Life After Death? Extension of Debt Relief?

By Christopher Combs | October 17, 2012

   Any forgiveness of debt is generally taxable income.  In 2007 during the height of the housing crisis the Mortgage Debt Relief Act was passed.  Under this Act any debt forgiveness after foreclosure or a short sale by a mortgage lender on a loan used to purchase a primary residence, or to make improvements to a primary residence, is not taxable income.  This Act is now scheduled to expire on December 31, 2012.    The Act had originally been scheduled to expire on December 31, 2010, but was extended for two years until 2012 because the housing crisis still existed. …


Strategic Defaults Are Not “Illegal”

By Christopher Combs | September 26, 2012

Hypothetical: Microsoft founder Bill Gates owns a rental home in Arizona which is “underwater” because the value of the home is less than the amount owed on the mortgage used to buy the home.  Bill Gates intentionally stops making the mortgage payments, and the mortgage lender forecloses. Issues: Does Bill Gates have any personal liability for the deficiency after foreclosure?  Is this intentional default by Bill Gates on the mortgage loan, i.e., strategic default, “illegal”? Discussion: Prior to 1971 all home foreclosures in Arizona were judicial foreclosures of mortgages, meaning that  the mortgage lender was required to file a lawsuit,…