Program Termed ‘Too Good to Be True’
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Re: “Controversial Programs Avoid Foreclosure, Tax,” April 3.
If it sounds too good to be true, it probably is. The tax issues aside, I would like to point out that under California law, when a trust deed securing a borrower’s loan is foreclosed, the party named in the Notice of Default is the borrower and not the current holder of title to the property. Furthermore, the credit reporting agencies report the foreclosure on the borrower’s credit report. To lead your readers to believe that they will not suffer the consequences of the foreclosure is disservice.
PEGGIE COLLINS
Collins, Robillard & Katz
The writer is an attorney.
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Kenneth R. Harney’s article represents an idea that sounds too good to be true. It is!
The Boston Harbor program Harney discusses may or may not preserve the selling homeowner’s credit, but it certainly is not the silver bullet to avoid tax liability that the article suggests. Boston Harbor can purchase a home facing foreclosure, but the homeowner’s tax problems will not just go “poof.”
If you own a $100,000 primary personal residence with a $150,000 purchase money non-recourse mortgage and you have an $80,000 tax basis, you will have $70,000 gain on the foreclosure of the mortgage ($150,000 mortgage--$80,000 tax basis). You can escape tax on this gain only if you reinvest in another primary personal residence with a cost of $150,000 or greater within two years.
You will face precisely the same tax rule if you sell your property to Boston Harbor or anyone else prior to a foreclosure.
TERRENCE FLOYD CUFF
Loeb & Loeb
The writer is an attorney.
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