When looking for low current mortgage rates and considering what could be deemed an accurate prediction of what they will be in the future, remember that predicting interest rates is not too different from making weather predictions. The farther out you try to guess, the lesser chance you will be accurate in your prediction. However, predicting a range of possibilities is possible and much more likely to have a smaller margin of error. The same way climate provides meteorologists with a broad indication of temperature, the economic climate can give a broad indication of mortgage interest rates and how they may be changing.

When a borrower has this commitment from a mortgage lender, it is as close as a borrower can get to actually having the cash in hand to pay for a home. That said, getting a commitment from a mortgage lender while you are searching for a home may be the only option of closing in time to benefit from the federal tax credit.

Current mortgage rates are also determined by any risks in the housing market. If home values plunge, as they have in many locations of the country, then risks for banks automatically amplify. This leads directly to higher mortgage rates so banks can reduce their risks in such situations. Taking this and other factors into account, it can be fairly confidently stated that interest rates will be increasing at some point in the near term.

The Federal Reserve has done a good job of letting us know rates will remain low. In fact, it recently announced they have no intention of raising current mortgage rates any time soon. In the midst of economic uncertainty, it is certainly in their best interest to make this widely known. Alternately, when current mortgage rates do begin to rise, the Federal Reserve will undoubtedly keep that to themselves. There will be several warning signs indicating a boost in current mortgage rates, but none more straightforward and clear-cut than the unemployment rate. As the unemployment rate creeps toward 10% nationally, it’s a good sign current mortgage rates will remain low. When the unemployment rate begins to sincerely decline, watch for current mortgage rates to rise, and quite possibly, sharply.

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Everyone thinks only about there bigger bills never about the smaller bills that do add up if you think about it. I am talking about grocery, gas, tolls for the bridge, pay money for the trains or buses, your children’s school supplies, clothing etc. Those are what I call the small bills. The big bills are mortgage bills, electric bills, phone bills, car insurance, the cable bill, water bill, child support payments, cell phone (house bill is separate from your cell phone bills) and credit card bills.

The qualifications for of Short Sale mortgage relief bill may vary, depending on the lender. However, the majority of lenders will consider a Short Sale if: The homeowner is facing a legitimate financial hardship (Ex. Loss of Job, Divorce, Relocation, etc.) and can no longer afford their monthly mortgage payments. The homeowner’s property is over-leveraged (a.k.a. negative equity); meaning their property is worth less than their current mortgage. (Ex. Home is worth $150,000 and Mortgage amount owed is $200,000. In this example the property would be over-leveraged by $50,000). The homeowner has missed several mortgage payments. Contrary to popular belief, a homeowner may still be eligible for a Short Sale even if their mortgage payments are current. If the homeowner can prove they are no longer able to make their mortgage payments, due to a financial hardship, their lender may still consider a Short Sale.

They will also need a BPO, a Broker’s Price Opinion. This is an estimate of current fair market value for the property given by a realtor, which should include any costs of repairs. This is a big factor in the bank’s decision of how much the property might be sold for and therefore how much of a discount to allow. Finally, the bank would prefer to have a qualified buyer lined up to buy the property, since they do not want to prolong the process any more than they have to after approving the short sale. The above process takes months. There is a lot of going back and forth, lost documents, requesting additional information of the borrower, speaking with different people all the time, etc.

I have seen cases where the borrower was still negotiating with the bank when the foreclosure proceeded and the house was lost to foreclosure in the midst of negotiations. This is really a process that calls for an experienced negotiator, knowledgeable about the process and the institution. Ironically, if the short sale is consummated, the borrower’s troubles may not be over. The bank may continue to pursue the borrower for the deficiency, the difference between the sales price and the mortgage balance. There may be a taxable issue for the borrower as we mentioned. In the past, the bank would issue a 1099-A for the amount of the bank’s loss to the borrower and he would have to pay income tax on that amount.

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There are some additional provisions that permanently increase the loan limit to $625,000 to help in the more pricey areas. There is almost $4 billion in neighborhood grants to refurbish homes in blighted areas to avoid abandoned homes from bringing the neighborhood down. There is also $180 million for pre-foreclosure counseling assistance. On the inner working side it overhauls the FHA that was basically designed in the depression era and now allows the Treasury to have virtually unlimited power to lend money to the FNMA and FHLMC through 2009 and gives the Treasury some control. The idea being that this will help support the housing market and the national economy.

Many also don’t like the fact that the current resolution would be open to any homeowner, not just those who bought into sub-prime mortgages-which are, of course, taking the brunt of the blame for America’s current economic turmoil. Therefore, opponents feel that the enactment of the current version of H.R. 1106 will not only not solve the mortgage crisis, but that it will only worsen America’s mortgage woes and cause increased economic instability. The arguments posed by supporters is just as convincing. Supporters say that the bill, and homeowners’ ability to get mortgage relief via bankruptcy court, is another necessary step to settle the current mortgage economic crisis.

