$15,500 California taxes for losing my home to a short sale in 2009?

By | August 16, 2009

Update: 1/31/2010: House sold, I’m now living in an apartment. Started getting automated collection calls last week from Green Tree which I did not answer. I sent them an email instead. They responded by calling me and saying their system does not allow them to send email. Well, they did send me email in the past. On the phone Green Tree says they will keep trying to collect even though the CA law is against them. The investor may not send me a 1099 form for up to 11 years, so says the Green Tree rep.  They are hoping a law will change so I’ll then be responsible to pay them. They recommend I get a lawyer to send them a cease and desist letter. This would lead to a lawsuit. According to my past attorney, I would win. I am in the process of consulting another attorney now to be sure that a lawsuit is the right thing to do to get this case closed. I haven’t gotten a 1099 form from either the 1st or 2nd yet.  I haven’t started doing my taxes. Will let you all know how that goes.

Update: 10/6/2009: I can’t believe it. Green Tree accepted the short payoff of $3,000 for the $60,000 HELOC. Totally unexpected. My B of A short sale is moving forward after all.

Update: 9/26/2009: The short sale, I’m told, could still fall through 4 days before the close of escrow because the 2nd loan was sold to another holder who is not aware that they hold the loan, thus, they can’t acknowledge that they accept the short pay off.  Last little trick by the bank?

Update 9/10/2009: GREAT NEWS! A large CPA firm (which will charge me about $400 to do my taxes for 2009) has done some research and determined that, in my case, I will not owe any additional California taxes due to my short sale, nor will I have capital gains because I’ve lived here for several years and because mine is a non-recourse debt. I was told that even with California not conforming to the Federal Mortgage Debt Relief Act of 2007 in the year of my short sale (2009), the 121 exclusion (up to $250,000 for a single person) would apply.

Really? I sent the CPA this link (http://www.ftb.ca.gov/professionals/taxnews/2009/July/Article_9.shtml) and he is double checking. I need to be certain about this!

Answer:  The CPA says, regarding the information at the above link, nothing there contradicts his certainty that while California does not conform to the Federal Mortgage Debt Act after Jan 2009, California does still conform to section 121. I’ll owe no additional CA taxes or Federal taxes due to my short sale!

I’ll only have the hit to my credit (see below and comments posted.)

Also, since I have not been paying interest this year, I reduced by withholdings to zero so more will be taken from my paycheck for taxes.

**** PREVIOUS POST BELOW ****

I may not correctly have understood the  tax consequences of a “short sale” of the home I purchased years ago for $300K.  (100% financing, first: $240K pay option ARM + second: $60K HELOC) I’ve learned that when/if I get approval for my short sale for $170K I will definitely get a 1099 form from the investor. No problem .. I thought:  The Mortgage Debt Relief Act of 2007 would protect me from owing federal taxes, right? However, the same is not true in 2009 of California taxes.

Governor Schwartzenegger signed S.B. 1055, California partial conformity legislation for mortgage debt forgiveness, on September 25. The law is intended to make California law closer to federal legislation enacted in the Mortgage Foregiveness Debt Relief Act of 2007. … California would allow the exclusion for 2007 and 2008. The federal exclusion is also allowed for 2009 through 2012. – shortsale

http://xenophilia.com/wp-content/uploads/2009/08/Blog_California_Prison.jpgI will be potentially taxed by the state as if I made an extra $130,000 in 2009. Of course, this is complete bs.  Where is my $130,000? I don’t see it. I don’t have it. It doesn’t exist. Debt cancellation income is not a gain when you walk away with nothing.  I have been ripped off, and now it seems the gouging will continue for years?

My mind always considers the worst options. I think it is a defense mechanism. If I revolt and refuse to pay my California taxes, will they throw me in prison? Will I need to hide from the law for years in a cave in the woods and eat bugs? Humor is my other defense mechanism.

Not paying may not even be an option. In addition to the 8% pay cut due to budget problems this year, I may have my wages garnished by the state to pay the huge taxes I’ll owe from some invisible gain that was not a real gain.  It makes no sense. The bank ripped me off by taking advantage of my lack of understanding of the Interest Only Pay Option Adjustable Rate Morgage loan.

It was a scam.  Those people should be in jail. My credit should be fixed. I should owe nothing. I’ve already lost three years of interest only payments.  How can I OWE money for getting ripped off by a predatory lender?

Some sites are posting wrong info about the CA tax consequences for 2009. I need to find out for certain. A foreclosure may actually be the better option. I have an appointment with a tax attorney this Tuesday. Questions I want nailed down:

  1. Am I exposed to a deficiency judgment to the first lender after a foreclosure, short sale or deed in lieu?
  2. Am I exposed to a deficiency judgment to the second lender (HELOC) after a foreclosure, short sale or deed in lieu?
  3. Is my loan a non-recourse loan according to the law?
  4. To what degree am I protected by the Mortgage Debt Relief Act of 2007?
  5. Will I owe federal taxes on either Cancellation of Debt or Capital Gains? How much?
  6. WIll I owe state taxes? How much?
  7. How will my credit be damaged by a foreclosure as compared to a short sale and how can I mitigate the damage?
  8. Can the attorney negotiate with the bank to report the sale “paid as agreed” to the credit reporting agencies rather than “account closed, not paid in full.”?
  9. Should I try a fourth loan modification even though the lender won’t reduce the principle and I’ve already been told I don’t qualify?
  10. How can I utilize the full force of California anti–deficiency protections?
  11. Can I sue for predatory lending and get my credit fixed?
  12. Should I request the lender produce proof of ownership of the loans?
  13. Should I ask BofA to prove that B of A or Countrywide made the proper lending disclosures?

If anyone else has been 1099’ed by B of A in California in 2009 after a short sale, I’d love to hear what happened for you.  If you are in the same boat or just curious, stay tuned as the story unfolds.

Update 8/25/2009:

Acceptance letter or short sale from B of A dated 8/25/ 2009:

“BAC Home Loans Servicing, LP and/or its Investors and/or insurers have agreed to accept a short payoff involving the above referenced property and the referenced account(s).  … BAC Home Loans Servicing, LP and/or its investors may persue a deficiency judgement for the difference in the payment received and the total balanced due, unless agreed otherwise or prohibited by law, if the short sale cloases on the loan refernced above. “

They attorney who reviewed my loan documents says  Cal Code Civ Proc  580b (2007) prohibits them from going after a deficiency judgment.

“No deficiency judgment shall lie in any event after a sale of real property or an estate for years therein for failure of the purchaser to complete his or her contract of sale, or under a deed of trust, or mortgage given to the vendor to secure payment of the balance of the purchase price of that real property or estate for years therein, or under a deed of trust or mortgage on a dwelling for not more than four families given to a lender to secure repayment of a loan which was in fact used to pay all or part of the purchase price of that dwelling occupied, entirely or in part, by the purchaser.

Where both a chattel mortgage and a deed of trust or mortgage have been given to secure payment of the balance of the combined purchase price of both real and personal property, no deficiency judgment shall lie at any time under any one thereof if no deficiency judgment would lie under the deed of trust or mortgage on the real property or estate for years therein. “

70 thoughts on “$15,500 California taxes for losing my home to a short sale in 2009?

  1. Intrachresodist

    I really feel for you, Xeno, about losing your house. I wanted to email you and ask questions like – how much did you borrow, what was the interest rate when you borrowed it, what is the interest rate now? But most of all I wanted to ask why didn’t you try harder to keep it, when the interest rate went up?

    I’m not from the USA, so I might be assuming something incorrect. I’m from Australia, where people will reportedly go without food and clothing
    rather than miss a mortgage repayment. So it’s a bit, err, alien to me to read how your mortgage became more expensive, apparently more than you can afford and so you just stopped paying it. In the meantime you can go on a road trip and visit Area 51. What. The. Fuck?

