Great News!!!!!!

The Mortgage Forgiveness Debt Relief Act has been extended for another year.  The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including any principal reduction) or foreclosure.  
If you are upside down in your home and don't see a way out. Contact me TODAY....

Foreclosure and Short Sale Update

                                      Foreclosure Sales

– properties foreclosed on in the past 12 months – accounted for 16.3% of the Los Angeles area resale market last month. Down from 16.6% the month before and 32.8% a year earlier. Last month’s level was the lowest since October 2007 when it was 16.0%. In the current cycle, the foreclosure resales hit a high of 56.7% in February 2009.

                                            Short sales

- transactions where the sale price was less than was owed on the property – made up an estimated 26.0% of Southland resales last month. That was down from 27.6% the month before and up from 25.4% a year earlier.

End Is Nigh For Certain Tax Exemptions

Currently, any debt forgiven by a lender in a short sale, loan modification, or foreclosure is
exempt from federal taxation. However, that exemption is scheduled to expire Jan. 1, 2013.    Borrowers will have to count mortgage relief from lenders as income on their federal tax returns, if the exemption is allowed to expire. That means, for example, a borrower
would have to pay taxes on a $100,000 reduction in principal owed on a loan, or a
$20,000 write-off in the amount owed after a short sale.

 An extension of the tax exemption – established under the Mortgage Forgiveness Debt
Relief Act of 2007 – is a strong possibility. But given that Congress will have to grapple
with serious fiscal issues after the November elections, there is no guarantee the
exemption will emerge from those negotiations intact.

 The Debt Relief Act exemption applies only to canceled mortgage debt used to buy,
build, or improve a primary residence, not a second home. The maximum exemption is
$2 million.

 Reinstating the tax would undercut the the effect of the National Mortgage Settlement
reached earlier this year in the federal government’s investigation into banks’
mishandling of foreclosure documents.

 Under the terms of the settlement, five of the biggest mortgage lenders must put some
$17 billion toward debt relief that enables borrowers to stay in their homes. Smaller
portions are reserved for short sales and refinancing.

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California's anti-deficiency protection for "purchase money" mortgages...

On Thursday, Governor Schwarzenegger vetoed SB 1178 (Corbett), C.A.R.'s sponsored bill that would have expanded anti-deficiency protections. In his veto message, the Governor made clear his view that the bill interferes with an existing contract. While disappointed in the Governor's misinterpretation of the bill, C.A.R. is grateful to the almost 13,000 California REALTORS(R) who urged him to sign the bill by responding to the Red Alert.

C.A.R. sponsored SB 1178 to better protect homeowners going through foreclosure. SB 1178 would have ensured that homeowners keep the same "anti-deficiency" protections they have in the original loan after the loan has been refinanced.

California's anti-deficiency protection for "purchase money" mortgages says that if a homeowner defaults on a mortgage used to purchase his or her home, the homeowner's liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting and allow borrowers brought down by financial crisis to get back on their feet.

Unfortunately, the 1930s law hasn't kept up with current times. Current law doesn't apply to loans used to refinance the original purchase debt, even if the refinance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to refinance their mortgages. During those years, almost no one realized that refinancing their mortgage to obtain a lower rate, they were forfeiting their protections and were becoming personally liable on the new note.

SB 1178 would have corrected this injustice by extending anti-deficiency protections to those who have refinanced their loans.

Thank you again to everyone who joined C.A.R.'s Government Affairs Team and fought for our clients.