Alex Can bank foreclose if payments are current?
A mortgage loan may be held by one bank initially, then taken over by another. While the homeowner’s records may indicate that they have been paying the mortgage, they may not have been paying to the right bank. Regardless, if the current lender is not getting the payments, foreclosure is possible.
What happens when a foreclosure is sold for less than the amount owed?
If the property sells for less than the borrower owes the lender, the sale results in a deficiency. Then, depending on state law, the lender might be able to get a deficiency judgment against the foreclosed borrower.
What happens to unpaid interest in a foreclosure?
As a result, the discharged principal, and under certain circumstances previously deducted accrued unpaid interest (see below), may be includible in the amount realized for purposes of determining gain or loss. A foreclosure is the legal process by which the lender takes collateral property to satisfy an outstanding debt.
How is a deed in lieu of foreclosure treated?
Under Regs. Sec. 1.1001-2, cancellation of indebtedness arising from the involuntary (i.e., foreclosure), or in exchange for the voluntary (i.e., deed in lieu of foreclosure), disposition of property is treated as a sale or exchange of such property.
How is cancellation of debt determined in a foreclosure?
The first calculation is to determine the amount of cancellation of debt income. Cancellation of debt income is determined by the outstanding debt balance immediately before the foreclosure (minus debt liable after the foreclosure) minus the fair market value of the property equals the cancellation of debt income.
If the property sells for less than the borrower owes the lender, the sale results in a deficiency. Then, depending on state law, the lender might be able to get a deficiency judgment against the foreclosed borrower.
As a result, the discharged principal, and under certain circumstances previously deducted accrued unpaid interest (see below), may be includible in the amount realized for purposes of determining gain or loss. A foreclosure is the legal process by which the lender takes collateral property to satisfy an outstanding debt.
Under Regs. Sec. 1.1001-2, cancellation of indebtedness arising from the involuntary (i.e., foreclosure), or in exchange for the voluntary (i.e., deed in lieu of foreclosure), disposition of property is treated as a sale or exchange of such property.
When do you have to pay dues after a foreclosure?
Under both foreclosure approaches, the homeowner still has some time after the sale to pay the amount due and any additional costs, including any applicable attorney’s fees, in order to get back the property. This is known as a redemption period.