2 Important Details of the Mortgage Bailout Plan

The mortgage bailout plan promoted in response to the 2007 mortgage crisis is often misunderstood. It is not designed to help people with mortgages in good standing. Instead, the plan is specifically made to assist those people who were victims of predatory lending and face foreclosure. There are really only two ways the mortgage bailout plan helps this narrow range of individuals.

#1 Tax Relief

Some borrowers will have a portion of their debt on a mortgage forgiven during a foreclosure process. This sum may be taxed, but the Mortgage Debt Forgiveness Tax Relief Act stays this tax on any debt forgiven between 2007 and 2012. More information is available on the IRS website.

#2 Foreclosure Relief

A borrower who took out a sub prime loan, paid the loan until rates adjusted but now faces foreclosure due to the adjustment alone, may be eligible to refinance the mortgage through the Federal Housing Agency for foreclosure relief. The borrower must be able to continue making mortgage payments if the interest rate is returned to a more acceptable level. Borrowers who simply can no longer afford to own their home are not eligible for relief under the FHA's expansion of services in the mortgage bailout plan.

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