In the final hours of voting to avoid the “fiscal cliff” in Washington, lawmakers chose to approve the extension of the Mortgage Forgiveness Debt Relief Act and Debt Cancellation that was originally approved in 2007. 

This is great news for sellers that are still struggling to negotiate with mortgage lenders on modifications or get their short sale approved on their home.  This act protects many sellers from being taxed on the difference of what they owe on the home and the current market value sales price that the home sells for.  Prior to the extension some short sale  homeowners could have faced a scenario where the bank forgives a $50,000 deficiency on their home, but the IRS taxes them on that deficiency.  This could have resulted in homeowners moving into a different tax bracket. 

The IRS web page has not been updated to show the date through 2013, but I imagine it will be soon.  For the details on the act please visit the IRS Mortgage Forgiveness Debt Relief Act and Debt Cancellation page at:



After months of discussion 49 states reached an agreement with the five largest loan servicers and will be offering as much as $25 billion to distressed borrowers and to states and the Federal Government.

This is exciting news for many homeowners that are upside down in their mortgages.  The servicers that are participating in this settlement are developing the guidelines to implement the plan to help homeowners.  The settlement is very complex so the plan is to execute it over the next three years (timeline taken off


  • Over the next 30 to 60 days, settlement negotiators will be selecting an administrator to handle the logistics of the settlement and monitor compliance.
  • Over the next six to nine months, the settlement administrator, attorneys general and the mortgage servicers will work to identify homeowners eligible for the immediate cash payments, principal reductions and refinancing. Those eligible will receive letters.
  • This settlement will be executed over the next three years.

More information about all of the details of the settlement can be found at:

What does that mean to Idahoans?  If you are upside down on your mortgage or struggling with your payment, there will be money set aside to help some homeowners re-finance, reduce loan principle and help with loan modifications.  It’s important to know that this relief may not be available immediately (see timeline).  It’s hard to say how many Idaho homeowners will get relief from this settlement.  The Idaho Statesman contacted the Attorney Generals Office and recently published this Q and A on how this would benefit Idahoans:

Most of the money will go to homeowners that are struggling to make payments and are at risk of foreclosure but have no equity so have been unable to refinance their loan.  See article above from the statesman, “For about 1 million underwater homeowners, their loan principal will be reduced by an average of $20,000.  But more than 90 percent of underwater homeowners won’t be helped.  Some, however, might be eligible to refinance at a rate of 5.25%”

You can contact your bank directly to obtain more information about implementation and requirements.

I personally have contacted two of the servicers for a client and have been told by one that they will not know how they are implementing this settlement for a minimum of 90 days.  The other servicer told me that they would be implementing the settlement in 6 to 9 months.

We definitely will be keeping our ears open and relaying any information that we possibly can.

In the meantime, read up on everything you can about this settlement to see if you would be a candidate and IF you have time to wait for the implementation of the settlement.

This article will appear in the Eagle Informer in February.  It was written by three Woodhouse Group agents that are familiar with the short sale process. 

“Short sale”, unfortunately, is a term that you hear quite often these days.  And while you may think you have a basic understanding of what that means, there are several “moving parts” to a short sale and without an understanding of all of them; you may not have the complete picture.

Fundamentally, short sale means to sell a property for less than what is owed to the lien holder(s) (lenders) to pay off the loan(s.)  What makes short sales complex are the number of variables often associated with a short sale transaction.  For example:

  1.  How many liens (loans) are recorded against the property?  This can include 1st and 2nd mortgages, lines of credit, tax liens, or mechanics liens.  The fewer number of liens on the property, the more straight forward the short sale process because there are fewer lien holders (lenders) to negotiate with.
  2. What types of liens are on the property? Different liens pose different challenges.   Home Equity Lines of Credit (HELOC), for instance, can create more difficult negotiations than a 2nd mortgage lien.  Personal tax liens  and mortgage insurance can also create obstacles.
  3. Who owns the lien?  Does a bank own it or a private investor like Fannie Mae or Freddie Mac?  Sometimes there are different guidelines and rules to follow based on who owns the lien.
  4. Has the property received a Notice of Default (NOD)?  A Notice of Default is the official document that lets the seller know that the bank is foreclosing on the property and states the official date the property is scheduled for auction.  Whether the property has a NOD recorded is important because that can have an effect on the amount of time that is available to complete a short sale.
  5. How does your financial situation look on paper? Not everyone is able to try to short sale their home.  Lenders require sellers to “qualify” for a short sale by a careful review of the seller’s financial situation and their “hardship” to determine the likelihood of the seller becoming more able to resume their payments in the near future.  The lenders will require copies of tax returns, bank statements, investment statements, pay stubs, profit and loss statements if self-employed and a detailed letter explaining the personal situation that has caused the hardship and inability to pay.

