Mortgage Debt Relief Act – Extended One More Year

Ordinarily any housing debt forgiven by a lender or servicer (short sale, principal reduction, short refinances, deed-in-lieu of foreclosure, etc.) is considered taxable income by the I.R.S. and must be included (added) to a taxpayer’s gross income when calculating their income tax.

In 2007, the Mortgage Forgiveness Debt Relief Act allowed homeowners who received debt forgiveness to not have to pay taxes on the amount forgiven in most circumstances.  The law was then extended in 2009 for an additional three years (through 12/2012).

The ‘fiscal cliff’ deal that was recently signed by President Obama extends the exception for home mortgage debt forgiveness for an additional year covering debts discharged through the end of 2013. 

Minnesota homeowners need to know that there are MANY stipulations in the legislation.  Most importantly, for homeowners to qualify for debt forgiveness, their debt must have been used to “buy, build, or substantially improve” their primary residence.  This stipulation is especially important for buyers whose debt has been forgiven on a refinanced or second mortgage.

You can view a copy of our newly-updated fact sheet here.

Consult a qualified tax professional if you have additional questions about the Mortgage Forgiveness Debt Relief Act or the most recent extension.

Dozens of other helpful facts sheets about foreclosure and foreclosure prevention are available to the public and can be freely downloaded from the Center's website, here.

If you're struggling with mortgage payments... you're not alone.  Thousands of others are also struggling.  More importantly, Minnesota has a statewide network of non-profit organizations that can help YOU put a plan in place to avoid foreclosure.  Last year, more than half of the people who sought out our services were able to avoid foreclosure.  Don't delay, contact us today.

Stripping Off Second Mortgages in Bankruptcy

The Minnesota Homeownership Center and the Housing Preservation Project have developed a new fact sheet that outlines the recent changes to Chapter 13 bankruptcy allowing 2nd mortgages to be stripped off if they are wholly underwater.


Prior to a ruling in "Fisette v. Keller" (actually court documents, here, if you're interested) this summer, limitations in the Bankruptcy Code prevented a mortgage on a principal residence from being modified in a Chapter 13 bankruptcy. Now, various courts have held that when the amount of the first mortgage is more than the value of the property, the second and third mortgages - and any other junior mortgages - are no longer secured and the limitation on modification no longer applies.  These underwater second and third mortgages can be treated as unsecured claims, similar to credit card debt, and stripped off (removed or cancelled) by a Chapter 13 plan.


The fact sheet defines when second mortgages may be "stripped off" - and when they can't.  


The Center is continually developing and updating our fact sheets around foreclosure prevention and homebuyer services.  Visit our website often for the most recent versions of these documents... they're free to download and distribute!

Successful homeownership - There is a path

Even though it might still be snowing, it really is spring in Minnesota and the only thing that appears faster than our potholes is the number of "For Sale" signs that pop up in front of homes across the state.

Thanks to our prolonged foreclosure issues... both prices and interest rates are low.  Homeownership is more affordable now that at any other time in recent memory, and many people are thinking about becoming homeowners.  Venturing into the world of home ownership can be VERY exciting! However, it can also bring some unwelcome surprises if you're not fully prepared.

Now, the Minnesota Home Ownership Center has prepared a new online tool that helps outline the path to successful homeownership.

Give it a try here, and let us know what you think in the comments!

If you're thinking about buying your first home in Minnesota... make sure you're on the right path - the path to successful home ownership.  There is tons of helpful information on the Center's website about buying your first home including information about affordable mortgages, down payment assistance and finding someone to help you through the process.  For more information, visit our website, here.

If you're not sure what YOUR path to successful homeownership should be... or would like to speak to a FREE non-profit Housing Advisor (Housing Counselor) about YOUR next steps... visit the Center's website to connect with the agency closest to you that offers these services.

Buying a Home With Someone?

One of the best reasons to take a Home Stretch workshop is to be able to fully understand all of the terminology that is related to homeownership.  This is especially important when closing on a property that you are buying with someone else... as a couple, family or just friends purchasing a property together.

In Minnesota when two or more people buy a home together they can choose joint tenancy or tenancy-in-common. The Minneosta Home Ownership Center has created a new Fact Sheet to provide an overview of both types of ownership.

Here's how it works:




Joint Tenancy
Joint tenancy is when two or more people own equal shares of a home. If an owner dies, ownership is transferred to the remaining owner(s).This is called the “right of survivorship.”

Tenancy-in-Common
Tenancy–in-common is when two or more people own a home. Ownership does not have to be equal. If an owner dies, ownership is transferred to the person(s) named in their will.

Tenancy-in-Common Agreement


When choosing tenants-in-common, a tenancy-in-common agreement is recommended. Agreements are usually written with the assistance of a real estate attorney.


The agreement generally includes:

• The agreed to percentage of ownership for each owner.
• A formula to determine the amount of each owner’s payment.
• Consequences for an owner not paying their portion of the mortgage.
• How property maintenance and the cost will be shared.
• Restricting the sale or transfer of ownership without the consent of the other owner(s).
• Acceptable reasons and the price to buyout an owner.
• What happens if an owner declares bankruptcy or in the event of a death.

