Magazine article American Banker

Short Sales Fall out of Favor as Tax Penalty Looms

Magazine article American Banker

Short Sales Fall out of Favor as Tax Penalty Looms

Article excerpt

Byline: Brian Collins

Mortgage servicers and troubled homeowners may be losing faith that Congress will pass legislation saving borrowers from paying a tax penalty when they do a short sale.

The number of short sales fell to 33,900 in the first quarter from 48,500 in the prior quarter and from 84,860 a year earlier, the latest report by the Hope Now alliance of mortgage servicers shows.

The first-quarter decline comes after Congress failed to extend the Mortgage Forgiveness Debt Relief Act, which expired at the end of 2013. Borrowers who complete a short sale this year could be taxed on any forgiven principal unless Congress passes an extension that is retroactive to Jan. 1.

"Some properties that may have avoided foreclosure as short sales are instead being foreclosed upon and contributing to the rise in REO stock," says Sam Khater, a senior economist at the analytics firm CoreLogic.

While foreclosure starts and home sales have been on the decline along with short sales, a report by CoreLogic shows the number of repossessed properties on the market has risen from 375,000 in August to 430,000 in March. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.