When will the IRS withdraw a tax lien under its Fresh Start program?

August 16, 2011
by David Allen Duner

Early in 2011, the IRS announced a series of measures to help taxpayers buffeted by the economic slowdown. The IRS calls these measures its “Fresh Start” program and they are intended help taxpayers who want to pay their tax liabilities but because of unemployment, slow business sales or for other legitimate reasons, cannot pay their tax debts. One of the most attractive features of the Fresh Start program involves the withdrawal of a tax lien.

Early in 2011, the IRS announced a series of measures to help taxpayers buffeted by the economic slowdown. The IRS calls these measures its “Fresh Start” program and they are intended help taxpayers who want to pay their tax liabilities but because of unemployment, slow business sales or for other legitimate reasons, cannot pay their tax debts. One of the most attractive features of the Fresh Start program involves the withdrawal of a tax lien.

Liens

When the IRS files a notice of federal tax lien (NFTL) it makes a claim to a taxpayer’s property as security or payment for a tax debt. The IRS must follow very detailed procedures, including sending the taxpayer a notice and demand for payment. If the taxpayer pays the tax debt, the IRS must release the lien within a prescribed period of time; generally within 30 days after the taxpayer satisfies the tax due, including interest and other additions.

There is an important distinction between release of a lien and withdrawal of a lien. Although the IRS may release the lien, the lien generally continues to be reflected on the taxpayer’s credit report unless the lien is withdrawn. This can negatively affect a taxpayer’s ability to get credit or, in some cases, could have a negative impact on the taxpayer obtaining a job if the employer reviews the taxpayer’s credit history.

Full payment

Under the “Fresh Start” program, the IRS has announced that liens will be withdrawn immediately once full payment is made by the taxpayer. The IRS has instructed taxpayers, whose lien has been released after full payment, to request withdrawal of the lien in writing. Taxpayers use Form 12277, Application for Withdrawal, to make this request.

Direct Debit installment agreement

The IRS will also withdraw a lien if the taxpayer agrees to enter into a Direct Debit installment agreement. In this arrangement, the taxpayer consents to having funds automatically debited from a bank account for the agreed upon installment amount. The IRS prefers Direct Debit installment agreements because they are automatic: the taxpayer does not need to remember to send a check or money order.

Not everyone is eligible for lien withdrawal after entering into a Direct Debit installment agreement. The IRS has explained on its web site that qualifying taxpayers are individuals; active businesses with income tax liability only (this would exclude active businesses with unpaid employment taxes); and defunct businesses with any type of tax debt. The current amount owed by the taxpayer must be $25,000 or less. The IRS has advised on its web site that taxpayers owing more than $25,000 may pay down the balance to $25,000 prior to requesting the lien withdrawal to be eligible for the relief. Additionally, the taxpayer’s Direct Debit installment agreement must pay in full the amount owed within 60 months or before the collection statute expires, whichever is earlier. The taxpayer also must have made three consecutive Direct Debit Payments before the IRS will withdrawal the lien.

Taxpayers should use Form 12277 to request withdrawal of a lien after entering into a Direct Debit installment agreement. The IRS warned it will file a new NFTL if the taxpayer subsequently defaults on its Direct Debit installment agreement.

Lien filing thresholds

The IRS has also adjusted the lien filing threshold under the Fresh Start program. The Fresh Start changes increase the IRS lien filing threshold from $5,000 to $10,000. However, the IRS has reserved the right to file liens on amounts less than $10,000 when circumstances warrant.

 

 

For more information about the Fresh Start program contact your accountant

Leave a Comment » | Build a Better life, Due Diligence, Short Sales, Tax Credit | Tagged: , , , | Permalink
Posted by Jim Evans

HAFA has finally arrived

April 5, 2010

Announced last November, today officially marks the date when servicers had to have in place the Home Af0rdability Foreclosure Alternatives Program (HAFA). The Treasury has set the required guidelines for eligibility, underwriting and servicing. Having a standard practice for short sales should go along ways towards making real estate agents sane again.