To view this new fact sheet, and other helpful information for first-time buyers, visit the Center's website here.

If you're thinking of purchasing your first home... and would like to learn more about the types of homeownership and lots of other important information, you should take a Home Stretch workshop! 

Foreclosure Suspensions in Minnesota?

UDPATE:  Bank of America & PNC have halted foreclosures in ALL 50 states, including Minnesota.  If other lenders join them, we'll update this blog post.


Recently a number of stories have hit the media regarding certain servicers halting or suspending foreclosures due to issues (errors) with their internal document processing and legal procedures.  The servicing companies that have voluntarily issued moratoria are GMAC and JPMorgan Chase, although many other servicers are reviewing their procedures, and others may follow suit.


The question has arisen as to whether these foreclosure suspensions/moratoria will affect any Minnesota homeowners.  The short answer is: probably not.


The key reason is due to the fact that the vast majority of foreclosures in Minnesota follow a process known as Foreclosure by Advertisement, and not the process of judicial foreclosure (where a judge must enter a judgment of foreclosure against a homeowner before the house can be auctioned/sold).  In Minnesota, no such step is required if the servicer is pursuing Foreclosure by Advertisement.


For more information about the Foreclosure by Advertisement process, the MN Home Ownership Center has created a fact sheet that highlights the steps a lien holder must take to foreclose.  That document is here.


From the NY Times:

The lender, JPMorgan Chase, said on Wednesday that it was halting 56,000 foreclosures because some of its employees might have improperly prepared the necessary documents. All of the suspensions are in the 23 states where foreclosures must be approved by a court, including New York, New Jersey, Connecticut, Florida and Illinois.  [Emphasis ours]

The Center will continue to monitor the situation, and if other servicers join the ranks of GMAC and JPMorgan Chase, we'll update the blog.  In addition... if any servicers halt foreclosures in Minnesota, we'll highlight that information as well.


If you're struggling with your mortgage payments - no matter who your lender or servicer is - getting help as soon as possible is key.  There is a network of FREE, non-biased, non-profit Housing Counselors that specialize in foreclosure prevention.  To locate your closest counselor, visit the MN Home Ownership Center's website, here.

New Fact Sheets for Homeowners Facing Foreclosure

Sir Francis Bacon once said that "Knowledge is power".  The Minnesota Home Ownership Center believes in taking that fact and putting it to work for families that are struggling with mortgage payments and/or are looking for information about how to avoid foreclosure.

We’re pleased to announce that FOUR new fact sheets are available thanks to our partnership with the legal assistance teams. (Special kudos and thanks to Stacey Keenan at Legal Services of Northwest Minnesota and Kari Rudd and Housing Preservation Project for their work!)

These fact sheets cover:

• The Tax Forfeiture Process in Minnesota
• Homeowner Association Liens
• Manufactured Home Repossessions
• Redeeming a home AFTER a foreclosure sale

The Center has compiled/created almost two dozen fact sheets, FAQ's and other flyers that can help when a homeowner is struggling with mortgage payments or facing foreclosure in Minnesota (all are available here).  Please feel free to print/distribute any of the fact sheets to homeowners that may benefit (Adobe Acrobat Reader required).

Do you have an idea for a fact sheet or FAQ that would benefit struggling MN homeowners? Feel free to email your ideas to Ed Nelson at the Center. Thanks!

MN Foreclosure Infographic

As many of you know, Minnesota state law determines the steps that lenders and servicers must take in order to foreclose on a residential property in Minnesota.  Back in 2008, the Center created a visual timeline of this process and it quickly became one of the most frequently downloaded documents from the Center's website.

We’re pleased to announce the Center has created a new and improved Minnesota foreclosure timeline graphic!

This consumer-friendly chart is an Infographic with pictorial representations of the different stages of foreclosure, in addition to text that helps explain each step.

Here's an sample of the new graphic:

A high-quality PDF version is available on the Center's website (along with over a dozen other helpful fact sheets), here.

If you, or someone you know is facing foreclosure or struggling with mortgage payments - THERE IS HELP.  The Center's network of Foreclosure Prevention Specialists are available to help... and all services are FREE. Click here for more information.

Another Minefield For Struggling Homeowners: Discount Payoffs

A “Discount Payoff Agreement and Release of Claim” is growing trend that the Center's Counseling Network is seeing being offered by second and other junior lien holders.

A Discount Payoff Agreement is an offer allowing homeowners facing foreclosure to pay a small portion of the total remaining principal balance on a second (or third...) mortgage in exchange for release of that mortgage. The Agreement also suggests that it will forgive all remaining debt owed on the released mortgage. This seems like a great opportunity, and mortgage holders will encourage homeowners to quickly sign the agreement and send in a check for the payoff amount.

But is it too good to be true?  Maybe.

Homeowners need to proceed with caution, and before agreeing to a "Discount Payoff" they need to consider the following:

   1. Is the Mortgage Debt REALLY Forgiven?

   2. How does the lender handle "Release of Claims"?

   3. How does the lender REALLY define a “Discount Payoff”?

The answers to these questions can really be a minefield for struggling homeowners... who may view a Discount Payoff as a life raft from a sinking ship.  BE CAREFUL... this life raft may be full of holes!