    If you stop paying the mortgage then the principal increases and you start paying interest on the interest. That’s why they call it Compound Interest. Also the interest rate on the unpaid amounts may be higher than the interest rate on the principal, which makes it a double whammy. If you were in a canoe on the river, you might have been paddling hard and not making headway against the current, but by ceasing altogether to pay your mortgage, that is effectively now you are paddling downstream.

    You’re angry that you might have to be taxed on $130,000 of forgiven debt. Let’s analyse this, since you give enough facts for me to work with. Remember I’m not USian so I could well be wrong about some or all of this. You bought the home for $300k. How much did you borrow, 100% of the purchase price? You bought the home “years ago”, but if the house sells for $170k you will owe taxes on $130k? That sounds like you borrowed 100% of the purchase price and over several years you didn’t make any headway to reduce the principal of your loan. If that’s the case then fair enough, people can do that. I don’t think it’s a good strategy, since it doesn’t reduce the interest payable and you don’t get any equity in the home.

    To be Continued …

    1. Xeno Post author

      Yes, I did borrow 100%. I asked for a 30 year fixed loan, but was talked out of it… I assume now because I could not have afforded the monthly payments. So, I was told to take the Pay Option ARM, and based on false information from the loan officer, that is what I did. I was told I could refinance if the home’s value fell. It fell, and I found out the hard way that this was not true. BTW, The few hundred dollars I saved to take a road trip (staying mostly in campgrounds and with friends) would not make a dent in the $2500 per month payments I’d have to make for the next 40 years. They won’t take partial payments. I stopped making payments on the advice of a Countrywide rep last year who told me that’s the only way they will take a short sale offer.

  2. Intrachresodist

    You bought the home for $300k – so you committed $300k of money you don’t have in return for the home. Since that time the US Real Estate market tanked (and ignoring its effect on the world economy) and now the home is worth an estimated $170k. As the owner of the home, you know the value may go up and down and you take the risk on the value of the home. Your loan provider doesn’t take any risk on the home value – actually they are taking the risk on you, that you can pay off their loan.

    To the loan provider, you’ve got $300k of their money. When you stopped paying the loan, they aren’t getting any benefit from that $300k any more. That’s a problem for them. I don’t know if they tried to negotiate with you, but if they can’t get any money out of you, eventually they have to act to get their money back. They have security over the home, so they foreclose to get back what they can. It’s too bad the home is worth only $170k now, but you took the risk on that, not them.

    So, assuming the home is foreclosed and sold for $170k, what is the situation? You now owe them $130k. You should be paying principal and interest on that debt. Specifically, you took the risk on the value of the home. You had so little equity in the deal that when the market tanked, you ended up owing more than the value of the property. That’s your fault. When the interest rate went up, you were unable or unwilling to pay the extra amounts. That’s also your fault – insufficient spare financial capacity to cope with changing circumstances (you over-committed your ability to repay).

    So soon, when you receive a 1099 form, you should be jumping for joy. As I understand it, the 1099 form means _debt forgiveness_. It means the lender is taking a loss of $130k on their investment in you. And you, instead of owing $130k to your lender, you will owe $0. They’ve essentially given you $130k, and now you have to pay only state taxes, which will be a lot less than $130k. Admittedly you will have to pay them all at once, compared to a $130k loan which you could have paid off over time.

    To be Continued …

    1. Xeno Post author

      As this was my first home purchase, I was wrong about several important things:

      1) My understanding was that this was a secured debt, that the loan was secured by only the home and that if the value fell, this was really the lender’s problem, not mine.

      2) Yes, I over committed, based on false information. Although I was rushed by everyone around me I tried my best to understand the consequences and especially if I could really afford this loan. I believed in providing my financial information to the bank that they were saying I could, because that is what I was told by the loan officer. Specifically, the tax savings was exaggerated, leading me to believe I could afford the payments when the adjustable rate adjusted. I should have only taken a loan where the payments were 33% of my take home pay after paying into retirement savings.

      3) I understood that prices go up and down, but I did not believe nor understand that they could fall nearly half the value in 3 years.

      1. JC

        Xeno apologize for chiming in late but, I ran into the same situation last year and was shocked to see the taxes owed to the ca ftb while preparing my taxes this year. I usually prepare my taxes thru turbo tax, do you know if your CPA used any extra misc tax forms to file this properly or did they just not report it to state? Thx and I greatly appreciate your input.

  3. Intrachresodist

    Last reply. Reading further into your message, you wrote “I’ve already been ripped off for three years of interest only payments!” – did you also borrow 100% of the purchase price, meaning you had no equity in the home whatsoever? I seem to recall you wrote about trying to renegotiate your loan (and not succeeding). Was your loan originally for a fixed 3-year period?

    I’m glad you’re getting professional advice about this matter. Although I’m certainly not qualified to give an answer on any of the 13 questions you list, I’ll bet dollars to donuts that the basic answer is: you are more screwed if you don’t pay, than if you pay.

    I really wish this isn’t happening to you Xeno. You’re the only person I know who’s losing his home to foreclosure (apart from that fool Casey, but that’s
    a different situation altogether). I think being angry about it won’t help; it will just eat you up inside. Talk to the tax attorney. Find out the worst case. Remember what Bob Parsons’ _father_ said about failure: “What’s the worst that can happen? They can’t eat you!”

    1. Xeno Post author

      Yup, that’s the basic question: How can I be the least screwed.

      I was angry last night, but part of that was the heat. (I’ve been saving money by not using the AC for the last several months.) Feeling my normal calm now after getting some sleep.

      Thanks much!

      1. steve

        I lucked out , my liabilities exceed my assets so although to protect my credit I have no plans ever to file for bankruptcy – at least I am excluded up to the excess liability for any short sale taxes.

        that is the only silver lining in otherwise a rags to riches back to worst rags story – in my case the stock market did it to me and not the house itself

      2. steve

        If a lender forecloses on my principal residence or agrees to a short sale, will I owe tax on the deficiency?

        Generally, when there is either a foreclosure or a short sale a taxpayer will receive either (in some cases the lender may issue both) a federal Form 1099-A, Acquisition or Abandonment of Secured Property, or Form 1099-C, Cancellation of Debt, that provide the amount of debt cancelled, information to compute gain or loss, and whether the taxpayer is personally liable for the debt.

        If you borrow money from a commercial or private lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purposes, depending on the circumstances. In a short sale, the lender agrees to accept less than full payment, and cancels the unpaid amount.

        The most common situations when a foreclosure or a short sale does not result in cancellation of debt (COD) income involve a non-recourse loan. A non-recourse loan means the lender’s only remedy in case of default is to repossess the property the lender cannot pursue you personally in case of default. A purchase money loan (that is, a loan taken to “purchase” your home) is generally considered to be a non-recourse loan in California. Refinances, second mortgages, and “cash out” loans are generally recourse loans.

        Although forgiveness of a non-recourse loan resulting from either a foreclosure or a short sale does not result in COD income, it may result in other tax consequences, like a reportable gain from the disposition. Even if the debt discharged is non-recourse, a taxpayer may have a gain to the extent the balance of the mortgage forgiven exceeds their adjusted basis of the property.

        The gain, if any, from the foreclosure or short sale may or may not be taxable, depending on whether IRC section 121 applies and the amount of the gain. IRC section 121 only applies to principal residences, and limits the amount of gain that can be excluded from income.

        If the loan is a recourse loan, then depending on the facts, you may have COD income, and potentially a reportable gain, in which case you would want to determine if one of the provisions in IRC section 108 would apply, allowing the COD income from the discharge of indebtedness to be excluded.

        For 2007 and 2008, California conformed, with modifications to IRC section 108 (a)(1) (E) that allows a limited amount of COD income resulting from the foreclosure or short sale of a qualified principal residence to be excluded. However, this exclusion is currently not allowable for any foreclosure or short sale that occurs on or after January 1, 2009. (Note: There is pending legislation that would extend the California exclusion, SB 97 and AB 111.) One of the provisions available in IRC section 108 that might apply is the insolvency rule, which would apply if a taxpayer has COD income and is insolvent (total liabilities exceed total assets); in that case, the exclusion only applies up to the amount of insolvency, (to the extent, liabilities exceed assets).

