California homeowners who saw their properties turned into foreclosed houses this year may soon be hit by an income tax. A California law that provides temporary exemption on homeowners who lost their properties in a short-sale, foreclosure or deed in lieu of foreclosure is scheduled to expire at the end of 2009.

The California law is similar to a national one that also provides exemption to borrowers from federal taxes on canceled mortgage debt. But unlike the state law, the federal law stays in effect until 2012.

Industry analysts said that the state tax effect could just be substantial but the rules may be complex. They advise borrowers who have troubled loans to consult a tax expert. Before the exemption law, debts canceled or forgiven by lenders were taxed as income.

An exemption to the previous law is nonrecourse debt. Under nonrecourse debt, lenders have the right to take over control of the collateral of borrowers who defaulted on their loans. However, lenders are prohibited from going after other assets of the borrowers.

Industry analysts further explained that forgiven nonrecourse mortgage debts do not mean taxes on debt income that was canceled.

Normally, a home mortgage loan is a nonrecourse debt. The debt is classified as recourse if the borrowers refinance their loans and gets cash or takes out a line of credit of home equity loan. Income tax is imposed on canceled recourse debt.

Income tax exceptions are also applied to borrowers who filed for insolvency or bankruptcy. According to industry analysts, many homeowners who have troubled loans incurred recourse debts that would be taxed if forgiven. This prompted members of the U.S. Congress to pass the Mortgage Debt Relief Act of 2007.

Under the federal law, a home loan forgiven through a modification, short sale or foreclosure is temporarily exempted from federal tax. But the law specifies that the temporary waiver applies only to debts used to purchase, build or rehabilitate primary residences. It excludes home equity debts used to pay for credit card debts, cars or other purposes.

The debt exemption under the federal law has a cap of $2 million and applies to forgiven debts from 2007 to 2012.

In California, tax exemption applies to debts forgiven between 2007 and 2008, with $250,000 as the maximum amount of exclusion from state income taxes.

The efforts of Fannie Mae and Freddie Mac to contain foreclosed for sale inventories as of May 31, 2009 under the Streamlined Modification Program of the Federal Housing Finance Agency have been described by FHFA Director James Lockhart in his recent report.

The Streamlined Modification Program was launched in November 2008 under the previous administration and ended in April this year. As this modification program ended, Fannie Mae and Freddie Mac continued helping the federal government by shifting to the Obama administration’s Making Home Affordable Program.

As of May 31, Fannie Mae and Freddie Mac had guaranteed 30 million residential mortgage loans.

In May, the number of completed loan modifications dropped for the second straight month to around 10,400 as Fannie Mae and Freddie Mac shifted to the Home Affordable Modification Program.

Under HAMP, loan modifications are not counted immediately as loan modifications because these modification efforts still have to undergo a trial period of three months to see if borrowers are able to make the modified monthly payments consistently. After borrowers complete the trial period successfully, their loan medications are considered as completed loan modifications.

Out of all foreclosure prevention efforts completed in May, 47 percent were loan modifications. Most of the foreclosure prevention schemes done were extension of terms and reduction of rates.

Meanwhile, the number of short sales completed in May increased by 3 percent to almost 3,700, a substantial increase from the number of short sales completed in May last year. Many borrowers worked out short sales as a foreclosure prevention strategy in order to ensure less damage on their credit records. They believe they can buy another house again when their financial situations improve.

The number of delinquent borrowers increased by around 80,100 in May, with all of them missing payments by two months or more. Mortgage borrowers who are in default by two months or more increased in May by about 7 percent to 1.3 million.

Foreclosure starts increased by 5 percent to almost 90,600. These foreclosures were made on home loans covering non-owner-occupied homes and owner-occupied homes which are already deemed not qualified for modification under HAMP.

The FHFA regulates Freddie Mac, Fannie Mae and the 12 Federal Home Loan Banks spread across the U.S. These government-sponsored financial institutions provide over $6.3 trillion in funds to financial institutions and mortgage markets across the country.

More than half of total home sales in Grand Rapids, Michigan in June were foreclosed home listing sales or short sales, based on real estate sales data in Michigan.

Out of the 1,081 houses sold in June, 53 percent were foreclosed home listing properties or homes sold through short sales.

Additionally, more than 25 percent of total homes sold in June were priced below $50,000. In June 2007, only seven percent of total homes sold were priced below $50,000.

