Apply for Mortgage Debt Forgiveness

Struggling homeowners who have missed payments or are in danger of possible foreclosure can receive debt forgiveness. Debt forgiveness can include any missed payments, late penalties, interest and fees that have accumulated through the life of the loan. California law blocks lenders from obtaining deficiency judgements when a short sale completes. To see if you can qualify for loan debt forgiveness, please call us at 1‑800‑760‑9156.

Qualifying for mortgage debt forgiveness is hardship based, or simply put something has occurred that makes monthly payments difficult. This can include loss of job, Covid-19 related hardships as well as drops in income. To date we have not seen any homeowner rejected for forgiveness over any hardship.

Some outstanding balances that have been accrued are not able to be forgiven through your mortgage lender. This can include missed HOA payments and late fees, leases on solar equipment and any liens put against a home from the IRS or other non-mortgage creditors.

Short Sale Financial Assistance

Receiving financial relocation assistance in a short sale will depend on whether or not your lender offers incentive programs and that you meet the lender's requirements. During the short sale process, we will negotiate with your lender for any available government or lender specific monetary assistance programs. Some of the largest mortgage lenders may offer up to $30,000 for relocation assistance. The most common relocation amount for short sale relocation assistance is $3,000.

Homeowners who do not live the property may also receive finincial incentives for performing a short sale, but is uncommon. Lenders may check the occupancy status to determine the amount of financial assistance the homeowner may receive. Incentives may also be offered to tenants during a short sale.

Previous incentive programs such as Keep Your Home California and the Home Affordable Foreclosure Alternatives (HAFA) program have depleted their assistance funds and are no longer taking applications. California Short Sale Solutions will always apply for all available relocation assistance programs during the short sale process. Distribution of monetary assistance is determined by your lender while following guidelines set forth by the state and federal government.


Programs Change

Incentive programs, guidelines and laws are constantly changing for short sales. Call 1‑800‑760‑9156 for the latest updates.

Short Sale Benefits for Homeowners

The primary benefit of a homeowner performing a short sale is mortgage debt forgiveness. After completing a short sale, you will no longer have a mortgage debt obligation to the lender. Liens against the home, including any second or third lien, will be forgiven. Here are some other benefits for short selling your home:

  • By law, all mortgage debt is considered forgiven when the short sale is completed. This means that your lender cannot come after you for any remaining mortgage balance.
  • California laws and clarifications by the IRS allows you to avoid paying taxes on a short sale in most situations.
  • You are allowed to live in the home until it is sold.
  • Lenders are not permitted to foreclose on your home during the short sale process.
  • A short sale is less detrimental to your credit than a foreclosure.
  • Outstanding deficiency judgements, such as HOA, can be forgiven or negotiated through a short sale settlement. Foreclosures can allow the opportunity for a lender to come after you for any outstanding debt still owed.
  • You may qualify for relocation assistance
  • You can buy another home sooner vs going through foreclosure

Short Sale vs Foreclosures

Homeowners who perform a short sale face fewer consequences versus those who let their home go to foreclosure. The biggest difference between a short sale and foreclosure is the time the homeowner must wait before being able to receive a standard loan. With a short sale, Fannie Mae states that a previous homeowner who performed a short sale must generally wait two years before they will be qualified to obtain a loan again. In comparison, a homeowner who completed a foreclosure must wait seven years before a loan can be obtained, with less time allowed for extenuating circumstances.

Because a short sale is a voluntary process there is less impact on credit. Unlike a short sale, foreclosures are pursued by a lender against the homeowner. In California, homeowners with multiple mortgages may be liable for deficiencies that were not satisfied at the time of the foreclosure. California law allows lenders to attempt collection or freezing of assets for the amount of debt from second or third mortgages or home equity line of credit.

Under California law SB 458, a second mortgage or home equity line of credit short sale will be settled during the short sale process. Lenders will have no recourse or legal ability to pursue any asset freezes against you. Homeowners who have multiple liens against their home may have limited options and alternatives to a short sale. Deed-in-lieu is the second most common alternative vs a foreclosure, but may be only available to those who have one mortgage.

Mortgage Debt Relief Act

The Mortgage Debt Relief Act (MDRA) was a government bill that offered relief to most homeowners who would normally owe taxes on forgiven debt after performing a short sale. Under previous US law, when debt is forgiven by a commercial lender (Bank of America, Chase, US Bank etc.), that debt would normally require the borrower to include the amount forgiven as taxable income on tax returns. The MDRA expired in 2016, but the Further Consolidated Appropriations Act of 2020 has extended debt forgiveness benefits. Other laws and guidelines have been provisioned in California to preemptively protect California homeowners.

Under California guidelines, those who perform a short sale on their primary residence are assured that no federal tax penalties will be incurred even though the Mortgage Debt Relief Act has expired. Technically speaking, under the anti-deficiency provision of Code of Civ. Proc. 580e, forgiven debt that has a non-recourse obligation is not considered income for federal income tax purposes the homeowner.


You Have a Choice

You can have a say in how long the short sale process takes. You might find benefits of having a short sale done quickly, or you may want to take things slow and steady. Call 1‑800‑760‑9156 for help.