Some Lose Homes Over as Little as $400

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tax lien home salesBy Daniel Wagner

WASHINGTON -- The elderly and other vulnerable homeowners are losing their homes because they owe as little as a few hundred dollars in back taxes, according to a report from a consumer group.

Outdated state laws allow big banks and other investors to reap windfall profits by buying the houses for a pittance and reselling them, the National Consumer Law Center said in a report being released Tuesday.

Local governments can seize and sell a home if the owner falls behind on property taxes and fees. The process helps governments make ends meet at a time when low property values and the weak economy are squeezing tax revenue.

But tax debts as small as $400 can cause people to lose their homes because of arcane laws and misinformation among consumers, says John Rao, the report's author and an attorney with the NCLC.

The consequences are "devastating for individuals, families and communities," Rao said. He said states should update laws so speculators can't profit from misinformed homeowners and people who have difficulty managing their finances.

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Mortgage Assistance Programs
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Some Lose Homes Over as Little as $400

Purpose: Lower your monthly mortgage payments.

General eligibility guidelines:
• You obtained your mortgage on or before January 1, 2009.
• You owe up to $729,750 on your primary residence or single unit rental property
• You owe up to $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property
• The property has not been condemned
• You have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify).
• You have sufficient, documented income to support a modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

Next Steps: Contact your mortgage company to see if you are eligible. Also, fill out the following forms:

Request for Mortgage Assistance Form
IRS Form 4506T-EZ   or 4506-T
Verification of Income

See the Making Home Affordable website for more details.

Purpose: To allow homeowners with Fannie Mae or Freddie Mac-guaranteed mortgages to refinance into a lower rate. The program primarily targets "underwater" homeowners, borrowers who owe more on their mortgages than their homes are worth. The Obama administration recently lifted a cap that prevented homeowners whose mortgages were more than 125 percent the value of their homes from qualifying. That has extended the program to a much wider swath of homeowners.  

General eligibility guidelines:
• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

Next Steps: Determine if Fannie Mae or Freddie Mac owns your mortgage using their Loan Lookup Tools. You can also contact your current mortgage servicer or another that is approved by Fannie Mae or Freddie Mac to inquire about HARP. You can alsocompare rates and costs with additional mortgage companies to ensure best refinance terms.

See the Making Home Affordable website for more details.

Purpose: To allow homeowners with FHA-insured mortgages worth more than their homes to refinance into a  lower rate.

General eligibility guidelines:
• Your mortgage is not owned or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA.
• You owe more than your home is worth.
• You are current on your mortgage payments.
• You occupy the house as your primary residence.
• You are eligible for the new loan under standard FHA underwriting requirements.
• Your total debt does not exceed 55 percent of your monthly gross income.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

Next steps: Talk to your mortgage owner to see if they want to participate in an FHA refinance. Or talk to an HUD-approved housing counselor for free.

See the Making Home Affordable website for more details.

Purpose: To help people who can no longer afford their mortgages to transition to more affordable housing. The program provides two options: a short sale or a Deed-in Lieu of foreclosure.

General eligibility requirements:
• You live in the home or have lived there within the last 12 months.
• You have a documented financial hardship.
• You have not purchased a new house within the last 12 months.
• Your first mortgage is less than $729,750.
• You obtained your mortgage on or before January 1, 2009.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

Next steps: Contact one of the HUD-approved housing counselors for free to discuss your options. When it's time for HAFA, be prepared to provide the following:

Request for Mortgage Assistance (RMA)

For more information, see the Making Home Affordable website.

Purpose: Get free advice on buying a home, renting, defaults, foreclosures, and credit issues.

General eligibility guidelines: This service is open to everyone.

Next Steps: Search for a HUD approved housing counselor near you, or call 888-995-HOPE (4673) for free, comprehensive assistance around-the-clock.

Purpose: To help unemployed people manage mortgage payments. The program can either reduce payments or suspend them altogether for 12 months or more.

General eligibility guidelines:
• You are unemployed and eligible for unemployment benefits.
• You occupy the house as your primary residence.
• You have not previously received a HAMPSM modification.
• You obtained your mortgage on or before January 1, 2009.
• You owe up to $729,750 on your home.

Next steps: Contact a HUD-approved housing counselor at 888-995-HOPE (4673). They will help you understand your options, design a plan, and prepare your application. You can also contact your mortgage servicer to see if you are eligible.

See the Making Home Affordable website for more information.

Purpose: To recover damages if financially injured during a foreclosure from 2009 to 2010.

General eligibility guidelines:
• Your mortgage loan was active in the foreclosure process between January 1, 2009 and December 31, 2010.
• The property was your primary residence.
• You had one of the providers listed here.

Next Steps: Fill out the form for a free independent foreclosure review here. Make sure to send the form by September 30, 2012.

