Many homeowners are facing foreclosure today.  The obvious result of that is that the homeowner looses their home and their credit is ruined.  It will take 5 or more years to establish good credit again.  During that time, those individuals will not be able to secure new sources of credit, i.e., credit cards and automobile loans, nor will they be able to purchase a new home.

In addition to that, there may be tax repercussions.  Previously, an individual was taxed on the difference between the price they paid for their home and what the bank ultimately resells it for.  In other words, if you paid $300,000 for your home, then the bank foreclosed and resold the home for $160,000, you would receive a 1099A and would be taxed on the difference of $140,000.  The IRS Tax Relief plan will eliminate that tax liability for homeowners who's homes are foreclosed on and are resold on or before December 31, 2009.  There are no guarantees for homes that have not sold by that date.

However, the Tax Relief plan will not stop a lender from pursuing a homeowner to collect any deficiency following a foreclosure sale or short sale.  Lenders are currently so backlogged with cases and files that there hasn't been much talk on this subject, but it will come around eventually.  Many people will be taken by surprise several years down the road when they discover they are being pursued and/or sued for the deficiency in the foreclosure sale or short sale of their prior home.  The good news is that President Obama's new Stability Plan may extend this to end of 2012.

No one knows with any certainty what the future will hold.  The best thing to do now is to protect yourself from a foreclosure.  A FORECLOSURE IS THE LEAST DESIREABLE OPTION, DOES THE MOST AMOUNT OF DAMAGE TO CREDIT AND SHOULD ALWAYS BE A LAST RESORT!

There are several options when facing the possibility of a foreclosure.  What's best for you will depend on your individual situation and circumstances.  A MortgageER specialist would be happy to discuss your options with you and advise you in the best possible course of action.