California’s Version Of Mortgage Debt Forgiveness Relief Act Passed With A Hitch

California's Version Of Mortgage Debt Forgiveness Relief Act Passed With A Hitch

California’s Version Of Mortgage Debt Forgiveness Relief Act Passed With A Hitch

Amendment holds SB 30 hostage to passage of SB 391

In the midst of all of the discussion about rising home prices and rising interest rates, the Senate Appropriations Committee recently approved Senate Bill 30, which would extend existing provisions of state law protecting homeowners from having to pay income tax on a short sale.   Good for homeowners.

However, like so many other bills, the committee attached SB 30 to another bill that many real estate industry people (including Realtors, county recorders, assessors and title industry) oppose.  That measure, Senate Bill 391, would establish a $75 per document recording tax to fund an affordable housing trust fund.  In a sense, the amendment holds SB 30 hostage to the passage of SB 391.  Not good for homeowners.

Federal Mortgage Debt Forgiveness Relief Act until December 31, 2013

The federal government already extended the Mortgage Debt Forgiveness Relief Act until December 31, 2013. However, if the state does not extend the California version then those homeowners who do short sales or have their homes foreclosed will be held responsible to the tax on the “phantom income.”

To be clear, SB 391 does not apply to sale transactions, the measure applies anytime a home/property owner records a document (e.g., refinancing, transferring into or out of a trust, liens, quit claim deeds, etc.).

To some this bill simply tacks on a new tax for homeowners to fund affordable housing.

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Filed under California, Foreclosure, short sales, Tax Credits

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