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Is That Congress I See on the Big White Horse?

Is That Congress I See on the Big White Horse?
by John Occhi, Hemet CA REALTOR
Mission Grove Realty

Anyone who does not have their head buried in the sand knows that the United States is on the verge of some sort of financial disaster as a result of repercussions of the blows the housing industry has recently taken. There are of course many opinions as to what the actual crises are, who is to blame and how do we prevent the worst case scenario. That is not the purpose of this article.

Ultimately, many families will lose their home either thru foreclosure or though some sort of loss mitigation method in the preforeclosure cycle, that might include an actual "short sale". Quickly for review, a short sale is when the bank accepts less payoff for the mortgage then what is actually owed on the property.

On the surface, this sounds like a pretty good deal - except the process is designed to eliminate further fraud in the industry. If they buyer thought he had to jump through hoops to get the loan - it is magnified in trying to get out of the loan.

The Good News on the Horizon

Our government is attempting to step in and ease some of the burden on families that have already been kicked to the ground. I guess they don't see any advantage of adding additional pain to the misery of the downtrodden or how it will be good for either votes or the economy (I'm sure the priority is in that order).

In essence, the new law, if it passes, will eliminate the reporting of discharged residential mortgage debt as income. If it passes, it will have an effective date and only debt discharged after that date will be effected, according to the current language of the bill.

The bill being discussed here was introduced by Rep. Robert Andrews, D- N.J., and Rep. Ron Lewis, R-Ky., HR 1876 and has found its way through the House of Representatives. It was introduced to the Senate on May 15, 2007 as Senate Bill S1394. This bill is sponsored by Senator Debbie Stabenow (D) (MI) and 4 Cosponsors: Senators John Kerry (D) (MA) (I can't believe I am agreeing with him - but heck this is America), Carl Levin (D) (MI) (or him), Olympia Snowe (R) (ME) and George Voinovich (R) (OH)

U.S. Capital with Reflection Pond

Of course, it still must get through the Senate as I mentioned earlier and then the President must sign it. So, if you ever get involved in "grass roots' politics - now would be a good time to put some oil on the wheels of government and get your grass roots machine in gear and running. At this point, you need to contact your U.S. Senators - you have two of them. Here in California, we have Diane Feinstein and Barbara Boxer. Love them or hate them, now is your chance to get them to do the right thing, if you agree with this legislation.

The bill is currently in committee. Here is a great link I found that shows how a bill moves through the government to become law. Diagram of How Bill moves through Government to become law

So What Makes HR 1876 so Special?

If the United States Senate passes this bill and the President of the United States signs it into law then HR1876, or the "Mortgage Cancellation Relief Act of 2007" as it is known, will offer homeowners tax relief if a portion of their mortgage is forgiven.

Currently, IRS guidelines dictate that any forgiven debt is reported to the IRS. The theory behind this is if you borrowed money and then did not have to pay it back, that you benefited from these proceeds and so now you must pay tax on those monies - just as you would on any other income.

So, for simplicity, let's assume you have a $100,000 mortgage that you fall behind on and lose your home. The mortgage lender recovers $80,000. This leaves the loan $20,000 short (hence the term short sale). The IRS vies this as income and you should be taxed on this - just as if it came to you in a weekly paycheck.

I know, many who will read this think it is not fair. Heck if you had the $20,000 you could have brought your mortgage current, after all. The bad news - this is currently the law of the land.

What's Your Opinion?

So, how do you feel about this legislation? Do you believe that the government should help bail out a small group of people that made foolish financial mistakes? Many Americans feel this way.

Or do you believe that the Government let this situation happen and that millions of loans that were doomed from the beginning were allowed to flood the market because of the greed of Wall Street and that the United States Government is a GOVERNMENT of the people and FOR THE PEOPLE and has a responsibility to step in and help clean up the mess that so many citizens find themselves in?

Perhaps you are somewhere in the middle. Either way, I would love to hear what others think of what may very well be the most important domestic legislation pending at this time - perhaps legislation that will help define this decade.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty
Hemet California Real Estate

Until Next Time, Have a Blessed Day,

John Occhi, ePRO & Five Star Certified REO REALTOR®
www.JohnOcchi.Com
Hemet - San Jacinto Valley, CA
The Excellence in Real Estate Team @
Allison James Estates & Homes
2281 W. Esplande Ave, #102-B
Next to "Starbucks"
San Jacinto CA 92582
(951) 654-5550

This blog and the contents written here is the intellectual property of John Occhi, Hemet - San Jacinto Valley REALTOR® in the South West Riverside County region of the Inland Empire of Southern California. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.

