“No taxes” owed on funds from government programs

The Internal Revenue Service (IRS) has clarified that some homeowners who receive financial assistance from the federal government under the Home Affordable Modification Project (HAMP) will not be required to pay taxes on that support. Specifically, funds received from the U.S. Treasury Department’s Housing Finance Agency (HFA) Innovative Fund for the Hardest-Hit Housing Markets (The “HFA Hardest Hit Fund”) and the Department of Housing and Urban Development’s (HUD) Emergency Homeowners’ Loan Program are exempt from taxation.

These aid programs provide financial assistance to struggling homeowners, either by making payments on the homeowner’s mortgage loan or by providing financial support during an owner’s transition to lower-income housing. Since payments under these programs are not made in exchange for any service performed by the homeowner, they can be excluded from the homeowner’s gross income for tax purposes under the general welfare exclusion.

Homeowners and lenders also should not report any mortgage interest deductions or receipts for payments made by a government agency. Placerville, El Dorado County, California region homeowners need to know this and pass on this information!

Complete details at:  “Guidance on Tax Consequence of Distressed Homeowner Payments Provided (IRS Notice 2011-14) 

Information credit given to the first tuesday Journal Online; by first tuesday Realty Publications, Inc.

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California “Delays Foreclosures” for 30 days!

It took banks 27.9 percent longer, or 225 days, to foreclose on a property in California last month than it did in March 2009, and 0.45 percent longer than it did in February, according to data tracked by foreclosure data company ForeclosureRadar.com.

The foreclosure process is likely to take longer in the future, the report said, since banks delayed sending notice of trustee sale filings to borrowers until an average of 188 days had passed since the notice of default, up from 142 days in February.

That extra delay pushed ForeclosureRadar’s preforeclosure inventory estimate up 12.6 percent to 157,768, compared to February. The inventory estimate fell 12.1 percent year-over-year in March.

The inventory of bank-owned properties (REOs) in California dropped 26.5 percent year-over-year and 1.4 percent month-to-month, ForeclosureRadar reported.

Foreclosure filings have dived since last year, “when lenders caught up on a backlog of filings after delays caused by new notice requirements introduced in California Senate Bill 1137,” ForeclosureRadar’s report said.

The bill prevented lenders from issuing a notice of default before contacting the homeowner to explore options to avoid foreclosure and delayed filings for 30 days after that first contact.