This new directive is aimed at loans that are not owned by or guaranteed by Fannie Mae or Freddie Mac. Recently Wells Fargo, Bank of America, and Citibank have all said they would implement these procedures on loans that they fully own. Fannie and Freddie are considering similar procedures.

To qualify certain criteria must be met:

  1. It must be a principal residence
  2. The loan was taken prior to January 1, 2009
  3. The mortgage is delinquent or default is reasonably foreseeable
  4. The unpaid principal balance is less than $729,750
  5. The borrower’s total monthly mortgage payment exceeds 31% of the borrower’s gross income

Every potentially eligible borrower must be considered for HAFA before the loan is referred to foreclosure. They will automatically refer you to this program within 30 days from the date the borrower:

  1. Does not qualify for a trial period modification
  2. Does not successfully complete a trial modification
  3. Is delinquent on a modification by missing 2 consecutive payments
  4. Request a short sale or deed in lieu

If the lender offers it up, the borrower has 14 days to accept this action. There are additional time lines and an initial appraisal up from that is required. The Realtor will have a bottom line number to work with that will encompass all fees for the sale and will be able to properly market to potential purchasers with assurance of acceptance.

Currently we have watched these short sales take months and months. This appears to cut the time line to about 45 days from the time we receive an offer. Additionally there are incentives for the seller who may qualify for up to $1500 in relocation assistance. I know in the beginning the process will be a bit rocky. I just hope that it quickly catches on to All of the lenders and investors out there.

1 Comment | Housing market, Mortgage Loans, Short Sales | Tagged: , , , , , | Permalink
Posted by Jim Evans

The long and the SHORT of it!

March 29, 2010

Many buyers have made an offer on a short sale, only to wait months and months to be denied by the lender. The seller’s lender(s) approval is required to sell a home “short” of the mortgage obligation. Most lenders have improved their processes over the past year, but it still involves more time and uncertainty than a conventional sale. On average a lender will lose 50% of the value in foreclosure and 30% on a short sale.

Beginning on April 4th the Obama administation is giving the lenders an additional incentive to improve the short sale process. There is also a relocation assistance piece for the home seller. Just as with other such initiatives, the banks aren’t required to go along.

Factors that can make it harder to participate in the program include:

  • second mortgages or private mortgage insurance
  • loans not backed by Fannie Mae or Freddie Mac
  • lenders with out-of-date systems that can’t work with the new program

Make sure your real estate agent is trained on these short sales. Many agents avoid them at costs because they are more difficult and consume way too much time. You wouldn’t want to lose out on a good deal, just because the agent is steering you away.

Before writing your offer, have your agent do a little background research. Just as important as your agent is the quality and skills of the listing agent. Is all of the paperwork in to the seller’s lender? Have they done an appraisal to determine market value? Is there a negotiator assigned? Do they know the timeline expectation. Deals can be had in the short sale marketplace, but experienced agents make it much less painful.

1 Comment | Short Sales | Tagged: , , | Permalink
Posted by Jim Evans

Are REALTORS all about the green?

March 17, 2010

OK, so it is Saint Patrick’s Day and a little green is on everyone’s mind during this economic downturn. As I was knotting up with my green tie today, I pondered the question that many people often ask. Is my agent worth the commission? These questions were magnified during the housing boom years of 2002 through 2005. It is feast or famine for those of us in the real estate business. We are like squirrels storing away our nuts for the certain oncoming winter. It has been winter for some time now and I can honestly say that REALTORS© have really stepped up for the American homeowner. When considering your representation, whether buying or selling, you should ask yourself these four things.

  1. Do I want the best in service, knowledge and negotiation working for me?
  2. Is my agent a full time REALTOR© that is up to the minute in their education?
  3. Is this one of the largest financial decisions that I will ever make?
  4. In a difficult housing market, do I want someone who understands the complexities of short selling, foreclosures and more, at my side?

