Congress has left unrenewed The Mortgage Forgiveness Debt Relief Act of 2007 created to help distressed homeowners; that were faced with taxes after a Principal reduction. Under current federal tax law, when the homeowners accept reductions in what they owe, the amount forgiven by the bank gets reported to the IRS, and the owner is hit with taxes as if it were ordinary income.
Without Congressional action to renew the breaks, those whom banks allowed to sell their homes for less than the amount of their mortgage would have to pay taxes on the forgiven mortgage debt as if it were income, and it will hit hard on homeowners with a massive tax bills. This Congressional inaction could add $75K in phantom income.
RealtyTrac estimates that in the first three-quarters of 2014, there have been more than 170,000 short sales representing a mortgage debt forgiveness of $8.1 billion total. The average short sale has a mortgage forgiveness of about $75,000, which if the tax break expires would be counted as income.
If Congress does not extend the law retroactively thousands of underwater homeowners could be hit with tax burdens that may not be able to handle.
We are experiencing one of the biggest foreclosure filling increases for the last four years.
The number of foreclosure filings experienced a big jump from September to October alone. These filings include but not limited to notice of defaults, scheduled auctions, and bank repossession. According to RealtyTrac this is the largest month-over-month jump since the peak of foreclosure activity in March 2010.
However even though Foreclosure filings reported were into a considerable 123,109 U.S. residential properties in October, fortunately still represented an 8 percent decline overall in the number of foreclosure filings from October 2013. This is equivalent to one house for every 1,069 residential properties in the U.S. reported a foreclosure filing in October based on the latest report from RealtyTrac.
These numbers did not take us by surprise due to that over the past three years an average of 8 percent monthly uptick was scheduled for foreclosure procedures in the country.
On the other hand, REO activity (lenders repossessing properties via foreclosure) increased by 22 percent from September. The largest month-over-month increase since June 2009. Overall, lenders repossessed 27,914 U.S. residential properties in October, as reported by RealtyTrac which is an agency that monitor housing foreclosure activities in the country.