What does this mean?

If a lender forgives some portion of a homeowner’s mortgage in 2013, either as part of a short sale or foreclosure, or in a loan restructuring that reduces principal, the owner/seller will not be required to count that forgiven amount as income for tax purposes.

Why is this important?

• Homeowners shouldn’t be forced to pay a tax on money they’ve already lost with cash they never received – and will never receive. 

• More than 20% of current homeowners with a mortgage are in a distressed financial situation and owe more on their homes than the current market value.

• The housing market, while recovering, is still fragile enough that this tax relief is necessary to provide stability in the coming year.

As always please consult with a tax advisor to see how this law pertains to your situation.

So borrowers that are tight on ratios should close by then…wanted to give you as much heads up as I got…  Fannie Mae and Freddie Mac are still having some issues with performance of some loans, so there is a further tightening coming in less than 2 months…

Any loan closing after 10/20/2013 (if I understand correctly) will be subject to the new rules :

Including: 

1. Worst case for self-employed borrowers (average of last 2 years tax returns or current year only if worse), up til now we have usually been using only last years returns
2. Lower debt to income ratios on some groups – not clear yet… but currently have been able to get approval at 49.9% Debt to Income – that may come down to 45% would be my guess
3. Appraisal waivers will go away, not a huge deal here
4. Must soon have enough cash for large monthly payments sources (eg. $6k Amex card due each month – need to show 6k in bank account on top of down payment) – only an issue for people with debt and low cash

For example:  you could purchase my listing in Forest Heights  the cute 2 bedroom 2.1 bath townhouse for $ 309,000

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