MORE MODIFICATION VS LESS MORTIFICATION

On September 1, 2012 The New York Times Sunday Review ran in an editorial entitled "Still No Justice  for Mortgage Abuse" that indicates we are nowhere near seeing the light at the end of tunnel in the foreclosure and mortgage mortification scandal.  Please see the excerpts from this editorial.

“It has been six months since the big banks settled with state and federal officials over evidence of widespread foreclosure fraud, promising to provide $25 billion in mortgage relief in exchange for not being sued over past foreclosure abuses.  The type of relief provided — mostly short sales, in which a bank allows a homeowner to sell for less than is owed on the mortgage — had become increasingly common before the settlement.  Short sales are better than foreclosures, in part because they prevent vacancies that depress house values. But they are not punishment for wrongdoing in any meaningful sense; rather, they allow banks to get higher prices for underwater properties than they could have gotten in foreclosure sales. Nor do they fulfill the settlement’s main purpose: to keep underwater borrowers in their homes by reducing the principal on their mortgage loans. According to the monitor’s report, $8.7 billion of debt has been written off in short sales versus only $750 million of principal reduction from loan modifications.  Even the relief that is provided may turn out to be less than meets the eye. That’s because much of the debt forgiven in short sales and loan modifications will be counted as taxable income to the borrowers, creating huge tax bills they will not be able to pay.” 

Banks continue to show irresponsibility/deceit towards the government in their lack of bailout to the homeowners.  Most importantly, the banks made an unprecedented legal maneuver carving out a shield of protection for themselves from the homeowners by restricting legal recourse for their wrong doings.

HOMEOWNERS BEWARE:  Short sale may place you in a precarious taxation position if your property is sold for less than you owe and the debt is “forgiven or written off” by your bank.   The amount that is “forgiven” by the bank is taxable by the IRS.   Your short sale my negatively impact you in the long run.  The bank is not telling you that you will be taxed on the money they "forgive."  It is not the bank's responsibility to educate the public. The bank will ultimately financially benefit from a short sale and you will have lost your home and be held responsible for taxes on the "forgiven mortgage."   The banksters just got away again!