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Foreclosure Side Effects


Foreclosure – Axsmith Law Blog

This story made us smile…the side effects of efficient foreclosure!

Jim Ryen, deputy auditor sitting in for Williams County Auditor Beth Innis this week, explained that there is no particular property he’s concerned about right now as far as foreclosures go. He has just two foreclosures this month so far, he said in an interview following the county’s regular session. One of those two he’s certain will be redeemed, and the other they’ve simply had trouble finding the individual.

“When we foreclose, every owner gets a certified mail, but once you start going international, you cannot use certified, you have to use registered because it deals with time sensitive issues and also with tax money,” he explained. “We’d also have to insure all that, just in case not everyone was noticed, so the insurance would pick up the costs of that.”

Foreclosure Repair Issues

And of course, empty houses mean vandalism, lowering property values, all that good stuff

Tempe, AZ - Axsmith Law Blog

In Arizona, Tempe tries to get property owners to stay on top of maintenance problems at abandoned and foreclosed houses, but it’s a problem growing larger each week, said Jan Koehn, Community Development Department code-compliance administrator.

“We have about 50 houses we’re having some problem with at any one time,” Koehn said. “It can be long grass and weeds, other maintenance problems, and it can be undrained, green swimming pools, which are particularly dangerous in that a child can fall in and you might not know.”

The maintenance problem is complicated when the “owners” abandon the home before the bank takes it. There can be as much as a 60-day lag between owners walking away and a bank taking over. During that time, the city has nobody it can effectively force to take care of the property, Koehn said.”

 Oh no, taxes too?

If you are one of the lucky few eligible to receive a principal reduction from the settlement, when the banks aren’t paying off their penalty bulldozing homes and waiving deficiency judgments, you have to reckon with this: because of the expiration of a Congressional law, every dollar you receive in principal reduction would be viewed for tax purposes as income, and thusly taxed. Most of the people needing a principal reduction are in dire financial straits; they wouldn’t need a write-down otherwise. So now, we’re going to hit them with a big tax bill that they can pay for with money they don’t have. A $50,000 principal reduction, entirely possible under this settlement, could lead to a $15,000 levy or more, depending on the income level and tax situation of the borrower. Even the $2,000 “sorry you lost your home” payments envisioned by the settlement could be subject to taxation, reducing their impact.


Short Sales Taxes

If more lenders realized the trouble that abusively quick foreclosures cause, there might be more of this encouraging behavior.

Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.

For representation at foreclosure mediation, phone Axsmith Law at (202) 285-5415.

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