        More information regarding foreclosures and short sales is available at irs.gov. In particular, you may want to refer to the IRS webpage titled “Home Foreclosures and Cancellations”

        If your reporting position is audited by California, you should be prepared to provide documentation and an analysis of your facts in support of your position.

  4. ca foreclosure

    The homes owners’ number one option should be to do a Loan Modification… Next they should consider a Short Sale rather than foreclosure. It’s too bad that many people are going to continue to suffer (taxes). Great post!

    -Heath

    1. Xeno Post author

      Found this info:

      1) In most instances its not the short sale itself but the late mortgage payments that will affect your credit. If the lender writes off the debt and issues you a 1099 for the amount of debt forgiven then technically they HAVE TO report it as “paid as agreed” on the credit report. That being said there are a number of people doing short sales that aren’t late on thier mortgage that walk away from a short sale totally unscathed (except for whatever they put down on the property when they bought it)

      On average when a short sale hits the credit report it will drop the FICO score about 120 pts and it will be 18mos to 2 yrs before you can qualify to buy again. This is substantially better than the alternative of foreclosure, which would hit your credit by 250 pts and take 4 yrs to recover from. BK will be about a 300pt drop and 7 yrs.

      2) The IRS tax laws bascially state that if a bank or lender writes off debt owed by you , they are to issue you a 1099 and you are responsible for paying income tax on the amount of debt forgiven (also called phantom income). President Bush signed into law this past december the Mortgage Forgiveness Debt Relief Act of 2007, whereby in certain circumstances, a homeowner does not have to pay federal income tax on debt forgiven on a loan secured by a qualified principal residence. To qualify your primary residentce and it must be a purchase money loan, meaning its the loan you used to buy the property. (in other words if you refinanced and pulled out 50K to buy and SUV and go to Hawaii theyre not going to wave the tax on the debt forgiveness)
      If you dont qualify with those guidelines all is not lost. There is a possiblity of getting the taxes due waived if you can have your accountant fill out IRS form 982 and prove that you were temporarily insolvent at the time you sold the property.
      . Whatever you do, if you do decide on a short sale be sure to work with someone who has expereince in successfully getting them done. TBecause of agents general lack of knowldge and training in this area the national stats show less than 10% of short sales getting approved before they go to foreclosure. – trulia

      1. MIke

        Does this mean that legally, if they report my short sale as “Paid in Full Less Balance Owed”, I can demand they change this to “Paid as Agreed”?

        I have never been late on my mortgage and have high credit score. If they refuse this, how can I demand they chance it since they really are accepting less than the original note?

      2. Xeno Post author

        Hi Mike,
        Demand? You can’t. You can ask, you can negotiate, and they can tell you to go jump in a lake. My lawyer said it isn’t worth trying to get them to report “Paid as Agreed” because they simply won’t. I tried anyway at the time when I had the most leverage. Kept asking to speak to someone with the authority to make the call on this… got several layers up the food chain after probably 2 hours on the phone, but B of A still refused, saying this was not an option. If anyone accomplishes this, let us know how you did it.

  5. steve

    if you are not late on your mortgage payment after the short sale – are you saying – you can buy next month and your credit score wont drop 120 pts?

  6. Xeno Post author

    I’m still learning as I go, but what I read is that a short sale getting accepted by the bank when you are not late on any payments is very rare. In other words, if you are making payments, why would they take the short sale? Did this happen to you?

    As far as credit scores, I don’t really know… still trying to figure that out. My lawyer says the score takes an equal hit with a foreclosure or a short sale, but the above info is different. I tend to trust the lawyer rather than the real estate agent who wrote the above…. Anyone know for certain?

    1. steve

      I heard short sale takes 3 months to 18 months to repair depending on how many months you were behind prior to the short sale.

      I believe neither the lawyers or the brokers but only the mortgage bankers the lend to you – who knows what the right answer is?

  7. steve

    heres how bad things are for me , I lost my job 6 weeks ago, I have a $4,500 montly mortgage payment. I lost over $2.5 million in the stock market with no assets remaining since I was liquidated by my broker. I just put my house for a short sale with the listing going august 30th or so. I didnt realize and check the state tax law only knew about my the Obama tax relief act and assumed so goes the feds so goes the state. I bought my house for %980,000 – the short sale price is $ 475,000 , I owe still $810,000 so roughly $325,000 LOSS for the bank since I have no assets for any kind of no liability release issue.

    What is the California state taxes on that loan forgiveness. I need to save up for the tax payment if indeed it ended 2008 for CA the tax forgivness.

    and oh yes I lost my job 6 weeks ago. I am in a terrible bind.

    my work is in a fidiciary capacity so I am only 30 days late when I was refused by the bank in modification negotiations and documented thats why I proceeded to a short sale and indicating no way can I find an exec pay job without relocating.

    I am concerned amt a future employer checking my credit score before they hire me – catch 22 – If paid and didnt miss any payment not sure if loan modification would have gotten to the negotiation stage and now short sale should be ok since I lost my job – but the question is
    if I had kept up with the payments and not more then 30 to 60 days behind and if a short sale is paid in full do I really need to with 2 years to buy – my broker says to pay any more – whole short sale deal with take 90 days to complete with bank so that I would be only 120 days behind – would anyone adivse that I keep it no more then 30 behind IF that saves your credit or does it really matter between 30 days or 120 days – or is it 60 days the key.

    please help – I got to get it right – or pay a heavy price.

    its a catch 22 for me – I am in the twilight zone – in terms of financial disaster – but want to use the rules to mitigate enough damage to have a chance to have a life thats gives me at least a fighting chance to be normal in a year or so .

    this is like nightmare in real life

    1. Xeno Post author

      Steve,

      Wow. That is a pickle… So many of us are in “how can I get least screwed” mode now.

      Hopefully someone with some inside info on credit scores will enlighten us soon!

      This is from July 2008:

      The result of a foreclosure or a short sale is basically the same — a lost home and long-lived damage to your credit record. But the prevailing thought has been that a short sale, in which the lender approves a sale for less than the full amount owed, is worth the hassle because it damages your credit less than foreclosure. I’ve written as much in previous columns. But I’ve found that it’s not necessarily so.

      I’ve also found a burgeoning crop of for-profit counselors trying to sell pre-foreclosure advice to consumers.

      What you don’t need, when struggling with an unaffordable mortgage, is to spend scarce dollars on short-sale or foreclosure consultants. Reputable help is available, for free, from established nonprofit groups.

      Probably the best solution, if your finances haven’t disintegrated beyond rescue, is to work out a loan modification with your lender. As long as the result of a modification is affordable, it’s the one option that allows you to stay in your home, and it’s much less likely to ruin your credit. Depending on how your lender reports it to the credit bureaus, the loan modification might not even show up on your credit reports or FICO credit score.

      A foreclosure and short sale inflict equal damage to your FICO score, according to Fair Isaac, the company that compiles those all-powerful numbers. Either will make you ineligible for three years for a mortgage insured by the Federal Housing Administration. (Extenuating circumstances, such as serious illness or death of a wage earner can justify exceptions, according to the FHA.)

      There’s not much difference between the two, according to Ira Rheingold, executive director of the National Association of Consumer Advocates, which is based in the District. “Whether you go to foreclosure or not, it does a lot of damage to your credit score,” he said. You will always have to report that you lost a home on future mortgage applications. It will limit your chances of getting a new loan for as long as seven years.

      washpost

      1. steve

        tried the loan modification routine, got all the way to the negotiators by the time I got their I lost my job, and they said no income no loan modification and suggested signing the home back, finding a job fast , short sale, talk HUD who does nothing for high end homeowners.

        I am very disturbed by the short sale damange – I have heard otherwise – so we need to post this on a board where there are mortgage lenders posting.

