I’ve read that the Mortgage Forgiveness Act recently passed by Congress only applies to 1st mortgages. Is this true? If yes, does that make this law a “pig in a poke”? Aren’t most short sales done on second mortgages since they have the most to lose? Since most people used second mortgages to get 100% financing over the past 5 years, it seems most of the people this law was designed to help will be excluded. Am I wrong?
anyone?
guy came to me last week wanting to use form 982 (a new one) to eliminate a 1099C (cancellation of debt from a forgiven credit card) from being income.
At first I thought he was crazy.
Then I thought well maybe…if he had filed for bankruptcy (he had not)
But after reading the rules, it appears that the Act is pretty lenient if you’re insolvent (defined as liabilities more than assets, not necessarily bankrupt) and includes almost ANY forgiven debt. with virtually no documentation requirements.
I’ll report back as I learn more. Personally, I think it’s an IRS quagmire waiting to explode…