This blog is part of the ActiveRain Real Estate Network, which is a social network highlighting the best of Web 2.0. Information is provided with the intent of educating and assisting home owners, home sellers, home buyers and real estate investors with information the can be used to make better real estate decisions.

I am proud to be a full time REALTOR® who is proud to be a contributing member of the ActiveRain community.

Posted by John Occhi, ePRO, Hemet-San Jacinto CA Real Estate, 951-443-6259 on 07/16/2007 12:29 PM

Comments (29)

mortgage, government, foreclosure, preforeclosure, short sale, relief, opinion, congress

Originally posted at: John Occhi's Blog: Is That Congress I See on the Big White Horse?

This post has been included in California Information Riverside County, CA Information Hemet, CA Information

29 Comments on Is That Congress I See on the Big White Horse?

JUL

2007

Hi John, I agree with you, as someone that has had to get involved in about a dozen short sales this year alone. With all the other stress on these families and for, most times, over a year in Ohio before their home is taken, they then are facing a tax bill for sure as none of these homes covered the mortgage to the bank when sold. I also support a six month moratorium on foreclosures, that is in the Ohio House, because of the attitude 90% of these banks have on the home owner. Very difficult in negotiations, most of them won't even deal directlty with the home owner's. Unrealistic mitagation techniques, a ton of money to get current and absolutely no pro-active measures with these poor people. This is America and we take care of the world, spend billions in Iraq, N. & S. Korea, etc, etc......before we even think of our own. Shame on the current crop of politicians who only work at re-election. It's past time to hit the unfeeling banks and wake them up! Thank you for the avenue to vent. Great post and very timely. Regards, DavidC

We're mad as hell and we're not gonna take it anymore!

Hi John,

Your posts are always so popular that by the time I get to them you already ahve 10 or more comments.

Not this time. I'm in early.

The IRS will already ignore the 1099 if 1.) it represents a purchase money loan, and 2.) you have a letter from a CPA or tax attorney detailing your "loss."

If this bill passes it will benefit primarily those that took cash out with a re-fi. It is going to reward stupidity and greed!

That is not to say that I am against it. I am actually in favor of it because it will simplify the process for the actual "victims" and so what if it rewards the others?

Bill Roberts

P.S. Thanks for another opportunity for controversy. It's what we need to bring out the best.

David M. Childress Thanks for the awesome comment and support for the bill -now please let your state senators know you in in support - you are fortunate because one of your senators, George Voinovich (R) (OH), is a co-sponsor. show him you support - send a link to this blog and lets get some activity going. Get everyone you can to comment and sent the link to congress!

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty
Hemet California Real Estate

Bill Roberts OK, bill I agree that the "stupidity and greed" will be rewarded - if losing your house is a reward.

Remember, these are the people who should have never been allowed to buy a home in the first place - let alone borrow hundreds of thousands of dollars. Who really is the stupid.

What about the mortgage companies that had radio commercial after radio commercial stacked up on drive time seducing homeowners into tapping into their equity for more of whatever it is the homeowner wanted.

OK, they were and still may not be able to handle money responsibly. Not everyone can. Not everyone really understands money.

Personally, I believe their is more than enough blame to go around - from wall street to main street. The mistakes are not just those of the folks who now find themselves homeless and facing huge tax bills.

Your solution with an accountant does work - some of the time, but you can never say it will always work. And I wonder how many people do their own taxes or rely on some seasonal company like Liberty or H&R Block where the seasonal "consultants" have ever even heard of this program. The information is only good if it is known and acted upon. Besides, if these people are so 'stupid' they may never know about it.

Well, I'm glad yo are for the bill - so please spread the word and lets get lots of good comments like this one on the blog and then send links to your congressional leaders.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty
Hemet California Real Estate

I support the idea and personally have a soft spot in my heart for those that fell victim to the predatory actions of some lenders over the past few years. I would get goosebumps when I heard advertisements on the radio or tv or when I read their ads in the newspaper because I knew that people would fall for the ad just like they fall for all of the other "get rich quick" type ads on tv. Thankfully, most of the ads about the kazillion different ways to get into a home has seemed to slow down considerably since the shake-up in the lending industry.

