Thursday, November 8, 2012

Loan Modifications & the Federal Housing Finance Authority

A very interesting article in Business Insider for all those who have Fannie and Freddie (GSE) underwater loans. While its true that the current head of the FHFA has blocked any attempts to have Fannie and Freddie write off losses of underwater loans, the article speculates that "He's going to lose his job in the next six weeks" and this will quickly change.

An interesting aside is how this will create huge tax liabilities for homeowners in cancellation of debt income for those who have their underwater loans wrote off because the Mortgage Debt Tax Relief Act of 2007 is set to expire at the end of the year.

Maybe, it would be wise to extend the Act prior to concerning ourselves with whether its prudent to write off underwater loans.