"[Lender] will provide a satisfation of debt within the statutory time limit… [Lender] may be required to report this transation to the IRS. We recommend that you discuss this matter with your accountant or financial advisor. You loan will be reported to the credit bureau as “Account Settled” "
Huh. So, how to decipher this? I really wish we could cross-post to the legal forum. mutter Note the lovely tidbit: ‘your accountant or financial advisor’. The owner’s couldn’t make their house payments for multiple months; as if they’re gonna have money to hire a “financial advisor”! :rolleyes
Anyways, how likely are the owners in danger of 1099 sometime around April 15th of next year?
Congratulations on getting a non-deficiency judgment you can breathe a sigh of relief due to the recent mortgage forgiveness debt relief act of 2007. This allows taxpayers to exclude income from the discharge of debt on their principal residence. The debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief. So you should not have a problem with the 1099.
The caveat - this only applies for principal residence. If it is not their principal residence, my understanding is that they would owe taxes on the forgiven debt…
It still may be wise to seek the advise of a CPA. Because, you’re potentially talking big dollars here, if the outcome ends up different than what you think. Find the money, you can do it. Deficiency judgments and 1099’s surface for a number of reasons, and unless you have a single purchase money loan on your primary residence…be careful.