Unfortunately as you eluded to John, not everyone understands money. There are many people out there that had no idea of the implications they would face later on after they purchased their home. All they knew was that "x" mortgage company could get them into that home.

Politician I am not but I do understand people and people make mistakes sometimes based on ignorance. I am willing to bet that there are more than a few members here on AR that have personal experiences from their own family members falling victim to this.

by: David Kucic, Hawaii Home Buying and Selling Team where military is spokena and military are always welcome.
http://davidkucic.com

investment properties/second homes-no help

primary/owner occupied-okay

does anyone out there remember the RTC.

we had a problem and we got through it.

we will do it again.

1SG (Ret) David & Tonya Kucic Welcome back from your well deserved weekend get-a-way. Thanks for stopping by and leaving your comments - they are always welcome and respected. You are right, there are many of here in the Rain that have similiar problems within in our families. I would even go out on a limb and predict that there are more than one or two of us in the Rain, that find themselves in a very similiar predicament and that this relief, if it passes, will be considered to be a Godsend.

The key is we have to get it to pass - so please pass this blog on to those you know and ask them to comment and them pass it on to your congressional leaders in Washington. As REALTORS® I don't think we need the NAR or our State associations to bang the drum -we can do it for causes we believe in - I believe in this one.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty
Hemet California Real Estate

Jay Beckingham - I agree we will get through our problems as a country. Yes I remember the RTC And the whole S&L scandal. I also remember the GREAT DEPRESSION from the first hand stories of my grandparents, parents and aunts and uncles - they lived it. It was real and waiting for the government to "get through it" was not a very pleasant experience.

This legislation is only for primary residences only and not commercial, investment or second homes.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty
Hemet California Real Estate

JUL

2007

OK John,

I just HAVE to chime in again. We all have somebody close who will be affected by the current climate in the real estate and financial markets.

A close member of my family (on my wife's side) got a cash out re-fi last year to do some home improvements. They didn't come to me because they didn't want to "share" personal information with us. As a consequence they got a very bad loan. It is a neg am ARM that is now @ 8.35%. The balance has been growing at approximately $1400 per month. They are in jeopardy of having the loan re-cast. When that happens their payment will be triple what they are currently paying. Since they got the loan the husband has been out of work for medical reasons. They are barely hanging on as it is. They will not be able to make the payments when the loan re-casts.

I don't want them to lose their house, and if they do, I don't want them to owe taxes on their gain. They are in that group of "stupid" people who did something "stupid" but I have to agree with you that they didn't know what thet were getting themselves into. The LO really screwed them. We need legislation against these predators more urgently than we do for this tax forgiveness.

I support this legislation for all the reasons I've outlined in my other comments.

But I think that we are missing the bigger issue. Stop selling loans to people that will re-cast and then the borrower will have no way to make the payment. This type of loan is "criminal."

Bill Roberts

JUL

2007

From One New Yorker to another: Thanks, for taking the time to talk with us today! Your a man who has been granted much wisdom and knowledge, and you apply that wisdom and knowledge to those of us in need. . . "Great will be your reward."

Pattie and Dan Hundley

JUL

2007

Do we have an update on HR1876 yet?

JUL

2007

Rosemary Brooks I am certain, if and when it passes, it will make major media headlines for more than a few days. Remember the term, "due process" - this means it takes a long time for stuff like this to happen.

If I am not mistaken our lawmakers are on summer vacation and not doing much more than water skiing and golfing right now - I look for activity in the fall - it is a non-election year, so no telling what will happen.

John

JUL

2007

Hi John!

I am one of those who got sucked into a mortgage where they overinflated the appraisal (because of the crash I owe more than it's worth) and I have been stuck wondering how I'm going to survive as a single person on a teacher's salary in Phoenix. I just heard about this bill and am trying to find out when (and if) it will pass and it will be my only savior. It will give me a chance to start over instead of drowning in the taxes I'll have to pay if it doesn't pass. As if student loans weren't enough to keep you under! I learned a hard lesson on this house when it comes to lenders and the lies they tell.

JUL

2007

Tammy - First, thank you for stopping by and commenting on my blog. I always welcome the public to let me know what is on their mind and if my work is actually having a benefit for anyone out there other than those in my industry.

