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Update

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Senior Contributor

Update

http://www.usatoday.com/money/economy/housing/2011-07-24-short-sales-mortgages_n.htm

 

Found the above link interesting.

 

Still in the holding pattern regarding the house.   A "delay" has occurred because the bank tried to sneak one past the mortgage insurance company (HAFA).   The loan clearly did not qualify for that insurance program so they are trying another insurance program.   (huh?  yeah, I know, it's as clear as mud to me too.  It means if the banks can get the insurance companies to pay out on the loans, they will probably accept the current offer.   If the insurance companies say no, then the banks are less likely to accept the offer.)

Message 1 of 9
8 REPLIES 8
Highlighted
Established Contributor

Re: Update

An interesting article indeed,   IOBA.

I was curious about the mortgage insurance reward/payout  for the lenders involved.

A search on Google didn't reveal much, so I'll ask you instead.

 

Do lenders pay capital gains tax rate or regular business income tax rate on the awards they receive from insurance companies

when a person defaults?   Poor lenders, they lose big time when a borrower defaults, right?

 

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
Message 2 of 9
Highlighted
Senior Contributor

Re: Update

As I understand it, the lenders do not pay ANY tax on the insurance money.    Just like we don't pay out any tax on an insurance claim that is paid to us, or life insurance policy money received (in most cases).

 

The lender (and I could be wrong) tries to collect from the owners.   When it gets to be considered a loss/default, they "Charge off" the balance and all related expenses.   That is taken as a loss on their taxes.   Then they

 

1.  Still try to collect from the owners through CA's and sometimes judgments.   But on their books, they have recorded the debt as uncollectable.

2.  They file claims with the mortgage insurance companies, if the loan has an insurance policy on it.   Claims are paid out based on the type of insurance policy.

** if the loan had PMI on it, then the gov't backs the loan and will pay the amount due (principle only, no interest or fees) to the lender

** if the loan didn't have PMI on it, then the lender had an option to purchase a separate mortgage insurance policy on the loan.  (It's usually purchased on the bundle of loans sold/bought, especially if the bundle is 2nd mortgages.)  If the loan defaults, the lender files a claim and may be awarded a percentage of the loan (almost never full value of the principle on the loan, and no interest or fees).

3. HAFA was a gov't program created in 2010 to help home owners stay in their homes.  Not many people reported success with the program.  For some people, it insured their loan while they were going through a loan modification.  It was to ease the lender's minds and hopefully avoid short sales and foreclosures.  (I have this impression from what I have read and heard about the program.)

 

With regards to my situation, the lender, posing as the owners of the house, submitted an application to HAFA.  It didn't qualify - the home has been vacant for more than a year.   So now the lender is looking for any other gov't backed programs out there to provide a little financial relief if they accept the short sale offer.   They did not appear to have PMI or other insurance on the first loan.

 

And the longer they take to figure things out, the more the house values drop in my area.  Smiley Happy   I sincerely doubt my original offer on the house (which was it's fair market value at the time, minus a give back at closing) will be the appraised value.   Yes, the chill is in the air as home values continue to plummet this season.   

 

I have my coffee, my hot chocolate, a good book, a blanket, and myfico.  Smiley Happy  I am settling in for the winter.  Smiley Wink

 

 

 ***

 

This information is how I understand it.  I could be wrong.  

 

Message 3 of 9
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Established Contributor

Re: Update

Thanks, IOBA. The explaination you provided is helpful.

 

Good luck with your endeavor.

Remain cozy;  and, with your frame of mind, I hope things work out for you.

 

Good Luck.

 

 

 

 

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
Message 4 of 9
Highlighted
Frequent Contributor

Re: Update


@IOBA wrote:

As I understand it, the lenders do not pay ANY tax on the insurance money.    Just like we don't pay out any tax on an insurance claim that is paid to us, or life insurance policy money received (in most cases).

 

The lender (and I could be wrong) tries to collect from the owners.   When it gets to be considered a loss/default, they "Charge off" the balance and all related expenses.   That is taken as a loss on their taxes.   Then they

 

1.  Still try to collect from the owners through CA's and sometimes judgments.   But on their books, they have recorded the debt as uncollectable.

2.  They file claims with the mortgage insurance companies, if the loan has an insurance policy on it.   Claims are paid out based on the type of insurance policy.

** if the loan had PMI on it, then the gov't backs the loan and will pay the amount due (principle only, no interest or fees) to the lender

** if the loan didn't have PMI on it, then the lender had an option to purchase a separate mortgage insurance policy on the loan.  (It's usually purchased on the bundle of loans sold/bought, especially if the bundle is 2nd mortgages.)  If the loan defaults, the lender files a claim and may be awarded a percentage of the loan (almost never full value of the principle on the loan, and no interest or fees).

3. HAFA was a gov't program created in 2010 to help home owners stay in their homes.  Not many people reported success with the program.  For some people, it insured their loan while they were going through a loan modification.  It was to ease the lender's minds and hopefully avoid short sales and foreclosures.  (I have this impression from what I have read and heard about the program.)

 

With regards to my situation, the lender, posing as the owners of the house, submitted an application to HAFA.  It didn't qualify - the home has been vacant for more than a year.   So now the lender is looking for any other gov't backed programs out there to provide a little financial relief if they accept the short sale offer.   They did not appear to have PMI or other insurance on the first loan.

 

And the longer they take to figure things out, the more the house values drop in my area.  Smiley Happy   I sincerely doubt my original offer on the house (which was it's fair market value at the time, minus a give back at closing) will be the appraised value.   Yes, the chill is in the air as home values continue to plummet this season.   

 

I have my coffee, my hot chocolate, a good book, a blanket, and myfico.  Smiley Happy  I am settling in for the winter.  Smiley Wink

 

 

 ***

 

This information is how I understand it.  I could be wrong.  

 


IOBA-- I could use a dose of your patience!  Good luck and great attitude to have.

Message 5 of 9
Highlighted
Senior Contributor

Re: Update

Good article.  I didn't know any of that - I thought we've seen the bottom of the housing prices = it doesn't look that way around my area, either.

 

When we were rushing to buy this summer I thought for sure that was it, as low as it could go. 


Good Luck waiting and waiting and waiting!

STARTING: 11/24/10 EQ-584 EXP-648 TU04-595
CLOSED FIRST HOME 8/19/11 EQ-630 EXP-691 TU04-653
CURRENT: EQ-701 EXP-??? TU08-720
Message 6 of 9
Highlighted
Senior Contributor

Re: Update

October, November, and now into December...brrr!

Message 7 of 9
Highlighted
Established Contributor

Re: Update


@IOBA wrote:

October, November, and now into December...brrr!



You can always do a change of pace..... How about Puerto Vallarta come January ??

_________________________________________________
"You may never know what results come of your actions,
but if you do nothing, there will be no result" ~ Mahatma Gandhi
Message 8 of 9
Highlighted
Senior Contributor

Re: Update

Considering our place has no heat and it's between 55-60 right now (inside) that sounds great!   But then we'd have to explain the big expenditure..And worry about having enough to close (if we ever get to closing...).   We are determined to put 20% down so there's no PMI or escrow.

Message 9 of 9
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