upon which relief may be granted.

The Court dismissed all of the Plaintiffs’ claims EXCEPT their claim for unjust enrichment. The reason for the dismissal of the breach of contract, promissory estoppel, and fraud and misrepresentation claims was based on the Plaintiffs not having their loan modification agreement in writing, and the fact that Minn. Stat. 513.33 requires credit agreements to be in writing. Plaintiffs’ claim for consumer fraud was dismissed because a public benefit is required to use the Private Attorney General Statute (Minn. Stat. 325F.69) and the Plaintiffs’ claim was based solely on the communications between Plaintiffs and CitiMortgage; there were no allegations by Plaintiffs that CitiMortgage made misrepresentations to the public.

The Court found that Plaintiffs had properly asserted a claim for unjust enrichment, and thus that claim was not dismissed.

The major lesson in this case, for a homeowner who is in the process of getting their loan modified, is to do everything possible to get something in writing from the bank. Until you have something in writing, the bank can change the terms of your modification at its own whim (or let your house go into foreclosure after it has told you your loan is modified and after it has accepted many modified payments from you). The phone conversations that you have with the bank are not enough –  you need to get it in writing!

Posted in Housing Law | Tags: loan modification | Leave a comment |

Bank of America – possible principal reductions for up to 200,000 borrowers

Posted on March 12, 2012 by Elizabeth Rosar Chermack

According to a recent CNN Money article, up to 200,000 borrowers with Bank of America mortgages could obtain a reduction in the amount of principal that they owe on their mortgage, thanks to a recent settlement between the five major mortgage servicers, the federal government, and the attorneys general of 49 states and District of Columbia. According to the article, the possibility of obtaining a principal reduction  “only applies to the mortgages [Bank of America] owns and some that [Bank of America] services for private investors. Loans backed by government-controlled agencies like Fannie and Freddie or insured by the Federal Housing Administration are not eligible for the program.” The article goes onto say that Bank of America has already identified the borrowers who may qualify and plans on reaching out to them as soon as the settlement is approved by the court. This could be great news if you are one of the lucky 200,000 borrowers.

Posted in Housing Law | Tags: Bank of America, principal reduction, settlement | Leave a comment |

Will the Mortgage Forgiveness Debt Relief Act be renewed?

Posted on January 23, 2012 by Elizabeth Rosar Chermack

Will the Mortgage Forgiveness Debt Relief Act be renewed? I wish I knew the answer to that question. Right now, there is a lot of uncertainty about the renewal of the Mortgage Forgiveness Debt Relief Act. According to the IRS website, the Mortgage Forgiveness Debt Relief Act “applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.”

Any time that you owe a debt to someone (or an entity – such as a corporation), and that debt is forgiven or canceled, the IRS says that the amount of debt that is forgiven or canceled is income.  You also usually “get” to pay taxes on that income.

The Mortgage Forgiveness Debt Relief Act provides some homeowners with tax relief. If your home is encumbered by an underwater mortgage and you lost your home to a short sale, deed in lieu of foreclosure, or foreclosure, then the Mortgage Forgiveness Debt Relief Act might apply to you. If it applies to you, then you can exclude certain cancelled debt on your principal residence from your income (and that means you wouldn’t have to pay taxes on that “income”).

Unfortunately, the Mortgage Forgiveness Debt Relief Act expires at the end of this year (2012), and no one knows yet whether it will be renewed. My hope is that it will be renewed, because without its renewal, there could be a lot more former homeowners in serious financial trouble (owing a significant tax debt after losing their home).

If the Mortgage Forgiveness Debt Relief Act is not renewed – or if it doesn’t apply to you – there are still other ways (proving insolvency and bankruptcy) to possibly prevent owing as much in taxes. My advice is that if you are having difficulty paying your mortgage and you think that you may be losing your house to foreclosure, deed in lieu of foreclosure, or a short sale, consult with an experienced CPA or accountant as soon as possible. That way you can do everything possible to reduce the amount that you could owe.

Posted in Housing Law | Tags: canceled debt, deed in lieu of foreclosure, foreclosure, Mortgage Forgiveness Debt Relief Act, qualified principal residence, short sale | Leave a comment |

Fannie Mae is trying to “clean up its books”

Posted on August 29, 2011 by Elizabeth Rosar Chermack

This article in the Detroit Free Press, part 1 of a 3-part series, discusses how Fannie Mae claims that it tries to keep families in their homes, while at the same time pressuring banks to foreclose. Alan White, a law professor at Valparaiso University and a leading national expert on the foreclosure crisis, is quoted in the article:

“Fannie just wants to clean up its balance sheet and get these loans off the books while taxpayers are eating these losses,” White said, referring to the multibillion-dollar federal bailout of Fannie Mae in 2008 and the rising cost to taxpayers.

“And Treasury and the FHFA are letting them get away with it. It’s a huge waste. Wealth is being destroyed, people are losing houses needlessly, and taxpayers are losing money.”

