At Foreclosure Solutions, LLC, we believe that literacy is the cornerstone of a secure and prosperous future. Understanding the principles of personal finance empowers individuals to make informed decisions, manage their resources wisely, and navigate economic challenges with confidence. Our commitment to enhancing literacy means we offer comprehensive educational resources and guidance designed to demystify complex concepts and provide practical strategies for everyday management.
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Negotiated with your lender but achieved no resolution.
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Filed for bankruptcy only to face foreclosure again.
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Attempted to sell or modify your loan with no success.
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Used your savings or retirement funds, only to start over.
A foreclosure occurs when the homeowner has failed to make payments and has defaulted or violated the terms of their mortgage loan. The process can be stressful, embarrassing, and it can have long-lasting consequences, such as:
A foreclosure can usually be avoided—even if you already received a foreclosure notice. If you need further assistance, contact a Fannie Mae Mortgage Help Center.
While it’s common to hear about the credit consequences of foreclosure, not everyone considers the tax consequences. A foreclosure brings about a property title transfer and subsequent tax assessment. Most property owners do not realize that by losing their home to foreclosure, there are likely going to be tax implications.
Any time debt is forgiven; it is considered a taxable event. The IRS states that any borrowed money that is not paid back is considered as income and is taxable. A mortgage involves the bank or lender granting funds to the owner in return for a promise to pay the funds back. When the owner begins repaying the money, this money is not claimed as income on their tax return. If, however, this debt amount is canceled or forgiven, it will have to be included as income for tax purposes. The loan amount is considered income because there is no longer an obligation to repay the lender for the same.
Once the property is sold by the lender, the tax consequences come in. The original loan was based on the value of the property, but these values keep changing. If the property is sold for less than it was originally worth, and the bank is unable to recover all the money it had lent, the balance is reported to the property owner and the IRS on a Form 1099-C, Cancellation of Debt. This amount is considered as income and must be reported on the homeowner’s income tax form leading to capital gains and income tax applicable.