The Mortgage Debt Relief Act of 2007 is set to expire at the end of 2012.

What’s that mean?

It means that if you are considering a short sale and/or foreclosure the time to act is yesterday. That’s because the amount a lender forgives on a primary residence will be taxable on federal income taxes the second the clock strikes midnight on Jan. 1, 2013.

Indeed, banks must sign off on a deal, as well as agree to release the distressed homeowner from the debt/shortfall before Dec. 31, 2011.

Currently, under the five-year plan, the Internal Revenue Service (IRS) “allows taxpayers to exclude income from the discharge of debt on their principal residence…. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.”

In 2013?

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Slow ride, take it easy …

Many Americans are taking the Foghat approach to living these days, unable (or unwilling) to meet their monthly mortgage obligations and, in the process, living rent-free until theirs lenders evict them from their homes.

And with the average distressed homeowner able to live like this for nearly two years (674 days) it’s actually emerged as a popular “strategic” move because of the economic hardship plaguing millions throughout the nation. Indeed, according to a recent CNN Money report, nearly 40 percent of homeowners in default have not paid their lenders a single penny throughout the entire foreclosure process.

The other 60 percent in distress have made some sort of payment(s), ”looking for ways to make good with lenders and get their homes back.”

So how is it possible to live in a home for so long without paying a mortgage?

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When mediation, short sale, foreclosure and all other property-saving options are exhausted, big banks such as Bank of America (BofA) and Wells Fargo are donating select — typically “low value” — distressed real estate assets to local charities.

BofA donated 150 homes throughout the United States in 2011 and plans to up that amount to more than 1,200 in 2012. Wells Fargo, meanwhile. topped 1,120 donated homes last year, which is 295 more than it did in 2010.

Most of these homes are either refurbished, resold or demolished “to rid neighborhoods of blight,” helping the communities in which they are located recover from the housing downturn faster. On the flip side, banks rid themselves of maintaining homes they can’t sell, which, naturally, saves them money over time. Even underwater homeowners who can’t sell their properties are literally giving them away in exchange for tax deductions.

According to the GreenBayPressGazette.com, Habitat for Humanity — a nonprofit housing organization that builds simple, decent, affordable housing in partnership with people in need – renovated and sold 1,210 donated homes that it received from June 2010 to June 2011.

It’s a “win, win, win” decision, according to a BofA official mentioned in the report, which benefits the neighborhood, bank and investor.

If it’s too good to be true, chances are, it’s too good to be true.

That’s a pretty solid life lesson, which should certainly be applied to many things, especially when it comes to making a big decision like where you intend to lay your head at night.

Therefore, be weary of “homeowners” who offer to rent properties — that aren’t even theirs to market — for rockbottom prices. In fact, with the glut of foreclosed homes affecting just about every corner and neighborhood throughout the United States, the opportunities for scammers looking to dupe hard-working, honest folks increase exponentially.

Such is the case foreclosed homes being used to scam would-be renters. The scammers list foreclosed and/or vacant homes for rent, collect a down payment, typically online, and then disappear.

Rinse, wash, repeat and cheat.

A Keller Williams Realty agent from San Jose, Calif., explains how it’s done via the Seattle Times:
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Foreclosure.com today announced that the deadline to submit essays for its 2011 scholarship program has expired and that it will now begin the review process of the nearly 10,000 submissions received throughout the 10-month contest.

At the beginning of the year, the company challenged college students throughout the nation, regardless of major, to answer the following question:

“You have acquired $150,000 in cash to be used specifically for a distressed real estate purchase. Outline a detailed strategy that ensures the maximum return on investment, whether it is in terms of financial profit or personal satisfaction … or both.”

Entries, which were required to be original and be at least 800 words in length and no more than 2,000, came from far and wide across the United States, including University of Southern California (USC), Syracuse University, Duke University, Ohio State University (OSU) and Arizona State University (ASU), among others.

In total, the Foreclosure.com 2011 Scholarship Program tallied 9,636 essay submissions.

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