John Bullis column: Home mortgage refinancing

Most seniors have concern for children or grandchildren who have homes that have less value than the mortgages.

You may even be making gifts to help them get through this very tough time. Gifts are not taxable income to the child or grandchild. If the gifts are within the annual exclusion ($13,000 total per calendar year), then you have no gift tax to pay. That will be a topic for future articles.

In the Sept. 27, 2010, issue of Fortune magazine there is an article by Allan Sloan about his idea for refinancing mortgages that are "underwater" (owe more than the house is worth).

He suggests a new mortgage at the current low rates for what the home is now worth and a government guaranteed mortgage for the difference (the amount of debt that is greater than value).

The main mortgage lender would not have to take a "write down." The lower monthly payments would be a benefit by being less each month. It would also help preserve a good credit rating. Also, the pride of not becoming a deadbeat is a benefit.

His example is a home bought for $350,000 in July 2006 with a 6.8 percent mortgage with no down payment. If the home is worth only $280,000 now and the mortgage is $334,000, then it's "underwater."

His idea is to get a new mortgage for $280,000 (the value of the home) at 4.7 percent and the government guarantee the other $54,000 at 4.7 percent interest. That would reduce the mortgage payments about 25 percent, say $6,700 per year.

Whatever cost the government might pay would be less than all the losses from foreclosures. His plan would give some breathing time and a lot of peace of mind.

Perhaps contacting the senators and congressional representatives is the first step in getting Sloan's idea put into law. Your calls and letters can make a difference.

Did you hear "one loss doesn't make a season?"

• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.