House was auctioned off yesterday

[trappedincali]

So my house was auctioned off yesterday. As far as the recorded message states, it sold to the beneficiary for ~$376k. This is what was owed on the loan and about $230k more than the value of the house. So how does this work regarding the 1099 I'll get. Do they sell the house and hit me with tax on the difference?6

[Evan Bedard]

Hi trappedincali,

So my house was auctioned off yesterday. As far as the recorded message states, it sold to the beneficiary for ~$376k. This is what was owed on the loan and about $230k more than the value of the house. So how does this work regarding the 1099 I'll get. Do they sell the house and hit me with tax on the difference?6

That is what typically happens. They will issue you a 1099 for the deficiency balance on the loan.

I am very sorry to hear this has happened and I wish the best for you and your family..

[nativelasvegan]

This hurts my heart. Cannot imagine how difficult this was for you.
Sorry to hear this too. Good luck to you in the future.

[Jillian118]

Well if the house sold for what was owed on it, there would be no deficiency

[BobandArlyn]

Our thoughts are with you and your family. Much luck in the future. Let us know how it turns out for you guys. Take care.

[trappedincali]

Thanks for the concern, but it's really not that bad. I'm moving into a much nicer house and this burden of being hopelessly underwater is gone. I can move on with my life and I'll deal with the tax issues when they come up. All in all, we're content with our decision.

[ultimate4799]

Hi Trappedincali, I'm sorry to hear this happen to your family but wishing you the best... I'm pretty sure this will be the best decision for your family..BTW, is your loans recourse or non-recourse?

[trappedincali]

Originally Posted by ultimate4799

Hi Trappedincali, I'm sorry to hear this happen to your family but wishing you the best... I'm pretty sure this will be the best decision for your family..BTW, is your loans recourse or non-recourse?

They are recourse. I refinanced to lower my rate a few years into the loan and was unaware of the protection I was losing at the time. I doubt it would have stopped me anyway since I had to refinance before my rate adjusted. I have a second of $66k through BofA (originally Countrywide). I expect that they will be in a better position to negotiate a reduced settlement on a payment plan since the loan is unsecured now.

I'm also hoping to get cash for keys to help with moving expenses. We don't move into our new place for another week, so I hope to hear from someone representing the first real soon on that matter.

[trappedincali]

Well, today I arrived home to find something from Fannie Mae taped to my door. It offers an option for relocation assistance (cash for keys) for the previous homeowner(s) or lease option for current renters (while the house is put up for sale).

I have 3 day apparently to contact them. I'll keep updating on my cash for keys negotiations as things transpire.

[ultimate4799]

Hey Trappedincali, I'm glad you are close in getting $$forkeys... I remember someone from this forum got $3k-$5k offers depending how soon you can vacate premises and you need to broom/clean home and leave the appliances... I wish you best of luck and keep us posted...

[Under_H20]

Originally Posted by Jillian118

Well if the house sold for what was owed on it, there would be no deficiency

So is that how the taxes for deficiency determined?... remaining loan balance less the amount sold at auction?

[cleach]

Right, but the bank bought it back themselves. So THEY (the bank) is still out the difference between what is owed and what the house is worth.

If I'm mistaken, someone let me know - my house sold at auction yesterday, and this was my understanding.

[trappedincali]

Originally Posted by cleach

Right, but the bank bought it back themselves. So THEY (the bank) is still out the difference between what is owed and what the house is worth.

If I'm mistaken, someone let me know - my house sold at auction yesterday, and this was my understanding.

This is my understanding as well. But I will still probably get a 1099 for the difference. I am currently tallying all of my debts and assets and am going to consult a tax specialist, since I'm hoping to claim insolvency next year. Need to get all the facts and numbers all in order now though.

[trying2*]

Hi trappedincali,

As I posted to the "How long between first missed payment & foreclosure" thread in response to your posting; our situation is very similar. CA HomeAuctioned - Cont'd To Pay HELOC??

Good luck with you!

[KT in CA]

trappedincali,

Make sure when you are tallying your numbers for insolvency to get balances and values as they were on the day BEFORE your trustee sale. I've done tons of reading and research on the IRS website. To quote the IRS in publication 4681, "You were insolvent immediately BEFORE the cancellation to the extent that the total of all of your liabilities exceeded the FMV of all of your assets immediately before the cancellation."

We have to go the insolvency route because we refinanced and took out cash. Our trustee sale is next Tuesday, so Monday night will be spent on the computer accessing all the information. Also, you need to value everything you have, if you don't know this already. Make sure you get a ballpark value of your home. I'm using Zillow, for whatever it's worth, to compare with what the bank says the FMV of my home is on the 1099 they send.

There is an insolvency worksheet in the IRS Publication 4681. The IRS recommends using it to calculate your numbers and keep for your own records. I would download it if you haven't already and read it. There is a lot of valuable information in it.

