The Bureau has requested that the company provide copies of their contracts relating to the short sale offered as well as a detailed description of their pre-foreclosure services including all documents. In addition we requested information concerning their licensing with the Department of Insurance and Real Estate with respect to selling or offering viatical settlements, annuities and the sale of property. The company has refused to provide the requested information.
In January 1995, the IRS issued a press release stating that transfers of property to companies like this will be regarded as a sham and will not be recognized as a bona fide sale for tax purposes. In other words, if income tax comes due as a result of foreclosure or other transfer of property, conveyance of the title will not avoid that liability. Most mortgage companies require that you obtain their permission before assigning the note to a third party. By not complying with that requirement, the mortgage company will report any non-payment of mortgage and cancellation of debt to the IRS and the credit reporting agency in the name of the original holder of the mortgage. In addition, the transfer of title with out the consent of the lender may be a default in the note resulting in a demand for full payment of the mortgage. Credit reporting agencies place credit information in the file of the person named on a loan, in part identified by a social security number, rather than the new person who has title to the property.