Loan Deficiency

1099-C New Interpretations by AZ Courts, see what Doug Farnham has to say with Mortgage Mediation Group.


1099-C
New Interpretations by AZ Courts
Over the course of the past year or more there has been much discussion in the real estate community of the effect of the issuance of a 1099 by a lender(s) to the IRS following a short sale of a property and reporting the deficiency balances remaining on the loan(s). Many have openly stated that when a lender submits the 1099 to the IRS following the short sale that the lender has reported the deficiency not only as forgiven debt for tax reporting purposes but, has also forgiven the debt for purposes of legal collection against the borrower/homeowners. Many homeowners have relied upon those statements. The exact legal effect of the issuance of a 1099 by a lender on that lender’s right to legally enforce and collect upon the deficiency, however, is not so very clear. The Arizona Court of Appeals has issued an opinion in Amtrust Bank v. Fossett, No. 1 CA-C 08-0840 (Ariz. App. Dec. 15, 2009) in which the court concluded that the effect of the issuance of a 1099 upon a lenders ability to sue a borrower for a loan deficiency has not been decided.
The simple facts of this case are that Fossett had defaulted upon a car loan issued by Amtrust Bank in 2002. The bank repossessed the car and sold it in 2003 leaving a balance due on the loan of $20,000. Two years later, 2005, Amtrust filed a 1099-C with the IRS reporting the sum of $18,000 as “discharged” or a forgiven debt. As a result, Fossett reported the sum of 18,000 as income and included that amount on his income tax returns for that tax year.
Amtrust later sued Fossett for the unpaid balance due on the loan. Fossett filed a motion with the court claiming that Amtrust had “discharged” or forgiven the balance of the loan by the filing of the 1099 and therefore, should not be permitted sue him and collect upon that same debt. Amtrust replied by arguing that the filing of the 1099 was done in order to comply with Federal tax laws and accounting requirements but was not intended to release the borrower from the legal obligation to repay the balance on the loan. The Court of Appeals found that there is no clear position under Arizona law and that there is a split of authority across the country on whether the issuance of a 1099 does or does not act as a release by the lender of the ability to sue a borrower for the remaining deficiency on a loan (in Connecticut it does, but in Pennsylvania it does not). The Court of Appeals remanded the case back to Maricopa Superior Court for final determination at the trial level.

Clearly the issue of whether a lender will be legally precluded from suing a borrower to collect upon a loan deficiency after a short sale because of the filing of a 1099 remains undecided. Arizona courts could go either way on this issue. Until there is a clear and precise ruling from the Arizona courts, borrowers in short sales should not be told that the issuance of a 1099 may provide them any form of protection from legal claims by their lender to collect on any loan deficiencies.


Doug Farnham (Central/Southern AZ)
(602)774-3753
dfarnham@tcmmg.com

Bob Verbic (Northern AZ)
(928)899-5765
bverbic@tcmmg.com

www.MortgageMediationGroup.com

Sabino Canyon Photos

Tucson is beautiful and green right now with all of our Winter and Spring rainfall. It's a 7 mile hike top to bottom, plus many many other trails for hiking. They have trams you can take up and down and hop on and off as you want to. Absolutely gorgeous now! You might even see a Mountain Lion!

Taken by Peggy Nelson

Taken by Pam Treece of the Dove Mountain Office
Saguaro:
Taken by Pam Treece of the Dove Mountain Office
Prickly Pair Flower:
Taken by Pam Treece of the Dove Mountain Office

Steve Harney of Keeping Current Matters

Steve Harney of Keeping Current Matters has a really interesting blog! You may want to follow it!
http://kcmblog.com

Here is the Tucson Main Market Housing Report from Long Realty.com. Check it out!
Main Housing Update 3-2010

Free Public Online Tax Credit Seminar

My company, Long Realty, will present a free public online tax credit seminar on Thursday, February 25 from 6:30 p.m. to 7 p.m. to help consumers better understand the home buyer tax credit that expires April 30, 2010.