        If you are right I am screwed -and maybe screwed out of a future job if I dont get a job offer soon before the damage shows up on my credit report

      2. steve

        talked to my borker today and his attorney – said damage is for 2 years before you can buy – since you cant short sale unless you miss payment – so not paying the mortgage or paying it during the short sale gets you the same results – 75 to 120 pt drop – avg 8o pt drop.

        oh well got to learn how to live in apts again after living in 3 different homes for the last 28 yrs

      3. Xeno Post author

        Thanks Steve,
        Good to know. I’m thinking the same thing about apartments. At least I’ll have a jacuzzi and probably a weight room. On the down side: The noise, potential damage to your car with no garage, lack of space … great adventure.

        It seems some potential employers would be aware of the mortgage disaster and hopefully sympathetic if you have the right attitude and the skills they seek…. but I don’t know much about your industry’s hiring practices.

    1. Xeno Post author

      Do they have sand fleas in Baja? Giant stinging jellyfish? High speed Internet?

      I don’t think I’d last. I’m addicted to stress. It’s the way that I get things done. If I’m not under pressure then I sleep too long, hang around like a bum and that makes me nervous.

      I never learned to surf, but a day at the beach would be great. It has been a few years at least.

      Living off the land? Good idea… as long as I could find a way to make it stressful. 😉 Perhaps when I retire. Eventually I want to see how much food I can grow. How much land does one person need to grow enough to live happily?

      Tequila? You can have mine, since I like most of my brain cells. I have future plans for some of them.

      1. steve

        addicted to stress and type A personality, why don’t you just get married have some kids and you need for stress will be over.

        in the meantime Ive put in my mine 6 bedroom 4 1/2 bath to a apartment for 2 years or more in my mind , will be hard to adjust , two cars in an apartmen complex – means got to get rid of 5 rooms worth of junk – the moving part and storing give me more stress then loosing the house ( or in this case ) now getting rid of debt vs loosing the house – so its almost more like a positive then a negative if you want to look at it that way.

        also got to get a new girlfriend – she left me in the mist of all the disaster – who wants to hang around a sad depressed person with no money and tenuous future -didnt blame her – stock market can turn you into a gambler – and destroy your fortunes , family and future – hard lesson to learn – In Search of Happiness movie in reverse is my story

  8. steve

    I used to go to the gym 7 days a week , havent been to one in 6 years gain 15 lbs
    I still jog and do ab exercises on video , have one of those chip up towers and mat to do push-ups. yes a complex with weight room would be great. although I live near top of a hill right now and a scenic jogging trail is right outside my door.

    i hope your not a workaholic -got to stop and smell the roses too and spent time with your girlfriend – I was one of those like you and one day everyone was married and all the women gave up on me and now the women my age are all married and the younger ones too immature for me.

    as for my credit rating hope to get hired before the bad credit part hits – timing has to be perfect to get out of my mess – I was financially destroyed betting the market to go down before the disaster happened so I lost everything right before the crash betting it to crash too early – so when the crash happened – it made it worse for me .

    as you can see my luck in life – pretty bad lately – just one ounce of luck to come my way and I will jump up for joy – thats how bad my luck is I could write a move script

  9. steve

    everyone says something else – even the lawyers.

    short sale will be reported as “settled,” but that’s not good. Settled is considered seriously negative by scoring models. It would be better if they just showed it as paid $0 balance and left it at that. But you won’t have any say so over how they report it.

    I know you’re getting conflicting info but the only source that you should be listening to is someone from Fair Isaac.

    Those other parties that you mentioned don’t know their way around credit scores. And the worst are mortgage brokers and realtors. I can’t tell you how many messes of theirs I’ve cleaned up in my time. In fact, I place the majority of the blame for the meltdown on brokers and realtors. Being commission based is too tempting for many people to do the right thing. I’ll tell you how it’s treated so you can stop getting the run around…

    Short sales are as bad as a foreclosure. Credit scoring models have what’s called a “Performance Definition” or Perf Def in my world. A Perf Def is essentially what the model’s primary design objective is. The FICO score’s Perf Def is to predict likelihood of someone going 90 days past due or worse in the subsequent 24 months after scoring. A settlement (or short sale) is considered payment not in line with original contract terms so it’s treated by default as negative.

    Anything that’s treated as negative (or “major derog”) is for all intents and purposes the same. So, a settlement is the same as a repo, foreclosure, charge off, collection, etc etc. It may be better from a lender’s policy perspective but not from a scoring perspective.

    So there you have it. Active Rainers – if you have REAL real life experience and can comment on the statements made above, please do so and we can all learn together.

    Copyright 2008 Richard P. Zaretsky, Esq.

    Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

    Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com – FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW – We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website http://www.Florida-Counsel.com. See our easy to find articles at Need Short Sale and Modification Information? – These Articles Probably Answer Your Question

  10. Wiese

    Steve,

    Your girlfriend leaving is a good thing – she obviously didn’t love you, but what you had – the stuff. You’ll find a real girlfriend through this. I lost my job too and am selling my house and have decided never to live in a house again. I want a hassle free apt in Portland and a scaled back life style. If you can’t pay cash for a house, you lose anyway. It’s cheaper to live in an apt when you factor in all the costs. At least I never went for the “McMansion”, I went for a classic 1930s dollhouse in a highly desireable area and bought cheap. I’ll make a good profit and will use the interest to subsidize my apt. I’m also planning a trip to Paris and Italy. I feel like I’m 19 again. I love it – I’m starting over. It’s all in how you look at it. It’s a time of opportunity, a time to think in a new way and reevaluate your values. You sound like a smart guy – I’m certain you’ll come out quite well. Best wishes to you.

    All these changes are good – it’s shaking things up, getting us to think outside the box. It’s hard, but worth it. I feel like I’ve gone through a rebirth. I paint, I write and I play and write music. I do more now than I’ve ever done. As long as you have your health, you have everything. The rest is icing on the cake.

    1. steve

      p.s. I WISH I could live the simple life but even after sale of home, I will be in debt due to my over leveraging in the financial collapse so thats why I have to get back in that rat race for a few more years to get it all straightened out – sad but the reality of life part – yes I never enjoyed what I did that much – my talents were somehwere else just never found what it was

      I draw too by the way I drew for the first time in 30 years since I was a little kid – my secretaries loved them – I drew pictures of all of them – but I am not an artist by any means like you

      more able to copy draw

  11. Wiese

    Oh – and life is short – wasn’t it Aristotle who said that thoughts are the highest form of action? So, try not to worry – it actually creates a change in energy – instead, send out positive thoughts of what it is that you want – you’ll get a better turnout.

    1. steve

      boy arent you the philosopher and a talented one at that, paint , write music , write a play – you would have fit in perfectly with the Sausalito crowd near San Francisco.

      what were you doing before – Ive seen doctors types do this rebirth thing but if you lost your job you werent a doctor since healthcare is still the place to be in , in a bad economy, my dentist neighbor or soon to be ex neighbor works 4 days a week and lounges by his pool every friday with his wife.

      I need that kind of karma rebirth – Ive always struggled thru life – possbile because I chose a path that was difficult and not the things that I was passionate about and maybe the wrong priorities, not having ever been married is one of my biggest disappointments in life.

      I knew the girlfriend wasnt the right one, but sometimes you need some kind of emotional connection to someone just for the part of them that you like and is good and you purposely ignore all the parts of them that isnt right for you.

      like they say you marry the one you can’t live without and not the one you can live with.

      if that can find that special someone maybe finally the other parts of my life will come together too.

