No Taxes on Forgiven Mortgage Debt

A collective sigh of relief from a lot of Americans...

Congress passed legislation Tuesday to protect mortgage borrowers from getting a surprise tax bill when they restructure their loans to avoid foreclosure.

The House adopted legislation passed by the Senate last week to spare homeowners for three years from taxes as high as 35% on canceled mortgage debt.

"Homeowners who restructure their mortgages to avoid foreclosure should not be hit with a tax bill as a result," Treasury Secretary Henry M. Paulson Jr. said. "This legislation will temporarily exclude homeowners who have restructured their mortgage loans from having to pay taxes on the mortgage debt forgiven."

Here is the full article...

Bush Subprime Mortgage Plan - Devil Is in the Details!

Yes I stole that title from the article I am about to reference. Why? Because it is a little catchy (especially for a Monday morning) and it is do true. Here are some excerpts from the Bankruptcy Law Network article...

Harvard Professor Elizabeth Warren says the plan “seems to be nothing more than a guideline for when some lenders or servicers might let some borrowers extend lower interest payments for a while before the interest jumps up later. The loan on the house stays the same, even the family owes much more than the house is now worth–a circumstance that will cut off any refinancing option and any real resolution of the problem. The plan doesn’t require any new laws or government intervention because no one is bound to anything.”

And...

There is no help in the plan for people whose ARM rates have already reset and payments increased, those who have already missed a mortgage payment or two and are facing foreclosure, and those who owe more mortgage debt(s) than the home is worth, according to the plan summary document.

You can read the entire article here...

Severe CDO Rating Cuts Over...

While reading over at Money Central I saw this article which caught enough of my attention while drinking my coffee...

The worst of severe rating cuts of collateralized debt obligations tainted by U.S. subprime mortgages is probably over and 2008 should begin a "healing process," a senior director at Fitch Ratings said.

Deteriorating value of U.S. subprime mortgage debt has resulted in $67 billion of rating cuts of CDOs by Fitch, including top-tier "AAA"-rated debt that now has been lowered on average to "BB"-rated debt known as junk bonds.

Asked if Fitch expects further CDO downgrades ahead, Richard Hrvatin, a managing director at Derivative Fitch in New York, said the worst cuts were behind.

"I never say never, but I think the answer is the rating action that we've taken is meant to be adding stability to the ratings," Hrvatin said on Sunday, during the Opal Financial Group CDO Summit. "I think the answer to that question is no."

Fitch last month completed a global review of CDOs tied to deteriorating subprime mortgage debt resulting in total downgrades of $67 billion, including affirmations of $10.7 billion of structured finance CDOs across 158 deals.

Got to love those subprime mortgages! Here is the rest of the article...

Foreclosure Prevention Counselors.

What is an "foreclosure prevention counselors" and how would I get one? Good question, and hopefully this article from TwinCities.com will help clarify a few things...

Do you fear foreclosure will cause you to lose your home?

Help is on the way.

On Friday, members of a private-public partnership announced that an additional $1.8 million will be available to fund foreclosure prevention counselors.

The extra money will fund 37 counselors - up from 18 working statewide.

Homeowners needing help working through their mortgage or foreclosure problems should call the Home Ownership Center at 651-659-9336, or 866-462-6466 outside the Twin Cities.

"Many of these foreclosures can be prevented by asking for help," said Minnesota Gov. Tim Pawlenty, who announced the beefed up program Friday at Lutheran Social Services.

The earlier people call for help, the easier it is for them to stay in their homes, state Commerce Commissioner Glenn Wilson said.

State, nonprofit and business officials estimate the extra counselors will be able to prevent an additional 5,700 families from losing their homes.

But that's just a fraction of the number of families who might face foreclosure.

The Greater Minnesota Housing Fund estimates that 20,573 families will lose their homes through foreclosure this year. Another 60,000 will fall behind on their mortgage payments. Even experts don't know how bad the mortgage crisis will get before the market - and families - are able to find stability.

Here is the link the full article...

Freddie Mac Take a Big Hit

Here is a headline you would not want to see if you worked for Freddie Mac: "Freddie Mac Reports Third Quarter 2007 Net Loss of $2.0 Billion or $3.29 Per Diluted Share".

Ready for some crazy numbers?

