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 mjposner@warddamon.com
