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I have power of attorney (POA). My dad has dementia and is in a nursing home. He stopped paying the mortgage when he went into the nursing home. I am not on the mortgage. can I sign the papers being served to him to spare him?

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Igloo, I hadn't had any reason to even be aware of the debt forgiveness issue until the real estate recession and the ensuing onslaught of publicity surrounding the miscreants in some of the shyster mortgage outfits, as well as the massive number of homeowners who were overextended, especially as it became known that loans were slid through with nominal due diligence on the part of some lenders.

Since the number of defaulted mortgages skyrocketed, and lenders took massive losses, it does make sense that some relief was granted to homeowners through the 2007 act, although I'm sure the lenders found some way to appease their consciences and balance sheets through some back-door lobbying in their own behalf.

I did some quick checks of Form 4861, although I imagine the publication I reviewed was the one issued several years ago before the sunset provision activated.

I do recall now that some of the issues were solvency/insolvency of the trust, inheritance basis and FMVs, and more issues. Now that it's not as stressful, it might be nice to dig out the old files and check my notes to see what I documented and eventually decided.

You raised the issue of non-recourse loans....that might have been one of the issues for heirs. I don't recall if the original mortgage was recourse or non-recourse, nor do I recall if one of the issues was whether or not heirs inherited rights in a house subject to a loan with either recourse status.

It doesn't make sense that recourse and deficiency judgments applicable to a mortgage would filter down to and be obligations of heirs, but at that time Countrywide was getting away with a lot of things that were far from honorable or sensible.

Sometime when I have insomnia, I'll go back and reread some of my notes and the old IRS pubs; doing that usually puts me to sleep quite easily.
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garden - you know the increase in issuance of 1099-C Cancellation of Debt seems to be a in the last 5 -7 years. Awhile back someone on AC wrote a post on why 1099-Cs became de rigeur. Guestshoppadministrator, was it you?

In doing a quick google, IRS got under 1M 1099-c in 2003. BUT 5.98M in 2014. IRS publication 4681 seems to details the Mortgage forgiveness debt relief Act of 2007. It lost me when it started going into status on non-recourse loans.....

Ilrychlic - long story short, dad will need someone to deal with his taxes if he gets the 1099-C.

Projected 1099-C for 2015 is 6.5M. CPAs will be busy!
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Igloo, re the process of debt forgiveness and what needs to be filed....I spent some time years ago after my sister's house was foreclosed reading through the IRS publications on the issue, with the need to ensure that I did whatever I had to do. I do recall researching the applicable statute as well.

I honestly don't believe that I ever filed any forms, as my interpretation was that it wasn't necessary. However, this was a situation in which my sister was the mortgagor, I was Co-Trustee, so I approached the issues from that perspective. And it was a bit more complicated because of the Trust.

If I ever get the motivation to go back to that stressful time period, I'll look up the old tax returns I filed to see if I did actually file a 982 - it doesn't even ring any bells.

What I do clearly remember though is that there was a sunset time when that forgiveness expired, so it may be that our situation occurred before the expiration of the statutory period and I wasn't required to file anything. What I do remember is the convoluted logic I had to wade through to determine what the status was for a deceased person whose home had been transferred to a trust.

You raise a good point about the bank's logic in granting a mortgage to an elderly man, although I'll be 72 this year and I don't consider myself elderly! And I probably will need to get a mortgage if I'm able to get things together enough to get out of my neighborhood.

If the OP's father's bank wasn't a predatory lender (which it might very well be), then he would have had to have really good collateral in the form of assets for a bank to make that kind of a loan.
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Garden is spot-on about questioning why papers need to be actually served. I've been under the impression that they are just certified mailing to the property or last known address of the mortgage holder. If that is accurate, Dad shouldn't actually in person have to be served in order for foreclosure to go though and be done.

I'd reject service if I was the DPOA until I knew what my liability was by doing this.