The article also cites examples of banks requesting a delay in the foreclosure process in order to allow short sales or loan modifications to occur, and Fannie Mae declining those requests and insisting that the banks proceed with foreclosure.

Posted in Housing Law | Tags: Fannie Mae, foreclosure, foreclosure prevention | Leave a comment |

Emergency Homeowners Loan Program (EHLP) – Must apply by July 22, 2011

Posted on July 12, 2011 by Elizabeth Rosar Chermack

From the ELHP Minnesota website:

The Emergency Homeowners’ Loan Program (EHLP) can provide eligible homeowners with a 0% interest, forgivable loan that pays past-due mortgage payments (principal, interest, taxes, insurance, attorney fees), as well as a portion of the homeowner’s FUTURE mortgage payment for 24 consecutive months (up to a $50,000 limit) provided that certain eligibility requirements are maintained.

If you are eligible for EHLP, you have a very tight timeline during which you must apply – you must apply by July 22, 2011. For more information on how to apply, visit the official EHLP website.

Posted in Housing Law | Leave a comment |

Fannie Mae and Minnesota Home Ownership Center Partnership

Posted on July 11, 2011 by Elizabeth Rosar Chermack

The Minnesota Home Ownership Center and Fannie Mae have entered into a partnership “to accelerate the response time for struggling Minnesota families with loans owned by Fannie Mae.”

If your loan is owned by Fannie Mae, and you are struggling with your mortgage payments, you should contact the Minnesota Home Ownership Center ASAP.

If you are unsure about whether Fannie Mae owns your mortgage, here is a link to a blog post that explains how to find out who owns your mortgage.

Posted in Housing Law | Tags: Fannie Mae, foreclosure prevention, loan modification, Minnesota Home Ownership Center | Leave a comment |

More than 500,000 HAMP modifications have been made permanent

Posted on February 8, 2011 by Elizabeth Rosar Chermack

As of February 1, 2011, more than half a million HAMP modifications have been made permanent. Read more about it here. What do people do when they don’t receive a permanent HAMP modification? Some people, who may not qualify for a modification under the HAMP program have been able to obtain an in-house modification through their bank. Generally, the application process for an in-house modification is the same as the application process for the HAMP program, but the banks have more leeway in deciding whether to grant an in-house modification. The process for obtaining an in-house modification is not really any less frustrating or time-consuming than obtaining a HAMP modification. It is, however, another option for a struggling homeowner who would like to save his or her home.

Homeowners who are not able to save their homes sometimes participate in the Home Affordable Foreclosure Alternatives (HAFA) Program – by doing a short sale or a deed in lieu of foreclosure.

Sometimes, a homeowner who is unable to obtain a modification chooses to let their house go into foreclosure. A homeowner who chooses this option should be sure that they understand their state’s laws regarding deficiency judgments and foreclosure. Here is a link to my blog post about Minnesota’s laws regarding deficiency judgments.


Posted in Housing Law | Tags: deficiency judgment, HAFA, HAMP, in-house modification | Leave a comment |

Who Owns My Mortgage?

Posted on September 20, 2010 by Elizabeth Rosar Chermack

Are you trying to figure out whether Fannie Mae or Freddie Mac owns your mortgage?

To find out if Fannie Mae owns your mortgage, go to this website.

To find out if Freddie Mac owns your mortgage, click here.

If Fannie Mae or Freddie Mac own your mortgage, that means that they are your “mortgage investor”, which is different from your “mortgage servicer”. You make your mortgage payments to your mortgage servicer. If you are struggling with making your mortgage payments and want to apply for HAMP or another loan modification, you should contact your mortgage servicer. If you don’t know who your mortgage servicer is, you can look that information up here, on the MERS website.

*** Please exercise caution when entering personal data, such as your social security number, into a website.***

Posted in Housing Law | Tags: Fannie Mae, Freddie Mac, MERS, mortgage investor, mortgage servicer | 1 Comment |

“Buy and Bail”

Posted on September 17, 2010 by Elizabeth Rosar Chermack

“Buy and Bail” is the term used for homeowners who, while owning one house with an underwater mortgage, obtain a mortgage for a new house. Then, after they have purchased the new house, they “bail” on the underwater house by letting it go into foreclosure.

This article discusses how homeowners have accomplished this. Depending on how the “buy and bail” process occurs, the homeowner may be committing fraud. According to the article, the FBI is currently pursuing more than 3,000 mortgage fraud cases. The practice of “buy and bail” is not without risk.

Posted in Housing Law | Tags: buy and bail, foreclosure | Leave a comment |
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© Elizabeth Rosar Chermack, Attorney at Law. Disclaimer: The content of this website is provided for informational purposes only. Information you obtain from this website is not, nor is it intended to be, legal advice. You should consult an attorney for individualized advice. Use of this website does not create an attorney-client relationship. Elizabeth Rosar Chermack, Attorney at Law, is a designated debt relief agency by an Act of Congress and the President of the United States. She assists consumers seeking relief under the U.S. Bankruptcy Code.