Most people have heard the saying “Penny wise and pound foolish”. REALTORS© who have toughed it out the past few years have gone through extensive training to help distressed homeowners get out of difficult situations. We have invested much time and money in keeping our neighbors in their homes. We have exerted much energy figuring out how to get through to the banks and convincing them to do the right things. Most agents have spent countless hours helping people figure out how to modify their loans, and have never taken a fee for this public service. I know of several cases where due to a real estate agent’s efforts, a foreclosure has been stopped or even reversed. We are all in this together and if our knowledge can benefit our neighbors, so be it. We have lobbied the government for tax credits which continue to prop up the housing market. We have been the voice of the people when it comes to keeping mortgage interest deductions. We know all to well, that families are more secure by homeownership. Long term wealth and savings is created by real estate values, as long as supply and demand remain at reasonable levels.  We are dedicated to the preservation of affordability and the stability that homeownership brings. I hope that today finds you well. I hope that you see equity in your future. I hope that you will call on a professional when needed. So, lift your green beverage up in a toast! This housing market would have been much more severe without REALTORS©. After all the dust settles on this economy, homeownership will still be a large part of the American dream.

Leave a Comment » | Housing market, Short Sales, Tax Credit | Tagged: , , , , , , | Permalink
Posted by Jim Evans

Short sale buyers seek closure

February 23, 2010

 It may be a long process to buy or sell a home short, make sure your agent know the intricate ins and outs.

By Benny Kass, Tuesday, February 23, 2010.

Inman News

DEAR BENNY: Almost six months ago, we made an offer to buy a condominium, under a short-sale arrangement. Our real estate agent called it a clean deal, as we are paying cash and all closing costs.

Our agent has called the listing agent and I have called the bank that holds the current mortgage (although they say they cannot discuss this with me for legal reasons) to try to learn why we cannot get an answer to our offer. My wife and I are anxious because we want to resolve this one way or the other. Didn’t our president get a new law enacted that is forcing the banks to respond promptly? We need some help, and the bank is dragging its feet. –Bob

DEAR BOB: Although the federal government is attempting to get lenders to shorten the time they have in which to respond to short-sale proposals, there currently is no federal law on this subject.

However, on Nov. 30, 2009, the Department of the Treasury issued guidelines that lenders are encouraged to follow. It is a complex process. Homeowners who are underwater can request that their lender preapprove short-sale terms. Although it is not clear how long the lender (or the servicer of the mortgage) has to respond, once the lender determines the amount it will be willing to accept from a short sale, the borrower has 120 days in which to find a buyer for the property.

When the homeowner enters into a sales contract with a potential buyer, and assuming that the lender has already preapproved the terms and conditions for a short sale, the lender must approve or disapprove the short sale within 10 business days after receiving the sales contract.

Accordingly, if you are a homeowner in financial trouble, talk with a real estate agent to start the preapproval process. This will take the most time, so you should begin this as soon as possible. There is a lot of paperwork involved that has to be presented to the lender.

The Treasury directive requires that once the short sale takes place, the homeowner/seller must be fully released from future liability. This has been a real problem in the past, since many lenders — after allowing a short sale — were still going after their borrowers for the deficiency — the difference between the net sales proceeds and the outstanding balance of the loan.

You can access this directive from the Web site of the Home Affordable Modification Program. Although lenders are encouraged to follow the guidelines now, technically they do not take effect until April 5, 2010, and will sunset Dec. 31, 2012.

Leave a Comment » | Short Sales | Tagged: , , , | Permalink
Posted by Jim Evans

Bank of America steps up foreclosure prevention efforts

January 27, 2010

By Les Christie, staff writerJanuary 26, 2010: 6:23 PM ET

NEW YORK (CNNMoney.com) — One roadblock slowing President Obama’s foreclosure prevention program seems to be clearing away. Bank of America, the nation’s largest mortgage lender, said Tuesday that it was the first lender to agree to lower or eliminate payments on second mortgages.

This federal initiative, called the Second Lien Modification Program, pays incentives to second mortgage holders to work closely with first mortgage holders under the Home Affordable Modification Program.

First mortgage holders have been reluctant to lower payments when there was a second lien involved because they did not want to take on losses while leaving payments on the second mortgages intact.

The lack of an agreement with second lien holders “has been a major impediment to getting successful modifications done,” said John Taylor, CEO of the National Community Reinvestment Coalition, a group whose members include foreclosure prevention counselors.