Freddie Mac FRE today reported a net loss of $2.0 billion, or $3.29 per diluted common share, in the third quarter of 2007, compared to a net loss of $715 million, or $1.17 per diluted common share, for the same period in 2006. The company also reported a decrease in the fair value of net assets attributable to common stockholders, before capital transactions, of approximately $8.1 billion for the third quarter of 2007, compared to an increase of approximately $300 million for the same period in 2006. Compared to the second quarter of 2007, the company reported declines in both net income and fair value primarily due to increased credit-related expenses and losses on mark-to-market items.

"Without doubt, 2007 has been an extremely difficult year for the country's housing and credit markets and, as our third quarter financial results reflect, we have been impacted by the deterioration in these markets," said Richard F. Syron, Freddie Mac chairman and chief executive officer. "We recognized the challenges facing the mortgage markets, however, and have taken further steps to address them. At the same time, as our charter mandates, we have continued to meet our mission by playing a stabilizing role in the markets and supporting our customers.

This chunk of article was borrowed from MoneyCentral on MSN. You can read the whole thing here.

How bad can a US downturn possibly get?

That is a good question and I would like to know the answer. Luckily the people over at The Financial Times has an article with the same title...

First, the good news. The US housing slump is unlikely to drag the US economy down very much. It is true that up to now, the major source of weakness in the US economy has been the housing sector. At the end of Q2, 2007, the Federal Reserve Board reported the market value of the US residential housing stock $21.0 trillion and single family mortgage debt at $10.1 trillion. About 14 percent of the mortgage debt, $1.3 trillion, say, is sub-prime. According to the Case-Shiller data, since the end of 2006, the average US house price may have fallen by 5 percent or so, knocking about one trillion dollars of the value of the US housing stock. The brain behind these data, Bob Shiller of Yale University, believes a further decline, over a period of years, of 15 percent is in the cards.

The reason for the good news is that there is no first-order wealth effect from a change in house prices on private consumption; a decline in house prices is a redistribution from home owners to consumers of housing services, that is, from landlords to renters.

Then a lot more details...

The major source of demand strength is the US economy is the external sector. This is not surprising, as the rest of the world is growing faster than the US and the real effective (that is, trade-weighted) exchange rate of the dollar has dropped like a stone. Exports are a much more important source of demand in the

US (12.0 percent of GDP in 2007Q3) than they were in 1975, for about 8.5 percent of GDP or in 1965, when they were 5.2 percent of GDP. From its peak in 2002Q1 the broad effective real exchange rate of the US dollar had depreciated by 25 percent by 2007Q3. The precipitous decline of the nominal and real exchange rate of the dollar since September can easily have added another 5 percent to the cumulative real depreciation rate. In real terms, the dollar today is as weak as it has been at any time since 1970.

And a lot more details...

Here is a link to the blog entry...

Don't Get In Debt For Christmas

Well most of us are already in debt, and Christmas is definitely not going to help. This article has some good advice for handling debt and the holiday season...

One thing that really upsets me each January is hearing how stressed a number of Fool readers become after overspending at Christmas.

Although the festive season is a wonderful time of year, all too many of us get carried away with the parties, Christmas meals and the wish to buy lavish gifts for our loved ones, meaning that we start the New Year in that dreaded word, debt. And of course, with many of us being given ridiculous credit card limits and overdraft facilities it's all too easy to spend more than you earn.

What's more, I know a number of people who have only just paid off the debt accrued last Christmas this month - but are ready to wield that credit card and start all over again!

But just take a moment to take a deep breath before you hit the shops to do your Christmas shopping. Are you already in debt -- and by that I don't mean mortgage debt? Do you have an outstanding balance on your credit card, or are you paying off a personal loan or overdraft?

If the answer is yes, it's time to think carefully before spending any more. Remember, the more you owe, the more interest your debt will accrue and the longer it will take you to pay it off. And I don't know about you, but I absolutely hate owing any lender any money -- and knowing that the interest I'm paying them is effectively going into some overpaid director's bonus!

There is a lot more information in this article which can be found here.

Y! Answers How To Get Out of Debt

I always keep an eye open for any articles related to this website, and today I came across one from an unusual location: Y! Answers (Australia).

The Headline: "Big Problem- Income is less than cc debt, utilities, mortgage, car payment; no money left over for anything!?"

The Details: "Both my husband and my income is less than our debts, this doesn't even include food and gas! All of this due to our cluelessness when we bought our home with no money down, 100% financed, 3/1 (interest only) ARM!!, that can not be refinanced because property values have gone down so much. Thanks in advance for the advice!"

