INFO ON NEW SHORT SALE LAWS SB 458 & 931 by Mike Pahua

By
Real Estate Agent with Orange County Real Estate

CA SHORT SALE LAW UPDATES FROM http://www.shortsalesoc.com/

7/15/2011: NO DEFICIENCY JUDGEMENTS ALLOWED ON JUNIOR LIENS Gov. Jerry Brown signed SB 458 (Corbett) into law. SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans. Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens. The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference. SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lien holders -- those in first position and in junior positions -- will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property. SB 458 contains an urgency clause making it effective upon signing.

1/1/2011: NO DEFICIENCY JUDGEMENTS ALLOWED ON ALL 1ST LIENS IN CA. Senate Bill 931 (SB 931) pertaining to California short sale deficiencies was signed by the Governor on September 30th. Beginning January 1st, 2011 any first mortgages that accept a short sale will not be able to obtain a deficiency judgment against a seller after the completion of a short sale . If a lender provides written consent to a short sale on a first mortgage, they lender must accept the sales proceeds as full payment and discharge the remaining balance due on the loan. The new law will apply to all first mortgage loans secured by one to four residential units, including purchase money, hard money and refinanced loans. This law does not apply to 2nd or any other junior lien holders. Also, the new law does not prevent the lender from seeking damages for fraud or waste by the borrower.

2007: Mortgage Forgiveness Debt Relief Act of 2007 ****(Expires 12/31/2012)**** You may not have to claim income from forgiven debt after a short sale. If you are a homeowner whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness (Taken From IRS.gov).

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes -- for example, to pay off credit card debt -- do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans do not qualify for the tax relief provision. In some cases, however, other tax relief provisions -- such as insolvency -- may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

The Short Sale Services I offer:

  • Attorney Negotiated Short Sale Service at No Cost To Homeowner
  • Free, Confidential, and No Obligation Consultation at your home.
  • No Cost to you. The bank will pay the all the commissions and closing costs.
  • No Obligation. Cancel your listing at any time.
  • Weekly Updates on the status of your Short Sale.
  • You may still pursue a loan modification during the short sale process.
  • Industry proven short sale system with a 97% success rate.
  • Experience. I've worked with all the major lenders.
  • You may remain in your home during the short sale process.
  • Discreet Sales Process. No one will know your home is for sale. (some restrictions apply)
  • I am sympathetic to your needs and I will hold your hand the entire time.
ContactTopOrangeCounty Short Sale Realtor Mike Pahua at 949-309-2400
Get more short sale info and view success stories at http://www.shortsalesoc.com/
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