Mortgage Debt Forgiveness Letters from Some Lenders in California

As part of the "National Mortgage Settlement" reached during 2012, some lenders in California are in the process of determining whether to forgive balances on certain second mortgage loans.

mortgage debt forgiveness

 

In those very limited situations where borrowers qualify, a letter from the lender would be sent to the borrower spelling out the conditions of the "offer of mortgage debt forgiveness".

Because of possibility that such a lender letter could be a fraud or a hoax, title companies will need to do serious diligence in order to clear or eliminate the prior trust deed from title. Until completion of title company due diligence, there would not be a recorded reconveyance of a prior deed of trust.

Title companies must verify that the "offer of mortgage debt forgiveness" is valid, and that the borrower has not opted out and has in fact accepted the lender's offer.

Some borrowers are expected to decline such an "offer of mortgage debt forgiveness" because of significant tax liability on phantom income – and receiving a 1099 from the lender for the amount of the debt forgiveness.

In order for title company to verify all of the essential these facts, a third party authorization and full cooperation will be required from the borrower and lender.

If you as borrower receive such a letter "offer of mortgage debt forgiveness", be very careful. Contact the lender and determine all necessary facts, including contact information for the person at the lender making decisions. Then consult with an experienced real estate attorney or income tax professional about your decision whether to accept the offer.

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This is for information only and is not the providing of professional legal or tax services. If you have questions about your legal rights involving mortgage debt forgiveness letter, you should contact the IRS and an experienced real estate attorney or income tax professional.

About Harrison K. Long

Businessman, Professional Realtor agent, GRI, Broker associate, Coldwell Banker Residential Brokerage - Orange County, California - CA DRE 01410855 - Helping property owners, estate trustees, executors and administrators, fiduciaries, bankers, investor group managers, with listing and sale of properties - helping people with their best decisions about homes and real estate - Member at the Orange County Association of REALTORs (serving on its board of directors for 2012); California Association of Realtors (serving on its board of directors for 2011-2102); National Association of Realtors - Also an attorney member of the California State Bar Association #69137 - Contact by telephone or text at 949-701-2515
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