Click here for more info.

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The rules for property tax sales can be confusing, especially to elderly people who can't keep track of their finances and people in minority-heavy communities that were targeted by subprime lenders. Here's how it works:

• The government files a public document called a tax lien saying that it can seize the property if the taxes remain unpaid.

• If the taxes aren't paid, the government auctions the lien to investors. Past investors include JPMorgan Chase, Bank of America and people who respond to Internet get-rich schemes, the report said. Homes typically are sold at steep discounts.

• For a limited time, the homeowner may buy back the home by paying to the investors the purchase price of the lien, plus interest, fees and other costs. That's possible because investors haven't bought the home itself -- they have purchased the tax lien, which gives them the right to seize the home later.

• If the owner fails to pay all the costs, investors can sell the home at a big profit compared with the cost of buying the tax lien.

The report said state governments should make it easier for homeowners to retake their homes after tax lien sales. It said that they should limit the interest and penalties that investors can charge and increase court oversight.

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10 Tax Breaks for the Home, Room by Room
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Some Lose Homes Over as Little as $400
Your home is where the refund is. Whether they are home office deductions, tax credits for new purchases, renovations, or "green" tax incentives, Uncle Sam is able to help you recoup some of your expenses you've put into your home.
That is, provided you have all the receipts, manufacturer's certificates and other required paperwork for any deduction or credit you plan to claim on your tax return.
Homeowners have lots to wade through to determine what all they might juggle when it comes to tax planning. To make tax preparation easier, we have outlined the following tips to help homeowners navigate tax season this year.
You can deduct lawn maintenance if you fit the "business use" test, says Bay Area tax expert Gary Price, of accounting firm Sensiba San Flippo (ssfllp.com).
Lawn care and landscaping expenses are deductible if the taxpayer's client's regularly visit the home office, or where the lawn is used as part of the business, as in a daycare provider with children going out on the lawn for play area. Yes, this even applies to snow removal. Use form 8829.
If you primarily work from home, you should be able to deduct a percentage of your mortgage interest, real estate taxes, casualty losses, home repairs and maintenance, utilities, house insurance, security system and even garbage removal based on the square footage of your home office space compared to the overall square footage of your home.
"In order to qualify as a home office in the eyes of the IRS," says tax attorney Roni Deutch, CEO of the Roni Deutch Tax Center, "you need to have a separate room or designated space that is used exclusively for business purposes. If it is not a room, then the space needs to be separated by a room divider of some sort. Additionally, the IRS is very strict about the exclusive use rule, so if your children play in the office or your spouse uses the room as a home gym then it will not qualify."
Use IRS Form 8829 if you are self-employed. Download Publication 587 for IRS rules. And if turned an old bedroom into an office space using California Closets or other remodeling project, you should be able to deduct that expense too for work, if you itemize.
Did an adult child, other relative or friend move in with you after a job or home loss or for another reason? If so, and you've been charging them rent, you can deduct a portion of their living space, says CPA Brenda Schafer, CFP, from the Tax Institute at H&R Block in Kansas City, MO.
"Depreciation is allowed only for areas used exclusively by the renter, such as a bedroom and separate bathroom. If total allowed deductions exceed the rental income, a loss is generally allowed up to certain limitations."
If you converted a basement, attic, garage or other space into rental quarters, Uncle Sam gives you a break on the remodeling costs.
"Converting a basement to a separate rental unit is treated as a "regular" rental. Mostly, that means that depreciation on the rental portion of the home is allowed. Expenses to remodel the basement would be added to the depreciable basis of the basement of the house and would be depreciated," Schafer told HousingWatch.
Windows, storm windows, certain fuel stoves, doors, and storm doors, all qualify, says John Egan. "The neat thing about the credit is that you could replace just a few windows in your home or even put a window in an area of your home where there is not one." Perhaps put a skylight in the kitchen.
"A very simple skylight can give a whole new look to a kitchen or family room and get a big discount," he says. File form 5695 with your tax return.
Even replacing your window shades or adding a window film to the glass can get you a tax credit. Duette Architella shades by Hunter Douglas (previous picture) qualify for the tax credit, as does Panorama solar control window film (pictured).
Homeowners can receive a 30 percent credit on the cost of qualifying window coverings, up to $1,500. Installation costs do not apply. This tax credit applies only to improvements made to a primary residence from Jan. 1, 2009 through Dec. 31, 2010. Complete IRS form 5695.
Qualified biomass stoves and furnaces heat a home or water by burning biomass fuel, such as corn, cherry pits, wood pellets, plants and fibers. The tax credit covers the product and in some cases the installation, which is a good thing because the larger products are not cheap.
The inexpensive models can cost $700, but the larger units go for $4,000 or more. The Harman PC45 Corn/Pellet Stove (pictured) runs about $3,500, a spokesperson for the company told AOL Real Estate. Installation fees can add another $500. Some biomass fireplace inserts, which are heating units that retrofit into an existing fireplaces, might qualify for the tax credit.
Energy-saving home upgrades also qualify for tax deductions, says John Egan, a certified financial planner with JM Egan Wealth Advisors in Madison, NJ. "The government-sponsored energy credit is the easiest one to qualify for and the most practical one to get tremendous savings on needed home improvements," he told AOL Real Estate.
"It can only be used in your primary residence and offers 30% as a tax credit up to $1,500,. That's a dollar-for-dollar credit as long as you have some income tax of at least $1,500. That means you can get a 30% savings on a $5,000 home improvement." From lightbulbs to spray-on insulation like Icynene that helps cut down on air leakage, there are many products and upgrades that qualify, helping you increase energy efficiency. Some other products have no max on the credit and for some you can even carry forward the tax credit over several years until 2016.
Adding on a new reflective roof could qualify you for a tax deduction if you choose the right product, reports the Metal Roofing Alliance. Asphalt roofs with appropriate cooling granules meet the requirements, as do metal roofs with certain pigmented coatings.
Metal roofs can resemble slate, shake and tile, such as the one pictured of an Allmet Roofing Products. If your house is shaded and the roof is not exposed to much sun, or your attic is well insulated, this might not be the product for you.
Thanks to the Residential Energy Efficient Property Credit, seriously "green" homeowners that have installed alternative energy equipment, such as solar hot water heaters and geothermal heat pumps and wind turbines, can be eligible for a credit up to 30 percent of the cost of equipment and the installation, with no cap, except on fuel cells.
Buyers of small wind turbines, including vertical axis ones made by Helix Wind (pictured), can claim a credit through 2012 provided installation began in 2009 or 2010.
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It also called on local governments to let people pay back taxes or fees to investors on an installment plan, and to increase notice to homeowners and make sure they understand their rights.

