Asset Planning, Inc Blog
Programs for Underwater Homeowners
Two new bills went in effect in April to aid distressed homeowners. The first bill is called the Home Affordable Foreclosure Alternative Program or for short HAFA. HAFA is intended to help people that don't qualify for a loan modification under the first government program HAMP. Under HAFA borrowers and lenders will get cash from the government to complete a short sale. A short sale, basically, is when a lender agrees to accept less than is owed on a property in order to sell the house to a new buyer. In addition to the financial incentive given, the government program requires lenders to approve and set the terms of the short sale prior to the house being listed and release the borrower of all future liability on the first lien mortgage. The program will be in effect April 2010 until December 2012.
The second government program offered this month is from the state of California. This law changes California tax code to absolve homeowners from income tax owed on canceled debt. Perviously, debt forgiven in foreclosure, short sale, or loan modifications was treated as taxable income. This change in California tax code mirrors the 2007 Federal Government tax relief program called the Mortgage Forgiveness Debt Relief Act.