      I am so busy trying to sell the house, find a new job, figure how I am going to move with 6 bedrooms worth of stuff and a 4 care garage full of stuff even though I live by myself and yes, I am planning to sue my former employer – it was an illegal layoff thing – a law firm wants the case on a contingency basis – I hope for a quick out of cour settlement – but delaying it until I get a job – it could mar my emnployment chances for life – despite the fact it shouldnt.

      ive had two interviews since I lost my job in July – finalist in both – one said I was over qualified and it wouldnt be a challenge even though it paid $150,000 , the other one I was the finalist too – the interview ended in august 14 but they wont make the decesion until next week – I wonder if my ex employer is giving out bad references – or is my credit rating affecting it – its hard to find a job where you tell them you turned the place around but they let you go

      so everythings at an all time low – but I do see possibilites ahead if I think positive exactly as you say – thank you for your support and insightful and positive thoguhts

      I havent read books in 20 years – bought two books recently but havent opened the cover – The power of Now by Eckhart Tolle and a cheap one got on Ebay – the law of attraction in action by Deanna Davis – yes I am turning into self help books for the first time to find myself again .

      hope the stars realign for me soon and in the right or different path that ends in happiness for a change

    2. steve

      I will certainly try.

      The thing I have to overcome is psychologic i.e. things sometimes come full circle, when I was little, the thing I was most afraid in life was to be poor , the second was to be alone one day without someone special – well I became a millionaire and lost it all and more and am in debt so my first fear came true. The second part also came true . I think if I had made the second fear my priority , the first part may not have been that important and that fear would not have come true or be a factor.

      the thing is how to change the course of life – before I let it pass me by again in the second half of my life.

      what is ideal and how you have to struggle each day is the hard part

  12. Wiese

    I’ve always been a rebel of sorts, so I only took jobs that I felt I could give my best – It was never about income for me, I wanted fulfillment. My last job was as a copywriter for an advertising agency. Prior to that, I ran a gallery at an art museum. Before that, I started a cultural arts paper (I couldn’t afford to keep it up), and before that, I was a community relations coordinator for a national book chain – I booked all of the author, music, children and art events and was the media and community laison. Before that, I ran a Capezio Dance Theatre Shop (I was a dancer for 8 yrs). I left two very successful husands because I felt the first one was only about money, the second one was a TV lump and had a hard time saying “I love you” – though, I know he did – both were very good men – just wrong for me.

    I’m now in the 2nd half of my life and getting ready to make another life change with my move to Portland – no more suburbs, no more houses. And for the first time in my life, no relationship for 3 yrs now. I’ve grown more in the past 3 yrs than ever before. Now, I finally really know myself and what I want from a relationship.

    The Power of Now was good, but for me, it lacked a softer quality – it’s true that now is all that exists, but, there’s something missing in his message. The Law of Attraction is good – as was the film, The Secret. I recommend a book called, Cloud Hidden, by Alan Watts – he wa

    1. steve

      Youll lived a full life already.

      without knowing you I am about to make a big leap of judgment. Those people when they were young and were gifted with looks and or talent and things are easy for them and the world is unlimited for them tend to want alot out of life emotionally and spiritually and their minds wander for more satsifaction of the next level – those that dont see that unlimitness are more satisfied with less emotionally , spritiually and financially – i.e. dont always have to try new things , no unlimitedness to the opposite sex etc. but they end up having a more although mundane live – a more stable and lasting one – I think you may be plagued when you were younger with looks, may pesonality and enough talent to alawys to want more – so that in the end – you meet the wrong people – the peopl that have alot but not inside – and thats why you are where you are – your were plagued by having too many oppourtunites and wanting to seek everything and not being able to be satisfied with anything

      sometimes having to many gifts turns into a plsgue of sorts – the ones with too much money , too much in looks , too much in talents – sometimes ends that way.

      thats the way the world levels the playing field eventually for all of us

      good luck

  13. Wiese

    Sorry about that – he was the popular poetic philosopher of the sixties. He wrote about Taoism and the metaphor of us being the collective “Eyes” – “I’s” – of the universe – making up that one big “Eye” or “I”. He explains how the impact of the wheel hitting the ground is what makes the wheel go around – or the violent plucking of the strings on the lute that makes the sound of music. It takes an agressive act of motion to make things happen. Like birth.

    For me, I’ve always been motivated by the things that move me inside – it’s about feeling good, doing what I enjoy and also about the people I work with and the place I work in. If it’s sterile or ugly, or confining, or goes against my ethics – I don’t want to work there. I’ve honestly never really had fear – other than of heights. Maybe I’ve had a fear of getting stuck or of having to do something I don’t want to do. But, I’ve been – am – currently broke – and I’ve been very lonely in the past while married.

    Anyway, that’s my favorite book Watts wrote. You can also get cds of his talks. He just has an eloquent, poetic way of philosophizing that makes it easy to understand. Caroline Myss is good too – she wrote a book called, The Anatomy of the Spirit – it helped me learn to forgive hurts. And Joseph Campbell, The Power of Myths or The Hero With a Thousand Faces – he’s amazing…

    I think the seminal point is to find out who you really are inside, what you really want out of life and then be authentic in living your life, true to yourself. We all know the material things are just stuff. It’s how we feel that really matters. This whole situation is like a gift to you – to point you in another direction – it’s an opportunity for you. Buddha said, “I am awake!” That, to me, is the real goal.

    I agree, the daily struggles are the hard parts – I’ve learned this past 8 mo of unemployment, to trust the universe – to know that I have people around me who love me and care about me (and have surprized me with loving, generous help), to step outside my comfort zone and get myself out there more (ie., exhibit my paintings, send in short stories etc., to have patience (this is the HUGE one for me), and I’m constantly grateful for everything. I’m not having luck finding a job yet, but I’m getting more physically fit than I’ve been in while – eating healthier (it’s cheaper), and enjoying just time to think, to read, to figure myself out, to grow, and do all the things I love to do. It also develops my faith in the universe or god or whatever you want to call it – I know that I will have what I need and that I will be fine and that work will come.

    Who knows, a lot of millionaires lose it all and then make it back again. I suspect that you will land on your feet and all will be better than ever. Best wishes to you.

  14. Wiese

    I understand what you’re saying – there’s truth in it – I always sought love, happiness – never felt lasting satisfaction, but not because of having so many opportunities or talents or looks – I had very little – in fact, I had more discouragement. Life was tough – an abusive, background – had very, very little (shared a bedroom with 3 brothers – homemade clothes etc.),and was left at age 16 – mother moved away suddenly – overnight – and left me in an already abusive home, family ripped in different directions. I saw horrific things and experienced things a little girl shouldn’t. I was also raped as a young woman. Dropped out of college after first semester due to drugs. (Went back in my mid 30s.) I was raised to marry, have kids – college and career were discouraged.

    This background and my innate level of creativity is what put my mind into a different kind of world – I sort of lived in a pollyana-fairytale-innocent-dream-place in my head. It was a survival mode. I was numb. But I moved towards what I liked – not as a search from unending satisfaction, but as a way to make life worthwhile – art, dance, theatre, music – humor -It was what kept me connected and brought me joy. It was a long time struggle for me to accept life. I married my high school sweetheart – and then married again – too soon – always searching for love. I was an incomplete person. My goals weren’t fixated on having nice things or lots of stuff – they were fixated on simply feeling loved – having a sense of place or purpose.

    Now, I’ve found myself – I’ve learned who I am. I no longer need a relationship to feel loved, I love myself. I’m in the world now. I’m in my late 50s and life has never been better. I feel like I’m finally awake! So, my “plague” was the hardships of my past. And my search is over. If I fall in love, then that will be my whipped cream – the topping to my life. But, I’m fine either way. I do like change though -it’s the essence of life.

    1. steve

      I think I better understand now. Most people in life never ever really end up meeting that very special person, alot of people just come close but hope for the first. IF the essence of life is change then the question is there someone so special that they last throught time and all the changes thats going to take place with you.

      I understand that money into money are void of alot of the more important things in life, and the lump on the couch youre talking about wasn’t someone that can move you heart – i.e unless youve lived thru pain, joy and sorrow and know the meaning of life by experiencing it – the lump on the couch can’t give you the emotional needs you thurst – that comes from someone thats willing to make you feel special because when they look at you as someone special – you can feel the warmth and tenderous and passion from someone that you know truely loves you , you can know by the way they look at you , the way they touch you and the way they are always loyal and giving to you .