The low level of foreclosed home listing prices has pushed down the average home price in Grand Rapids to $113,923, a 13-percent decline from the average price in June 2008. The June drop however is much less than each of the annual drops in the first 5 months of 2009, which ranged from 17 percent to 29 percent.

Real estate analysts in the area said they are hopeful the slowdown in the pace of price decline is a positive signal, in addition to the decreasing number of days a foreclosed residential property stays in a foreclosed home listing.

They said home inventory in the area have dropped from 13 months to about ten months worth of inventory.

However, housing analysts are concerned about expectations for more foreclosed home listing properties in the coming months, as discussed in a recent report issued by the Treasury Department.

Some brokers in the area said that banks have told them they are going to release large volumes of foreclosed properties in the third and fourth quarters.

Michigan is among the ten U.S. states most clobbered by foreclosures. In May, it is sixth in charts of state foreclosure rates, with one house in every 326 housing units hit with a foreclosure action. Out of nearly 14,000 foreclosure filings in May, 6,246 properties were already in foreclosure listings while the rest were already for trustee sales.

This week, the Obama administration has expanded its Making Home Affordable program to help more troubled homeowners, especially those with underwater mortgages, but many homeowners now doubt the effectiveness of the new provision of the program.

Many homeowners have been complaining that their lenders have not been responding to their applications for modification and refinancing despite connecting with certified counselors.

Because of barriers to the Obama administration’s foreclosure prevention program, housing analysts contend that more houses will be added to foreclosed home listing inventories in the coming months.

If you do your online foreclosed home search, you will probably encounter ads or news related to the foreclosed properties of celebrities.

In these uncertain times, celebrities and socialites are not immune to sudden reversals of income. Hollywood magnates and fans are known for their fickle tastes, granting riches on their current favorite one day and then moving on to someone else the next day.

Some celebrities are now struggling to prevent their properties from being included in foreclosed home search sites because they took out huge amounts of loans during their heydays to buy large homes they thought they could easily pay with their huge paychecks.

Former baseball star Jose Conseco was among the first sports celebrities to admit in public being affected by the foreclosure crisis. Last year, Canseco walked away from his mansion in a Los Angeles suburb, saying it was not logical to keep paying it as its value was falling steeply. Canseco owed his lender over $2.5 million when his mansion was repossessed to be added to foreclosed home search lists.

The case of Damon Dash, co-founder of Roc-A-Fella Records, is another celebrity foreclosure story. He was hit with a foreclosure filing last year after missing the required $78,500 monthly payments on two Manhattan condos which he purchased for more than $7 million in the boom times. In March, he was hit with another slap when his wife Rachel Roy sued for divorce.

Michael Jackson earned millions at the height of his musical career, but decades of opulent living and wild spending decimated his bank accounts and tied him to millions of debts. His $25-million Never Land Ranch could have been another foreclosure statistic if Colony Capital did not take the risk of helping him out.

New York City socialite Veronica Hearst, widow of publishing tycoon Randolph Hearst, sits at the top of luxurious foreclosure stories. Her $45 million 52-bedroom beachfront home vanished from her control when it was purchased at a foreclosed property auction for only $23 million by New Stream Secured Capital.

Former baseball star Lenny Dykstra went into investment consulting and publishing when he retired. But his lifestyle magazine The Players Club put him into debts that could put his California mansion worth more than $18 million into foreclosed home search lists.

Mafia heiress Victoria Gotti has been the subject of plenty of online foreclosure stories recently when her arrears on her loan taken out to buy her $4.2 million mansion on Long Island reached $650,000.

There are other sad celebrity foreclosure stories. But as former baseball player Jose Canseco said, he and other distressed celebrities are more fortunate because they have other places to stay when their homes are foreclosed. Canseco expressed concern for many families who become homeless when their houses are added to foreclosed home search lists.

Arizonians say Southern Arizona is among the best places for retirees and other people looking for a place to live, but many of them do not relish the statement that many like to retire in their state because of large numbers of affordable listings of foreclosure homes.

Forbes.com has named Pima County as one of the country’s ten best places to retire partly because of its high affordability. The ranking explained that the subprime crisis led to thousands of affordable foreclosure homes in Tucson and surrounding areas.

But Arizonians insist that the relatively high number of foreclosure homes is not the main factor why retirees are moving to Tucson and other parts of Southern Arizona.

They even say that the foreclosure factor cannot be used by the Tucson Chamber of Commerce or the Metropolitan Tucson Convention and Visitors Bureau in their advertising campaign because people would just poke fun at the ads.

