As if any of us needed any more proof that the state and federal governments work to serve the interests of The Banks and Corporations while screwing consumers at any chance they get, we now learn that consumers who get “relief” under the terms of the National Mortgage Settlement (or other programs) are going to get screwed in the form of tax liability on any “relief” that they were given.
Now what makes this all worse as if it couldn’t get any worse is the fact that the lenders that provided all this “relief” undoubtedly take extraordinary tax benefits as a result of their “help” to consumers.
Things certainly are bad here, but there are some very important things that can be done in the context of these “deals” given to consumers that can help to reduce or eliminate the tax liability.
It just may become the latest outrage during a year of outrages. At the precise moment when the federal government finally delivers a modicum of justice and some economic relief to millions of homeowners victimized by the nation’s largest banks, the government threatens to beat those victims over the head with a punitive old favorite revenue raiser — a tax on forgiven debt.
Here’s the backstory: After years of standing on the sidelines and ignoring evidence that major banks were using their mortgage servicing arms to steal money from innocent consumers and illegally evict homeowners, the federal government finally joined with 49 states to prosecute the banks. It was a frustrating, agonizingly slow and painful process that led to an even more frustrating, agonizingly slow and painful negotiation.
The result was the National Mortgage Settlement, in which the five largest loan servicers must pay $21.5 billion in reparations and restitution to consumers victimized by their inappropriate conduct. Specifically, many homeowners whose mortgages were serviced by the Big Five — Citi, JPMorgan Chase, Wells Fargo, Bank of America and Ally Financial — may qualify for significant reductions in their mortgage principal and interest rates. And 1.5 million people who lost their homes due to questionable foreclosure practices can apply for a one-time payment of $2,000 (an insultingly low figure considering how much pain is involved in losing one’s house).
