topic Re: Will 1099-C Mess up a getting a mortgage? in Mortgage Loans

Will 1099-C Mess up a getting a mortgage?

Anonymous — Tue, 05 Aug 2014 15:35:14 GMT

My wife and I own a timeshare that is worth about as much on the resale market as we owe on it. We contacted the timeshare management and talked to them about selling it. They told is that rather than sell it, which will cost us fees and commission, they would be willing to just have us deed it back to them. It is not a forclosure and not reported as anything other than a sale back to the developer. However, they did say that we would essentially be "giving" it back to them and that they would be canceling the rest of the payments on it. Because of that, we would get a 1099-C from them that would need to be included in our next year's taxes.

So, when we apply for a mortgage next summer and our tax returnes are reviewed in underwriting, will the UW flag the 1099-C and deny the loan? Does it have any consequences?

Thanks!

Re: Will 1099-C Mess up a getting a mortgage?

pizzadude — Wed, 06 Aug 2014 19:16:35 GMT

@Anonymous wrote:
My wife and I own a timeshare that is worth about as much on the resale market as we owe on it. We contacted the timeshare management and talked to them about selling it. They told is that rather than sell it, which will cost us fees and commission, they would be willing to just have us deed it back to them. It is not a forclosure and not reported as anything other than a sale back to the developer. However, they did say that we would essentially be "giving" it back to them and that they would be canceling the rest of the payments on it. Because of that, we would get a 1099-C from them that would need to be included in our next year's taxes.

So, when we apply for a mortgage next summer and our tax returnes are reviewed in underwriting, will the UW flag the 1099-C and deny the loan? Does it have any consequences?

Thanks!

I don't think having a 1099C will preclude you from obtaining a mortgage, however you need to be very certain that it won't appear as any kind of deed~in~lieu, charge~off, settlement, short sale, or reposession on your credit reports. Any of those will sink your FICO score.

Also you'll owe taxes on the charged off amount, so make sure you can cover it as well.

Re: Will 1099-C Mess up a getting a mortgage?

Gunnar419 — Wed, 06 Aug 2014 19:01:48 GMT

I would also be very, very cautious about this offer. The people making it have a vested interest, being able to re-sell the unit. They say they're saving you commissions & fees & perhaps even a long, uneasy period of suspense. But chances are the taxes you end up paying will be higher than the commissions you supposedly saved.

If you're thinking about this, I'd definitely bring in a neutral person -- accountant, attorney -- who's knowledgeable about all the possible consequences. Good luck!

Re: Will 1099-C Mess up a getting a mortgage?

Anonymous — Wed, 06 Aug 2014 22:19:55 GMT

I wish my timeshare would offer that. I owe nothing and have offered to just give it back to them and they have refused...I just want it gone it was a huge mistake lol.

Re: Will 1099-C Mess up a getting a mortgage?

ShanetheMortgageMan — Fri, 08 Aug 2014 04:35:09 GMT

The 1099-C won't mess it up, but like others have said be very cautious... a 1099-C is a cancellation of debt, and is associated with a charge-off. It wouldn't be surprising to me if they reported a charge-off on the timeshare trade line.

I strongly encourage you to visit the Timeshare User Group at http://tugbbs.com/forums/ which you will most likely find people who were given a similar offer by the same exact management company you are dealing with, and can find out if they went for it or not, and if they did if it negatively impacted their credit. You can also research what your timeshare is actually worth, if it's a peak-season week and a 2-bedroom lock-off then you may be able to sell it on eBay, etc and pay off your debt that way... plus you'll save someone else from getting ripped off by the sales office.