Tax Implications of Principle Forgiveness with HAMP

[David]

I have just received my agreement for permanent HAMP mortgage modification. The numbers have me a bit confused; not completetly sure how Ocwen is manipulating the numbers. Here's some details (rounded numbers):

New principle balance: $297,000
Deferred principle balance: $147,000. Of this balance, $125,000 is eligible for forgiveness over three years.
Interest rate: 2% for life of loan.
Interest bearing principle balance: 150,000
Monthly payment: $1189.00 ($456 P&I) for 286 months.

Balloon payment details:

Deferred principle balance as of today: $222,000. I am confused on this, as the contract initially shows this amount to be $147,000.
Deferred principle balance after three years of forgiveness: $97,000
Balloon payment: $97,000. Again, it seems this amount should be $22,000 ($147,000 - $125,000)

I don't understand the change in amount of deferred principle. I am also concerned about the tax considerations for the principle forgiveness. Isn't this reported as income to the IRS? Finally, if I do the math, by the time I've paid off all balances ($150,000 + $97,0000), the actual amount forgiven is $50,000, not $125,000. Don't get me wrong, I'm happy overall with the HAMP offer, but I'd rather pay taxes on the 50K than the 125K.

Any thoughts or advice on the offer, in general, or tax question, in particular? Any input would be appreciated.


David

[LoanModHelpCenter.com]

I have just received my agreement for permanent HAMP mortgage modification. The numbers have me a bit confused; not completetly sure how Ocwen is manipulating the numbers. Here's some details (rounded numbers):

New principle balance: $297,000
Deferred principle balance: $147,000. Of this balance, $125,000 is eligible for forgiveness over three years.
Interest rate: 2% for life of loan.
Interest bearing principle balance: 150,000
Monthly payment: $1189.00 ($456 P&I) for 286 months.

Balloon payment details:

Deferred principle balance as of today: $222,000. I am confused on this, as the contract initially shows this amount to be $147,000.
Deferred principle balance after three years of forgiveness: $97,000
Balloon payment: $97,000. Again, it seems this amount should be $22,000 ($147,000 - $125,000)

I don't understand the change in amount of deferred principle. I am also concerned about the tax considerations for the principle forgiveness. Isn't this reported as income to the IRS? Finally, if I do the math, by the time I've paid off all balances ($150,000 + $97,0000), the actual amount forgiven is $50,000, not $125,000. Don't get me wrong, I'm happy overall with the HAMP offer, but I'd rather pay taxes on the 50K than the 125K.

Any thoughts or advice on the offer, in general, or tax question, in particular? Any input would be appreciated.


David

David - please send me this permanent modification agreement loansafe@loanmodhelpcenter.com, I have several other homeowners with the same agreements and ocwen has acknowledged to us that they don't know how that balloon disclosure is calculated so we are of course approaching them with correspondence and enlisting the aid of our experts and advisory board

we are working on getting this resolved.

in sum, its pretty opaque on the calculations on purpose, on the surface they say principal forgiveness but if you default more than 3 payments in any given 12 months after the agreement has been signed and paid on first payment, then the principal forgiveness is not earned.

the total amount of the balloon payment disclosure, plus the principal balance and past due right now all equal what you owe, and they are banking on the fact that the home will be worth double the balloon amount in 30 years so you can get a reverse mortgage lol.

that last part is my opinion.

the taxes federally are not applicable if it is owner occupied generally speaking, but consult with a tax professional - chris cooke, esq at Chris@TheCookeLawFirm.com 800-235-0894 and let him know michael at RestReportMatters.com wanted you to email him to go over the tax consequences for you.

i already told him you may call him.

michael - loansafe@loanmodhelpcenter.com

[David]

Michael, thank you for your quick response. The information about the tax situation is a relief for me. I will, as you suggest, follow up with a tax professional. I will also send you the documentation you request.