Re: Some good foreclosure news

Posted by OC Andy on September 25, 2007 at 22:50:41:

In Reply to: Re: Some good foreclosure news posted by Ethan on September 25, 2007 at 22:02:42:

Ethan:

The lender is effectively forgiving debt by agreeing to the short sale - they are consenting to taking less than the full amount owed in return for not having to pursue the foreclosure completely through and as a result, adding additional costs to what they have already incurred.

Keep this in mind also, If you do end up short selling the home, the "foregiveness of debt" i.e. the difference between what you owe and the final settlement amount becomes a one-time taxable event in the eyes of the IRS. With a few exceptions, you will be issued a 1099 for the difference.

Regarding the deficiency judgement, I had said it was a moot point because you still have the workout option and forebearance as possible alternatives at this point. If the foreclosure proceeds all the way through, then as you had found out through your research, there is no deficiency judgement on purchase money loans for o/o homes in CA when the lender elects a non-judicial approach.

Lenders may elect a Judicial approach however it is almost never pursued for time and cost reasons.

And yeah, I'm in OC

Andy

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