I bought a house in 2000 with 20 down on the first mortgage and 45% cash out on the second. It's the 125 LTV loan. I used the cashout of ~$100k to start a business which failed miserably a year later. After I lost my house and my business, I closed all my accounts, sold everything I had, and went abroad. I lived and worked there until last month. When I looked at my credit report today, it was clean except there were two tax liens, one federal in 05 and the other state in 03, totalling the same amount as my cashout. I'm sure these have nothing to do with income tax. They show something like this:
Date File: xx/xx/xx
Reference#: xxxxxxxxxxxxxxx
Court: xxxxxx County Rec
Plaintiff: <blank>
Liability: $xx,xxx
Asset Amount: <blank>
1. Can someone please tell me what's going on?
2. Can a lender classify a loan default as tax liens?
3. Now that I'm back and on my feet, I'm ready to buy a house again but with only 80 LTV this time. Can I get a mortgage? What can they do to me?
Please help. I don't know what to do.
Here is what may be going on. The bank may have sold your house for a lot less than you owed. Lets say the house was worth $100,000. The bank sells it for $50,000 to recoup some of their losses. They then report this loss. Well you are then taxed on $50,000 as an income since you did not pay off the bank. It may not seem like an income to you but the goverment looks at it as money you actually got.
This happened to my mother in law after they auctioned off her house. It took a couple years but then they hit her with all the taxes on that unpaid amount. To the government it is like an income.
Well OP
The IRS places a tax lien when past taxes are owed but not paid. However, creditors may place a lien on your property for unpaid claims. Had you not paid your creditor the money before leaving the country? You could try and talk to your creditor to see what explanation he might have
Thanks fireyone and carol for your reply.
The lender foreclosed and sold the property in 2001 for $1,000 more than my purchase price. So they made money on the foreclosure. How about that?
Yes creditors may place a lien on my property but I defaulted on 1st and 2nd mortgages (@13.25%) which are secured loans. So shouldn't these defaults be classified as foreclosures instead of tax liens on my credit report? I suspect a debt collection abuse here where the lender misrepresented the legal status of my debt.
Are you sure these are tax liens? Maybe since they was a second mortgage on the house that you defaulted on then it is as I previously explained. If they sold the house for $1,000 more than the original loan (purchase price) then that may have only paid off the first mortgage. If the second one was not satisfied then they would have written it off and it would have then been an income for you according to the government. I would call and find out as much as I could about this. Let us know what you do find out.