If you find yourself in trouble on a month to month basis you should find a REALTOR® that specializes in SHORT SALES. Unfortunately, I do not have one that I can recommend in your area - but you should be able to find a couple just by looking at the ads - see who is advertising Short Sale Properties for sale and then interview a few. Arm yourself by reading my articles on Short Sales and others you can find here on ActiveRain as well as the rest of the Internet. Remember this new law does not become effective until it is signed by the President of the United States and then has an effective date. My best case scenario is that the bill pushes through in the fall session, the President signes it with an effective date of January 1, 2008. I do not see much more happening between now and then - as the wheels of justice are often very slow.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

JUL

2007

Good morning,

I am in the Mortgage Biz in NJ for 20 years this year. Last Thursday I did a breakfast with an attorney on foreclosures Over 250 people showed up at the Grand Chalet in Wayne NJ. It was the largest event year, on the biggest vacation week of the year! --The Herold News was there & is doing an article on Monday--

When I started to touch on the short sale process----needless to say it is the hottest topic in the industry over here. They kept me over an hour afterwords--many wanted me to do a follow-up afterwards--ajacent boards want me to also follow up.

My question is I never actually did a short sale--but have so many past clients & realtors with past clients --that I could never have time to help them all out. The board wants to do a follow up

My question is many agents are strating to specialize in this here now--but the amount of expertise, persistance, & handling the negotiations & paperwork involved is way too daunting a task for most realtors--they are on commission--need to make money--I want to find a way to help out past clients etc who are in financial distress who I can not even refi because of credit & equity situation combined with recent big time tighting of lending guidelines. It is a disaster in certain areas here. Over 70% of the no-money down deals made here--the people are in over their heads who bought in the last 3-5 years.

Does anyone have any ideas how I can help? Are their any honest people who can help me? --do you know of anyone with experience in northern nj who would like to help me? My integrity & reputation is my greatest concern--I truely believe we get back what we send out & to get what ever you want you have to help others get what they want. Are there any honest llcs,organizations,etc. who can help us in crisus in NJ?

Thank You! Kenneth Lombardi--Sales Manager for FIF corp in Paramus---973-632-3487--

AUG

2007

Kenneth Lombardi - One of the biggest challenges I have is that my writing attracts people from all over the country. when they call, I will listen to their story and offer what knowledge I can pass on to them. The challenge is that I co not have someone in most areas that I can refer to because most people really don't want to get involved in Short Sales or are willing to take a stab at it since there seem to be so many right now, so why not.

I believe there are more investors who know more about short sales and loss mitigation at this point then there are REALTORS® - so you may want to look in that direction.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

John did they mention the "effective date" yet? Hopefully, it will go back at least 1 year. Is that hopeful thinking?

Its also good advice to have sellers document their lost with an accountant or cpa before doing the short sale. Because when they send in those financial statements to the lenders, that information is documented and will probably show up again. Going to a CPA after you've turned in all "the get it done fast financial statements" that sellers are doing themselves- could end up hurting later on. Most sellers don't go into the details that they may need to on those statements.

Maybe we as agents should let our sellers know that it would be wise to get their documentation together FIRST, so they can proactively possibly be forgiven for the income or at least some of it -- just in case this bill does not pass or the effective date does not back date to cover them.

AUG

2007

Well, I am one of the "STUPID" people you all keep referring to. I resent that because we thought we had solid reasons and solid income for buying our first house. We also bought what we thought we could afford, a modest home in our "less than ideal" location. Everyone around us was making hundreds of thousands of dollars in their houses at the time, we were scared we would "never" be able to buy a house if we didn't get our foot into the housing market. Our income was the best it ever could be and thought to be increasing. We thought we were protected by a 'regulated' industry and we would hire a good realtor and take a lender on recommendation in order to avoid the pitfalls. I had no idea how much greed was behind everything. Maybe even our own motives. Trusted friends, parents, everyone seemed to be telling us to "buy a house" and to stop throwing our money away to paying someone else's mortgage by renting. When all we ended up doing is giving our lender over $50 for the past two years. We will walk with nothing but a potentially bad tax bill and horrible credit. Not to mention relocating and settling into a new community AGAIN. it is my kids that will suffer, as well. I am still hoping to buy that house i can die in and stop moving around. i didn't think that was so much to ask for.....i was willing to work for it. HARD. but it didn't matter. those of you that think we are 'stupid' probably already own a house because you are older and/or have more experience to the the housing trends or you have a serious ego problem. grow some compassion. if you know so much, offer to mentor young families around you who have dreams of their own.

