LIEB BLOG

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Showing posts with label deed-in-lieu. Show all posts
Showing posts with label deed-in-lieu. Show all posts

Wednesday, October 14, 2020

Consent to Foreclosure or Deed in Lieu as Mortgage Workout Options: Which is Better?

With roughly 10% of Long Island homeowners behind on their mortgage, it's time to start thinking about foreclosure settlement options. Andrew Lieb breaks down the difference between a deed-in-lieu and a consent to foreclosure in this helpful article for lenders and borrowers alike.




Friday, January 10, 2020

New Law: Mortgage Forgiveness Debt Relief Act Extended to 1/1/2021

On December 20, 2019, Public Law No: 116-94 extended 26 USC 108(a)(1)(E) to 1/1/2021. 

According to the IRS, this law "allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief."

Short sales, modifications with debt forgiveness, and deeds in lieu of foreclosure are now viable options for many more distressed homeowners for the remainder of 2020.

Tuesday, July 26, 2016

Changes to New York Foreclosure Law Impose Stringent Penalties for Failing to Negotiate in “Good Faith”

Recently Governor Andrew Cuomo signed into law a comprehensive piece of legislation, which makes sweeping changes to New York’s requirement that Lenders and Borrowers negotiate in “good faith” during Mandatory Foreclosure Settlement Conferences.

Under New York foreclosure law, in a residential foreclosure action, commenced on or after February 13, 2010, involving a 1-4 family owner occupied property, it is required that a Mandatory Foreclosure Settlement Conference be held within sixty (60) days of service of the foreclosure summons and complaint. The purpose of the Mandatory Foreclosure Settlement Conference is to provide a venue for Borrowers and Lenders to settle the foreclosure action without further court action, via a loan modification, deed-in-lieu, short sale or other loss mitigation option. At this settlement conference, it is required that both parties negotiate in “good faith.”

However, the implementation of New York’s Mandatory Foreclosure Settlement Conference and its “good faith” negotiations requirement, has had its fair share of complications. To mitigate these complications, this recently enacted legislation, which takes effect on December 20, 2016, places stringent guidelines on the documentation and information that both parties must come to the conference with and requires that both parties, or representatives thereof, appear at the conference with full authority to settle the case.

Additionally, the legislation imposes more stringent penalties upon both parties should they fail to negotiate in “good faith.” Where it is found that a Lender has failed to negotiate in “good faith,” one or more of the following penalties may be imposed:
  • A toll of the accumulation and collection of interest, costs and fees during any undue delay caused; 
  • A civil penalty of up to twenty-five thousand dollars ($25,000.00); 
  • Actual damages, fees (including attorney’s fees) and expenses incurred by the homeowner as a result of the Lender’s failure to negotiate in good faith; or 
  • Any other relief that the Court deems just and proper. 
On the other hand, where it is found that a Borrower has failed to negotiate in “good faith,” the Court is required to remove the case from the conference calendar, meaning that the Lender will then be permitted to move forward towards obtaining a Judgment of Foreclosure and Sale. 

Since the Federal Making Homes Affordable (“MHA”) program is due to expire on December 31, 2016, these additional consumer protections, provided by the State of New York, will ensure the availability of continued protections for the State’s distressed homeowners by requiring that Lenders come to the Mandatory Foreclosure Settlement Conferences ready, willing, and able to settle foreclosure actions, or face the consequences.

Wednesday, December 30, 2015

Income Tax Relief after a Short Sale for 2015 & 2016

The President has extended the Mortgage Forgiveness Debt Relief Act through the end of 2016 by signing Congress’ Spending Bill into law. As a result, the amount of money from a mortgage loan that is forgiven incident to a short sale, foreclosure or deed-in-lieu of foreclosure will not be taxable as income.

In the last week of 2014, the extension was passed and then applied to all transactions that occurred in 2014, retroactively. Homeowners closed transactions assuming that they were paying income tax on the forgiven debt. As a result, homeowners elected not to pursue a short sale or deed-in-lieu when it turned out to be their best strategic option.

Now that the law proactively extends throughout 2016, homeowners in financial distress can list their homes for short sale, or work out a deed-in-lieu with their lender, without the fear of being hit with a severe income tax bill.

Another important provision of the Spending Bill, beyond the Mortgage Forgiveness Debt Relief Act extension, concerns mortgage insurance premiums, which are required for mortgage loans that exceed 80% of the purchase price of a home (and is required to be paid until the loan balance goes below 80% of the purchase price). Pursuant to the new law, premium payments can now be deducted from borrower’s income tax, in the same manner as mortgage interest, through 2016. This will continue to encourage homeowners who may not have the funds for a 20% deposit to still be able to purchase a home. 

Tuesday, May 26, 2015

The Making Home Affordable Program (MHA) has been formally extended 1 year

The Making Home Affordable Program (MHA), has been formally extended 1 year, through December 31, 2016, by Supplemental Directive 15-04. The program has been widely successful in providing affordable alternatives to foreclosure for millions of homeowners nationwide, and the extension through 2016 will provide relief to the millions more who will be in danger of falling behind on their mortgages in the next year.

This extension applies only to mortgages that are not owned or guaranteed by Fannie Mae or Freddie Mac and for applications that are submitted to the Lender on or before December 31, 2016. Though it is not necessary to have a decision on the application for a loan modification, short sale, or deed-in-lieu by the end of 2016 to be eligible under the MHA program, the transaction must close on or before September 30, 2017 if the borrower would like to receive incentive compensation, such as relocation assistance, payments for successfully completing a short sale or deed-in-lieu, or payments for making timely loan modification payments. Since the amount of relocation assistance that Lenders must offer has increased from $3,000 to $10,000 for all HAFA (short sales & deeds-in-lieu) transactions closing on or after February 1, 2015, borrowers must be mindful of the deadlines so that they may be eligible to receive this increased amount to assist them in moving costs.

This Directive also amends the MHA guidebook to allow servicers to establish a cap on the amount that they will pay to release the second mortgage liens, as long as the cap is not less than $12,000. It establishes a floor amount that borrowers may receive from their primary mortgage lenders to assist them in closing on their short sales or deeds-in-lieu.


These amendments ensure that borrowers will continue to have access to adequate relief through the MHA program.