Some answers were helpful:
"1. cut up the credit cards
2. cancel all that is worthless (cell, cable, internet, 3 way calling, newspaper, etc)
3. sell the house
4. stop buying EVERYTHING but food
5. start listening to Dave Ramsey to get out of the hole."

Some were not:
"welcome to the American dream. you and most of the country want to know what to do. well do what some have then fake a disability collect and live in a fixed income housing spending your disability check on booze and drugs blaming things on the government."

Click here to see all the great words of wisdom....

Mortgage Magic

"New mortgage magic is merely sleight of hand" was a decent enough title to get me to read the following article...

A new kind of mortgage can, as if by magic, make a 30-year mortgage disappear in half the time.

That's what readers are telling me, just before asking if it is "too good to be true."

The new mortgage is from Australia. It's called a "line-of-credit mortgage." Instead of making a monthly payment from your checking account to a mortgage company, the line-of-credit mortgage becomes your checking account. Like your checking account, your paychecks are deposited to the account. The monthly cost of the mortgage, interest-only for some period, is automatically deducted from the account.

The paycheck deposits bring an immediate advantage. The amount of your mortgage is reduced by each deposit. Since your mortgage interest payment is a fraction of your monthly income, you get to save the interest cost on the difference — every month.

You can read the whole article over at the Houston Chronicle website and discover some of the magician tricks.

Debt Help

Bills.com has a pretty decent help section regarding debt.

Bills.com has all the debt help, resources, and information you need to start tackling your debt. We even have a Debt Help Savings Center that will help find the best solution for consolidating and paying down your debt. There are actually a number of debt help solutions available to you. Bills.com will help identify what options you have and which ones are best suited to help you tackle your debt. Browse through our articles, debt help guides, and debt relief tips and get all the information you need to get your finances back in order. Bills.com is the answer to effective debt help.

Here is a link to the Debt Help section...

Subprime Lending Woes

I read an article entitled "Subprime Lending Woes: How Declining Home Prices Can Have Tax Implications for Unlucky Owners" that was written by Bill Bischoff a couple of days ago. Here is the opening sentenece which should grab most reader's attention...

Current subprime mortgage lending woes, combined with lower home prices in many markets, can have negative implications for taxpayers who are forced to sell their personal residence or if their lenders foreclose.

He also gives us some easy-to-follow examples...

Example 1: Let's say you paid $190,000 for your personal residence, which you could currently sell for a net of $250,000. However, the first and second mortgages against the property total $280,000. If you sell, you'll have a tax gain of $60,000. Why? Because the net sale price exceeds the property's tax basis by that amount ($250,000 sale price minus $190,000 basis equals $60,000 gain).

Will the IRS cut you any slack since you're $30,000 in the red on the deal ($280,000 of debt compared to $250,000 sale price)? Unfortunately, the answer is no. The sad truth is you can have a tax gain without actually having any cash to show for it. Reason: Your mortgage debt doesn't affect your gain or loss calculation.

Click here for the whole article to see how you might be affected come tax time...

$75 Billion Mortgage Debt Fund

I was trolling the internet yesterday when I stumbled upon this article...

Citigroup, Bank of America and JPMorgan are on Monday expected to announce plans for a fund to buy mortgage-linked securities in an attempt to allay fears of a downward price-spiral that would hit the balance sheets of big banks.

A person familiar with the discussions said that US banks collectively were expected to put up credit guarantees worth about $75bn for the fund, named the Single-Master Liquidity Enhancement Conduit (SMLEC).

But bankers said the scheme would evolve with the market and may only be as large as demand requires. The SMLEC would be temporary and capped in value, and would not be backed by any state guarantee. A person familiar with the proposals said it was hoped that other banks would join the syndicate.

I have always had a problem with the word SYNDICATE for some reason...

Here is a link to the full article...

The Mortgage Forgiveness Bill of 2007

What is "The Mortgage Forgiveness Bill of 2007"?

One of the most controversial and paradoxical real estate and mortgage finance stories to hit the media in recent weeks was that of a newly crafted real estate tax bill – the so-called Mortgage Forgiveness Bill of 2007. The bill, which may help you hold onto your money if you face foreclosure but will likely hit you hard in the wallet if you own a second home, was drafted by Democrats and approved by the powerful House Ways and Means Committee.