Even so, Arizonians admit that home prices across the state have become more affordable. In April 2006, the median price was $220,000, according to data from the Tucson Association of Realtors. Last month, the median was down to $164,000.

But home prices have been declining in nearly all housing markets nationwide. Besides, Tucson has not been battered by foreclosures as sharply as in Las Vegas, San Diego or Phoenix.

Based on RealtyTrac’s foreclosure data in April, one unit in every 238 homes received a foreclosure filing in Pima County. One unit in every 136 homes was hit with foreclosure in Maricopa County while Pinal County had one unit in every 92 homes hit with a filing.

Marshall Vest, a University of Arizona economist, explained that retirees are not basing their relocation decisions purely on the prices of foreclosure homes.

Jack Camper, chief executive of the Tucson Chamber of Commerce, said the foreclosure reasons cited by Forbes.com in its ranking are not to be embraced because there are large numbers of foreclosure homes across the country and not only in Tucson. He argued that there are more foreclosure houses in California and in Florida.

Camper stated that the major factors why people want to retire in Tucson are beautiful outdoors, cultural events, arts centers, a good university, golf resorts and opportunities for continuing education.

Lastly, Camper added that he has considered enjoying his older years in Tucson because of plenty of amenities, and not because of foreclosure homes, which can be found in all places nationwide.

During the housing boom, you may have been enticed by lenders to take out a mortgage loan that comes with an adjustable rate option. Your excitement over owning a new home may have made you forget to ask your lender what this option would bring in the long term. When the interest rates started resetting, you found yourself suddenly facing foreclosure. Nationwide, the thousands of foreclosure homes showed that very few owners managed to avoid a foreclosure.

When faced with as situation like foreclosures, you should never forget to act immediately. Of course, you must know a thing or two about the foreclosure process in order for you to make informed decisions. The most important fact about foreclosure is that it can be stopped. Here are effective ways you can accomplish this.

Negotiate
Many owners have failed to recognize the power of negotiation. You can stop the foreclosure process by offering your lender a new repayment plan that will be more manageable for you. Your lender can choose to accept this with some conditions attached. In most instances, you will have to agree to higher interest rates. There are very few lenders who would not negotiate. For them, it is a win-win situation for these lenders. They avoided considerable foreclosure expenses and at the same time did not add to their inventory of foreclosed homes for sale.

Sell
Home owners who have equity and yet can no longer pay off their mortgage debts almost always choose to sell their homes thru brokers like Foreclosure Listings Nationwide. These homes are considered to be very hot in the market and usually grabbed at once. Buyers know that the sellers are pressed for time and would be willing to cut down their asking prices, to close the deal and stop foreclosure.

Despite being one of the leaders of the pack, the high Florida foreclosures rate will be benefiting a group of people immensely. These are the foreclosure investors. Believe it or not, foreclosure investing is all about knowing when the time is right to buy. Right now the large inventory of Florida foreclosed homes are creating a buzz among seasoned investors who are hoping to grab the best deals for foreclosure properties located in real estate hot spots.

The timing is actually perfect. The softening market is driving down prices and owners facing foreclosure are quick to negotiate prices and sell their homes in order to cut losses and avoid besmirching their credit records. Investors are not only profiting from Florida pre-foreclosures but also helping out the market as well. The more distressed homes they buy, the fewer number of homes entering the foreclosure auction and real estate owned stages. This would eventually result to a more stable market condition.

Of course, the key here is knowing where to look for these Florida pre-foreclosures. Many sellers, wanting to sell their homes as quickly as possible before the re-instatement period is up, enter into listings contract with foreclosure brokers such as Foreclosure Listings Nationwide. This way, their homes would attract buyers who have been utilizing foreclosure listings as search tools.

As of May, the state has the 4th highest foreclosures rate according to RealtyTrac. Surprisingly, there were no notice of default filed but there were 17,000 filings under LIS. Overall, there were 21,704 filings, more than double the number of filings last year and more than half of the filings made last April. Florida follows Nevada, Colorado and California. Across the nation, there was a 20 percent foreclosures rate increase from April and 90 percent from May 2006.

Since last year, Illinois has suffered the same fate as the rest of the nation with regard to increasing foreclosures rate. But the situation is definitely improving. As of last May, the state has the 13th highest foreclosures rate, down four places or at least an 18 percent decrease from April. The reason for the improvement can be attributed to the mandatory counseling program that owners and borrowers have to complete to avoid Illinois foreclosures.

