| A loan modification that includes a reduction in the | | | | modification is an option you should consider. You |
| principle balance has some troubled homeowners | | | | lender may be willing to workout new loan terms that |
| worried about the tax consequences. Many mortgage | | | | will lower your interest rate, lengthen the term and |
| loan modifications are featuring a reduction in the | | | | even reduce the principle balance to arrive at an |
| amount owed to more accurately reflect the homes | | | | affordable and sustainable loan payment. The Federal |
| current market value. Since many areas of the | | | | Government is strongly encouraging lenders to reach |
| country have experienced severe value declines, this | | | | out to distressed borrowers to offer them a loan |
| amount can be substantial. A loan modification can | | | | modification before initiating any foreclosure action. |
| save a distressed homeowner thousands of dollars | | | | Secretary Paulson has mentioned even mandating that |
| and prevent foreclosure, but what about the tax | | | | lenders offer systematic and streamlined loan |
| liability? Read on ... | | | | modifications to homeowners as part of the Bailout |
| The Mortgage Forgiveness Debt Relief Act of 2007 | | | | billions. It seems that finally the government is willing to |
| generally allows taxpayers to exclude income from | | | | step in and force lenders to offer homeowners the |
| the discharge of debt on their principle residence. Debt | | | | help they need to stop the avalanche of foreclosures |
| reduced through mortgage restructuring-loan | | | | across the country. |
| modification-as well as mortgage debt forgiven in | | | | Many of the new programs have built in timelines, so |
| connection with a foreclosure, qualify for this relief. | | | | you should start learning right away about your loan |
| This provision applies to debt forgiven in 2007,2008 or | | | | modification options. You don't want to miss out on the |
| 2009. Up to $2 million dollars of forgiven debt is eligible | | | | billions of dollars in homeowner aid. You might have |
| for this exclusion - $1 million if filing separately. The | | | | been given a loan you did not understand or could not |
| exclusion does not apply if the discharge of mortgage | | | | afford, but do not be afraid to contact your lender now |
| debt is due to services performed for the lender or | | | | to get the help you need. Take the time to learn about |
| any other reason not directly related to a decline in the | | | | your lender's loan modification guidelines, so you will be |
| home's value or the taxpayers financial condition. The | | | | able to prepare an acceptable application. It is not really |
| amount of mortgage debt excluded will reduce the | | | | hard for an informed homeowner to get the loan |
| taxpayers cost basis in the home. For more detailed | | | | modification help they need from their lender-with just |
| information, please consult the IRS website. | | | | a little knowledge and preparation you can get the help |
| If you are struggling with high mortgage payments and | | | | you need to save your home. An informed |
| unable to refinance or sell your home, a loan | | | | homeowner is hard to take advantage of again! |