With some recent news about positive signs in the real estate market, some owners may be taking the pressure off themselves. However, the national statistics seem to indicate that about 30% of properties nationwide are in negative equity.The federal Mortgage Debt Relief Act was passed at the end 2007 to allow homeowners debt relief on their principal residences if foreclosed on or sold in a short sale. California later passed a bill also helping homeowners in this situation. Currently, it is set to expire at the end of 2012, meaning that if the deadline is not extended by Congress, owners after that date will be responsible for debt after a foreclosure or a short sale. Previous to this Act, the amount forgiven in a short sale, or walked away from in a foreclosure, was treated as "phantom income" to the owner, and taxed. California's Debt Forgiveness Relief Act also expires as of January 1, 2013.
So, after December 31, 2012, if a property is approved by the bank in a short sale and sold for
