I understand that a homeowner will be responsible for paying taxes on the deficiency through the 1099c form - unless they are able to file a 982. However, I wasn’t sure if they still need to file the 1099c if the property is sold post auction as a REO at a reduced amount from the loan balance. Please let me know what you think. Thanks!
Post auction, the property itself has nothing to do with the original homeowner anymore, so it doesn’t matter what the home sells for after that.
Hi, Please explain me. After foreclosure the borrower would still be responsbile for the deficiency? If there is such, filing 1099C would be any of use? Please explain me the procedure after foreclosure
From what I understand, in some states the Lender is able to file a deficiency judgement after the foreclosure to the original homeowner if the property is sold as a REO at a lessor value that the original loan.
What I don’t know is if the IRS will be looking for payment for the shortfall. Any ideas?
You MAY be confused.
1099C is not the same as a deficiency judgement.
1099C is for forgiven debt. THis arises from a SS where they agree to forgive debt.
Def Judgement arises from the legal contract (mortgage) which says if the property is taken back and sold for less, the borrower owes the balance. Def Judgement is much worse for the borrower. It hangs over their head for years and they owe dollar for dollar.
1099C is just counted as income and tax is paid at the rate of income tax (or zero if insolvent enough)
I don’t think I’m confused - maybe I just worded my post wrong.
What I want to know is whether there will be any taxes owed by the HO after foreclosure (or is this just reserved for a short sale).
No taxes, because they owe the FULL DEFICIENCY. THere are no taxes because there was no forgiveness of debt.
The full debt is still owed.
All of which is subject to change now since the president’s speech on loans and defaults today.
That is IF there were ANY relationship between what W says and what happens in reality.
This is political BS by both sides, IMO.
This “plan” doesn’t help people with neg equity and it encourages people who are not 90 days delinquent to become 90 days delinquent to get the loan guarantee, and how are we going to decide who is worthy of bailout?
But hey, it made a good sound bite today. That is all they care about…this news cycle.