Owners already facing foreclosure may consider several options to avoid foreclosure. Sadly, not all options would actually be effective. Some of the owners would end up with more problems because they did not really know what they were getting into. The counseling programs that the state officials have come up with will provide these owners with educated decisions.

Now, they could choose to negotiate with their lenders to re-finance their loans and know what they are getting into. Some owners with a little equity tied on their property can also try to sell their homes with the help of brokers such as Foreclosure Listings Nationwide, without worrying if they are making a mistake.

On the other hand, borrowers who are on the verge of taking out a loan, will now be well-informed about the mortgage. Lenders are also being held responsible for making sure that they enforce strict underwriting guidelines in order to determine paying capacity of the borrowers. In the past, borrowers will simply leave everything up to the lenders and the lenders just focus on the commission they are going to get out of the transaction. The result is the high foreclosures rate, mostly coming from the subprime mortgage market.

For the record, there were 709 homes that entered into the REO stage. Based on this, there is approximately one foreclosure filing for every 717 homes in Illinois as of May.

Bank foreclosed homes are properties that a bank owns due to foreclosure. The homeowner was unable to make their mortgage payments, so it was necessary for the bank to foreclose on the property. When the home did not sell at public auction, the title of the home is transferred to the bank that financed the loan. This happens so that the bank can attempt to recover their losses on the home by selling it. Each bank usually sells their bank foreclosed homes differently. Some banks sell them on their own, or some use a realtor to handle the sale of their bank foreclosed homes. Advertisement of bank foreclosed homes can be aggressive, or done on a more discreet basis, depending on the policies of the bank.

Bank foreclosed homes can sell for market value or any amount below market value. A lot of the price depends on the condition of the home and also how quickly the bank wants to get rid of it. A home is a nonperforming asset, so most banks want to sell them quickly. It is no secret that banks are in the business of making money, so bank foreclosed homes must be sold in order to make them a performing asset as soon as possible.

Anyone interested in buying bank foreclosed homes, should approach the bank that owns the bank foreclosed home they are interested in, or a foreclosure listings service that is handling it. They can then submit a bid for the purchase of the home. While the price may not be as good as on other foreclosures, buyers can still expect to save money. However, bids must be reasonable, or they will be rejected.

When it comes to financing bank owned foreclosures, some banks will offer financing options, and sometimes they expect buyers to have their own financing. They will expect buyers to furnish an earnest money deposit, which varies according to the asking price and bank policies. The process for buying bank owned properties can be different for each bank, so it is important to communicate with the bank or realtor to get the best possible deal on bank foreclosed homes.

Bank foreclosed homes can be found by contacting banks or realtors, but to get the most comprehensive listings of bank foreclosed homes in your area, it is better to use a listing service like Nationwide. They are experienced at finding bank foreclosure homes, and Nationwide is a trusted name in the foreclosure market.

Distressed properties are another name for foreclosed homes. Distressed properties are houses and properties that have been foreclosed on by banks or lenders. There are several types of distressed properties depending on where the property is in the foreclosure process. For instance, distressed properties that have received a formal notification of pending foreclosure proceedings are called pre-foreclosures. Distressed properties that have reached the end of the foreclosure process and are being sold at a public auction are another type of distressed property. A third type of distressed property is bank owned properties. These are distressed properties that did not sell at auction and have the title transferred to the bank.

Each of these distressed properties can represent an opportunity for you to save or make money. However, there are a few things that you need to do before buying any of these distressed properties. The first thing you need to do is get pre-qualified by your bank or lender. This way, you know how much money you can spend, and you also show the buyer that you are serious about buying a house. It also means that you can close quickly if you need to in order to secure the property. Having pre-approved financing and being able to close quickly are wonderful assets to have when you are going to buy a distressed property.

Another important step is to find out everything you can about the property. Distressed properties can have a variety of issues, and you should know about them beforehand so that you can make an educated decision about whether or not to pursue a distressed property. You need to research any financial issues that may affect your financial decision. Some distressed properties have tax liens against them for unpaid property taxes. This is just one type of lien a property can have against it. You also need to know about the condition of the house. Does the house need structural repairs or simply cosmetic repairs? Structural repairs can cost a lot of money, and if the property needs them you want to think about the impact of these repair costs on your decision. It is smart to get an estimate from a professional about how much these repairs are going to cost you.

You can find all kinds of distressed properties at Nationwide. Nationwide has a huge database of distressed properties in every stage of foreclosure. Each listing for distressed properties includes important information about the property and contact details. Nationwide has all the most recent foreclosure listings in your area.