I am a co-borrower/co-signer on a FHA loan that is underwater about 50k. No other loans on the property. Property meets Arizona requirements of being a single family home on a lot less than 2.5 acres and has been ex-daughter-in-laws primary residence for last three years. She is in trouble financially and is considering letting home either go into foreclosure or filing for bankruptcy and include the home.
What to expect from FHA? What to expect from IRS for deficiency?
Hi azchuck,
Welcome to the forum and thank you for joining.................
FHA has a pre-foreclosure program that works with the homeowner to mitigate any deficiency, but the homeowner would need to contact their lender and ask about it.
Pre-Foreclosure Sale Frequently Asked Questions - HUD
as far as tax implication after the process, you would need to consult with a tax advisor for that question.
Best Regards,
Cat Damiano
LoanSafe.org Moderator
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I am kind of a newbie here, but I live in AZ and am going through similar with non-FHA. From what I understand, since it is her primary residence, meets the anti-deficiency 'standard', and provided they take the house via trustee sale, neither of you would be liable for any deficiency. As far as the taxes, this seems to be a gray area, but I have spoken with our CPA and was told due to the Mortgage Debt Forgiveness Act (in our situation), so long as I let the house go before 1/1/2013, I won't have any tax liability (a HUGE factor for us). Another person I have spoken with told me FHA is very easy to work with as well on their situation and probably one of the easiest to Deed in Lieu, but I have no first hand experience with them.
Although you didn't ask, since you are a co-signer on the loan, you could quite possibly take a credit hit no matter what happens. I would definitely consult with an attorney if bankruptcy is the route chosen, as if you have assets/means, you could get drug into the proceedings as it relates to the house depending on whether it is included or not. Just a thought anyway...
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