Without alteration to the terms of second mortgages, first mortgage holders often have to lower their payments even more to hit the HAMP target requiring that borrowers’ total mortgage payments represent no more than 31% of their pre-tax income.

“For many homeowners facing severe financial difficulty, decreasing the payment on the first mortgage without a reduction in the payment on the second lien may not produce an affordable combined mortgage payment,” said Barbara Desoer, president of Bank of America (BAC, Fortune 500) Home Loans.

The second lien plan has been in the works since last spring, shortly after HAMP was initiated, but implementing it proved difficult.

HAMP itself has been a disappointment. Originally designed to help as many as 4 million borrowers obtain mortgage workouts, it had produced fewer than 70,000 permanent modifications as of Dec. 31. Another 800,000 or so homeowners were in a trial-modification phase.

The Treasury Department hopes the second lien program will make a big difference. It’s estimated that as many as half of at-risk mortgages are burdened with second liens.

Signing on Bank of America was an important first step because it is the nation’s top mortgage lender with 14 million loans outstanding, including 3 million second loans.

The lender said it has all systems in place to begin implementing the program as soon as the final program policies and guidelines are released by federal regulatory agencies. That is expected to happen soon.

More banks are expected to sign on to the program very quickly, according to a Treasury spokeswoman.

“They need a lot more of the major banks to sign up,” Taylor said. To top of page

Leave a Comment » | Housing market, Mortgage Loans, Short Sales | Tagged: , , , | Permalink
Posted by Jim Evans

Big Banks accused of Short Sale Fraud / cnbc

January 17, 2010

http://www.cnbc.com/id/34877347

Leave a Comment » | Short Sales | Tagged: , | Permalink
Posted by Jim Evans

2010 is here, where will our local housing market go?

January 6, 2010

This past year was an interesting time for real estate in Northern Virginia. We went from a flurry of foreclosure properties to a very limited inventory. As home prices fell and many found themselves underwater, it became difficult if not impossible to sell their homes. A large majority of the homes in Prince William County were found to be short sales. A short sale occurs when the seller’s lender, due to some sort of hardship, allows him to sell for less than the full amount owed. Buyers hurried to compete on these homes, only to wait for up to 6 months to find out whether the lenders would approve the sale. These buyers were encouraged by the federal tax credit giving a break of $8000 to any purchaser who had not owned a home in the past 3 years.

2010 is now here! There is still very little inventory. The tax credit was expanded to include many current homeowners as well as first time buyers, yet it expires on April 30th. There has been little success in loan modifications. Most owners that qualify to modify, find that in three to six months they are right back where they started. The federal government had been buying up some of these “toxic” assets, or defaulting loans but that is also set to expire soon. This should certainly have an adverse impact on interest rates. Although prices are extremely good right now, what will a 7 or 8% home loan rate mean? We are not talking about in a couple of years. We are talking about in the next 4 or 5 months!

Anyone on the fence should beware! If this doesn’t give you an incentive to get your DREAM HOME now, I don’t know what to say. Why wait for that investment property?

It is true, short selling will continue well into 2010. Foreclosures will continue to come on the market as well. Question is: Will anyone be able to afford them?

 

Leave a Comment » | Housing market | Tagged: , , , , , | Permalink
Posted by Jim Evans

Realty Times – Military Personnel Receive Federal Help on Short Sales

December 28, 2009

Members of the military who find themselves in a short-sale situation now have a new tool via the Homeowners Assistance Program (HAP) through the Department of Defense (DoD).

 

Congress expanded HAP when they passed the American Recovery and Reinvestment Act of 2009; and now nearly every military personnel involved in a short sale can get financial help through HAP if they find themselves upside down when they must sell because of a mandatory permanent transfer.

The HAP website (http://hap.usace.army.mil) contains several brochures for military personnel and for real estate professionals to help understand the expanded guidelines for those using the program.

