QUESTION
What steps are needed to have the second mortgage completely removed?
Asked on Jun 28th, 2013 on Foreclosures - Florida
More details to this question:
Second mortgage was discharged not through bankruptcy and a 1099-C, ("2012 - 1099-C, Cancellation of Debt") was received stating "Total Amount of Debt Discharged". "Date of Identifiable Debt" was 12/31/2012; however, six months later, nothing has been filed in our public records. First LTV ratio is 84%; Second LTV ratio was 55%; total LTV ratio was 139%. First has initiated foreclosure proceedings; second was discharged. We've received a high enough offer on the house to cover the First. When asked for a satisfaction from the Second since the 1099-C was issued, they said I still owe the debt. Will this need to be a short sale, even though the sale price covers the First, and the Second was discharged? Any insight would help. Thank you.
1 ANSWER
Erik Brito Espinosa
A 1099 discharge of debt is not a release from liability under the contractual obligation of the note and mortgage. It serves as a notice to the IRS that they do not believe they will recover the debt and for tax purposes the debt is forgiven; however, they could still file suit to collect the debt and the mortgage still serves as a lien on the collateral property if they did so, the 1099 would be reversed. In your case it would still have to be a short sale. The second loan was not discharged as you believe. Even a discharge under bankruptcy would only protect you from personal liability and still require a short sale, unless the lien was also removed from the property as part of the process.
Answered on Jul 01st, 2013 at 12:28 PM