The other important issue at hand for members of the House is the plan on how to spend the $200 million portion of the National Mortgage Settlement that was granted to Florida. Some of the proposals include using a portion of the money to assist low income FL residents with dormitory fees under the Florida Prepaid Tuition program. Additional expenditure proposals include $16 million to court resources to reduce the foreclosure backlog, and $20 million to go to Habitat for Humanity.

If your home has decreased in value, sometimes you are able to totally wipe out or “avoid” your second mortgage. For example, if you owe $300,000 on your first mortgage and $100,000 on your second mortgage and your home has gone down in value to $250,000, there is no equity or value to “secure” the second mortgage. Under these circumstances, the chapter 13 plan (and related section 506 motion) may provide to totally wipe out or avoid the second mortgage lien. The $100,000 debt owed on the second mortgage will be wholly unsecured and usually only receive a small dividend like the credit cards receive — typically around five cents on the dollar.

A certified copy of the order avoiding the second mortgage may be recorded in the county public records to document that the second mortgage is void.

Paul Baltrun, director of corporate development for The Law Office of Paul A. Krasker, P.A., has had success with clients of the firm receiving principal balance reductions and loan modifications. In fact, just recently, a client was granted a $205,700 mortgage balance reduction and a 2% decrease in their interest rate. However, Baltrun can understand the concerns of some industry experts.

Says Baltrun,“I look at these individual clients and this has absolutely been a success for them,” Baltrun said. “But looking at it as a whole, I have some concerns.”

One of the exceptions to discharge of indebtedness income is if the mortgage debt is discharged in bankruptcy, including under chapter 7 or under chapter 13. In order to take advantage of this exception, it may be important to file for bankruptcy before the foreclosure sale.

Another exception to discharge of indebtedness income is the insolvency exception. That means if you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. Insolvency generally means that your total debts are more than the fair market value of your total assets.

The new exception is the Mortgage Forgiveness Debt Relief Act of 2007 which generally allows people to exclude certain discharge of indebtedness from the foreclosure or mortgage restructuring on their principal residence. This new provision applies to debt forgiven in calendar years 2007 through 2012. The amount of forgiven debt is eligible for this exclusion ($1 million if married filing separately).

Is it enough? Some experts and borrowers argue that the settlement is allowing the banks to pay less in the long run. Many believe that if the reviews had been allowed to continue on a case-by-case basis, that individual borrowers would have been eligible for more compensation. However, there is a negative side to this process as well. Reviewing individual cases is an expensive process that can sometimes be subjective, based on the individual reviewing the case. In many instances, the process would be very time consuming, and would not even result in a ruling in favor of the borrowers.

Paul Baltrun, director of the Homeowner Assistance Division of The Law Office of Paul A. Krasker, P.A., empathizes with both sides. “On the one hand, certain foreclosure mishandlings should warrant a higher payout, and an independent review could be the most likely way of getting it. However, on the other hand, the agreement guarantees that those eligible will receive some form of compensation, and without any application process required by the borrower”, says Baltrun.

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One hundred percent of mortgage insurance premiums, in the form of PMI, or insurance offered by FHA, VA, or the Rural Housing Service can continue to be deducted for homeowners who have an adjusted gross income of less than $100,000. Those earning $100,000 or more can also benefit from the tax deduction, but in a more limited capacity.

Perhaps the best news for struggling homeowners in the fiscal cliff deal is the extension of the Mortgage Forgiveness Debt Relief Act of 2007. Now extended until January 2014, the act exempts individuals from having to pay taxes on mortgage balance forgiveness or short sales. While there are some parameters, the majority of distressed homeowners will be able to take advantage of this exemption. For homeowners living in some of the country’s hardest hit states, such as Florida, California, or Nevada, this is particularly imperative due to the fact that such a high percentage of home sales are currently short sales. Without this debt forgiveness, homeowners would be deterred from a short sale, and it would inevitably cause in increase in foreclosures.

Paul Baltrun, director of the Homeowner Assistance Division of The Law Office of Paul A. Krasker, P.A. feels it is important for homeowners to be offered principal balance reductions whenever possible to prevent foreclosure. The firm has negotiated numerous principal balance reductions, including one client who received a whopping $390,000 principal balance reduction.

Change-seekers who believe that a different outlook and different strategies are necessary for economic improvement will likely vote Romney. Those who believe that the current administration should be allowed to continue to carry out plans laid for economic growth will vote Obama. How will the election affect the programs that currently exist? Will the election negatively impact the improvements that have already been made to help stabilize the government? Voters are likely asking themselves these very questions, especially voters who have been heavily affected by the current housing slump and unemployment rate. Regardless of the outcome, today’s election could become one of the most important in history.