How Congress Is Providing Tax Relief To Foreclosed Homeowners

After Thursday's passage of the Mortgage Forgiveness Debt Relief Act of 2007, foreclosed homeowners have one less worry: taxes.

When a homeowner defaults on a home loan, a mortgage lender will sometimes "forgive" the debt owed.

One example is when a foreclosed home sells for less money than is owed on it. The mortgage lender will sometimes accept this lesser amount, while considering the mortgage to be "paid in full".

This is often called a "short sale" because the lender is "short" of the full amount owed.

Prior to Thursday, the IRS treated the forgiven mortgage debt as taxable income. This added thousands of dollars to a foreclosed homeowner's tax liability.

A $50,000 short sale, for example, could yield an additional $12,500 in taxes owed.

After the bill's passage, that tax liability is gone. No taxes will be owed on primary residence mortgage debt that is forgiven or written off by a mortgage lender.

The bill has two sides, though.

In order to recover the estimated $650 million in tax revenue that will be lost, Congress has limited the amount of tax breaks available on the sale of second/vacation homes. That will be impactful on homeowners, too, of course.

If you think the Mortgage Forgiveness Debt Relief Act of 2007 will impact you personally, be sure to talk with your accountant.

For Some Homeowners, PMI Is Tax-Deductible Through 2010

The resurgence of private mortgage insurance continues -- if only because it's aided by Congress.

For eligible homeowners, lawmakers voted to extend the tax-deductibility of PMI through 2010. The law was previously scheduled to expire at the end of 2007.

For all loans originated prior to December 31, 2010, and within those years, private mortgage insurance is 100% tax-deductible provided that two tests are met:

• The homeowner's household income is $100,000 or less in the calendar year
• The home loan is for a primary or secondary residence

For households earning more than $100,000, the deduction is phased out to the tune of 10% per $1,000 of additional income until it reaches 0% at $110,000.

So, if a single person earns $90,000 in 2007 and buys a home using PMI, the PMI expenses are tax-deductible in 2007. If that person's income exceeds the threshold prior to 2010, the deduction is phased out.

As always, talk with your tax professional about how tax deductions work and whether you qualify for a PMI deduction.

You've Been Pre-Approved -- Now Get RE-Approved

Even if you've been recently pre-qualified (or pre-approved) for a mortgage, it may be prudent to get "re-approved".

The mortgage industry is changing quickly; being prepared beats the alternative.

Recently, mortgage lenders have made adjustments in what they will lend, and to whom. This shrinks the pool of eligible mortgage borrowers.

Some of these guideline changes include:

• Low or no down-payment loans may require more income and/or assets
• No income verification (i.e. stated) loans may not be available
• Higher credit scores may be necessary to qualify

In addition to tighter guidelines, many mortgage lenders are now required to pass higher fees and/or mortgage rates along to their clients as well.

The burden of these mandatory extra costs will be the difference-maker in a mortgage approval for some mortgage applicants.

Getting re-approved can give home buyers a realistic sense of how mortgage financing may shape up in the changed mortgage environment. It's important to make sure that the mortgage plan still fits into your short and long-term financial goals.

But, if nothing else, getting re-approved gives you the opportunity to speak with your Real Estate professional and Mortgage Planner about changes to the industry, and how it impacts you on a personal level.

How To Squeeze Extra Tax Deductions From Your Mortgage In 2007

For most Americans (but not all), mortgage interest is tax-deductible in the year in which it was paid.

With some advance planning, therefore, a homeowner can increase his 2007 tax deductions by paying additional mortgage interest while the calendar still reads 2007.

The key is to make the mortgage payment due January 2008 a few days early.

Because mortgage interest is paid in arrears, a mortgage payment due January 1, 2008 accounts for interest that accumulated throughout December 2007.

Rather than make January's mortgage payment on January 1, 2008, a homeowner can send payment this week or next -- while it's still 2007 -- and increase the amount of mortgage interest paid in 2007. This can increase 2007's tax deductions.

Tax planning can be a complicated issue and not all homeowners qualify for mortgage interest tax deductions. Be sure to consult your tax professional before making any tax planning decisions. If you are without a tax professional, call or email me; I would be happy to make a trusted recommendation to you.

Giving the Gift of Choice

So, you're not sure what to buy for your anniversary? Maybe it's your teen niece or nephew's birthday, or maybe someone's graduation. Is it a wedding you're going to, or maybe a baby-shower? Perhaps you're a supervisor/manager or business owner and are looking for a cost-effective, but personal way to reward/motivate your staff.

Whatever, the reason or occasion, why not give the gift of choice?
That's right. You choose your budget, and allow the recipient to choose their own gift. You don't have to go through the stress of trying to find a gift that the recipient will actually like and appreciate. And, it's more personal than just a cash award which, most likely, will be spent on something that will not remind the recipient of your generosity and thoughtfulness.

It's very simple.
Choose your budget - Gift cards/albums range in price from $25.00 to $750.00, and just about everything in between. You can order a Gift Card that will allow the recipient to view their gift choices and redeem them online. Or, you can order a Gift Card, Album, and Envelope ensemble which will allow the recipient to view their choices in print before making their selection online.

This may be especially beneficial to Mortgage and Real Estate professionals.
Just think about it for a moment. You can surprise your very own co-workers in the office ...(hint-hint)... maybe with a congratulatory Gift Album when they reach a certain milestone, or maybe the new person when they accomplish their first transaction. But, you can also leave a great impression with your clients (past, present, new) by showing them how special they are because you did not settle on giving them the standard fruit basket.

So, what are you waiting for ???
Head on over here and take a look for yourself (if that link does not work you can type: http://spabon.ordermygift.com into your web-browser). Look through the items that are available in each Gift Album. You'll probably want to order one for yourself. That's fine too.

Just a friendly reminder
If you are a Real Estate and/or Mortgage professional, please make sure that you are always abiding by RESPA, especially Section 8.