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Negotiating Deficiency is Key in a Short Sale

Discussion in 'Short Sale Outpost' started by Moe Bedard, Aug 17, 2008.

  1. miked2023

    miked2023 LoanSafe Member

    What about the ANTI-DEFICIENCY law that went into effect in CA in 2011 - does this basically remove any need for negotiating deficiency when doing a short sale in CA now? I'm waiting on a short sale approval and am getting ready to negotiate this but perhaps I won't have to? That would be amazing!

    California Short Sale Anti-Deficiency Law Expanded
  2. kidsandliz

    kidsandliz LoanSafe Member

    Chase forgave the deficiency 1 year later which of course dinged my credit again. THe other lender (Amtrust as administered by New York COmmunity Bank - Amtrust was in receivership - ironically another arm of Amtrust is offering me credit cards while I owe them the deficiency and was in foreclosure - a case of the left hand not knowing what the right is doing LOL) did not excuse it but did not put that in writing. They sold the loan to Sallie Mac or whatever they are called without notifying me. I have never been contacted by them either. All parties have my address as I was living here when the house sold. I found out about the loan changing hands via looking at a credit report. I have not even tried to sort that out yet. I am trying to find out if they don't contact me for X number of months weather or not the loan can be written off. I don't want to trigger them trying to collect by me contacting them. Anyone have any clue about this?

    I tried to sue the realty agent since I told him I was not going to sell if I had a deficiency due, he then hid from me that it was still due so he could get his commission after trying to sell the house for 35 months. I could not find a lawyer willing to go after him because he is a big fish in a small pond.

    So basically I am screwed.
  3. TomEason

    TomEason LoanSafe Guide

    kidsandliz

    Thanks for your post.

    If it were me, I'd report the RE agent to NY's department of real estate and to the NY BOR.

    And I wouldn't give up on suing the agent. You'll eventually find a lawyer willing to take the case.

    FYI, the RE agent and broker likely have E&O insurance. That insurance carrier will likely settle with you, and you'll make some $$.
  4. kidsandliz

    kidsandliz LoanSafe Member

    Thanks for the suggestions.

    What does BOR stand for?

    Is it possible to negotiate this without filing a lawsuit with a lawyer? How would I find out who his insurance agent is - though the Idaho state real estate office? Perhaps i just contact them directly, tell them what happened (I have some e-mail proof) and then see what happens?
  5. TomEason

    TomEason LoanSafe Guide

    kidsandliz

    Thanks for your question.

    BOR stands for Board of Realtors.

    When you sue the RE agent, you'll quickly find the name of the E&O carrier.
  6. kidsandliz

    kidsandliz LoanSafe Member

    Thanks. I am trying to figure out how to do this without a lawyer living 2500 miles away since I can't find one to take the case either due to "conflict of interest" (plays golf with him, etc, small town) or "too far to go" (e.g. the ones in Bosie, ID - it is about 7.5 hour drive through the mountains to get there). Would the BOR know who the insurance company is for me to contact them directly or are they required to file that info anywhere with their license that I can get my hands on it through freedom of information act?
  7. TomEason

    TomEason LoanSafe Guide

    kidsandliz

    Thanks for your post.

    FYI, the BOR isn't a state government agency; it's a trade union. I recommend you contact ID's Dept of RE.

    If you can't find a lawyer who'll take your case, I recommend you sue the RE agent and broker in pro se.
  8. kidsandliz

    kidsandliz LoanSafe Member

    I was going to try to negotiate directly with the insurance company, but I guess I could file a lawsuit myself presuming I could figure out how you did that. Am I correct in presuming I will have to do that in ID since that is where my house was rather than in MS which is where I live now?

    I really appreciate your help. I just talked to the state office (irec.idaho.gov) and got the name of the insurance company that they have available. Then by googling errors and omissions insurance found a second one who underwrites in ID. I was going to call them and see if the broker/agent (whatever the heck is the correct term for him) has the policy with either one of them.

    I was then also going to file a complaint against the agent with the the irec.

    Is there any easy way to get a list of attorneys that specialize in real estate law? I found most do not and any list I have found is very incomplete. Fortunately the city involved is 3 miles from a state line so that some people who practice near the border have licenses in 2 states.
  9. TomEason

    TomEason LoanSafe Guide

    kidsandliz

    Thanks for your post.

    Yes you need to sue in ID.

    And FYI, all RE agents work for a RE broker; hence the lawsuit should be filed against the RE broker and the RE agent (any anyone else who could possibly be responsible).

    Once you file the lawsuit, you might initiate discovery proceedings to find out who their E&O carrier is.
  10. kidsandliz

    kidsandliz LoanSafe Member

    Thanks!!! In this case the agent I used owns the company (broker).

    I will now contact free legal aid in ID and see how to file a lawsuit.

    I really, really appreciate your answers. Saved me hours and hours of googling looking for them myself.

    Liz
  11. TomEason

    TomEason LoanSafe Guide

    Hi Liz

    Thanks for that gracious remark; it's gratifying to know you're gotten value from this site.
  12. kidsandliz

    kidsandliz LoanSafe Member

    You are welcome!