Tax lien sales differ from most foreclosures, which happen when people fall behind on mortgage payments. In many states, homes sold because of tax debts can be sold for only the amount of back taxes owed.

That means a $200,000 home might fetch only $1,200, the report said. In the process, homeowners can lose thousands of dollars in home equity that they have built up by making monthly payments.

It is difficult to put a figure on the number of homes sold in tax lien sales because the information is spread among thousands of local governments, Rao said.

A JPMorgan unit estimated in 2009 that about $5 billion worth of tax liens are sold to investors each year, according to a transcript of remarks made at a government meeting in Kansas City, Kan.

Rao said that he believes the actual number is much higher. He said Florida alone sold $2 billion worth of tax liens in 2008.

JPMorgan and Bank of America both said that they have stopped buying and bundling and reselling tax liens but still hold tax liens that they already owned and manage them for others.

For elderly people, home equity might represent their only retirement savings. Many older Americans draw down the equity in their homes over time through reverse mortgages and other loans that use home equity as collateral.

People who got subprime mortgages before 2008 also face challenges staying current on property taxes. Subprime lenders are less likely to bill borrowers for the property taxes and then pay the taxes directly to the government. Instead, borrowers are expected to keep track of their taxes and pay them without help from the mortgage company. People with higher-quality mortgages tend to pay taxes and insurance to their mortgage companies as part of their monthly bills.

The report is the first comprehensive study of each state's policies and procedures for tax lien sales. An early copy was obtained by The Associated Press.

(Daniel Wagner can be reached at www.twitter.com/wagnerreports.)

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

See also:
Banks' Paperwork Foul-Up Cost Atlanta Woman Her Home

Woman Nearly Loses Home Over Unpaid Tax Bill That Wasn't Hers

Bank Threatens Foreclosure on Woman With Stage 4 Breast Cancer


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Extreme Home Makeovers: From Sorry to Stunning
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Some Lose Homes Over as Little as $400

Joe and Melissa P. saved this 1904 South Wayne, Wis., farmhouse with seven bedrooms -- but no indoor plumbing. The house had been abandoned since the 1970s, and the remodel took 13 months (including work done during their engagement and wedding plans).

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Source: This Old House

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The project included a new roof, new siding, new windows, and the restoration of three porches. Inside, of course, they added all-new plumbing (and two bathrooms) and finished all the rooms (they'd been previously occupied by raccoons, honeybees and other critters). The couple even restored all of the house's original trim and doors.

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Walt and Patricia Purcell saw this Petersburg, Va., cottage while visiting their son and daughter-in-law. The kids had bought the adjacent, larger house as a vacation getaway -- and potential retirement spot for their parents. The house wasn't much to look at, really. Abandoned for 20 years after a fire, the windows and doors were missing, charred or boarded up. There was no flooring downstairs, and its water-damaged plaster was crumbling. Squirrels ran in and out, and birds nested in the clawfoot tub. Yet there was a certain charm to the place. The old brick, dating from the 1850s, had wonderful color, the window lintels were solid granite, and the upstairs had heart-pine floors.

