Friday, January 25, 2013

The IRS & Principal Reduction

IR-2013-8, Jan. 24, 2013
WASHINGTON — The Internal Revenue Service today announced guidance to borrowers, mortgage loan holders and loan servicers who are participating in the Principal Reduction AlternativeSM offered through the Department of the Treasury’s and Department of Housing and Urban Development’s Home Affordable Modification Program® (HAMP-PRA®).
To help financially distressed homeowners lower their monthly mortgage payments, Treasury and HUD established HAMP, which is described at Under HAMP-PRA, the principal of the borrower’s mortgage may be reduced by a predetermined amount called the PRA Forbearance Amount if the borrower satisfies certain conditions during a trial period. The principal reduction occurs over three years.
More specifically, if the loan is in good standing on the first, second and third annual anniversaries of the effective date of the trial period, the loan servicer reduces the unpaid principal balance of the loan by one-third of the initial PRA Forbearance Amount on each anniversary date. This means that if the borrower continues to make timely payments on the loan for three years, the entire PRA Forbearance Amount is forgiven. To encourage mortgage loan holders to participate in HAMP–PRA, the HAMP program administrator will make an incentive payment to the loan holder (called a PRA investor incentive payment) for each of the three years in which the loan principal balance is reduced.
Guidance on Tax Consequences to Borrowers
The guidance issued today provides that PRA investor incentive payments made by the HAMP program administrator to mortgage loan holders are treated as payments on the mortgage loans by the United States government on behalf of the borrowers. These payments are generally not taxable to the borrowers under the general welfare doctrine.
If the principal amount of a mortgage loan is reduced by an amount that exceeds the total amount of the PRA investor incentive payments made to the mortgage loan holder, the borrower may be required to include the excess amount in gross income as income from the discharge of indebtedness. However, many borrowers will qualify for an exclusion from gross income.
For example, a borrower may be eligible to exclude the discharge of indebtedness income from gross income if (1) the discharge of indebtedness occurs (in other words, the loan is modified) before Jan. 1, 2014, and the mortgage loan is qualified principal residence indebtedness, or (2) the discharge of indebtedness occurs when the borrower is insolvent. For additional exclusions that may apply, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals).
Borrowers receiving aid under the HAMP–PRA program may report any discharge of indebtedness income — whether included in, or excluded from, gross income — either in the year of the permanent modification of the mortgage loan or ratably over the three years in which the mortgage loan principal is reduced on the servicer’s books. Borrowers who exclude the discharge of indebtedness income must report both the amount of the income and any resulting reduction in basis or tax attributes on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).
Guidance on Tax Consequences to Mortgage Loan Holders
The guidance issued today explains that mortgage loan holders are required to file a Form 1099-C with respect to a borrower who realizes discharge of indebtedness income of $600 or more for the year in which the permanent modification of the mortgage loan occurs. This rule applies regardless of when the borrower chooses to report the income (that is, in the year of the permanent modification or one-third each year as the mortgage loan principal is reduced) and regardless of whether the borrower excludes some or all of the amount from gross income.
Penalty relief is provided for mortgage loan holders that fail to timely file and furnish required Forms 1099-C, as long as certain requirements described in the guidance are satisfied.
Details are in Revenue Procedure 2013-16 available on
Wekesa -

Wednesday, January 23, 2013

Tuesday, January 22, 2013

Glad to be Invited as Author!

Glad to be invited as an author to the Justice@Home Blogger.  Thanks Wekesa for setting this up and inviting me.  I look forward to contributing often.

Hey Team, Maxine Aarons filed her petition to protect her home in Gwinnette County today and served defendants in Cobb and Fulton.  
Gavel and Constitution - We the People
Fighting is Winning!

She was busy. Three counties in one day! Hey process service is no joke!  

We are so very proud of her.  

Reach out to her and say congratulations.
Email or Call.Go Maxine.


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PBS - The Untouchables

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Monday, January 21, 2013

Justice@Home 2013

Hi, Happy New Year

We have great news. Our Justice@Home Blog is back up and running wild.
We have lots to do this year, and J@H members have been busy fighting and winning against the bloated banks foreclosure machine.

This Saturday we learned from LaShunda Davis on how she won and is moving into her new home.

Here is an excerpt from Judge Carnes Order that led to Citi Bank settling the case out of Court:

"Accordingly, as it is possible on this record that the defendant did not hold the Note at the time of the foreclosure sale and as there is a difference of opinion as to whether Georgia law requires the foreclosing party to hold the note, the Court DENIES without prejudice defendants' Motion for Summary Judgment [31].

Effective October 9, 2012,8 discovery is reopened for a 60-day period to enable the parties to fully develop the factual record on this point. During discovery, defendant is directed to provide the plaintiff with any documents that would shed light on whether the Note, or a beneficial interest therein, was transferred to Ginnie Mae and when those transactions occurred, including when defendant received back transfer of the Note or of a full beneficial interest. Plaintiff may depose a Rule 30(b)(6) witness who should be in a position to explain all of the above, including explaining what a "beneficial interest" is. To the extent that the computer-generated MERS Milestones Report may not be a reliable indicator of any of these factual matters, this witness, or another appropriate witness, should be made available to explain why." (See entire order.)

On last Wednesday, LaShunda closed on her new home which she now owns "Free and Clear!"

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