Ask Me Help Desk - Florida Foreclosure Law /how does it work?

My husband and I about 2 years ago bought into the real estate market in Destin Florida when properties were selling for high prices and almost within a week of listing them in our area. I'm sure many of you know already where I am going with this. Well here goes. We sat back and watched the savvy business men and women as well as investors doing this and wanted a peace of the pie, so we jumped in and sure enough we bought a home and lived in it for 2 years then we put it on the market and it sold in 8 hours. We made 160,000.00 profit. Pretty sweet huh? So there you go we were hooked. Now we have some serious cash to put down on other properties and make big time money and just sit back and watch it grow right? Nope, didn't work out that way at all. We bought 4 more homes within a two year period. Our net worth rose from 200,000.00 to 1.6 million in two years, not bad for a couple in their early 40's huh? Guess you want to know how in the hell we did it. Well it's called the no doc adjustable rate mortgage loans.AKA as interest only loan.The one where you have to keep it for 1 year and 1 day before selling the home. Shoot we didn't care how we got the mortgage, we felt like Larry the cable guy just get er done bubba. All we could see was sweet little dollar signs .The point that I am trying to make on this is we got ourselves into a mortgage program that we did not fully understand and we let this lender talk us into putting false information down about our jobs and our monthly incomes just so he could get these loans to go through.Hey you know that is so true what people say money does talk. Remember we did have the 20% to put down on these homes, and to the lender that's all he really cared about.Please Don't misunderstand and think that we are blaming the lender for all of this mess that we are now facing because we honestly are not. We might not know what all of this mortgage mumbo jumbo means but we do know that a lie is a lie and we are 100% to blame for that .That is our own fault for letting our greed kick in. Well it has certainly came back and bit us in the butt so to speak. Now we are facing foreclosure on 3 of these homes and we have tried every thing from trying to do a short sell, to a deed in lieu, and so far we have had no luck with any thing. We know that our credit is shot to hell for the next 7 or 10 years and that has caused allot of sleepless nights for us. Well if that's not enough to make some one almost lose it, now I have realtors telling me that if we don't try for a short sell again that when the homes do go for auction and the mortgage company sells for less than what is owed.The mortgage company then rights their loss off to the IRS and the IRS will then take the negative balance plus all legal fees and attached this on to our income so we will have to pay taxes on all of that loss. Please if any one knows how the foreclosure law works in the state of Florida and can give us the true facts of what we are really going to be facing on all the steps of foreclosure in the near future we would really be grateful for the advice. Also I am sorry this is so long,my husband tells me all the time that I am to long winded and I just need to get to the point. I do try so hard to do just that and my questions always wind up like this. Sorry every one that actually stayed awake to finish reading this. Thanks so much, hope to hear from some one soon. Deb

Hello Deb:

I'm sorry for you troubles.

However, there's one bright spot. Your friend and mine, George W. Bush just signed a law that is going to prevent the IRS from charging you income tax on the money you supposedly made by paying the lenders back a lesser amount than you owed.

excon

Dear excon, that is what I am so confused about, we did not make any money at all ,we actually lost approx 106,000.00 thousand dollars that we had to put down on these homes for the 20% down payment. So how can the IRS tax us on money that we lost? Also we still have another home that we have allot of equity in, and we are not planning on defaulting on that home. Can the mortgage company or the IRS put some kind of a lean on that equity for us to pay back to whom ever for when we go to sell in the future. If this is possible for them to do. Is there any way we can keep that from happening?Meaning transfer a quick claim deed into a family members name or something? Thanks,for the info about Bush also. Deb

What you were told is true. What happens in a short sale, is the lender writes off the difference between what they get and what is owed. Essentially they are making you a gift of the difference. This gift is then income to you. Its like someone handed you the money to pay off the balance. So that income is taxed.

The good news in all this is that IF the lender DOES do this and gives you a 1099 for the amount they write off, then that's it. You will not owe anymore on the mortgage. They can't sue you for the balance or go after other assets or anything like that. But, depending on how much they write off, it can mean a hefty tax bill for you, unless you fall under the new law excon referred to.

Hello again, Debra:

In addition, depending on how you held the properties, you certainly will get a hefty deduction because of your loss. This has nothing to do with the tax consequences we discussed above.

In terms of the house you intend to keep. IF you can settle with ALL the lenders per a short sale or however you do it, as Scott said, they can't then sue you and place a lien on this house.

But, if only one lender sues you, your equity is at risk. You also have to ask yourself why would they let you skate. If you have equity somewhere, they're going to want some of it. I highly doubt you'll walk away with money jingling in your pocket.

