THE good news is that tax relief has been enacted for homeowners doing Short Sales. The Federal Mortgage Debt Relief Act of 2007 HR 3648 and Federal Bailout Legislation HR1424 extended until December 31,2013 tax relief for recourse debt forgiveness on principal residence indebtedness is excluded from taxable income. Qualified principal residence indebtedness is acquisition indebtedness secured by the principal residence of a taxpayer as defined for the deduction of residential mortgage interest, there are exclusions so please consult with your CPA and tax advisor.
A non-recourse loan is a secured loan that collateralized for a property, but for which the borrower is not personally liable. If the borrower defaults, the lender can seize the property (via foreclosure) but the lenders recovery is limited to the collateral. Meaning, there has to be enough equity to cover the amount being in default, if not the lender may obtain a deficiency judgment from the borrower.
A Deficiency Judgment is an unsecured money judgment against a borrower whose foreclosure sale did not have enough funds to pay for the promissory note in full.
Therefore, if you are still deciding on a Short Sale now and your will qualify for the Debt Relief Act for mortgage debt forgiveness, you have to act now. This Legislation has only been extended till December 31, 2013. By doing a Short Sale if that is the option you are taking, most likely your lien will be release with the sale and the lenders might possibly not purse any Deficiency Judgment after the sale.
The new Law SB 458 extends the protection of SB931 to ensure that any lender that agree to a Short Sale must accept the agreed upon Short Sale Settlement as payment in full of the outstanding balance of the loan. This includes loans in first position and in junior lien positions. The homeowner will not be held responsible for any additional payments on the property.
A foreclosure will stay on your credit report for 7 years and the lien balance might remain longer, whereas, a Short Sale will stay on for a much shorter period with a zero outstanding balance on the settled mortgage balance. Completing a Short Sale with an experience Short Sale Agent will make you situation stress free and will work with you on obtaining some cash back from the lenders for a relocation expense. An experience Short Sale Agent will inform and educate you with all that is happening and will guide you till the end, most importantly your experience agent will plan out a time line for when you are to expect to move and when you are to prepare to find another housing location.
These little information will help you realize that no one will come knocking on your door with a chain to lock you out of your home. It is very important that you know your decision is important as a Seller, no matter what type of transaction, make sure you are getting the respect you deserve.
As of July 1, 2013, the Department of Real Estate became the Bureau of Real Estate. This change is one of many included in Governor Jerry Brown’s Government Reorganization Plan #2 that was approved by the Little Hoover Commission and confided by the State Legislature of 2012.
To file for a complaint please go the Department’s Privacy Policy, or access to your records, you may contact the Information Security Office in the Department of Consumer Affairs, 1625 N. Market Blvd., Suite S300, Sacramento, CA 95834 or call the Consumer Information Center at: (800) 952-5210.
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Thanks for your inquiry about this subject. Please call Ken Go of 1st Innovative Finance for your Real Estate and Mortgage needs. Please call (562)508-7048 or write to [email protected].