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With just four rooms, it seemed like it could be a cozy home. So in May 2006, Walt and Patricia moved into the main house. Patricia cried that first night and asked Walt if they were doing the right thing, taking on this rundown little house in a slowly revitalizing urban area. But by the next morning, that moment of doubt had passed. 

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Wendy G. in Westfield, N.Y., bought this house at auction in 2000. It had been empty for a number of years and was in deplorable condition, but the land was wonderful.

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The homeowner gutted it completely and tore off the two attached garages, raised the roof for a second story, and added two bedrooms and a full bath, a front porch, an entryway, and a sunroom on the first floor. It took five years to complete, and they tried to use as much salvaged material as possible in the renovation.

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Vic and Cindy Young never planned on ending up back in Ohio. But when their four children settled in the Midwest, coming home started to look like a pretty good idea. "We decided to find a place where they would all be able to come down in just one day to visit us," Vic says. But not just any place. They wanted a historic house in a historic town. And since Vic, a full-time restorer of old houses, was hankering for a new DIY project, it wouldn't hurt if the place was a fixer-upper.

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Set atop a steep hillside overlooking the Ohio River in the town of Ripley, the 1840s Italianate had original double-hung windows crowned with drip lintels, columns flanking a wide front porch, and broad eaves supported by ornate brackets. "It looked so forlorn up there on the hill," Vic recalls of the house, which had stood abandoned for decades. "There were more majestic houses to be found, but this one spoke to both of us."

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In 2009, Aaron and Jade E. bought this rundown 1880s farmhouse in Punxsutawney, Pa. It needed a whole new roof and exterior siding, not to mention some landscaping to make the house look less ghostly.

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After a year of work, with a lot of help from friends, the couple had a new kitchen, an extra bedroom, a bathroom twice the size, and a house that looks like the ghosts are gone -- all for under $35,000.

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This Craftsman-style bungalow in Houston was built in 1910. It survived an extended economic downturn but suffered from a segregated floorplan, a severely outdated kitchen and bathroom, and a neglected yard. David S. wanted to add modern amenities while maintaining its historic character.

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The homeowner replaced all of the systems, opened up the floor plan, and added a bigger kitchen, a master bed and bath, a den, and a laundry room. He boosted the curb appeal by removing overgrowth, brightening up the paint job, and adding some colorful landscaping. David did all of the design work himself; with much help from This Old House, of course!

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This circa 1900 home in Marietta, Ga., had served as a rooming house for decades when Marion S. snapped it up. With help from a historic-home architect and a builder, Marion and her family sussed out the home's original layout and began work.

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After lifting the house, digging a new foundation, re-creating a porch, and refinishing all the doors and woodwork, the house was so beautiful that the architect won an award for the renovation from the local historical society.

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When Rick and Michelle D. saw this 1876 Italianate, the vegetation was overgrown, all the windows had been broken, the front porch was falling off, the roof had six layers of shingles, the interior was sagging, and it had been set on fire a few times. But it also had original tin ceilings, hardwood floors, 4 bedrooms, 2 bathrooms, and some beautiful carving on the front gable. So they bought it for $1.

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In a year and half, the family brought this house back to life, keeping costs down by reusing as much material as possible and salvaging parts from houses that were slated for demolition.

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Kara O'Brien wanted to buy this house from the first time she laid eyes on it. "It was just so sad looking. I thought, I need to fix it up." The 1911 bungalow was one of three vintage houses that sat in a row on the same block in the Kirkwood neighborhood of Atlanta, Georgia. While the area was starting to revitalize, the house bore the marks of its rough recent history: Iron bars secured the living room windows, and bullets were lodged in the siding. "Still, the solid heart-pine house had character and potential, even if its cedar shingles and roof were rotting from neglect. We desperately wanted to save it. But the owner, who showed up every three months to mow the lawn, refused to sell, though he rented it just once in five years."

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Kara settled for the house next door. But five years later, the owner changed his mind, and they leaped at their chance. They bought the house in 2005 and immediately began gutting the space -- but saved everything of value. A few weeks into the project, while on vacation in Puerto Rico, Kara got word that the third vintage house on our block had been set on fire, and the blaze threatened both the house she was working on and the one she was living in. Both homes survived with no structural damage, but it was a close call.

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Scott C. in Milford, N.H., picked up this eyesore on a main street. He managed to look beyond the surface and saw a solid building form with potential, nestled among Victorian, Colonial and Craftsman neighbors.

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The exterior work was completed with sustainability in mind -- all new insulated glass windows, recycling of old roofing, and prefinished HardiPlank fiber-cement siding.

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