      I can see that you havent experienced that yet – and never have been in the kind of love that doesnt leave you empty inside or even more lonely then if you were alone by yourself.

      But being content with yourself and not needing someone else is very deceiving – because the whole point of life is not being content – because then you become the lump on the couch yourself – being content is the same thing as giving up on life and saying I love myself but I cant love someone else at the same time – life is always better and sweeter when you share the love with someone else – when you find someone where you want to give more then you want to receive – thats when life feels alot more joyful and not just contentment .

      so gont give up on love with just yourself – you may one day find that special person that youve longed for but never been fortunate to feel – I would suggest you find a way to meet the kind of people you normally dont meet and see a whole new world out there – I think thats the only way you will find true love one day – doing the same thing over and over again only gets you the same results.

      I am hoping good things will come for me and hopefully for you too – sounds like you need a break in life just as much as I need one too.

      1. Wiese

        That was beautiful. It made me tear…Thank you. I haven’t given up and I’m not content – I’m just not in despair anymore – I can wait now – I’ve ventured out and I’ve dated a handful of guys – none for long – I’ve broken my cycle – I’m just hoping to meet that right person, and only then will I give so much of myself again. I think now that I’ve found love for myself, I know better what I want kind of love I want back from someone. Thank you again; you’re very kind.
        What you’ve said gives me added support. I appreciate that.

      2. steve

        If you ever loose your way again just listen to these songs , it will keep your spirits up – you will find meaning in a different way in each and every single one of these and I know you will love them all :

      3. Wiese

        Wow! Beautiful – beautiful song selections – I’m deeply moved that you would take the time to offer comfort to a stranger. It’s huge for me. I’ve gotten more from you in these few emails that I got in all of my relationships – I’ve not been good at it. I’m lucky to get a lot of attention, but that creates a problem – I used to just go with that, but I’ve learned now to be selective and not just go with who is attracted to me. I also have to be attracted to who the person is – it’s what defines whether I think they’re attractive or not.

        This sounds odd, but a problem I’ve had over the years is that guys think I’m younger than I am – so, I’ve been married to younger men and my last boyfriend for 10 yrs was over 20 yrs younger (he pursued me for a year and lied about his age and I was stupidly naive). But even though he seemed mature, he wasn’t, and I learned a big lesson from that. And guys my age often seem too stodgy – don’t stay active and just want to watch TV….It’s hard. I get a lot of guys who just want to push sex – I’m not that type. I’m hoping to finally meet the right guy when I move to Portland. I think I will eventually.

        Until then, thank you for what you’ve given me. You’ve no idea how much I appreciate your kind thoughtfulness. I am blown away that you sent those songs. You’re a good guy. I wish you the best.

      4. steve

        I like listening to those songs myself when I am in a reflective mood. The first two by Yanni’s new vocalists lyrics defines you the best.

        If youve been addicted to bad or loveless relationships , its a hard cycle to break if you have the mentality that if he loves me he will come around.

        the younger men thing – anything that has a age gap of more then 10 years is a very hard gap to fill. Some people are mature when they are 14 yrs old and stay that way for the rest of their lives – some are immature at 14 and stay that way for the rest of their lives.

        people have needs and desires and they finds ways to fullfill them.

        in life what comes too easily – you get very little satisfaction from , what comes hard generates the most satisfaction – ie. thats why rich people have so manly personal problems.

        same thing with relationships , if you have too many of them , then each one may not be that special – sometimes those that have the fewest relationships and even just one treasure them the most because they are very special.

        people that have alot of relationships then to be either the hunter or the hunted and its a thurst for the physical thats more important then the emotional. And the more experienced with relationships then to be drawn to the ones with the most relationship experience because the hunter seeks and the hunted makes themselves available where the hunter gathers.

        but the heart eventually overcomes all those factors and unless it can fill that void – it just doesn’t last.

        everyones uniques and they are usually is defined by their past -by the time your 18 , your almost the future shell of who you are and who you will be – to break from the mold developed when your 0-18 is a very hard thing to do since – its already defined who you are inside despite how you try to present yourself to the outside world.

        people are most alike when they are small and when you are old and in between that everyone can be worlds apart.

        You will always be drawn to the hunter from reading your emails because you have many serious life experiences and relationships and the hunter is always drawn by you – so that is why I think you end up in relationships that dont last and dont have the kind of love you are hoping to find.

        My advice is not to let the hunter find you but you find someone that really cares about you but then you will have to allow them the chance because if youve been addicted to bad or loveless relationships – when you are weakened by disappointments in life – you will fall back into that trap again – it will be a life long struggle until someone is worthy enough to help you break that cycle.

        You can break that cycle only if you meet the right people – the wrong people will draw you back because you heart doesnt always tell you the right thing to do. The heart will find the good things about something and ignore the bad things – because your heart wants to be loved whether its right for you or not.

        good luck in Portland – are you moving from Los Angeles or New York – never been to Portland , all I know is the farther you are from Los Angeles and New York – the better chances you have of finding the right person – not to say there arent alot of great people in those 2 cities .

  15. Xeno Post author

    Update 9/10/2009: A large CPA firm (which will charge me about $400 to do my taxes for 2009) has done some research and determined that I will not owe any additional California taxes due to my short sale, nor will I have capital gains because I’ve lived here for several years and because mine is a non-recourse debt. I was told that even with California not conforming to the Federal Mortgage Debt Relief Act of 2007 in the year of my short sale (2009), the 121 exclusion (up to $250,000 for a single person) would apply. Really? I sent the CPA this link (http://www.ftb.ca.gov/professionals/taxnews/2009/July/Article_9.shtml) and he is double checking. I need to be certain about this!

    Reply:

    I have highlighted the following points from the information you sent:

    “The most common situations when a foreclosure or a short sale does not result in cancellation of debt (COD) income involve a non-recourse loan. A non-recourse loan means the lender’s only remedy in case of default is to repossess the property the lender cannot pursue you personally in case of default. A purchase money loan (that is, a loan taken to “purchase” your home) is generally considered to be a non-recourse loan in California. Refinances, second mortgages, and “cash out” loans are generally recourse loans.

    Although forgiveness of a non-recourse loan resulting from either a foreclosure or a short sale does not result in COD income, it may result in other tax consequences, like a reportable gain from the disposition. Even if the debt discharged is non-recourse, a taxpayer may have a gain to the extent the balance of the mortgage forgiven exceeds their adjusted basis of the property.

    The gain, if any, from the foreclosure or short sale may or may not be taxable, depending on whether IRC section 121 applies and the amount of the gain. IRC section 121 only applies to principal residences, and limits the amount of gain that can be excluded from income. “

    “For 2007 and 2008, California conformed, with modifications to IRC section 108 (a)(1) (E) that allows a limited amount of COD income resulting from the foreclosure or short sale of a qualified principal residence to be excluded. However, this exclusion is currently not allowable for any foreclosure or short sale that occurs on or after January 1, 2009.”

    This does not mention California not conforming with IRS code section 121 or contradict the first paragraph.

    Yes! California still conforms to Section 121 in 2009! (Although IRC section 108 (a)(1) (E) does not.) Holy crap! This is great, and I have it in writing in an email from a CPA. Huge relief. Now the only consequence of the short sale will be the hit to my credit.

    Summary of Damages:

    Attorney’s fees: I spent $200 having an attorney review my loan documents to determine that I’m not open to a deficiency judgment from the 1st or 2nd loans. Learned they can only take the house. Retirement savings is protected.

    Taxes: None expected. No fee for the CPA advice from a reputable firm.

    Credit: Starting at a 767 FICO, I dropped 157 points after 1 year of not paying my mortgage payments (on the advice of a Countrywide rep as the only way to get the Short Sale approved.) I expect the Short Sale reporting will add a final whopping point reduction of another 150 points or so.

    Credit cards: Discover dropped my limit from $8400 down to $1200.

