HAMP, HARP, HARP 2, HAFA....
All of these "Home Affordable" attempts by the Federal Government to deal with the housing crisis have at best been dismal failures. The "Debt Forgiveness Act" is the only law passed which has had some benefit to troubled and underwater homeowners, and now it is set to expire December 31, 2012.
Normally when a debt is forgiven (i.e. the unpaid balance in a foreclosure or short sale is written off) the borrower receives a 1099 creating ordinary income for the forgiven debt. The Debt Forgiveness Act states that if the debt forgiven was for the borrower's residence and the loan was for the purchase or improvements to the residence, then the homeowner is not obligated to pay any tax on this 1099 income.
When the homeowner has lost his house to a short sale or foreclosure, it is ridiculous to also create a phantom tax for any debt being forgiven. Twice before, under the current and previous administrations, the Debt Forgiveness Act has been extended. Hopefully, after the election our Congress and Executive Branch will pass an extension of this beneficial law.
Please write, call or email your congressman and ask him or her to extend the Debt Forgiveness Act during the lame duck session after the election.
Contact me at 434-951-0858 or Tucker@TGBLaw.com if you have questions, or visit our blog below for previous tips.