Carsbad, Calif. (PRWEB) November 17, 2011
In a national survey of its current clients actively considering or navigating through the foreclosure process, YouWalkAway.com, a leading foreclosure agency that helps people understand and manage the foreclosure process, revealed that 35 percent of those surveyed indicated that the Mortgage Debt Relief Act expiration date of December 31, 2012 contributed to their decisions to walk away sooner rather than later from their property.
The Mortgage Debt Relief Act relieves former homeowners of their obligation to pay taxes on the difference between their loan amount and the amount their property fetches through short sale or at auction after foreclosure. The foreclosure process takes, on average, one year from start to finish.
“The survey results are not surprising; YouWalkAway.com has seen a number of homeowners reach out to us due to the impending 2012 deadline,” reports Jon Maddux, CEO of YouWalkAway.com. “Many are deciding to begin the foreclosure process sooner rather than later in order to ensure their foreclosure is complete by the end of 2012.”
To avoid a large tax hit and protect his family through the Debt Relief Act of 2007, YouWalkAway.com client Robert Applebee of Homestead, Fla. began the strategic foreclosure process in June 2010. He has an $184,000 mortgage from Bank of America on a home that in July 2011 was appraised at $49,900. Most recently, Bank of America refused a $55,000 short sale offer on Applebee’s home. If Applebee’s property were to fetch $75,000 at auction, he would have to add $109,000 to his net income and pay income taxes based on this amount if his foreclosure process is not completed by the end of 2012 and the Mortgage Debt Relief Act is not extended.
The Mortgage Debt Relief Act was created to protect homeowners who are foreclosing on principal residences only and who have never refinanced by taking out a home equity line of credit. The Internal Revenue Service states that The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
“Today, about 80 percent of the people who come to me inquiring about foreclosure tax ramifications qualify for tax relief under the Mortgage Debt Relief Act,” states Cheryl Gerhardt, a CPA who has worked with some YouWalkAway.com clients. “These are usually people who purchased during the height of the market from 2005 to 2007 and never had the opportunity to take out a second, whereas a few years ago clients who were getting foreclosed upon had made purchases in the early 2000’s, took out a home equity line of credit and could not qualify.”
Gerhardt continued, “More 2005 to 2007 buyers are realizing they may be better off walking away from their home, but only once they start to think about this do the start to considering all the factors, including taxes. I believe there are many of these buyers who do not know they need to act soon because of the approaching expiration of the Mortgage Debt Relief Act.”
Additional results of the YouWalkAway.com survey indicate that 78 percent of the respondents were walking away from their primary residence. Of those, at least 76 percent would qualify for relief under the act. When asked whether they knew about the Mortgage Debt Relief Act, most of the respondents said they contacted YouWalkAway.com because they had heard about the act but were seeking additional information.
Maddux adds, “The potential protection afforded by the Mortgage Debt Relief Act is not common knowledge. Potentially millions of people will find themselves stuck with a huge tax bill after foreclosure if the government doesn't renew the Debt Relief Act at the end of 2012 or if they don’t finalize their foreclosure by that date. The bill may well expire, like when Congress chose not to renew the home buyer’s tax credit.”
A YouWalkAway.com client who wishes to provide only her first name, Gabrielle, is walking away from her Los Angeles home because she is upside down on her mortgage by $130,000. “The expiring Debt Relief Act prompted me to act now,” she said. “I'm in an adjustable rate mortgage, so the monthly payment is quite low, and I like living here, but staying is financially risky, especially not knowing where rates will be in five to ten years.”
According to the Lender Processing Services Mortgage Monitor, over four million home loans are 90 days or more delinquent or in foreclosure as of November 1, 2011.
YouWalkAway.com surveyed 2108 individuals and received 518 responses for the above-referenced survey.
Located in Northern San Diego, Calif., YouWalkAway.com is a foreclosure agency run by a team of real estate and legal experts with more than 50 years of combined experience. Featured in a wide range of reputable and powerful media pieces, YouWalkAway.com is acknowledged for being a trustworthy and valid foreclosure resource agency and the nation’s foremost authority on foreclosure laws and consequences. It is the objective of YouWalkAway.com to empower homeowners who purchased their homes at the peak of the real estate market to take control of their financial future. http://www.youwalkaway.com