    Phone calls: Spent about $180 in phone calls to the Bank trying to negotiate a loan modification, calling lawyers, CPAs, real estate agents, etc.

    Time: Had to arrange to have four different home inspections, plus a pest inspection, lots of paperwork to sign,.

    Stress: I had a lot of phone calls from the bank asking if I will make a payment. Lots of worry about the possibility of owing huge taxes and of deficiency judgment. (That’s gone now!)

    Pride: Failure at first attempt at home ownership. Mitigated by being one of many and by resolving to do it right the next time.

    CONCLUSION: Everything works out fine, in this world of mine.

    1. steve

      great additonal research and thanks for the update – since my debt exceeds my assets , I was considered to to qualify for no taxes as insolvent for california taxes anyway.

      but at least there is this $250,000 exclusion so if my short sale results in about $380,000 in relieved debt I can use the section 121 exclusion up to that and claim the rest as insolvent tax exclusion so I am covered both ways.

      yes , in my case my credit – ie. the 2 years it supposedly takes for the FHA to allow mortgage loans after a short sale – per the letter they issued is my only remaining concern in the event I wish to time a new house purchase right before any rise in interest rate – and or neede to use the tax deduction to coincide with a strategy to rebuild my credit and time a purchase less then the 2 year wait supposed before they will lend to you again.

      I will print this out and keep in my tax files for the new year – but at least I am like now 100% sure that I made the right decesion to do the short sale – before I know where I will relocate in the bay area – hopefully – move only once and not twice if the sale and new job – works out perfectly.

      thanks for updating for all of us this info – its helpful

    2. steve

      Xeno , ok I skimmed your email too fast. I am only 1 1/2 month behind in my mortgage on purpose to preserve cash since my monthly mortagage is $4,500 per month.

      my goal is to sell and complete my short sale in 4 months limiting the amt of months not paid to 120 days – believing that when you complete a short sale with payments at or less then 120 days behind that the total impact of the credit drop is about 120 points for both the short sale and 120 days of no mortgage payment – thats my goal. I plan to repurchase in 2 years after the FHA mortgage loan waiting period and i expect my credit score in 2 years to be back above 750 or more so that its only a temporary 2 year mar versus a lifetime of headaches if I kept the house or tried to.

      from reading you email – I realized that I skimmed over it too fast – I believe what you are saying is that a forgive of debt under a short sale qaulifies for the IRC 121 exclusion and therfore you are saved whether since section IRC 108 no longer qualifies in CA starting in Jan 2009 .

      so yes I did read it right 1st time after all – in my interpretation.

      I believe my total hit from the whole short sale is going to be only 120 points – not that compounded effect you have because you didnt pay for a whole year – 4 months is all I expect on no payment for me – I paid the previous 2 months to ensure my short sale got listed by my broker with him authorized to deal with the Bank – before a notice of default can be issued which is 2 months behind at the earliest which is another 5 days – since my house got a bid 2 days after the listing – I think – it is possible I wont even get a NOD before the short sale is completed.

      so my goal is also to have a goodwill adjustment on my sale to indicate paid in full – by having limited number of months of the mortagage not paid – I believe because the bank was about to finish my loan modification when I lost my job the week they were to finalize it – the Bank was the one that forced me in effect to do the short sale so therefore – I believe I am in good hands since the process I am following is to the tee of what B of A expected inorder to successfully complete a short sale without alot of damage – If mine works out wiht minimal credit damage – my pre-plannning will have paid off handsomely.

      good luck to you – I think my short sale will turn out the best it can – so I am very confident so far in the process.

    3. steve

      Xeno, I am happy for you but I am curious how did you manage to go 12 months without paying your mortgage and not have a foreclosure.

      like I mentioned I am only 1 1/2 month behind on my mortgage put my house on listing this last saturday and have multiple bids for it already in less then 6 days – so my house will be sold as soon as BofA – allows the short sale – I am hoping this saves me about 80 pts ont my credit by doing it so fast without alot of months behind before the sale is completed – like I said $ 80 to 120 pts on my credit rating in total is all I expect and with my debt to income ratio improving fast – my credit may be back up in a few months – is my most optismistic scenario

      1. Xeno Post author

        Your case may differ, so get an attorney to determine if you are open to a deficiency judgment on the first and 2nd.

        My thoughts: Ask a Green Tree manager (be sure to get a name, email and phone number) politely to please release the lien for $3K now so you can do the short sale, then they can determine at a later time if you owe them any more. The $3K is a sure thing for them, it is SOME money whereas if they don’t agree, it will foreclose and they may end up with nothing. Have your real estate agent talk to the GT manager. I suspect he/she has to convince GT that the buyer will walk rather than pay more than $3K and also that the seller is unable / unwilling to contribute.

        In California if you used the money from the two loans to buy a home (purchase money loan) and you lived in it and the first and the 2nd (HELOC) were signed on the same day, and you didn’t take anything out of the HELOC, then they can’t take anything other than the house. The attorney I hired reviewed my original loan documents and he and his partner determined that I was not open to a deficiency judgment on either the first or the second.

        I gave the loan documents to Green Tree and as far as I can tell, they dropped it. I haven’t heard a word from them.

  16. Wiese

    Steve,

    Wise words… although, for me, I wasn’t addicted to loveless relationships, I just wasn’t happy with the kind of love I got – I guess I was just addicted more to being in a relationship and took whatever love came my way even if it wasn’t the right person – based on how I was raised, to be with someone and to get married. (Hence, married twice.)

    This changed with the younger guy I was with – he made me feel special and pretty and smart and all those things – but more than that, he was loving, giving, attentive, playful, fun and emotionally connected with me – we made each other happy – we just connected. It sadly ended because we’d both come to a point where we each needed to grow on our own – he in his 30s, and me in my 50s. It’s like we finally felt loved the way we needed to feel it which ended that void and created a sort of platform to finally further our individual growth. We had that secure place now to stand on.

    If we’d been closer in age, it wouldn’t have mattered, neither of us had killed our demons yet – we were both on the same path of trying to feel loved when we met, but we hadn’t resolved our own individual stuff that we still each carried and needed to resolve – things that had nothing to do with a relationship. So, that’s where I’ve been the past 3 yrs – in huge personal growth.

    So, now, I’m just me – no void, no relationship – no hunters and even with continuing disappointments, I’m solid. And I’m ready to finally give myself as a whole person and know what I want in a relationship and what makes me happy etc. But, I’m not looking. I’m fine either way. I would prefer a relationship, but I don’t need one. I’m happy.

    I’m in Central CA (6 yrs) having moved here from the coast. Too hot, bad air, a lot of wannabes, and pseudo “rich”, a lack of appreciation for culture, and a lack of social consciousness here. I have a niece in New York, an actress. Love it, but wouldn’t want to live there. And Los Angeles is too congested and crazy for me. Portland will be wonderful. An hour from the coast, cooler climate, a different sensibility.

    Thank you because you’ve added to my journey. I wish you good things and someone who will love you for you. By the way, my son recently went through a similar situation as you – his house payment is about the same -and he had another house he put money into and sold – at a loss. Now he’s put his home up for sale. He had lost his job and was used to a very good income, but now, he’s found a better job and so won’t have to do the short sale – but is wanting to still sell his house and downsize. Fortunately, other houses on his street have sold within a short time, so he should be able to sell it okay. But this economy has sure wrecked havoc with a lot of people’s lives…And I’m glad I won’t have to pay taxes on up to $250,000 from the sale of my home – that will help with my transition. Anyway, thank you and best wishes.

    1. steve

      OK, I was trying to illiict how far youve come and you definitely got yourself together now. I will stop the psych guessing now that I can tell youve become a strong person .

      I started out in Sacramento , moved to Santa Barbara for 4 years, lived in Los Angeles for quite a while , then moved back up north to the rollings hills in Farfield Ca – most likely will end up getting a slightly better paying job near the coast but will have to move closer to like San Mateo area although I like where I live right now where I can drive to Contra Costa and take the Bart to San Francisco and dont have to live there just visit – I am purposely taking more of the 8 to 5 job to ensure I have enough free time to do the things I want to do. Your son obviously did well . If I had hindsight I would have played it safe and probably wouldnt have to work anymore – successful son and niece thats an actress so thats where all the artistic side of you originated .

