This is part two of a two-part post recounting parts of my conversation with an experienced attorney working for one of the state’s largest foreclosure law firms. The first installment was published on June 19, 2012. Here is a summary of the rest of our conversation:
Most commercial mortgage loans made to LLCs or corporations require a separate personal guarantee by the individual principals of the corporate or LLC borrower. If the investment fails economically the lender can and usually does foreclose its mortgage on the property
The bank expects the client to pay the loan in full in a real estate market where the client cannot sell the property and cannot refinance the property with another bank because banks today are reluctant to extend new credit. The client wonders why his loan which has always been paid on time is suddenly …
A very skilled and busy mortgage defense attorney told me that he sees some mortgage lenders bypassing foreclosure and suing borrowers directly for default on the underlying mortgage note.
Many people do not understand the significance of tax form 1099 in the foreclosure context. A 1099 is an IRS reporting form indicating that the lender has written off a mortgage and is declaring a tax loss. The borrower may have to declare the bank’s loss as imputed income.
Finally, one of my clients reported a common sense resolution to an upside down mortgage.
Many people facing foreclosure are concerned about income tax liability from the lender’s forgiveness of mortgage debt. If the mortgage lender does not pursue a deficiency judgment and writes-off the loan after foreclosure the lender could send the owner a IRS Form 1099 for imputed income for the amount of debt forgiven.
When homeowners decide to let their upside down properties go into foreclosure they typically stop caring for the properties physical condition. Repairs are deferred unless absolutely necessary.
I have reported recently that some second mortgage lenders have become more aggressive by suing defaulting homeowners personally for a deficiency judgment. I recently received an email from a litigation attorney representing New York residents who purchased an investment home in Florida subject to a first and second mortgage. I had referred the client for …
Several people who are contemplating voluntary foreclosure have asked me whether they should continue paying their homeowner or condominium dues during the foreclosure process. I have recommended that homeowners stop paying homeowner dues if they are voluntarily surrendering their homes to their mortgage lender.