Here we go again - debt forgiveness in adjustments
Posted: Thu Oct 23, 2008 7:19 pm
Opinions please:
Typical Countrywide borrower eligible for an adjustment on their loan to bring it into reality. BofA is offering a principal reduction of $23,000 to match the current appraised value and to reset the current interest rate (11.395%) back to the original rate (7.925%) for three years without a prepayment penalty. Again, it's a REMIC pass-through mortgage so there is no penalty for the servicer to NOT issue a 1099, but given the scrutiny of this settlement arrangement with the various Attorneys General, shouldn't borrowers assume they're going to be on the hook for not only the taxes on the $23,000 but the difference in three years of decreased interest payments as well?
I believe they should - but I also believe BofA/Countrywide isn't saying one way or the other while discussing the terms with the borrowers, and this late in the year, a lot of them don't have the time or resources to put aside several thousand dollars for anticipated taxes.
If it were ol' Bean in charge of the Treasury I'd issue a directive temporarily lifting the requirement to collect taxes on forgiven debt.
Typical Countrywide borrower eligible for an adjustment on their loan to bring it into reality. BofA is offering a principal reduction of $23,000 to match the current appraised value and to reset the current interest rate (11.395%) back to the original rate (7.925%) for three years without a prepayment penalty. Again, it's a REMIC pass-through mortgage so there is no penalty for the servicer to NOT issue a 1099, but given the scrutiny of this settlement arrangement with the various Attorneys General, shouldn't borrowers assume they're going to be on the hook for not only the taxes on the $23,000 but the difference in three years of decreased interest payments as well?
I believe they should - but I also believe BofA/Countrywide isn't saying one way or the other while discussing the terms with the borrowers, and this late in the year, a lot of them don't have the time or resources to put aside several thousand dollars for anticipated taxes.
If it were ol' Bean in charge of the Treasury I'd issue a directive temporarily lifting the requirement to collect taxes on forgiven debt.