Debt Relief Act and Foreclosure

Since there are many people unemployed right now, a lot of homeowners are finding it hard to keep paying their regular mortgage payments. Some of them have good rates but, without jobs, they still cannot keep up. Some homeowners have adjustable rate mortgages and find their home payments adjust to twice what they were paying. Many homeowners cannot afford to stay in their homes so they need sell and move on. The problem is that, with dropping home prices, they also find themselves with upside down mortgages. That means, they owe the mortgage companies more than their homes are worth. So, what can they do?

Is Selling the Homes an Option?

The first thing that comes to mind for a lot of homeowners is to sell and move on. However, if they were to sell their homes, they are going to get less for them than what they owe the mortgage companies. Therefore, selling may not be the best option. But, it is often a good idea to consult a Realtor to make absolutely certain that there is no way to sell and walk away free and clear without having to come up with the rest of the money for the mortgage balance later on.

Is Refinancing an Option?

Usually when you owe more than your home is worth, banks do not want to lend. However, there could be options that allow you to refinance your house or modify your loan especially when the rates are extremely low right now. If your credit is good or fair and want to explore the option of refinancing or have any home loan questions, call your bank as well as other mortgage companies for comparison. Sometimes, your own bank may not be able to help you but other banks may be able to.

Mortgage Forgiveness and Foreclosure

A lot of homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Soon their mortgage companies start to foreclose. Foreclosure severely hurt your credit so you need to call your bank and try to negotiate with them before they foreclose. If they do foreclose, however, there is the new Mortgage Forgiveness Debt Relief Act of 2007 that will work on your side. This Act allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.