Late Tuesday night, Congress reached a settlement in the “fiscal cliff” negotiations. As a result, the Mortgage Forgiveness Debt Relief Act has been extended for another year. The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including any principal reduction), or foreclosure.

C.A.R. would like to thank the 26,296 California REALTORS® who sent messages to their members of Congress and made 1,862 calls in response to C.A.R.’s Call-for-Action.

Also under the agreement, so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers. These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. The thresholds have been increased and are indexed for inflation so will rise over time. Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20 percent reduction.

The reinstitution of these limits has far less impact on the mortgage interest deduction (MID) than a hard dollar deduction cap, percentage deduction cap, or reduction of the amount of MID that can be claimed.

Capital gains rates on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 for married couples.

C.A.R. will continue to provide updates as they become available.

Ban on advance fees for loan modifications now permanent
In October of 2009, pursuant to SB 94, it became illegal for any person, including lawyers, real estate licensees, corporations, companies, partnerships, or any other licensed or unlicensed person or party, to demand, charge, or collect any advance, up-front, or retainer fee, or any other type of prepayment compensation for loan modification work or services, or any other form of mortgage loan forbearance, involving 1 to 4 residential units. The provisions of Senate Bill 94 were due to sunset on Jan. 1, 2013.

However, with the recent signing of AB 1950, the sunset provisions of Senate Bill 94 will be repealed, making the ban on the collection of advance fees for loan modification and forbearance services permanent

Tip of the week: Distributed denial of service attacks and customer account fraud
Recently, various sophisticated groups launched distributed denial of service (DDoS) attacks directed at national banks and federal savings associations (collectively, banks). Each of the groups had different objectives for conducting these attacks ranging from garnering public attention to diverting bank resources while simultaneous online attacks were under way and intended to enable fraud or steal proprietary information.

This alert provides a general description of the attacks, along with risk mitigation information and sources of related risk management guidance. The alert also reiterates the Office of the Comptroller of the Currency’s (OCC) expectations that banks should have risk management programs to identify and appropriately consider new and evolving threats to online accounts and to adjust their customer authentication, layered security, and other controls as appropriate in response to changing levels of risk.

More info: OCC’s Bank Information Technology Division, (202) 649-6340.