There are other variables that could affect the ability to short sale a property.  These topics, and others, will be covered in future articles.  Of the various options a homeowner has when they owe more than the market value of their home and they are struggling to pay their mortgage, a short sale is a viable way to go to try to avoid foreclosure.  The most important thing to consider if you decide to try to short sell your property is to use a real estate agent that has short sale experience.  It could mean the difference between a successful short sale and a foreclosure.

Written by:  Rebecca Standerfer, Marilyn Talbot, and Judy Trimble

Many people who are struggling to stay in their home, decide to walk away and let the home foreclose.  That is an option.  However, if you want to save you credit from being hit so hard, there are other options that might work for you: 

 Cure/Reinstate  Reinstatement might be possible when you are behind in your payments but can promise a lump sum to bring payments current by a specific date.   Once you are in default, you still have an opportunity to cure the default of the loan.  You typically have 120 days from the formal Notice of Default, until the foreclosure auction date.  At anytime prior to foreclosure, you are allowed to pay the delinquent amount plus any costs incurred in the foreclosure process. 

 Redemption  This is defined as paying off the loan in full.  At all times, until the foreclosure auction actually takes place, the borrower has an absolute right to “pay off” the loan that is in default.  This payoff usually occurs through a refinance of the property with a new lender providing a new loan to the borrower.

Forbearance  Your lender allows you to delay payments for a short period, with the understanding that another option will be used afterwards to bring the account current.  Lenders sometimes combine Forbearance with Reinstatement if they know the homeowner will have the funds (for example a tax return or inheritance) to bring the account current by a specific date.  If the account is past due, but the homeowners NOW can make payments, the lender might agree to let you catch up by adding a portion of the past due amount to a certain number of monthly payments until the account is current.

Military Forbearance  Similar to regular forbearance but since you are military, you could qualify for additional benefits like a longer forbearance period with no negative impact to your credit score.  A special hotline has been set up to offer additional guidance about this option:  877-MIL-4566.

 Repayment Plan  This option is similar to forbearance in that you must demonstrate to the lender that you have had a temporary situation which have resulted in your inability to make loan payments.  The difference is that you do not believe you will receive enough funds to reinstate the loan all at one time.  The lender will sometimes combine a forbearance and create a repayment plan for you to make extra payments each month over a set period of time until you catch up prior to your foreclosure date.

Refinance  You may be able to refinance and receive  a completely new mortgage with new terms, interest rates and monthly payments. This would replace your current mortgage and may lower your payment so you could improve your financial situation.  You may qualify for the Home Affordable Refinance Program:    Remember that this program is currently in the process of being changed so if you do not qualify now, you may qualify in the next several months. 

Loan Modification  If you can make the regular monthly payment now, but cannot catch-up the past due amount, the lender might agree to modify the mortgage. They may do that by adding the past due amount into the existing loan, financing it over a long term or change your interest rate.   Lenders may also modify loans if you no longer have the ability to make payments at the same price or level. The lender can modify your mortgage to extend the length of your loan (or take other steps to reduce the payments).  You may qualify for the Home Affordable Modification Program:

FHA Loans  If you have an FHA-insured loan, the lender might be able to help you receive a one-time payment for the FHA Insurance Fund.  FHA has a loss mitigation option that allows a borrower to get an interest free loan from HUD to bring their mortgage payments up to date.  You will need to contact your lender to file a partial claim.  Your lender can work with the Department of Housing and Urban Development (HUD) to help you. FHA information line: (877) 622-8525

VA Loans Financial counseling to help homeowners avoid foreclosure is available through VA Regional Loan Centers. Contact 1-800-827-1000 and ask for the phone number of the Loan Service Representative in your area.

Short Sale   This is when you owe more than fair market value on your home.  You and your real estate agent work with your lender to approve the sale of the home and forgive the remainder of the debt owed.  You may qualify for a pre-approved short sale through Making Home Affordable:    Or contact a real estate agent that is experienced in short sales and they can help you navigate through this process.

Deed-in-Lieu of Foreclosure  Your lender may offer be willing to accept a deed-in-lieu of foreclosure.  You would voluntarily transfer ownership of the property to your servicer.  Many lender require that homeowners try to modify their mortgage or short sale their home before they will accept a deed-in-lieu. 

HUD(U.S Department of Housing and Urban Development) You can contact a HUD approved counselor at (800) 569-4287 or search on the web at A counselor may be able to help determine which options might be available to help you negotiate with the lender to work out a repayment program.

Be your own advocate 

You need to put a plan in motion.   Lenders do not want to foreclose if they can help it, but many of them are overwhelmed by the number of defaulted mortgages.  Make sure you get them all of the information that they require and follow-up on a weekly basis on what the status of your loan is.