This online seminar is available at no cost and will feature Tony Finley, CPA, Chief Financial Officer for Long Companies. Finley will be presenting insight into the new tax credit in easy-to-understand terms while answering live questions from online viewers. He will also explain various scenarios as they apply to buyers and sellers in today’s real estate market and address the impact of the current trends in the real estate market as it relates to buyers and sellers.

The federal home buyer tax credit features a tax credit up to $8,000 for qualifying first time home buyers and up to $6,500 for qualifying current homeowners purchasing a new primary residence. Purchase contracts must be signed by April 30, 2010 and close by June 30, 2010. Certain restrictions and qualifications apply, details can be found at www.LongRealty.com/taxcredit.

Finley is a CPA, has an MBA from the University of Texas, and brings 19 years financial management and leadership experience to Long Companies.

Registration for this online seminar is available by visiting Long Realty’s website, www.LongRealty.com. There is no cost to participate; Seminar is open to the general public and can be accessed by any computer with an internet connection and telephone for audio. This is not a sales presentation; it is a live, informative event.

Home Buyer Tax Credit

FOR BUYERS

The $8,000 first-time homebuyer tax credit is extended
Now, qualified first-time home buyers would receive their $8,000 tax credit if they sign a purchase contract by April 30, 2010 and close by June 30, 2010
-The home purchased must be their primary residence
-Buyer cannot have owned a home during the past three years
-Tax credit is up to 10 percent of the home’s value (not to exceed $8,000)
-Annual income caps to qualify for the tax credit will increase ($125,000 for single filers / $225,000 for joint filers). Partial tax credit can be granted for incomes up to $145,000 for single filers / $245,000 for joint filers

BRAND NEW

-New $6,500 tax credit for current homeowners purchasing a primary residence
-Eligible home buyers must have lived in their current home for five consecutive years of the past eight years
-The new home’s cost need not exceed the current home
-Eligible for homes with purchase agreements written by April 30, 2010 and that close between Nov. 6, 2009 and June 30, 2010
-Annual income caps to qualify for the tax credit will increase ($125,000 for single filers / $225,000 for joint filers). Partial tax credit can be granted for incomes up to $145,000 for single filers / $245,000 for joint filers

To learn more about obtaining the tax credit, visit the Frequently Asked Questions and Tax Credit Changes Comparison Chart.
To obtain forms to claim your tax credit, see this information from the IRS.
For further information about eligibility requirements and limitations, visit www.irs.gov or www.FederalHousingTaxCredit.com.

Check all Tucson Homes for Sale on www.TucsonHomes.com and
If you are interested in moving into an Independent, Assisted or Memorty Care
Community in Tucson check out my www.TucsonSeniorResources.com

This web site has information on help if your wish to stay in your Tucson Home or if you wish to sell your Tucson Home.

Sherie Broekema, SRES, CRS, ABR
Long Realty Co.
www.TucsonHomes.com
www.TucsonSeniorResources.com

A Prairie Home Companion with Garrison Keillor

A Prairie Home Companion with Garrison Keillor came to Tucson Convention Center with Public Radio and TV. Last night we watched a two hour live performance of Garrison Keillor which was outstanding. We were surrounded by Minnesotans clapping and tapping their feet to the music. The group iMas played music ranging from Tejano to country to funk. They are a Mexican band and say they are booked for weddings through December.
Dave Rawlings a guitarist, producer, singer, songwriter sang and played for us also. with songs such as I Hear Them All/This Land is Your Land.Plus my favorite part where Garrison does all his songs and stories. My favorite song was There's No Rust in Tucson! Tucson received such nice reviews over and over again in the evening. His research team surely does their home work and we should have even more tourists. coming out to enjoy our wonderful weather and environment. Seems like we are all from somewhere else. My husband from Minnesota and me from Hawaii.

Tucson home sales and Tucson Real Estate should have a boom just from his show.