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The Mortgage Debt Relief Act Evaporates

At the stroke of midnight on 12-31-13, as we celebrated the New Year and listened to the historic hymn of Ole Lang Zine, the US Treasury vault door slammed shut. For those that could hear beneath the noise and celebration, the echo of “No more free money!” was heard.

What does this mean for the continuation of Short Sales as a viable form of relief for underwater home owners? Is the game over or is this still an option?

Short Sales for underwater properties are still going to be a prevalent means of establishing a permanent solution for these properties. However, in order to get the full benefit, you will need to find your way through the expanded labyrinth that now includes tax law. A full assessment includes debt mitigation, how to properly handle mortgage payments, credit for employment and security clearances, how to protect your assets from the lender, how to sell the property that is acceptable to the lender and actually close without losing the buyer, and now Dear Ole Uncle Sam for taxes. Now more than ever, people will need to work smart and competent help, that can handle all the important objectives of a successful short sale, may not be as readily available.

Of course, for people that are still stuck in underwater properties, they will still have the option to do nothing and dissipate assets hoping the problem will solve itself with Mr. Market. These poor souls live by the news headlines and hope they will eventually wake up and be back to even. I am not sure these people can be helped although I wish them the best of luck always.

On a much more positive note, the coming year will also provide additional opportunities for the qualified and willing to refinance their underwater mortgages beyond just the traditional Fannie Mae and Freddie Mac paper. This may help those that were not eligible in the past.

For those that took advantage of the opportunity to permanently solve their underwater mortgage problems over the past six years, I say congrats. Money doesn’t get any better than free. For others that still remain undecided and may be alarmed by the expiration of the debt relief act, I say a partial cure with the potential of a complete cure is better than no cure at all.

In 2014 it’s time to get back to work in spite of the obstacles. As we welcome in the New Year, it’s time to work smart and not hard. Half of the solution is usually at hand when the decision to act has been made. Happy New Year!

Blogging from the front line of the housing crisis.

George Omilan

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