Discussion:Foregiveness of Debt/Foreclosure

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Discussion Forum Index --> Tax Questions --> Foregiveness of Debt/Foreclosure


Bx524 lca (talk|edits) said:

8 January 2007
Scenario:

Mortgage Lender(A) sells a loan to an outside Investor(B), but Services the loan on behalf of the New Investor(B). The Mortgage Lender(A) retains a Servicing Fee and passes the Principal and Interest on the loan to the New Investor (B). In the event that b/c of Foreclosure, the debt is foregiven and an Acquisition of the Secured Property takes place, who should file the 1099-A/C? The Mortgage Lender(A) or the New Investor(B)?

Any information that can be provided would be great!! Thanks!!

Sandysea (talk|edits) said:

8 January 2007
The one (in my opinion) that has the lien on the property is the one that would forgive the debt. The Lender (A) sold the loan even though they are servicing it for a fee. The lien holder is the one who can forgive a debt or foreclose...They will be the one on the title search I am certain :)

Bx524 lca (talk|edits) said:

8 January 2007
Thanks Sandy...

What would your thoughts be about the possibility of the lien holder (in this case, the New Investor(B)) transferring their 1099 responsibility to report to an Agent (in this case the Mortgage Lender(A))?

Thanks for your thoughts!!

Sandysea (talk|edits) said:

8 January 2007
In my opinion again, this would need to be a legal transfer of title to the original Lender. The lien holder name will need to be registered with the county and State and probably new title transfer fees will apply as well as points on the mortgage, but you could certainly transfer the ownership of the lien to a new lienholder. Then that individual would be the one to forgive the debt. :)

Bottom Line (talk|edits) said:

9 January 2007
Look at the paperwork for the sale of the loan. Who's taking the actual loss and who is the new owner of the foreclosed property.

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