FF & GA about the phantom income forgiveness on underwater mortgages, I was under the impression that the mortgage holder still issues the 1099-C for the whole amount written off plus and fees to the old mortgage holder for the year the foreclosure is done AND then mortgage holder does 1040 tax filing with a IRS 982 Reduction of Tax Attributes form and worksheet done offset the phantom income. They have to file both to get the discharge of taxes due.

ilychic - sounds cryptic doesn't it! What this all is about is whatever the $ amount is written off by Dads walking on his mortgage will be viewed as income by the IRS as the bank will file a 1099-C cancellation of debt. If the house gets sold @ 95K before dad completes foreclosure , then the 1099 will probably be in the 35k range; but if not, its going to be whole 130large. Plus interest and fees on the mortgage. Whatever the case, it's "income" reported to IRS with taxes due on that income.

Now for those on Medicaid, this poses 2 problems:
1. the "income" takes them over the impoverishment required to be eligible for Medicaid. Yeah totally loco but for states that do an IRS match-up for income, it will trigger an issue of for Medicaid. So you have to do taxes for dad to get this dealt with. Because if not...
2. Taxes are due on the amount shown in the 1099-C. If dad ignores dealing with this, the IRS as a supercreditor can attach some of his monthly SS or other retirement income to pay on taxes due. 130k is maybe 25k taxes due. Which is a problem for dads required by Medicaid co-pay to the NH each month as he will be short due to IRS seizure of some of his monthly income.

982 is a CPA done filing to do. It's not a DIY, quicken, turbo tax filing imho.

I'd look into filing some sort of compliant with the state against the banking group that issued the mortgage to your dad. They could have a history of predatory action with other advanced seniors besides your dad, especially if it was a bank officer who approached dad to do the mortgage
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Some potential issues to consider:

1. Assuming the property is in PA (based on your profile), the PA court rules may or may not address service of process on behalf of someone with dementia. If the court rules do, I believe that the court rules would supercede any authority granted in the POA.

2 What exactly is the lender trying to serve? Default notices are generally sent by certified mail. I haven't researched PA foreclosure statutes to determine whether or not foreclosure can be by advertisement or in equity (i.e., a lawsuit). If the document to be served is a Summons for a foreclosure suit, I think the court rules for the court in which the suit is filed would definitely govern whether or not you can accept service of process.

3. I honestly think you could be in an awkward position by accepting service for your father, given his dementia. Are you familiar with the foreclosure process? Do you know what will happen? Have you spoken with a real estate attorney regarding foreclosures in PA?

4. During the real estate crash, a statutory provision was enacted providing forgiveness of tax obligation for forgiven debt, as FF references in her second paragraph. Those who were foreclosed did not have to treat the forgiven debt as income. I don't know w/o researching statutes whether or not that provision has expired. That's something that should be determined.

5. Another alternative, which should be discussed with a real estate attorney, is execution of a deed in lieu of foreclosure. The lender agrees not to foreclose if title is conveyed to the lender, and foreclosure is avoided.

This is a technique used by commercial lenders during earlier real estate downturns.

I doubt if attorneys outside the transactional and real estate practice are would be familiar enough with the practice to offer advice on it. You may need to see an elder law attorney for the various issues of Medicaid and nursing home payment though.

6. The deed in lieu issue would be complicated if your father gets Medicaid. So if he is on Medicaid, I really do think some legal advice would help you through this morass.
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lrychlic, what was the reason your Dad refinanced the house? Was it to get a lower interest rate? Or did he need to get some equity out of the house, and if yes for what reason?

This can become complex, because if the mortgage company "forgives" the unpaid balance of the loan [$130k minus $95k] that $35k could be considered "income" even though it isn't in your Dad's pocket.

What I would do is talk to an Elder Law attorney to see what are your best options.
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We quit paying the mortgage in September because medicaid takes all his money for the nursing home. The house has been on the market since November. He is upside down on the mortgage anyway. Someone from their bank assessed his house at $170,000 2 years ago and gave an 82 year old man a mortgage based on that. House is for sale for $95,000 and he owes $130,000.
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As POA, you are probably supposed to deal with the mortgage payments if he can make them versus selling the home. You are supposed to act on his behalf as his financial agent - you sign checks for him as Your Name, daughter and POA for His Name, for example. Not sure if you WANT to accept the papers - would get legal or estate planning advice on that. It sounds like you need that in any event! You can use your father's funds, if any, to pay for those kinds of consultations and services.

How long has the mortgage been in default, BTW?
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