Earlier this year the Mortgage Debt Relief Act was extended to December 31, 2013. What does this mean for homeowners?
Any deficiency judgments (the difference between what your property is sold for and what you owe on loans on your property...y) will be forgiven in the event a homeowner decides to either short sell their property or their property is sold through a foreclosure. The result being: a homeowner will not be responsible for the tax consequences (which might be as high as $2 million depending on the loan). However, all signs are pointing to the fact that this Act will not be extended out after December 31, 2013. As a homeowner you either need to short sell your property or let the property go before December 31, 2013, if you want to reap the benefits of the Act.
What I think will happen: Starting January 1, 2014, pending properties in foreclosure are going to significantly increase. The result of which will be the following: the only viable option for homeowners if they cannot afford their mortgage payments (and have been denied for mortgage assistance) will be to file lawsuit against their lenders in order obtain more favorable mortgage terms, and potentially obtain additional compensation for damages.