Working with the Housing Preservation Project, a non-profit legal organization, the Center has produced a fact sheet that defines and explains "Discount Payoffs" and offers advice about some of the pitfalls and the possible dangers associated with them.

For a copy of this new fact sheet... click here.

Not all "Discount Payoffs" are dangerous... and they can be a great help for struggling homeowners burdened with second or third liens.  Before signing ANY documentation from a lien holder... whether it be a Discount Payoff or any other paperwork... the Center recommends that homeowners seek the advice of a certified non-profit Foreclosure Counselor.  To find your local FREE housing counselor, click here.

¡EXITAZO! Evento Contra El Embargo (Foreclosure) En Minneapolis

Readers... don't panic... you're still at the MN Home Ownership Center's blog!  The Spanish headline is a response to the Center's "Borrower Workshop for the Latino Community" that was held at Plaza Verde in Minneapolis on Saturday January 9th.

'Exitazo' means HUGE SUCCESS... and the event was, indeed, a huge success:

• More than 160 people attended the event;
• Over a dozen foreclosure prevention counselors from local non-profit housing counseling agencies worked with homeowners to get their questions answered and start the counseling process
• Four lenders/servicers (Chase/JP Morgan; Freddie Mac; US Bank and Wells Fargo) assisted with outreach by mailing and calling consumers and sending loss mitigation staff to work with homeowners
• More than a dozen volunteers worked tirelessely to register homeowners and coordinate the event
• Mayor's from Minneapolis, St. Paul, Brooklyn Park, Brooklyn Center, Plymouth, Richfield and Bloomington assisted with outreach by signing letters inviting homeowners to the event.
• The event was highlighted in two Spanish-speaking newspapers and two radio stations.  Graciela Mendez from Neighborhood Development Alliance was interviewed on "La Invasora" during the event.

Here are a few pictures from the event:

For additional pictures, feel free to visit the photoset at the Center's FlickR album.  Did you take pictures of the event?  We'd love to add them to our album.  Contact Ed Nelson.

The Center's outreach to the Spanish-speaking community is not limited to large-scale events like the workshop at Plaza Verde.  The Center has a Spanish-Language website here, and is constantly working with its network partners to improve information sharing with the Latino Community.  A complete list of all of our handouts/fact sheets in Spanish is available here.

Bankruptcy and Foreclosure Fact Sheet Now Available

The Minnesota Home Ownership Center, working with our partners at the Volunteer Lawyers Network and the Housing Preservation Project, has just released a new Fact Sheet with answers to frequently asked questions about the issue of bankruptcy and foreclosure.

The fact sheet, available here, answers such questions as:

• What happens to my mortgage in bankruptcy?
• What happens if I file for Chapter 13 bankruptcy, and default on my mortgage payments?
• Can I convert a Chapter 7 bankruptcy to a Chapter 13?

These, and several other questions, are answered in the new fact sheet.

In addition... the Center is continuing to work on a fact sheet that answers questions about the complications that arise when homeowners declare bankruptcy but still need loan modifications.  Stay tuned!   

Did you know that the Center now has over a dozen Fact Sheets that can help struggling homeowners answer questions about their mortgage and foreclosure?  A complete list of Fact Sheets is here.

Helpful Fact Sheets - Foreclosure Prevention

The Minnesota Home Ownership Center has worked for years to create over a dozen fact sheets, FAQ's and other flyers that can help when a homeowner is struggling with mortgage payments or facing foreclosure.

NOW... all of these fact sheets have been compiled in one location on the Center's website! (www.hocmn.org >> Stay in Your Home >> Helpful Fact Sheets)

Feel free to print/distribute any of the fact sheets to homeowners that may benefit (Adobe Acrobat Reader required).

Do you have an idea for a fact sheet or FAQ that would benefit struggling MN homeowners? Feel free to email your idea to Ed Nelson at the Center. Thanks!

Updated Fact Sheet: Mortgage Debt Forgiveness

The Minnesota Home Ownership Center has recently updated its Fact Sheet: "Mortgage Debt Forgiveness - Key Facts"

In late December 2007, Congress passed legislation changing the tax code relating to mortgage debt forgiveness. Ordinarily, debt forgiveness – including short sales, short refinances, deed-in-lieu of foreclosure or other ways lenders forgive debt owed - counts as taxable income. The legislation from 2007, which was recently extended an additional three years (through 12/2012), changes the tax code, offering an exception specifically targeted for home mortgage debt forgiveness. Minnesota homeowners need to know that there are MANY stipulations in the legislation.

You can view a copy of the fact sheet here.

The Center has also produced a number of additional fact sheets on:

• "Homeowner Rights During the Redemption Period";
• "After a Foreclosure: Understanding Judgements";
• "Making Home Affordable" and many others.

These facts sheets are available to the public and can be freely downloaded from the Center's website.

The fact sheets can be found here and here.

They are also available in Spanish, here and here.