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MORTGAGE DEBT RELIEF ACT OF 2007 TO SUNSET ON DECEMBER 31, 2012
The Mortgage Debt Relief Act of 2007 (affective calendar years 2007 through 2012) generally allows taxpayers to exclude income from the discharge of debt on their principal residence up to $2,000,000. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a short sale or foreclosure, qualifies for the relief. In the absence of an extension of the act, any debt forgiveness which occurs after December 31, 2012 will be taxed as ordinary income. It is extremely important to understand your rights, and the potential financial impact of loan modification, short sale, and foreclosure.
The IRS Code and California Tax Code both provide the Mortgage Debt Forgiveness Relief.
For a more detailed explanation follow the links below:
LAW AGAINST SHORT SALE DEFICIENCIES EXPANDED
California Senate Bill 458 (effective 7/19/2011) prohibits a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy. C.A.R.
This law is fully set forth as Senate Bill 458 (Corbett) at www.leginfo.ca.gov.
SB 458 BACKLASH BY 2ND MORTGAGE HOLDERS
The amended law does not require junior lenders to agree to a short sale. Thus, it will likely be more difficult in the future to convince junior lenders to approve a short-sale offer. Instead of accepting a fraction of the amount owed by approving a short sale, junior lenders may prefer to allow the property to go into foreclosure and pursue a deficiency judgment after the foreclosure sale.
The expansion of this law may have an adverse affect on short sale approvals. If you are experiencing difficulty in obtaining a short sale approval from your lender or have a post-foreclosure deficiency, please contact us to set up a free consultation in order to fully understand your rights and responsibilities in the short sale process.
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