AP - A recent article on the status of the Mortgage Debt Relief Program.
Foreclosures have been dropping dramatically over the past year, but without help from Congress they could begin to rise again. In 2007, Congress passed a tax exemption for mortgage debt forgiveness. That exemption expired at the end of 2013 and has not been extended, as some predicted it would be.
The recent foreclosure crisis was one of the most dire
episodes in U.S. housing history, but it could have been even worse had the
banks not forgiven billions of dollars in mortgage debt. Much of that was
mandated by legal settlements with the federal government and state attorneys
general. Since 2007, banks have approved approximately 2.8 million short sales,
according to Black Knight Financial Services. A short sale is when the home is
sold for less than the amount of the mortgage.
There is support in Congress for an extension, as well as
among state attorneys general and housing advocates. Several bills are being
considered that could extend the tax relief through 2015 or 2016, but with the
much broader move to overhaul the entire tax code, they appear to be getting
lost in the shuffle.
It is difficult to put an exact number on principal
reduction mortgage modifications, but they number in the millions as well. All
together, billions of dollars were expunged on paper and not taxed as income,
as they would have been prior to 2007. These foreclosure alternatives helped
and continue to help bring down the number of homes being lost today.
Loans in the foreclosures process are down nearly 28 percent
from a year ago, according to Black Knight, but the pipeline, while no longer
growing, is still large. More than 3 million borrowers are behind on their
mortgage payments, and 1.24 million are in the foreclosure process. Many of
those delinquent borrowers could avoid foreclosure through a short sale or principal
reduction loan modification.
Even banks and investors could get hurt if borrowers can no
longer afford short sales. Short sales have helped to clear much of the
distress from the housing market, especially in states where the foreclosure
process requires a judge. Those states have huge backlogs of delinquent loans.
"With fewer short sales, you're going to see longer
liquidation timelines, so you're going to see more full foreclosures and REOs
[bank repossessions]," said Sean Nelson of Fitch Ratings. "With
longer timelines, you have more costs associated with liquidation of the
properties. More costs translates to lower recoveries for investors.Weitz - this article is pretty self-explanatory, but we still continue to believe the law will be extended...someday. Without it, foreclosures and bankruptcies would increase dramatically and that is not good for anyone.
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Rylee Park Properties
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Kirkland, WA 98033
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