beckster Posted February 11, 2011 Report Share Posted February 11, 2011 I have a client that has been living in his house for 8 years. His mortgage is 320,000, house is worth 100,000. For the last year, he has been trying to have his loan modified but to no avail. He has been making all his payments so his credit has not been affected. He is trying to keep his head above water, but slowly sinking. He is thinking of purchasing a new residence for 100,000 while his credit is still good and then letting his upside down residence go. He is so fed up. If he does this, is there anyway that he could be eligible for cancellation of debt for principal residence? (i.e. maybe live in home until foreclosed??) I really appreciate all the insight you share on this board. Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted February 11, 2011 Report Share Posted February 11, 2011 I have a client that has been living in his house for 8 years. His mortgage is 320,000, house is worth 100,000. For the last year, he has been trying to have his loan modified but to no avail. He has been making all his payments so his credit has not been affected. He is trying to keep his head above water, but slowly sinking. He is thinking of purchasing a new residence for 100,000 while his credit is still good and then letting his upside down residence go. He is so fed up. If he does this, is there anyway that he could be eligible for cancellation of debt for principal residence? (i.e. maybe live in home until foreclosed??) I really appreciate all the insight you share on this board. This may not answer your questions, but would recommend to your client to get a pre-qualification for a loan first, let me tell you, banks have gotten very strict. I see it kind of hard for banks to lend if you have negative equity, but again have him do all his homework first before taking the plunge. I am sorry to hear that, but do you know if the TP refinanced during the years and just wasted the money? I hear a lot of people complain they owe more then what the house is worth, but they tend to forget they took out all the equity and bought a car, paid credit cards, vactions etc... Quote Link to comment Share on other sites More sharing options...
jainen Posted February 16, 2011 Report Share Posted February 16, 2011 >>principal residence<< For cancellation of debt, the term has the same meaning as in Section 121, two out of five years. However, in many states purchase loans are non-recourse. If this is a non-recourse loan, he can't use "cancellation of debt for principal residence" because technically he doesn't have any COD, just a loss on sale. In a broader context, since he can afford to honor his commitments why does he want to stick it to the bank that helped him out? No wonder our economy is a mess! 1 Quote Link to comment Share on other sites More sharing options...
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