For the lenders side, they need to agree to write down the current loan amount to just 90% of current appraised value – also known as a “hair-cut”. The appraisal must be performed by an FHA approved and licensed appraiser. They must agree to waive all fees and pre-payment penalties. They will also want to document that there is financial hardship. They must run their numbers to see if it’s beneficial to re-do the loan or foreclose. For the new FHA loan, the borrower must agree to no equity loans for 5 years unless it’s for home maintenance or improvement. Borrower must agree to share the equity if the property increase at 100% of the profit the first year if sold and then 90% the second and then 10% down to 50%, that is the most unusual part of this program.

What do you think? Regardless of which side you’re on, there’s still time to voice your opinion. As of March 11, 2009, H.R. 1106 had been sent to the U.S. Senate’s Committee on Banking, Housing, and Urban Affairs. There’s no word on how much time the committee will dedicate to further review before creating recommendations amendments or other actions before sending it to the Senate floor. It’s also possible that the Senate will opt to move forward with legislation U.S. Senators have drawn up instead of the House’s version. Therefore, you do have some time to chime in on the issue. Still, things seem to be moving pretty fast-at least on some topics-in our government. So, speak up!

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Upon the foreclosure or short sale of a piece of real estate, the lender with the deficiency will issue a Form 1099-C, Cancellation of Debt to both the taxpayer and the IRS. In past years, the amount of cancelled debt would give rise to what is sometimes referred to as “phantom income”. This phantom income would be taxable as ordinary income and would result in tax that had to be paid by the taxpayer. The taxpayer however, having never taken actual receipt of any cash, would many times be unable to pay the tax this phantom income produced.Fortunately for taxpayers, Congress addressed this very issue in The Mortgage Forgiveness Debt Relief Act of 2007.

The Mortgage Forgiveness Debt Relief Act of 2007 offers homeowners an exclusion of income from the discharge of debt when their principal residence is foreclosed. The amount that can be excluded is based on your filing status with single taxpayer and married filing separately can exclude up to $1 million and taxpayers filing jointly can exclude up to $2 million. The only catch is that law only applies to foreclosures that occur between 2007 and 2012.

Therefore, borrowers are still exposed to deficiency claims for any “cash-out” portion of the refinancing. It is this cash out portion of the refinancing that is creating the extensive deficiency exposure faced by many California borrowers.

For taxpayers who have lost their homes either through foreclosure or a short sale scenario these relief provisions are welcome news. However, it is important for taxpayers to remember that these provisions only apply to principle residence loans that were used to acquire, construct or rehabilitate a taxpayer’s principle residence. Taxpayers who have used loan proceeds for other purposes may still be facing a taxable income situation. Taxpayers who have experienced or are facing foreclosure or short sale scenarios on rental, business or investment properties are likewise at risk as these provisions will not apply. In these situations it is imperative that taxpayers have a competent tax professional to assist them with their tax planning and preparation. Taxpayers may still be able to obtain relief under other provisions such as the establishment of insolvency. However, navigating specific tax laws in these areas can be tricky.

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I will first start off by saying that I am not a tax attorney or an accountant. So for a complete understanding of the following concepts, I would recommend seeking professional advice. What I am writing is based upon my reading, understanding and discussion of the legislation and of the IRS mortgage relief bill publications that are commonly available. I will include links to those documents for those of you that are interested in understanding this topic better. In the early part of the foreclosure crisis, Congress enacted legislation called ‘The Mortgage Debt Relief Act of 2007′. The main part of this legislation was directed at the primary residence homeowner.

Following this legislation, it became widely believed that only the primary residence homeowner received tax relief from a 1099 received after foreclosure or after Short Sale. What this misconception overlooked is that the tax liability following the receipt of a 1099 could still be effectively reduced by other provisions in the tax code that deal with issues of insolvency. Many Investors felt dismay and became quite forlorn when they felt that their underwater single family house purchases were ‘going down’ and dragging them with them. Not only that, when all was said and done they feared that they would be hit with big 1099′s and resulting big Income Tax payments in the following years that would throw them into bankruptcy. Why wouldn’t they? After all many of these small portfolio investors were usually good people who never missed a payment on anything in their life and had no prior reason to consider or understand anything about the meaning of insolvency.

What are the consequences of Debt Forgiveness or Debt Deficiency? Whether it is debt forgiveness or debt deficiency, the consequences are essentially the same. A lender has two general options regarding any unpaid debt. 1. The lender can forgive the debt. 2. The lender can get a court ordered money judgment to chase the borrower for the money or sell the debt to a third party. If a lender agrees to forgive the debt, the lender will, in all likelihood, file a 1099 form for the forgiven amount. You should also remember to check your state taxing authority, since your state may consider debt forgiveness as taxable income. If the debt is secured by property, it may be possible to negotiate an exchange of the property for the full debt balance. In this case, the lender would not have a reason to file a 1099 form.

If your cancellation of debt relates to a rental or investment property then you need to be particularly careful. Dealing with tax issues associated with rental or investment property can be very challenging so you should seek the help of a professional. Taxpayers need to realize that analyzing the tax impact of cancellation of debt is complex and they should seek the guidance and advice of a CPA or other qualified tax professional for any issue they have. Not only might they have a mortgage relief bill , but they need to make sure that all the required IRS forms are properly completed.

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