Authorized under Section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966, HAP is a law that is managed by the U.S. Army Corps of Engineers “to assist eligible homeowners who face financial loss when selling their primary residence homes in areas where real estate values have declined because of a base closure or realignment announcement.” The American Recovery and Reinvestment Act expands the legislation temporarily for DoD employees caught up in the mortgage crisis. Those who can apply for assistance include:

  • service members and DOD employees who are wounded, injured or become ill when deployed;
  • surviving spouses of service members or DOD employees killed or died of wounds while deployed;
  • service members and civilian employees assigned to BRAC 05 organizations; and
  • service members required to permanently relocate during the home mortgage crisis.The assistance is limited to employees who were reassigned within about a 5-and-a-half year period between 2006 and 2012 and the house being considered must have been the applicant’s primary residence. Some of the criteria for eligibility include:
  • Permanent reassignment requires move of more than 50 miles.
  • Reassignment ordered between 1 February 2006 and 30 September 2012.
  • Property purchased (or contract to purchase signed) before 1 July 2006.
  • Property was the primary residence of the owner
  • Owner has not previously received these benefit payments.An online brochure, which can be printed via a PDF file, is available here.This next paragraph is very important for purchasers of houses where the HAP program is being used.

    The execution of this program requires the assignment of the contract to the Department of Defense, via the U.S. Army Corps of Engineers. In essence, the seller conveys the house over to the USACE and then the purchaser buys the house from the USACE all at the same time at the same settlement or escrow table. Your state laws may require a few differences, but this is how it’s executed on the ground level.

    Many Realtor contracts contain paragraphs that will not allow the assignment of a contract, so military sellers using HAP may need to strike this paragraph to allow the contract to go through without any hiccups.

    An “assigned” contract is one where one party in a sales contract can assign their interests over to a third party before settlement. It would say something like: “this contract is between ‘Mr. and Mrs. Seller’ and ‘Mr. and Mrs. Buyer and/or assigns.’”

    With this language, it allows Mr. and Mrs. Buyer to slip in Mr. and Mrs. Buyer-2 at some point in the performance of the contract. It’s legal, and is usually used via a pre-foreclosure contract where one party is finding houses for sale and selling them to a secondary buyer once they get the terms of the contract in place.

    Thus, in the use of the DoD’s HAP program, the purchaser needs to understand that at the end of their contract, before they go to settlement, the seller will no longer be Mr. and Mrs. Seller, but the U.S. Army Corps of Engineers.

    For details on how the HAP program works, visit here.

    Published: December 28, 2009

    • Posted via web from Jim’s posterous

    Leave a Comment » | Short Sales | Tagged: , , , | Permalink
    Posted by Jim Evans

    Treasury sets guidance to simplify “short sales” – keeping my fingers crossed!

    December 1, 2009

    NEW YORK (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed “short sales” of homes and other loan modification alternatives to stem a rising tide of foreclosures.

    The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury’s website.

    Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders.

    The incentives, first announced in May, expand on the government’s Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 trial modifications they have started.

    “While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve” or offer a modification, the Treasury said in its announcement.

    Financial incentives for completing short sales or similar deed-in-lieu transactions — in which the deed is simply transferred to the lender — include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would receive $1,500 in relocation expenses.

    Short sales are favored by real estate agents and community groups over foreclosure because they can preserve the borrower’s credit rating and leave the property in better condition than when a homeowner is evicted. While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure.

    But short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.

    Among requirements, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt.

    It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.

    In one of the most contentious issues gumming up negotiations between lenders, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000.

    Second lien holders in recent months have begun demanding more money from the first lender, seller, buyer or agent in exchange for releasing their claim, agents have said. Because primary lenders would face larger losses in a foreclosure, some subordinate lenders have felt empowered, the agents said.

    The largest second-lien holders are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc.

    Second lien holders may proceed with a short sale outside of the Treasury program, if they felt the cap was too low, a Treasury official said in October.

    “If there was a short sale program that didn’t recognize the second lien holder position, it could have pretty damaging consequences for the industry,” Sanjiv Das, chief executive officer of CitiMortgage, said in an interview last week.

    (Editing by Leslie Adler)

    via news.yahoo.com

    It certainly can’t hurt. Let’s see if the banks go along!

    Leave a Comment » | Short Sales | Tagged: , , | Permalink
    Posted by Jim Evans

    Follow

    Get every new post delivered to your Inbox.