Foreclosures and 1099s?

Question:

here's our situation: I have a home in NC, my wife has a home in fl. We got married this past year. We decided to sell the house in florida and move to the house in NC. the problem is: we owe 217,000 on the house in florida and the fmv is about 175,000. The value of the house dropped about 40,000 in less than a year! We have two mortgages on that home, the first loan is for 175,000 and then a 2nd loan for the remaining cost of the house, about 40,000. What are our options? Can the bank sell the house at any price they want and than we're stuck with paying taxes on the difference, and than also have to payoff the 2nd mortgage of 40,000?

Answer:
A lot will depend upon the wording of the mortgage loan contracts. Many mortgages are "non-recourse" which means that the property is the only security for the loan. If it's foreclosed upon or you do a short sale the lender cannot recover any shortfall from the borrower.

The other issue is that any debt forgiven may be considered taxable income to you. This is called Cancellation of Debt income or COD for short. This can get sticky for you. You may be able to avoid the tax if you are insolvent at the time of the cancellation of the debt. You are insolvent if your total liabilities exceed the FMV of your total assets on the date of the COD. Contact a tax adviser for further information on that issue.

You have options but you need to give more information so that someone here can help you
better.

I can definitely help you if you would like to email me for information.

What you have in the home in Florida is called negative equity...you owe more on the house than it is worth.

When you say, "Can the bank sell the house at any price they want," are you saying that you are abandoning the property and allowing them to foreclose to move? That is a very financially irresponsible reason.

When the bank sells the home, the bank will get a deficiency judgement against you for the difference, and from your figures, that will most likely be over $40,000 (plus fees). If you can't pay that, you'll need to consider bankruptcy.

I also, don't know what a 1099 would have to do with the sale of your home, considering that is an income document.

A recent foreclosure will also make it virtually impossible to purchase another home in North Carolina.

please get some info about it, i work with a company thet helps with pre foreclosure sales in the md, and va area, but there a lot of companies that helps you with out charging you any money. get some advise, i know from people that get scamed with tousands of dollars with getting any real help.
search in hud.gov any certified council agency to help you. in some cases the second lender asumes the whole debt, and gives you a 1099, and yes, you might have to pay taxes for that.

Foreclosures and 1099s?

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