The 2007, Mortgage Forgiveness Debt Relief Act exempted homeowners from paying income taxes on any portion of their mortgage that is either forgiven in foreclosure, eliminated it in a short sale or reduced in a principal reduction agreement entered into between homeowners and the financial institution. This has been a tax break that has saved homeowners tens of thousands of dollars in Federal Income taxes. Most homeowners are unaware that any reduction in the amount of their mortgage would be considered income to them and taxable by the Internal Revenue Service.

Example

Let’s assume that you purchased a home for $350,000. Unfortunately, it goes into foreclosure. Let’s assume you took out a $300,000 mortgage on your home and at the time of the foreclosure sale, you owed $250,000. At the sale, the home sells for $100,000. Therefore, there would be $150,000 of your mortgage that would not be paid. Under the present law, the Mortgage Forgiveness Debt Relief Act of 2007, your financial obligations to pay income taxes on this $150,000 are eliminated. Once this statute expires, you would have to pay income taxes on the $150,000. Now let’s assume for purposes of this discussion your income tax rate was 30%. This would cause you to pay $45,000 in income taxes as a result of your home being sold in foreclosure. This would be a shock to most homeowners!

Celebrities are among the four million Americans whose homes have been foreclosed on in the past five years. Being a celebrity allows you to accumulate large sums of money. However, being a celebrity doesn’t mean you have enough money to pay your bills. The following is a list of celebrities whose homes have been foreclosed on:

Chris Tucker

Chris Tucker is a comedian. He owned a property called Bella Collina in Lake County, Florida. SunTrust bank, in October of 2012, brought a foreclosure proceeding against Mr. Tucker. In this proceeding, the bank alleged that he owed $4.5 million. Mr. Tucker bought the house when the real estate market in Florida was still high. In the end, he was able to sell the house in a short sale. It has also been reported that Mr. Tucker is indebted to the IRS for $11.5 million related to back taxes.

Rhianna

Rhianna is a singer. She owns a home located at Janus Place in Beverly Hills, California. Her home is approximately 8500 square feet. She purchased the home for approximately 7 million dollars in 2009. Shortly after purchasing the house, there was a flood which caused “extensive damage” to the home. It had been listed for sale for $4.5 million. Rhianna has defaulted on making the payments on her mortgage. She has requested the home be sold in a short sale.

Burt Reynolds

Burt Reynolds owned a home in Hobe Sound, Florida. He was more than two years behind on his home payments. It is estimated that his mortgage payments were over a million dollars behind. He seeks to sell the home in a short sale for approximately five million dollars. It is estimated that he paid over $15 million for the house when the real estate market in Florida was much stronger. The house is a waterfront piece of property and has approximately 13,000 square feet of living space. In addition, he has a helipad and a docking area for his yacht.

About The Author

Elliot S. Schlissel, Esq. is an attorney with more than two decades of experience representing individuals whose homes have been foreclosed. He litigates cases involving mortgage fraud, robo-signers and fraudulent foreclosures.

In 2012, 309,000 Americans received mortgage for relief from their financial institution. As part of the landmark settlement over foreclosure abuses, $6.3 million was cut from homeowners’ mortgages in 2012. Each homeowner, who will receive mortgage relief, received approximately $85,000 in reductions in the amount they showed. Homeowners in New York State received approximately $625 million dollars in funds for mortgage relief. Over 7,000 New York homeowners benefited from these mortgage reduction packages.

The mortgage relief packages were part of a settlement of a lawsuit brought by the United States government and the Attorneys General in 49 states. The total settlement package was over $25 billion. The banks involved in the settlement were Ally Financial Inc., Bank of America Corp., JP Morgan Chase & Company, Citibank and Wells Fargo & Company. The lawsuits brought by the Federal government and the state Attorneys General dealt with problems caused by many financial institutions bringing foreclosure proceedings without properly investigating as to whether they had the appropriate documents to verify they were owed the money from the homeowners.

Unfortunately, there are an additional 11 million Americans who owe money to the financial institutions in amounts more than their homes are worth. All of these Americans have homes that are under water. There are 11 million homeowners also in need of help with their mortgages!

About The Author

Elliot S. Schlissel, Esq. is an attorney with more than 45 years of experience. He is a former president of the Commercial Lawyers Conference of New York, a regional bar association. He has been representing individuals regarding foreclosure defense, mortgage modifications and fraudulent mortgages for more than two decades.

In 2012, 309,000 Americans received mortgage relief from their financial institution. As part of the landmark settlement over foreclosure abuses, $6.3 million was cut from homeowners’ mortgages in 2012. Each homeowner, who received mortgage relief, received approximately $85,000 in reductions in the amount they showed. Homeowners in New York State received approximately $625 million dollars in funds for mortgage relief. Over 7,000 New York homeowners benefited from these mortgage reduction packages.

The mortgage relief packages were part of the settlement of a lawsuit brought by the United States government and the Attorneys General in 49 states. The total settlement package was over $25 billion. The banks involved in the settlement were Ally Financial Inc., Bank of America Corp, JPMorgan Chase & Company, Citibank and Wells Fargo & Company. The lawsuits, brought by the Federal government and the state Attorneys General, dealt with problems caused by many financial institutions bringing foreclosure proceedings without properly investigating as to whether they had the appropriate documents to verify they were owed the money from the homeowners.

Unfortunately, there are an additional 11 million Americans who owe money to the financial institutions in amounts more than their homes are worth. All of these Americans have homes that are under water. There are 11 million homeowners also in need of help with their mortgages!

About The Author

Elliot S. Schlissel, Esq. is an attorney with more than 45 years of experience. He is a former president of the Commercial Lawyers Conference of New York, a regional bar association. He has been representing individuals regarding foreclosure defense, mortgage modifications and fraudulent mortgages for more than two decades.