AUG

2007

Wow, Californian! I did not see above where anyone thought you were stupid. Maybe I should read everything again. But if you read my comment and others, I am on your side! I have a deep resentment and distrust for the banks right now from personal experience. I do not see anyone really helping people like you, my neighbors and clients that are in real distress. I do not understand why our elected geniuse's do not seem to be taking any action. If it is not too late for you to do something with your bank, I would get in touch with someone right away. If you do not know anyone, maybe I can help, I would love to try!

You may contact me any way you wish, email or phone. Regards, David

AUG

2007

Forgiveness of the discharged loan is one critical element in keeping the American economy going and I'm all for it! I do not agree that homeowners who have found themselves in the situation of foreclosure are stupid. Foreclosures occur for many reasons such as job loss, divorce, medical reasons, adjustable mortgages, etc.; how can that be termed as being stupid? Foreclosures are at epidemic rates and solutions must be put into place and the passing of the Act would be beneficial. Secondly, I agree that steps must be taken in predatory lending - those who thought they could get away with making bad loans to people who dreamed of home ownership - after all, it's the American Dream and should be a dream not a nightmare. Furthermore, lenders in this country are going to need some government assistance in keeping their heads above water in order to avoid further economic disastors here in our great nation. Thanks John for getting us to speak up and Californian don't listen to those throwing stones, it's awful what you're going through.

Rosemary Brooks Sorry for the delay in getting back to you. As far as the legislation, nothing will happen until after the summer recess ends after Labor Day. The legislation that passed the House calls for the bill to be effective on a date after the President signs the bill - My guess is still that the bill will be passed and ratified by both houses and sent to the President by October, November at the absolute latest and that the effective date will be on or about 1/1/2008.

But heck, what do I know, I'm just a taxpayer - they don't ask me squat.

Now Have a Blessed Day,

John Occhi, Hemet CA REALTOR
Mission Grove Realty

CALIFORNIAN - Well, I hope that I have not offended you. I re-read my blog twice and cannot see any indication where I referred to you as STUPID.

As far as those who have referred to you by that name, I would contact him directly and let him know how you feel on the topic. I will be sending him a link back to see what you have said, and perhaps he will comment here again.

I believe as a group, some very unwise decisions were made, which is very unfortunate. Heck, trust me, I know - I have one of these loads, I know what is going on.

You make some very valid points and that is why I am here and this is why I am focusing just about all of my business on helping people just like you.

If I can help, please get in touch with me directly. Believe me, I am much more sympathetic than judgemental.

Now Have a Blessed Day,

by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist

David M. Childress - There is a comment above, "It is going to reward stupidity and greed!" which sparked a discussion on "Stupid".

I must apologize if this was interpreted by any on my part to believe that I thought those in this situation are stupid. I was merely bringing the level of conversation to the level in which it was presented an showing by contradiction that I did not believe the term to be accurate. It was a debate, and I was defending those who had been labeled with the term. In no way have I ever, nor will I ever endorse the position that those who are getting hurt right now have ever been stupid.

Now Have a Blessed Day,

by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist

Lynn Pineda Great response - I had to get up and solute the flag in my office and say a little prayer for all of those who are in deed experiencing the American Nightmare version of home ownership.

Now Have a Blessed Day,

by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist

Thanks John. I actually think if someone would ask people like you, they would not have all the problems that we are now facing! I appreciate the update. have a great day.

Rosemary Brooks - Are you kidding, I could cure all of the problems of the world, if they would only ask...

Now Have a Blessed Day,

by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist

John - very interesting, thanks for sharing. I am not 100% sure what my views are, but this has definitely opened my eyes a little bit wider....

Kaushik Sirkar - Fortunately, this is not a case where you have to be either with us or against us - as long as you can understand the process. Helping the consumer is one thing, helping mega-banks is something different in my book.

Now Have a Blessed Day,

by John Occhi, Hemet REALTOR®
Mission Grove Realty
Preforeclosure Specialist

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