mortgage debt, PropertyRadar

California Version of Mortgage Debt Relief Act Extension May Exit Committee End of August

In a blog post dated May 28, 2013, we reported that one of the factors depressing California short sales is uncertainty surrounding the status of the California version (SB 30) of the Mortgage Debt Relief Act extension passed by Congress on January 1.  The federal extension generally allows taxpayers to exempt mortgage debt forgiven by a lender in a loan modification, short sale or foreclosure from taxation.  It was expected that the California legislature would follow suit and pass similar legislation shortly after the first of the year.  The bill, unfortunately, has languished in committee for nearly eight months.

At that time of our May 28 post, SB 30 had passed its first policy committee and was pending on the Senate Appropriations Committee Suspense File (a legislative process that is used to review bills that cost more than $150,000).

In a classic game of political football, the popular Mortgage Debt Relief Bill (SB30) was linked to the unpopular California Homes and Jobs Act (SB 391), a bill that imposes a $75 fee on all new recorded documents.  The income from this bill is earmarked to support affordable housing.

According to our legislative contacts, SB 30 is still in the Appropriations Committee but may exit the last week in August.  Unfortunately for California homeowners interested in a short sale, passage of SB 30 is still contingent on the passage of SB 391, meaning the outcome of SB 30 is anything but certain.