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I had a first and second motrgage and the bank allowed me to

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do a short sale. We...
I had a first and second motrgage and the bank allowed me to do a short sale. We had mortgage insurance on the second mortgage. The bank did not file the claim with the insurance company on the second mortgage and instead sent a 1099 to me for that one as well as the first. My tax preparer told me she thought that if you had mortgage insurance and the lender failed to file the claim they could not send a 1099. Can they 1099 me if I had mortgage insurance?
Submitted: 6 years ago.Category: Tax
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Answered in 3 minutes by:
10/3/2011
Tax Professional: Ellen, Tax Attorney replied 6 years ago
Ellen
Ellen, Tax Attorney
Category: Tax
Satisfied Customers: 36,715
Experience: 25 years of experience helping people like you.
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Welcome to JustAnswer,

So sorry to hear of this dilemma. If my answer is not clear to you, please ask me for clarification by using the reply button.

It does appear that a lender would be required to file the insurance claim before sending the 1099. However, if this property was your primary residence, there would be no recognition of income resulting from the 1099

The Mortgage Forgiveness Debt Relief Act of 2007 excludes from taxation discharges of up to $2 million of indebtedness that is secured by a principal residence and is incurred in the acquisition, construction or substantial improvement of the principal residence.

I hope that it helps to know this information

Thank you in advance for remembering to click accept. If you experience difficulty using the accept button, please let me know as JustAnswer pays me for my time only if the "accept" registers.
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Customer reply replied 6 years ago
This was not my primary residence. I can't understand why they didn't file the claim and they won't give me an answer. Should I be entitled to the premiums that I paid for the mortgage insurance for 5 years.
Tax Professional: Ellen, Tax Attorney replied 6 years ago
No you would not be entitled to the premiums. However the lender would typically be entitled to payment from the insurer. You will want to be aware that if the insurer does make payment to the lender, the insurer may then file suit against you to collect the shortfall
Ellen
Ellen, Tax Attorney
Category: Tax
Satisfied Customers: 36,715
Experience: 25 years of experience helping people like you.
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Customer reply replied 6 years ago
I was told that lender cannot sue you for the deficiency if they send a 1099. Is that correct?
Tax Professional: Ellen, Tax Attorney replied 6 years ago
By sending the 1099 the lender is declaring the debt to be not collectible. However the does not waive the lender's rights to later file suit -- however it is extremely unlikely that this would occur
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Customer reply replied 6 years ago
Thanks.
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Ellen
Ellen
Ellen, Tax Attorney
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