Hello CTC,
I have a concern. I recently had a short sale approved in California through B of A and the buyer wants to close asap. I got a letter from B of A stating "BAC Home Loans Servicing, LP and/or its investors may pursue a deficiency judgment for the difference in the payment recieved and the total balance due, unless agreed otherwise or prohibited by law, if the short sale closes on the loan referenced above."
Can they really come after me for the difference? I thought this was the whole purpose of the short sale...to avoid it. I've relocated and find a new career so I don't want to risk taking that hit. Any advise?
Matt
This is all helping a lot everyone. We have gone back to B or A and asked them to change the wording and they said they couldn't do it. I'm going to keep trying. I'm really impressed by all of the knowledge and communication from everyone. I'll be back to let everyone know how things turn out. - Matt
Matt A., we definitely seem to be on parallel tracks. We should network on the site.
Like you, my (Level 1 - I found out) negotiator came back with an unhelpful response that the approval letter cannot be changed for anyone. I got a tip from someone to contact the Office of the President at B of A directly, to get movement. So I did, by emailing [email protected] (she is the president). Within 24 hours I got a call back from her office telling me they have reassigned me to a "Level 2 VIP" negotiator, who they tell me has more leverage to actually negotiate. They have subsequently missed their window when they were supposed to be in touch with me, but I have their direct name, email and phone number, so I have left messages and hope to hear back soon.
I have conducted myself very professionally with all B of A staff, regardless of how difficult they are, or how much they clearly are cogs in the machine. I hope that this, combined with perseverance, gets me where I need to go.
And I'm taking notes on everything.
Do you have any additional insights to share on how to get their attention?
Hello all,
Ok, after a lot of research/calls/emails I have come to this conclusion just now. This is an exact quote from B of A:
"CA is a non-deficiency state, by law we can not go after the deficiency."
We'll see I guess but you can bet that I am keeping the email handy just in case!!!!
Thank you again for all you input.
Regards,
Matt
Matt, apologies I miswrote Barbara Desoer's email address, it includes a middle initial and is:
Its called the Mortgage Debt Foregiveness Act of 2007. look it up.
About the act
http://www.irs.gov/individuals/article/0,,id=179414,00.html
Clikc on publication 4681 to read more about foreclosure, credit cards, repo's
then see the IRS news release IR-2008-17
from what i read as long as its your primary residence the debt is forgiven and you will not owe taxes on it. Now i cant remember when this ends though. Might be soon or already has and im also not sure if they will extend it or not.
but who am i? i was in a 9th grade reading class for reading comprehension. PRobably mispelled alot on here too :). Wouldnt it make you feel bad if i actually made a ton of money in real estate!!!?
here we go
IR-2008-17, Feb. 12, 2008
WASHINGTON — Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out newly-revised Form 982 and attaching it to their 2007 federal income tax return, according to the Internal Revenue Service.
Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions, available now on this Web site.
“The new law contains important provisions for struggling homeowners,†said Acting IRS Commissioner Linda Stiff. “We urge people with mortgage problems to take full advantage of the valuable tax relief available.†(Weeeeeee Inflation is coming :)
The late-December enactment means that reporting procedures for this law change were not incorporated into tax-preparation software or IRS forms. For that reason, people using tax software should check with their provider for updates that include the revised Form 982. Similarly, the IRS is now updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. The paper Form 982 is now being accepted, but the IRS reminds affected taxpayers to consider filing electronically, which greatly reduces errors and speeds refunds.
The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. In most cases, eligible homeowners only need to fill out a few lines on Form 982 (specifically, lines 1e, 2 and 10b).
The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.
Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. For debt cancelled in 2007, the lender was required to provide this form to the borrower by Jan. 31, 2008. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.
The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home ( Box 7).
Note: Legislation enacted in October 2008 extended this relief through 2012. Thus this relief now applies to debt forgiven in calendar years 2007 through 2012.
Did Matt or Jeff ever get BofA to remove the deficiency judgement language from the approval letter ? I found myself in the same situation currently in California. Our BofA approval letter is almost identical to what Jeff and Matt described. I did read Jeff's advice about putting the condition of the bank not to pursue deficiency judgement into addendum of the sales contract. It's too late for us now. We are scheduled to close escrow in about one week. I am still trying to talk with the negotiator for her to remove the deficiency judgement clause and to put in writing to release us from all liabilities before signing. From what I learned so far, unless we can get them to agree to our terms, it's better for the us not to go through with the short sell and let the bank foreclose on the house instead. At least they can't go after us for the remaining balance in a foreclosure in California. Any thoughts ?