Tell me more...

The New Bill Would Cut Out the Tax but Repay it by Curbing a Tax Break

If the Mortgage Forgiveness Bill of 2007 passes and becomes law, homeowners facing foreclosure won’t be responsible for paying taxes on debt forgiven by lenders. That is the main focus of the bill, and is great news for those homeowners.

But in order to make up for tax revenues that will be lost if the bill goes through, a major tax break for those who own second homes will be drastically trimmed.

Where did you get this info from?

Here

Drowning in Mortgage Debt?

Well I thought that it was a catchy title when I came across it over at StarNewsOnline.com. It covers some of the options that you can explore if you are in the hole...

The road to foreclosure can start with a late mortgage payment and end at the courthouse steps, where your house will be auctioned to the highest bidder.

But you don't have to go down that road, even if you have fallen seriously behind on your payments.

Your mortgage company can help in several ways, but the key to keeping your home and your credit rating is to act early, say lenders, counselors and attorneys.

The people to whom you owe thousands of dollars are in the lending business, not the property business. Especially in a housing market where prices are stagnant and homes are hard to sell, why would they want to be saddled with owning and keeping up your home?

Here is the full article...

What's with Subprime?

These days a whole lot of "Subprime" is being tossed around. But what exactly uis subprime? Luckily the Mortgage Professor can help...

Subprime Lenders Defined

A sub-prime lender is one who lends to borrowers who do not qualify for loans from mainstream lenders. Some are independent, but increasingly they are affiliates of mainstream lenders operating under different names.

Subprime Borrowers Defined

A subprime borrower is one who cannot qualify for prime financing terms but can qualify for subprime financing terms. The failure to qualify for prime financing is due primarily to low credit scores. A very low score will disqualify. A middling score might or might not, depending mainly on the down payment, the ratio of total expense (including debt payments) to income, and ability to document income and assets.

The article not only defines the terms, but goes into some of the problem with subprime loans. Click here for the whole article...

2007 Subprime Mortgage Financial Crisis

Well you know that the sh*t has hit the fan when you have a Wiki article entitled "2007 Subprime Mortgage Financial Crisis". It was created back on March 15th of this year and has been updated quite a few times. Here is a snippet...

The subprime mortgage financial crisis was the sharp rise in foreclosures in the subprime mortgage market that began in the United States in 2006 and became a global financial crisis in July 2007. Rising interest rates increased the monthly payments on newly-popular adjustable rate mortgages and property values suffered declines from the demise of the US housing bubble, leaving home owners unable to meet financial commitments and lenders without a means to recoup their losses. Many observers believe this has resulted in a severe credit crunch, threatening the solvency of a number of marginal private banks and other financial institutions.

Click here for the full article...

Mortgage News Daily

What is it?

A website

What kind of information do they cover?

Daily Mortgage News

Brilliant. Any other ingenious insights?

No

Can I at least have a link?

Sure.

Avoid Bankruptcy

I was looking at some other debt related blogs on Blogger and came across Debt Consolidation Management Assistance. Here is a snippet of one article that caught my eye:

Here is a snip:

Avoid Bankruptcy: You May Have to Pay the Debt Back Anyway

The most widely held misconception about bankruptcy is that it’s the debtor’s version of the “get out of jail free” card in Monopoly. While most people know that bankruptcy affects your credit for 7 to 10 years, very few people know that it’s possible that you’ll have to pay back the debt anyway, even if you file a Chapter 7 “straight” bankruptcy. The formal definition of bankruptcy is “a proceeding in federal court in which an insolvent debtor’s assets are liquidated and the debtor is relieved of further liability.” On the other hand, the commonplace definition of bankruptcy is probably “the process of completely wiping out your debts for free.” In some cases, the latter definition may be appropriate, but in a good number of scenarios, it’s likely that even with bankruptcy, you’ll still have to pay back at least a portion of the debt.

Click here to read the whole article.

I was unaware of that whole scenario. Good to know....

Consolidation Loan Tip

Here is a tip that I found yesterday:

The truth is, you probably have more options then you realize. Traditional "consolidation loans" from a financial institution may not even be your best choice. Instead, you may want to think about:

* using credit cards
* a home equity loan
* a loan from your insurance policy or retirement plan
* a loan from a relative to consolidate

Each of these options can be extremely helpful or extremely dangerous depending on how you use them. The key when you consolidate is to create a plan that will have you out of debt in three to five years, and to stop adding to your debt

I came across this tip while Googling for tips. It came from the nice people over at Gay Mortgage Loans.