Nope. If you transfer it now, it will look like you are attempting to hide money from your creditors (which is exactly what you'd be doing), and that's a CRIME. They put people in the slam for that. Better to lose money than your butt.

excon

excon and Scott are both right. You sure got yourself into a nasty situation. You can only hope that the mortgage people will settle and you won't lose your shirt totally.

Do not transfer your "good" home either as that is hiding assets and is punishable. I'm sure you heard the phrase "I should have quit when I was ahead". The times we live in now remind me so much of the 1929 wall street crash when you look back at history. It's the little people trying to be big shots that get hurt in the end. You knew lying on the loan applications was wrong also giving false or incorrect information. Right now, I'd just be thankful I wasn't sitting in jail for fraud upon the lender or worse.

Have you consulted an attorney on your present mess yet?

Thank you to every one that has been so helpful on your advice,my husband and I do realize that now more than ever we need to seek legal advice on our situation. I do want every one to know however that I as well as my husband are good people and we don't sit around and try to figure out how we can cheat the system. I know that's how it looks, we did get caught up in the market and listened to people that acted like it was no big deal.Had we even had a clue that this was the risk, we would have never done this. No matter how much money it was. But again that is still our fault because we were so nieve and didn't do our home work.My Grandmother always made the comment Live and learn Die and forget it all. Wow she was sooooo right. Thanks again to every one for your help. Deb

Hello again, Debra:

Nobody here suggested you did anything untoward. You got into a business, and you lost. Big deal. There's enough blame to go around, and we haven't seen the worst of it yet.

But, you're young, and it's only money. You'll recover. Believe me, the market will turn around. Next time, you'll be wiser.

I lost money on the first FIVE businesses I tried. I made a ton of money on the 6th. Maybe I should have quit after five. LOTS of people told me I should. But, nahhhh, I didn't listen.

excon

Quote:

Originally Posted by Debra Allen

My husband and I about 2 years ago bought into the real estate market in Destin Florida when properties were selling for high prices and almost within a week of listing them in our area. I'm sure many of you know already where I am going with this. Well here goes. We sat back and watched the savvy business men and women as well as investors doing this and wanted a peace of the pie, so we jumped in and sure enough we bought a home and lived in it for 2 years then we put it on the market and it sold in 8 hours. We made 160,000.00 profit. Pretty sweet huh? So there you go we were hooked. Now we have some serious cash to put down on other properties and make big time money and just sit back and watch it grow right? Nope, didn't work out that way at all. We bought 4 more homes within a two year period. Our net worth rose from 200,000.00 to 1.6 million in two years, not bad for a couple in their early 40's huh? Guess you want to know how in the hell we did it. Well it's called the no doc adjustable rate mortgage loans.AKA as interest only loan.The one where you have to keep it for 1 year and 1 day before selling the home. Shoot we didn't care how we got the mortgage, we felt like Larry the cable guy just get er done bubba. All we could see was sweet little dollar signs .The point that I am trying to make on this is we got our selves into a mortgage program that we did not fully understand and we let this lender talk us into putting false information down about our jobs and our monthly incomes just so he could get these loans to go through.Hey you know that is so true what people say money does talk. Remember we did have the 20% to put down on these homes, and to the lender thats all he really cared about.Please Don't misunderstand and think that we are blaming the lender for all of this mess that we are now facing because we honestly are not. We might not know what all of this mortgage mumbo jumbo means but we do know that a lie is a lie and we are 100% to blame for that .That is our own fault for letting our greed kick in. Well it has certainly came back and bit us in the butt so to speak. Now we are facing foreclosure on 3 of these homes and we have tried every thing from trying to do a short sell, to a deed in lieu, and so far we have had no luck with any thing. We know that our credit is shot to hell for the next 7 or 10 years and that has caused allot of sleepless nights for us. Well if that's not enough to make some one almost lose it, now I have realtors telling me that if we don't try for a short sell again that when the homes do go for auction and the mortgage company sells for less than what is owed.The mortgage company then rights their loss off to the IRS and the IRS will then take the negative balance plus all legal fees and attached this on to our income so we will have to pay taxes on all of that loss. Please if any one knows how the foreclosure law works in the state of Florida and can give us the true facts of what we are really going to be facing on all the steps of foreclosure in the near future we would really be grateful for the advice. Also I am sorry this is so long,my husband tells me all the time that I am to long winded and I just need to get to the point. I do try so hard to do just that and my questions always wind up like this. Sorry every one that actually stayed awake to finish reading this. Thanks so much, hope to hear from some one soon. Deb

Hi, I just read this.. I have a similar matter and was wondering how you made out? Any advice. Thank you.