Citimortgage Forgives Heloc...forgives It!!! What?!?

Enchanted

LoanSafe Member
Sep 23, 2009
46
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Hi all, I haven't posted in several years, after having our first mortgage modified not once, but twice - the second time as a result of extended job loss because of Superstorm Sandy. On the advice of our accountant, and also went along with what was posted here, we walked away from our HELOC at CitiMortgage. Last payment was 5/9/12. Over the years we have had calls and letters from debt collectors, spaced out more and more until I can't remember the last time I heard from anyone about this. It shows up on my credit as "Collection/Charge off".

Today we received a FedEx letter. My heart stopped - I thought perhaps they were pursuing foreclosure as our property value has increased somewhat. But much to my surprise, the letter states "YOUR MORTGAGE IN THE AMOUNT OF $199,000 WILL BE FORGIVEN!. It goes on to say the lien will be released, and we may be required to report this amount as income on our tax return.

I am SHOCKED. Never, ever expected this!

What happens now? We receive a 1099? Can we write any of this off? (Home improvements? College? Business expenses? Because that's where the money went.) What happens to our credit? Does it change the way this is reported? Obviously we will be contacting our accountant, but does anyone have any experience with this?
 

Jzone

LoanSafe Member
Jun 20, 2017
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Congrats! Hope that happens with mine too. Im in similair situation , but my second mortgage with citi was discharged in Chapter 7.

You prob will get a 1099. Forgiven debt is considered income. Your accountant can tell you more about what you can use to reduce your income, but generally, the expense needs to be in the year it was incurred. Hope you have saved your receipts!

Your credit prob wont get any worse since it already shows up as a charge off. Worst case scenerio is your income goes up by $199,000 this year and you pay income tax on it. You prob cant pay it, but contact IRS and work out a payment plan. Still better than having $199,000 debt.
 

Moe Bedard

Call 1-800-779-4547
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Loan Safe Mortgage
Aug 10, 2007
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Congratulations!

I agree with Jzone. Talk with an accountant about the $199k which may now be construed as income for 2017 taxes. Yes, you can have write-offs, but they will need to be documented and provable.

Thanks for sharing your success story!
 

Enchanted

LoanSafe Member
Sep 23, 2009
46
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Part II - The Mortgage Satisfaction Letter arrived today! It is both dated and notarized on 1/15/18. Would that mean I have a whole year to plan for this 1099? I thought if it came at all, it would be dated year end 2017 and we would receive the 1099 for 2017. Now I'm not so sure. I sent a copy to my lawyer and she said it looks like a valid mortgage satisfaction. I wi l monitor my land records to see when it comes off, however here in NYC these things don't get recorded all that quick LOL.
 
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illstay

LoanSafe Member
Sep 28, 2011
170
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Congrats!!!! Is there nothing better than such a letter? I got one at Christmas time around 2013, just after we filed BK. Of course the 2nd mortgage could not contact us as the 2nd was discharged in BK, however we knew that they could foreclose if they wanted to, and like you, this is what we thought they were planning (in our case it was a phone call from the 2nd). I of course called them back to let them know that they would be in trouble for contacting us after BK, but I was going to also give them an FYI that if they wanted to foreclose, they could do what they had to do. Imagine my shock when the Rep said they were calling to let me know the loan was forgiven and papers would be sent shortly! Couldn't sign them fast enough, monitored the land records daily until the loan fulfillment showed up! We didn't have to do anything with income taxes because we were somehow considered insolvent? That's what IRS said, but I don't think it mattered anyway because mortgage forgiveness was still in effect.
 

Enchanted

LoanSafe Member
Sep 23, 2009
46
1
8
Congrats!!!! Is there nothing better than such a letter? I got one at Christmas time around 2013, just after we filed BK. Of course the 2nd mortgage could not contact us as the 2nd was discharged in BK, however we knew that they could foreclose if they wanted to, and like you, this is what we thought they were planning (in our case it was a phone call from the 2nd). I of course called them back to let them know that they would be in trouble for contacting us after BK, but I was going to also give them an FYI that if they wanted to foreclose, they could do what they had to do. Imagine my shock when the Rep said they were calling to let me know the loan was forgiven and papers would be sent shortly! Couldn't sign them fast enough, monitored the land records daily until the loan fulfillment showed up! We didn't have to do anything with income taxes because we were somehow considered insolvent? That's what IRS said, but I don't think it mattered anyway because mortgage forgiveness was still in effect.
"Mortgage Forgiveness" - I've seen this phrase but I don't know what it means. Can you explain? And I'm assuming it's gone by now? (boo hoo)
 

illstay

LoanSafe Member
Sep 28, 2011
170
1
18
"Mortgage Forgiveness" - I've seen this phrase but I don't know what it means. Can you explain? And I'm assuming it's gone by now? (boo hoo)
I may be using the wrong term -- perhaps I should say extinguished? Anyway, the bottom line is the total amount of the loan (principal and interest) is wiped clean, it's no longer owed, and it is entered as "loan satisfied" on your municipal land records. It seems to be still around from the posts above from the user "Enchanted" Frankly I think it was done for us because they knew they weren't getting it anyway, as we had filed bankruptcy. Since the house was underwater, there was no money to be made from foreclosing. I'm sure they get to enter it as a plus on their books somehow. And to reiterate, this was the 2nd mortgage.
 

Enchanted

LoanSafe Member
Sep 23, 2009
46
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8
I may be using the wrong term -- perhaps I should say extinguished? Anyway, the bottom line is the total amount of the loan (principal and interest) is wiped clean, it's no longer owed, and it is entered as "loan satisfied" on your municipal land records. It seems to be still around from the posts above from the user "Enchanted" Frankly I think it was done for us because they knew they weren't getting it anyway, as we had filed bankruptcy. Since the house was underwater, there was no money to be made from foreclosing. I'm sure they get to enter it as a plus on their books somehow. And to reiterate, this was the 2nd mortgage.
Let's add to this - we got a document from Citimortgage via UPS. It was our original HELOC document with CANCELLED stamped in red, and the original recording from our County Clerks office - also stamped CANCELLED. The attached letter, dated January 22, 2018, states:

"We are writing to you regarding your mortgage account which has a zero balance as of 12/27/2017. This letter is for information only. No action is needed.
Enclosed are the following documents for your loan. Please retain these important documents for your records.
Original Note
Recorded Security Instrument

The letter goes on to say if you need further info, contact Citimortgage, blah blah blah.

Flabbergasted. And still confused about the conflicting dates - if it will be considered written off in 2017 or 2018? Still no 1099.
 

indeep1959

LoanSafe Member
Jan 14, 2009
358
6
18
Congratulations! I had a couple forgiven back in the day, although the Mortgage forgiveness act was still in effect about 6 years ago. A good accountant should be able to make sure you don't pay any or little tax.