In 2008, the housing crisis devastated many states nationwide, but no state felt the impact worse than Florida. Though, there has been a lot of promise in the past several years, Florida’s housing market still lags behind the nation as a whole. To make matters worse, the one tool that has helped many recover from the housing crisis, has been taken away permanently. Without reauthorization of the Mortgage Forgiveness Debt Relief Act, South Florida residents will continue to be unjustly burdened while they are still trying to put their lives back together.
The main principle behind the Mortgage Forgiveness Debt Relief Act, is that it allows taxpayers to exclude income from the discharge of debt on their principle residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief. The problem now is that The Debt Relief Act expired on Dec. 31 2014 and was not reactivated as expected. What was supposed to be a promising end to 2015 never materialized for South Florida homeowners.
Not only did many people lose their jobs in South Florida after the 2008 financial crisis, but many also found that their homes were worth much less than the outstanding mortgage balances they had incurred. Without provisions like The Mortgage Forgiveness Debt Relief Act, many homeowners will face thousands of dollars in taxes, even after they have already lost their home and all of its equity.
The Mortgage Forgiveness Debt Relief Act has been reauthorized twice since its conception in 2007. This is because hosing recovery was much slower than anticipated. Recent foreclosure statistics provided by RealtyTrac, put Florida’s situation into perspective. In the third quarter of 2015, Florida had five cities that where ranked among the top 10 with the highest foreclosures for metro areas in the United States. These cities were: Deltora-Daytona Beach-Ormond Beach (No.2), Tampa (No.3), Miami (No.4), Lakeland (No.7) and Ocala (No.8).
Non-profit organizations, like the Neighborhood Housing Services of South Florida, is working with many homeowners to improve their chances for staying in their homes, or to facilitate the process of exiting. They have also partnered with Ocwen, a leading mortgage servicer, headquartered in South Florida. Their goal is to identify and work with homeowners who are eligible for a mortgage modification, which may also include a principle reduction.
A principal reduction is a simple tool that reduces the principle amount of a loan to current market value. To date, Ocwen has modified a vast number of loans with a total of more than $12 billion in overall principle reductions. However, without the re-authorization of the Mortgage Forgiveness Debt Relief Act, all forgiven principle reduction will be taxable in 2015. This will undoubtedly put many people in a difficult position, creating a suggested path that would require individuals to acquire tax obligations that they too often cannot afford.
Many banks and other institutions have received a series of finical breaks during the recovery of the US housing market, but homeowners facing foreclosure have lost their main venue for recovery.
If you are facing foreclosure and need a Miami foreclosure defense attorney, contact Graham Legal to set up an initial consultation.