Click here for the whole article.

10 Debt Consolidation Myths

What are the biggest myths surrounding debt consolidation? I am glad that you asked...

1. Credit counseling, debt-management programs -- it's all the same.
2. Credit counselors can cut your monthly payments in half.
3. Some companies offer lower interest rates than others.
4. Some agencies can negotiate lower DMP payments than others.
5. Debt settlement is the cheapest way to go
6. You need a formal program to get out of debt.
7. Debt consolidation always saves you money.
8. DMP helps your credit rating.
9. Bankruptcy will ruin your life.
10. Bankruptcy is no big deal.

This is just a high level overview. To find out more of what each of these mean, read the full article over at BankRate...

Debt Consolidation FAQ

I came across a pretty informative FAQ about Debt Consolidation over at FH Financial Service.

Here are some of the questions:

1. Why should I use FH Financial Debt Settlement Plan?
2. What is debt settlement?
3. What is a Debt Management Plan?
4. Is Debt Settlement the same as Debt Consolidation?
5. Is Debt Settlement the same as Consumer Credit Counseling?
6. Can you settle your debt on your own?
7. How long does the Debt Settlement program take?
8. Are your Debt Settlement services guaranteed?
9. What is the effect of how much debt I have on my credit score?
10. How will Debt Settlement affect my credit score?
11. How does Debt Settlement compare to bankruptcy?

Well that should answer a couple of questions at least.

Here is the link to the Debt Consolidation FAQ.

Pros and Cons

Should I consolidate? Well one would think the answer would automatically YES, but there are some Pros and Cons. The following link is a page that can help answer this question.

The calculator provides two types of information about each of these options. One is the total monthly payment, which consists of mortgage payments, mortgage insurance premiums if any, and non-mortgage debt payments if any. Borrowers on tight budgets must be concerned with the monthly payment, but it should not be the major determinant of their choice. It fails to reflect differences in tax savings or debt reduction as between the options.

The second type of information the calculator provides about all the options is their total cost over a period specified by the user. If the user’s time horizon is, say, 5 years, the total cost of each option is the sum of the monthly payments over 5 years including lost interest, less the tax savings and reduction in total debt over that period. Minimizing this cost should be the borrower's major objective.

Here is the link to the article...

Debt Consolidation Calculator

Being that this blog is trying to find out some helpful information about Mortage Debt, I thought that a "Debt Consolidation Calculator" would be useful. There is a decent one over at Mortgage 101. Over there it says:

Discover your potential monthly savings by combining your bills into a single source. Eliminate high interest rate credit card and installment loans with a tax deductible (consult your tax advisor) consolidation loan. Use our calculator to figure how long before your savings equal the cost of obtaining a new consolidation loan.

Here is the link for the Calc.

Mortgage/Debt Elimination Scams

I came across an interesting article that covered Mortgage/Debt Elimination scams. Here is a quick clip from the article:

Never missing an opportunity to profit from others’ pain, many scam artists flooded the Corn Belt selling various books and kits that espoused hinky theories about why the farmers weren’t really liable under the law to repay the banks on their loans. Many of these theories involved so-called “Allodial Title” schemes, while others involved thwarting sheriff sales by repeatedly putting bogus liens on the property. Other popular theories involved the remarkable claim that money isn’t really money, and that the banks never actually made any loans in the first place.

It was an interesting read, and just another notch on the Resource Belt.

Source: www.quatloos.com
Article: Mortgage Elimination/Debt Elimination Scams

Dangers of Debt Consolidation

While poking around the web I came across an article from over at bankrate.com that tells a different story then most other sites. It says:

But, says Viale, 70 percent of Americans who take out a home equity loan or other type of loan to pay off credit cards end up with the same (if not higher) debt load within two years.

Viale's statistics underscore a major problem with debt consolidation: It feeds upon the tendencies that got you in trouble in the first place. By taking on yet another creditor, you're adding the proverbial fuel to the fire. In this case, it's your money that's burning.

Here is the full article.

Just Getting Started

Just here trying to gather some good information regarding mortgage and debt consolidation. I will hopefully be adding links to resources as I discover them. If anyone has any hints or tips, go ahead and send them this way. Thanks.