How does a home equity loan on an second home that was foreclosed on affect my taxes?

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I’m from northern Virginia and my wife and I let our rental property go due to lack of income. It was foreclosed on 7/14/10. We stopped paying on it in January, but July was the acquisition date. We had a home equity line of credit through another lender, a personal bank and not our original mortgage holder. We have still been paying on that credit line since the foreclosure. They sent me a 1099 form that basically states I am not paying on the line anymore, as if it were defaulted because the loan is now unsecured. I have received no documentation on any of the interest I paid for the entire year last year, and it is impacting my annual taxes greatly. Any advice?

2 Comments
  1. Reply
    Bill
    April 29, 2011 at 10:43 pm

    You need to read the contract that you signed on the equity loan. Since you gave their collateral away they may have the right to call the loan in and demand that the balance be paid immediately. As far a not being credited with interest payment you will need to contact them and see what has happened. Any way you look at it you are not in a very good position.

  2. Reply
    real estate guy
    April 29, 2011 at 11:14 pm

    sorry, but you are SCREWED. The 1099 should show (or a 2nd one will come) what the bank lost. This amount is TAXABLE income. You will owe INCOME taxes on this amount. No capital gains, but the higher INCOME taxes.

    Yes, congress waived the taxes until 2012. BUT this was only on 1st trust (purchase money) on primary homes.

    In addition, the bankS (the FIRST and 2ND MORTGAGES) will come after you for the money.

    The next step is BK.

    I guess you didn’t talk with a lawyer before you just thought you could walk away. NOW IS THE TIME

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