Most homeowners will not pay real estate taxes during the foreclosure process because there is generally no personal liability for these taxes.
Most people assume that the homeowner defendant will ultimately lose a foreclosure court case. That is not necessarily true. Some attorneys have successfully defended against foreclosure actions. They usually challenge the chain of ownership of the mortgage note from the originating lender through a series of institutional buyers and assignees who took ownership of the note and mortgage through the Wall Street securitization process.
The typical mortgage defense asserts that the foreclosing bank cannot bring suit because it cannot show that it properly acquired ownership of the mortgage. This defense usually fails. More successful mortgage defenses are based on evidentiary challenges. If a foreclosure case does not lead to a release or settlement, the matter will be set for an evidentiary hearing. The lender is required to prove it is entitled to foreclose the mortgage. The lender must produce a witness to sponsor these documents into the court record.
A successful defense finds reasons to deny the introduction of these documents into evidence. Generally, the defense may effectively object to the documents based upon the hearsay rule applicable to business records.
These inexperienced attorneys usually do not anticipate and do not know how to respond to evidentiary objections. For these reasons, successfully defending the foreclosure and beating the bank requires hiring an experienced litigation attorney who is very knowledgeable about the foreclosure process and rules of evidence and the applicable legal precedents.
Another problem with mortgage foreclosure is possible income tax consequences. The general rule is that when a lender forgives or cancels a debt, the borrower can incur income tax on the amount of debt forgiven.
You may also incur income tax liability for a deed in lieu of foreclosure. The taxable income will be the difference between the property value and the mortgage loan balance on the date you surrender the property to the bank. A foreclosure may result in cancellation of debt income depending on whether the bank pursues a deficiency judgment. Suppose the mortgage lender gets a deficiency judgment for the difference between the property value and the mortgage balance on the foreclosure sale date.
In that case, the lender is not forgiving any part of the loan, so there is no imputed income. If the bank chooses not to pursue a deficiency judgment, or pursues the judgment unsuccessfully, the borrower may incur income tax liability for debt forgiveness.
In December , Congress acted to prevent many debtors from income tax liability associated with foreclosure avoidance. The one-year period commences on the day after the clerk of the court issues the certificate of sale or the day after the mortgagee accepts a deed in lieu of foreclosure. The one-year limitation period applies to any action commenced on or after July 1, , regardless of when the cause of action accrued.
Deficiency Judgments in Florida Post- Foreclosure Deficiency Judgments in Florida The granting of a deficiency judgment is the rule rather than the exception. We Can Help or Romy jflawfirm. This deficiency judgment will come at a time when the borrower is struggling financially.
Indeed, the borrower could not even come up with the mortgage payments, and now they have not only lost their home, but they still owe money to their lender.
Fortunately, there are ways to avoid a deficiency judgment after foreclosure. Not every homeowner who faces foreclosure is going to lose their home. There are several defenses to foreclosure that are often successful. For example, if the lender attempts to foreclose but they do not have certain documents pertaining to the property, such as the note, they cannot prove that they own the loan.
When this is the case, their foreclosure lawsuit is not going to be successful, so the borrower can often remain in the home. When there is no successful foreclosure lawsuit, there can be no deficiency judgment, so this is often the first option explored when a lender has started foreclosure proceedings. When facing foreclosure, many borrowers ask their bank if they can sell the property in a short sale. If the bank agrees, the home is sold, usually for less than what is still owed on the mortgage.
The proceeds from the sale go towards the debt that still remains, but there is still a balance on the mortgage the initial borrower owes. Lenders in these situations are allowed to file a lawsuit against the original borrower in order to recover the money from their debt. However, when drafting the agreement to the short sale , a provision can be included that states the lender will waive their right to a deficiency judgment.
If the lender agrees, they then cannot file a deficiency judgment lawsuit. Lenders do often agree to waive this right, but it is always better to work with an attorney that can negotiate on your behalf if you need to secure this type of agreement. Another foreclosure defense that is often used is a deed in lieu of foreclosure.
This means that the borrower no longer owns the home, but that the lender does. Due to this, often the lender will still expect the borrower to vacate the home shortly after the agreement is drafted. When this is the case, the borrower may still have a deficiency on the property. With a deed in lieu of foreclosure, this deficiency is the difference between the fair market value of the property and the total debt owed.
Again, the lender can file a deficiency lawsuit against the borrower to recover the debt still owed. Just like with a short sale agreement, it is important to speak to an attorney that can help draft the deed in lieu of foreclosure agreement. Within this agreement, it is important to include a provision that the lender waives its right to file a lawsuit and secure a deficiency judgment in court.
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