Mortgage Debt Relief Act: This law was passed to aide homeowners whose mortgage loans were satisfied by foreclosure or short sale, with the remaining balance owed forgiven by their lenders. Prior to enactment, any debt forgiven by a lender was taxable as income to the former borrower unless they had been discharged in bankruptcy or were legally insolvent. For example, a $250,000.00 loan satisfied by a $150,000.00 short sale would have resulted in $100,000.00 in forgiven indebtedness. If treated as income, a tax of nearly $20,000.00 could be due.
This law expired December 31, 2013, but just last month the law was passed extending the exemption retroactively from January 1, 2014 to December 31, 2014. Therefore any applicable debt forgiven in 2014 will still be exempt from taxation. However attempts to extend the law for two years failed, so currently any debt forgiveness after December 31, 2014 would again be taxable.
Protecting Tenants at Foreclosure Act: This law was passed to give bone fide tenants up to ninety days after foreclosure sale to retain possession of their rental home as long as the tenant paid fair market rent to the party who acquired the property at foreclosure sale. Due to the foreclosure crisis many tenants became displaced after foreclosure with little notice or understanding. However, this law expired December 31, 2014, and it is unlikely that the law will be reinstated.
With the law now expired, tenants have no extra protection post sale. In Florida, most foreclosure judgments provide for virtually immediate possession after sale and issuance of a certificate of title. All that is necessary is for the Clerk of Court to issue a writ of possession, and the sheriff to post at the property, leaving tenants with only twenty-four hours' notice to vacate.
Foreclosures: Florida continues to lead the nation in foreclosures, with 1 in every 546 homes in the state in foreclosure according to RealtyTrac, with Palm Beach slightly better at 1 in 599 homes and Broward slightly worse at 1 in 520 homes. The good news is that the number of homes in foreclosure has declined nearly twenty-five percent and the trend is further downward, but there are still a lot of clean-up foreclosures either pending or nearly ready to be refiled.
Statute of Limitations: Many foreclosures were filed in 2006-2009 and were ultimately dismissed for a variety of reasons. After five years the cases were refiled by the lender, or an Association or subsequent owner has sued to quiet title. The issue in these cases is whether Florida's five year statute of limitations applies. If it does, the note and mortgage disappear, giving the property free and clear to the then property owner (usually a successor or Association).
Two Florida Appellate Courts have rejected this argument, and held that the loans were still valid, only the payments more than five years old were lost. This preserved the lien of the mortgage and allowed the lender to complete its foreclosure. However, in two recent decisions the Third District Court of Appeal has reached a different conclusion, finding that in certain circumstances, after five years, the loan expires (even if the lien of the mortgage remains valid). This has created a conflict in the law, and ultimately will have to be decided by the Florida Supreme Court.
Home Values: 2014 was another good year for Florida home values, with zillow.com finding that there was a 10.6% rise in 2014. They are also predicting a slower rise on 2015 of 2.3%. However, Palm Beach and Broward Counties both fell about 1% from 2013. Sales also fell in Broward County by about 6% with sales up by 9% in Palm Beach County. What had been a low price seller's market has stabilized with higher prices and a better balance between supply and demand.
Interest rates remain steady, with 30 year fixed rate loans hovering around 4%, with 15 year loans one point lower. Adjustable Rate 5/1 Loans are even lower with rates of about 2.75% fixed for five years.
While obtaining loans remains an issue due to credit and income restrictions, recent changes by FNMA and Freddie Mac has resulted in an expansion of low down payment loans (3%) which benefits lower income and first time home buyers. In addition, President Obama announced that the FHA will lower mortgage insurance premiums by one-half percent, saving homeowners nearly $900 annually. These programs, coupled with historically low rates, should help sustain the real estate market this year and possibly encourage new buyers into the market.
Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County. They specialize in real estate law and business law, and can assist buyers and sellers in loans and purchases/sales. They can be reached at 561.594.1452 or by e-mail at firstname.lastname@example.org