Hello - Last year I received a payment of $3750.00 as a result of an agreement between federal banking regulators and my old mortgage servicer in connection with an enforcement action related to deficient mortgage servicing and foreclosure services (www.independentforeclosurereview.com for details). I was under the impression that since I lost my home this payment would not be taxable, but I just received a 1099-MISC for the $3750... it's a class action settlement but to recover for losses - do I have to pay taxes on this? I live in New Jersey, if that matters.

I am concerned because I was unemployed all year last year (and am still unfortunately so) with the only income being 6 months of unemployment (of which I had taxes withheld) and this payment. I am hoping I don't have to come up with extra money to pay taxes on it, but thought I would ask you as a professional to get an idea. If it is taxable, how much should I expect to have to pay?

Many thanks for your advice.