C.A.R. strongly urges all California REALTORS® to respond to NAR’s Call-for-Action in support of extending the federal income tax exemption on mortgage debt forgiven in a short sale or loan modification.
C.A.R. sponsored legislation in 2011 and worked with the IRS and the Franchise Tax Board to ensure that mortgage debt forgiven by a lender in a short sale isn’t taxable income to the borrower; however, that does not apply to debt forgiven as part of a loan modification and does not apply to short sale debt forgiveness in other states.
Congress must act to protect distressed homeowners who receive this type of mortgage modification.
Additionally, distressed home sellers in the 49 other states need Congress to act in order to be protected from this tax on phantom income when they do a short sale.
Other states, like many areas in California, continue to struggle with high numbers of short sales, and this bill can help the 5 million “under water” homeowners and nearly 1 million households who are seriously delinquent on their mortgages or in foreclosure nationwide.
This is an important piece of legislation to help the nation’s housing market continue its recovery.