Ohio’s House Owners May Smile Again

Posted in Foreclosure Homes, June 12th, 2007 |

June is the month for celebrating National Home Ownership. The purpose is to inculcate into the people the value of putting down roots – lighting the home fires under a roof of one’s own. It is a common American dream, which has suddenly become a nightmare.

Property prices are tumbling, foreclosures are rising and the citizens are faced with the harsh reality of losing their real possessions – the land and the roof above it. Mortgages in April are higher by 62% compared to last year. The numbers in Ohio are especially disconcerting. If the national average for foreclosures is 1.19%, in this state it is 3.38%. Adding insult to injury the federal tax code has declared that any ‘loan forgiveness’ will be regarded as income.

At this critical juncture action is imperative to forestall a national emergency. Motivated by this catastrophe some Democrat Senators like Debbie Stabenow are working on the Mortgage Relief Act which would get rid of this tax penalty clause and encourage owners to work with lenders to come to an amicable settlement. In that case the government would waive the clause on ‘loan forgiveness’ as income.

Since the last 13 years the first abnormal jump came in 2006. In Ohio this meant an increase of 24% over 2005 –there were 79,000 properties ready for slaughter. There are no signs of improvement. The gloomy prediction is that over the following two years the rate will further rise as mortgage rates will be re-set at a higher notch.

The origins of this calamity may be traced back to the giving out of sub-prime loans to those who would have found it difficult to obtain a loan as per regular means. But now they are tasting the bitter fruit. Statistics show that these sub-prime loans account for less than 20% of outstanding mortgages. COHHIO has highlighted that these loans represent 63% of foreclosures in Ohio in the years 2004/2005.

Many are angry that mortgage lenders are being held responsible by the Congress for these irresponsible lending deals. The law is not tuned to use the government as an instrument to forgive debts. Many borrowers and lenders are trying to amicably come to a workable settlement. Already bent the owners should not be burdened with a further tax on ‘loan forgiveness’. It is unfair to tax an income which does not exist, says a legal expert.