    (Won't let me send without 20 characters… so much for brevity LOL)

    Liz
  13. cmsatter

    cmsatter LoanSafe Member

    Hi, I have viewed this site off an on for a few years and in this thread came across a bunch of old posts (2010-2011) that stated a bank cannot give you a 1099-C and then also still seek a deficiency judgement. My wife short sold her home last year (she acquired it before we were married) and at the time Nationstar did not give her the deficiency waiver (they would have given it with a $30k contribution from her which she/we were not in the position to do). She decided to proceed with the short sale and it closed April 2013. She just got a 1099-C in the mail today and they canceled over $154k in debt. We are in Nevada, does that mean since the bank canceled the debt they can no longer pursue a deficiency judgement against her?
  14. kidsandliz

    kidsandliz LoanSafe Member

    YOu got lucky they gave it to you for 2013 as the law was extended for not having to pay on the 1099.

    Also does anyone know if they forgive the deficiency what to do if they do not send you a 1099? I see by my third credit report (the other two have not updated mortgage information since 2011 when it went into foreclosure and I sold short in 2011) that one of the mortgages (I had an 8/15 that got split when it was resold) is listed as charged off as of April 2013. I have not yet gotten a 1099 (I realize there are a 3 days left to get this). When I called the company they couldn't even find a record of my mortgage (New York Community Bank - they are a pain in the rear to deal with).

    Thanks,
    Liz
  15. Cat Damiano

    Cat Damiano Mortgage Wars

    There is some information about this located here;



    [h=3]IRS Reporting[/h] Any financial institution that forgives or writes off $600 or more of a debt's principal (the amount not attributable to interest or fees) must send you and the IRS a Form 1099-C at the end of the tax year. These forms are for reporting income, which means that when you file your tax return for the tax year in which your debt was settled or written off, the IRS will make sure that you report the amount on the Form 1099-C as income.


    Even if you don't get a Form 1099-C from a creditor, the creditor may very well have submitted one to the IRS. If you haven't listed the income on your tax return and the creditor has provided the information to the IRS, you could get a tax bill or, worse, an audit notice. This could end up costing you more (in IRS interest and penalties) in the long run.

    [h=3]Exceptions to Reporting Income[/h] There are several reporting exceptions stated in the Internal Revenue Code. For example, if the financial institution issues a Form 1099-C, you do not have to report the income on your tax return if:


    • the debt was a non-business debt and was canceled before 2007 as a result of Hurricane Katrina
    • a student loan was canceled because you worked in a profession and for an employer as promised when you took out the loan
    • the canceled debt would have been deductible if you had paid it
    • the cancellation or write off of the debt is intended as a gift (this would be unusual)
    • you discharge the debt in bankruptcy, or
    • you were insolvent before the creditor agreed to settle or write off the debt.
    Insolvency means that your debts exceed the value of your assets. To figure out whether or not you were insolvent, you will have to total up your assets and your debts, including the debt that was settled or written off.


    Tax Consequences When a Creditor Writes Off or Settles a Debt | Nolo.com
  16. Cat Damiano

    Cat Damiano Mortgage Wars

    This would be a question that you would need to confirm with an attorney in Nevada.

    Here is some information that may help;


    Black & LoBello Frequently Asked Questions » Black & LoBello
  17. cmsatter

    cmsatter LoanSafe Member

    Liz, you might want to call the IRS if you get issued a 1099-C at a later date. For a home I short sold in 2010 I had both a first and second mortgage. The first mortgage issued a 1099-C in 2010 (right away) but second mortgage (after I settled with them) issued one in 2011. I called the IRS to see if I could use the mortgage debt forgiveness act two years in a row since both 1099-C were related to my primary residence and the agent told me if they were both related to the same property (and you meet all the guidelines of the act) it didn't matter which year they were issued. You file form 982 in the calender year the 1099-C was issued.
  18. cmsatter

    cmsatter LoanSafe Member

    Hi Cat, have you heard anything about if a bank issues a 1099-C then they waive their rights to seek a deficiency judgment?

    Also to the tax issue I actually short sold my primary residence after we had just got married (which I bought before we were married) and on our first joint tax return I used the mortgage debt forgiveness act to write off the 1099-C I was issued on my 1st mortgage (this was back in 2010). We moved into my wife's home at that point and then lived there until she short sold that home in 2013. Do you know if she (or we since we file a joint tax return) can use the mortgage debt forgiveness act again?
  19. Cat Damiano

    Cat Damiano Mortgage Wars

    I posted the Q&A for you from an attorney, you would need to ask either ask the attorney that question or a Tax Professional. When I had a question on a 1099 C I received that was not a mortgage so therefore not included in the mortgage debt forgiveness, I contacted H&R Block to help me.
  20. buchanovich

    buchanovich LoanSafe Member

    What Ms. Damiano said re: lawyer and accountant.

    I can tell you this. There is nothing to prevent you from using the Debt forgiveness relief act any number of times provided you meet the requirements. The big issues are "primary residence" and the debt having been used for "purchase or improvement of the primary home". Only you know the answer to the latter question. Note also that the forgiven debt was YOURS in the first case and YOUR WIFE's in the current case, if I'm reading your post correctly. So, you can use the act. You might also look into insolvency as an exemption. Publication 4681 (IRS) tells you what you need to know. It would appear you were still living in the home when it was put up for sale so "primary" probably can be made to work. (No rental? No changing of formal address such that it wasn't that home within the tax year used?)

    A 1099-C, forgiven debt is NOT a "cross to a vampire" with a deficiency suit. However, if they did sue (nothing can stop anyone from suing anyone for anything; it's all in the hearings) showing a judge that 1099 with a forgiven debt amount might be a good argument. The bank would have to rescind that or be guilty of tax fraud since they likely wrote off the amount when issuing the form.

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