Also, if you don't know already, you are only able to offset the amout of canceled debt up to the point of insolvency. Say, if you had $150k in canceled debt, and were insolvent by $100k, then you would still have to pay taxes on the $50k remaining. At least in theory. Maybe a good tax person can find a way out of this for you.

A tax professional will be able to advise you on all of this. That I am not. But I wanted to give you a heads up on the date you use to calculate your insolvency.

Take care and good luck,

KT in CA

[kbspots]

I don't understand how it was sold for more than it was worth. Around here in Ohio, say the house is worth $99,000, the property cannot sell for less than two-thirds the value which would be $66,000. I guess the starting bid would have to be at $66,000. Just curious.

[scottp999]

The bank bids on it, puts it in their REO inventory to try to liquidate it because no one offered what they considered the minimum bid at the foreclosure auction. The process is not over, the house did not go to a private individual. The bank will continue to have carrying costs on the property and the severity level (loss amount) will get worse over time. I don't think they will come for a deficiency, or issue a 1099 until they liquidate the property from their REO portfolio.

I would talk to a real estate attorney in your area to see where this ride really ends.

[trappedincali]

Well, it was a busy three days moving, but it's almost complete. We still keep one vehicle at the old house and I have two lights on timers to keep the appearance of occupation.

I called the contact number written on the Fannie Mae form, but got no response. I called Fannie Mae's number (which was also on the notice) and they gave me the number of the agency assigned to the property. Left a voicemail there too, but still no response after three days.

Funny, the letter said I had three days to contact them, but nobody has returned my calls.


Thanks for all the info on the tax situation. We don't really have a lot of debt (~25k), so insolvency may not help much at all.

Since the house probably wont sell until next year, I'm assuming we wont get a 1099 until 2011?

[ultimate4799]

hey trappedincali, I hear you We've moved out a week ago and I know how tiring and stressful it was... I was shock to know the sale date of our home got moved to Nov 12th(from Oct 8th >> Oct 30th... I just wanted this tragedy out of our way and my kid seemed started accepting the truth that we lose our home to foreclosure and our lifes should move on.. more later...

[homesweethome]

Yea, I just want this ride to end, my sale date was Oct. 13th, realtor's first offer was $1,000 to move out by the 31st of this month, I figure 90 days at any cash for keys is good for me. I have to find a place, rent it, save to move (I paid my Oct. trial mod payment, and caught up on homeowners insurance). So, I will call the attorney representing the bank on Monday.

[mimirayo]

I thought they had to do an audit after the sale to make sure there was no modification or repaymnt plan in place at the time of the sale, which would void the sale? It usually has that at the bottom of the notices here in MD.Would this have any effect since you were on the track to a modification?

[so-cal-gal]

Originally Posted by homesweethome

Yea, I just want this ride to end, my sale date was Oct. 13th, realtor's first offer was $1,000 to move out by the 31st of this month, I figure 90 days at any cash for keys is good for me. I have to find a place, rent it, save to move (I paid my Oct. trial mod payment, and caught up on homeowners insurance). So, I will call the attorney representing the bank on Monday.

I would not be so quick to just be contacting the BANK's attorney. You have YOUR own attorney and THEY should be getting this resolved. Given that there was NO NOTICE, yet they took the 4th payment, this looks like a case that could even bring in HUD to investigate the mess.

Do not be so quick to give up.They SHOULD NOT be able to sell the property like this.

If you contact the bank's attorneys you are risking any grounds your attorney is working on to undo this mess. Don't do it without contacting your attorney first. Your attorney hopefully is trained sufficiently to deal with the bank's attorney and cut through any attempt at the bank faking you out of a complete correction of this mess OR a settlement that reflects the bank's mess-up.

[mimirayo]

I agree So-Cal. There are NISI listings here and it gives 30 days from the date of sale to bring up why the sale should be void. Being on, and their accepting of the trial payments should be more than enough grounds to object to the sale

[so-cal-gal]

Originally Posted by mimirayo

I thought they had to do an audit after the sale to make sure there was no modification or repaymnt plan in place at the time of the sale, which would void the sale? It usually has that at the bottom of the notices here in MD.Would this have any effect since you were on the track to a modification?

I am not sure of 'Homesweethome's contract, but in my own case the problem is that the servicer never signed the modification contract. There was never a reason cited that matches with ANYTHING stated in the contract nor anything that I can see that is stated in the AG settlement agreement itself. No notice was EVER provided of the decision not to honor the contract. This brings them to having breached basic contract law.

Currently, the only way to deal with these contracts is to file a law suit. If you live in MI the AG there and their housing authority can solve it without a suit from posts I've seen.

Homesweethome may be in the same boat as far as there being any proof of any actual modification contract signed by the servicer but even in a worse aspect because this was a mod with a TRIAL period.

Did the servicer ever sign even that agreement? Are there ANY STANDARDS that are in the public arena for what is used to determine who gets a resultant permanent mod?

[pdsfoley]

So-cal-gal give me a call thanks PDS!!