Foreclosure Relief Law
Foreclosure relief commonly lies in the policy of each lender; however, much of the lender's policy is tied to federal legislation aimed at protecting homeowners. Lenders, in turn, offer mortgage restructuring and payment arrangement before resorting to foreclosure proceedings.
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Mortgage Forgiveness Debt Relief Act of 2007
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The Mortgage Forgiveness Debt Relief Act of 2007 was passed to discharge otherwise taxable income created by modifying the terms of a troubled mortgage or foreclosed property sold for less than the balance of a mortgage. The law was written to include debts forgiven from 2007 through 2012.
Government Programs
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The Department of Housing and Urban Development, on loans backed by the Federal Housing Administration, offers a variety of programs for troubled borrowers facing foreclosure. These include rent-back plans, where homeowners surrender their homes and remain as tenants, loan modification and short sales. Each program follows state and federal foreclosure legislation.
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Mortgagte Restructuring
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Some lenders, driven by foreclosure law, have found it cheaper to allow borrowers to remain in their homes under modified loan terms than to foreclose and attempt to sell properties at a loss. Mortgage restructuring involves rewriting loan terms without refinancing. New payments and interest rates are based on what borrowers can afford to pay.
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References
Resources
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