Distressed homeowners no longer need to pay California state income tax on debts forgiven in a short sale, foreclosure, or mortgage loan modification. Introduced into law yesterday, Senate Bill 401 generally aligns California’s tax treatment of mortgage debt relief revenue with federal legislation. Pertaining to debt forgiven on a loan secured by a “qualified principal residence,” individuals will now be exempt from both federal and state income tax penalties. The current federal exemption is for indebtedness up to $2 million, whereas the California State Senete Bill 401 exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.
Archive for the ‘mortgage’ Category
CA State Senate Bill 401: Forgiven Debt from Short Sales, Foreclosures, and Loan Modifications Not Subject to Taxes
Wednesday, April 14th, 2010Federal Government Takes Control of Fannie Mae and Freddie Mac
Friday, September 5th, 2008Mortgage giants Fannie Mae and Freddie Mac, who have backed 70 percent of new mortgages in recent months, are being taken over by the federal government in an effort to stabilize the housing market according to reports emerging from Washington D.C. The firms will be placed into conservatorship and the top executives will be dismissed.
The holders of the companies’ debt and preferred stock shares will be protected under the conservatorship plan but common stock holders can expect to see their shares drop dramatically in value. The government is looking to make conservative quarterly cash infusions into the companies rather than try to wipe the debt slate clean. The goal is to stabilize the mortgage market without a full scale tax payer bailout of the companies.