      I am sure Portland is nice and green – I know I watch the Steve Prefontaine Classic up in Oregon every year and it looks like Santa Cruz with a track since Oregon like a mecca for distance runners since I used to run Track and love to watch track and field – jogging is still a great way to stay in shape and get alot of fresh air.

      I agree with you Central Valley is the pit of California although Sacramento all the way to Lake Tahoe seems to be pretty decent to live.

      1. Wiese

        I loved Santa Barbara in the 70s – my mother lived there for about 30 yrs. – I still have family in that area and in Thousand Oaks too. I used to spend a lot of time in Santa Cruz too, when I lived in Monterey – at Logos bookstore. Ha. I like Portland better, it seems classier or something – a little more sophisticated – but there’s definitely some similarities. I didn’t know about track runners in Portland – that’s great. I would be more inclined to jog in Portland since the air is clean and I LOVE to be outdoors. Instead, I walk with handweights inside my house to James Brown’s Greatest Hits – it’s hilarious – sometimes I do my minitrampoline or my eliptical, but the walking is more free. I really work up a sweat and do arm stuff as I walk. The music makes it easy to do and fun. Yes, Sacramento is a great place – I like old town Sac. I haven’t been to Tahoe since I was a kid – too far from the ocean for me though. But you hit it on the head about the Central Valley, the pit is accurate. Ugh.

      2. steve

        I lived in Isla Vista and remember the El Ecanto restuarant above the hill overlooking the ocean that I used to go dinner at with treasured dates, and took a plane once over Montecito to see all the mansions there. On a cool breezy summers night Santa Barbara was like paradise – didnt have to go anywhere for vacation – it was a dream city to live in.

        I am a little sad right now, I was the finalist to two major interviews for two high paying jobs that I thought I was going to have to decide between the two – but they both fell thru , one I learned on Friday , the other just today when I read the San Francisco newspaper that they chose someone else.

        I planned and attacked my job loss with precesion planning the sale of the house, the timing of the new job and everything – without thinking that it may get alot worse before it gets better – so I am a little down on myself right now and listening to 3 interpretations of watermark – because now I am not so sure what my future holds – I thought I was going to in the worst economy get a better job within 2 months and the plan almost worked – I almost feel all is lost – thinking positive and doing all those things didnt work this time – looks like my bad luck is really bad this time – I couldnt turn the ship around – its like plugging up the leaks heading it back to shore only to find that you went in circles and are back where you first started – this was the first time Ive been turned down for a job in over 14 years – it just may be a sign for me to do something else in life and live a very simple life – maybe its telling me dont go back to the rat race you never liked it – it will only destroy the rest of you.

        http://www.csac.counties.org/default.asp?id=597

      3. Wiese

        Steve, I’m so sorry. It’s an unusal time. So many of us are in a sort of twilight zone right now. I’ve been applying for positions for almost a year and have not received one call. It’s been surreal. I’ve never had a problem before – I’ve always been hired if I can get the interview. I’ve never been turned down for a job. It’s not you – it’s the mess of our economy that the Bush administration put us in with all the deregulation and hedge funds and catering to Wall Street.

        We’re in a global shift – a real spiritual upheaval that has altered how we see things. It’s literally shattering peoples lives. I’m convinced it’s for a longer term good, but being in the midst of it, is extremely difficult and trying.

        For me, it’s been an excruciatingly endless year living on unemployment. I’ve run the gamut from denial to grief, to anger to finally just accepting that there’s really not much I can do but let it ride out and keep trying. I’ve learned some good things from this experience, but it’s been extremely tiresome. I’ve had my meltdowns, (just had to put close to a grand on car repairs) but I can’t give up. So, I try to pamper myself in whatever ways I can – I try to savor what I do have and focus on that. My health. My family. My friends. Music…dancing around the house, painting…

        Angela Davis’s father once told her that life is like a tennis ball, the harder you get thrown down, the higher up you bounce. It tests our spirit. At some point, the shear law of physics shows that the direction will eventually change. It’s just that it seems that the direction has been infinite – this dreadfully long limbo of closed doors with heavy things falling our head. So, we have to take it day by day, moment by moment and hold on to what we can.

        The shift that we’re in is life altering – planet altering -it’s a complete change of course. So many are suffering. Try not to feel defeated. After the rain, the sun always shines the brightest. The thing to know is that we are not in control. Life has its own plan for us. We’re not the dance, we’re the dancer. But you’re not alone.

        My son is still trying to sell his house, they may end up losing it and losing their equity to buy another home. They have a 2 yr old. They both work good jobs. But the big mansion houses are not selling so well…This month is the first month they are not able to pay their mortgage. I wish those who created this big mess would experience more consequence to what they’ve done. I suspect they will in time. But it doesn’t lessen our hardships. Someday before too long this will get better. In the meantime, hang on to the mast – stay strong and know that you are not alone. (I’m sure you get my metaphor – the mast having its main purpose to carry a small sail to keep the boat pointed into the wind while it does its work at a standstill).

  17. Wiese

    The positive is more for dealing with the moment rather than with attempting to make something happen – it’s a form of trust in the universe even when things seem hopeless and just a way of being. Everything is as it should be, even though it’s not the way we want it to be.

    Maybe you’re right, maybe you’re being pointed in another direction. Or maybe the ratrace needs to wait for you to experience some other stuff first. Maybe there’s something bigger/better for you – I think the hardest part of life is the mystery – not knowing why we’re here exactly, what the point of everything is. My guess is that it’s to simply experience being. That we’re all a part of the same whole is obvious, it’s like when the world began, we broke into separate bits (each of us being the individual “I’s” that make up the “Eye” of the universe….trying to find our way back. There’s isolation, loneliness in being individuals…we all need love – connection. I think we’re just going through the motion basically – the experiential reality of being alive. It’s interesting.

    On another note, my younger brother was married at Montecito Park – it was a hippie wedding in the 70s – all white with flowers in our hair. Such a beautiful place, Montecito. And I danced my first strobe light dance at 17 in a club in Isla Vista – it was scary, but exciting!

    1. steve

      Angela Davis? – you were definitely with the hippie radical UC system Berkeley Santa Barbara crowd.

      strobe light dance? I took date in 1979 out I think it was the Miramar Hotel that had a disco floor – yes they had strobe light in 1979 when I was at college there still – my date was a little timid since she never went to a disco before – I remember the dorms at UC santa barbara every month there was a dance night sponsored by the sororities I think – I just went to two of them but they were fun.

      back to my normal self today – and ready to set new goals – get back in prime shape is one and looking for different types of jobs along with my current method that may still get me some kind of result by November is my target . You sound a little like Depak Chopra with the higher level of consciousness theories. I can only phanthom maslows hierachy of needs since thats seems to reflect how I am reacting to things.

      I am also seeking legal avenues in my last job as my 3rd plan of attack – a lawyer has been dying to take the case on contingency basis – and its a winnable case

      I will let the universe decide where I end up and how things go – its like those movies that go back in time and the future – everything you do creates a different path course or outcome in life

    2. steve

      I always knew I was meant to do something else and by not doing that something else you end up going thru the motions and a part of you dies. Thats why so many people end their successful careers to do totally something else that pays 1/4 of what they did succesfully.

      But very few people are able to do that or are willing to take those risks to find out for themselves whether its a whim or a real passion.

      same thing with relationships.

      alot of people are divorced because they married for the wrong reasons – they marry in the hopes that if he or she loves them they will come around. Alot of women that get lots of marriage proposals but turn them all down – were smart enough to say no before it became a divorce later – the reason is that alot of women will only see the part of someone they like and ignore all the things that they can never live with just to make things work because they rather be with someone then be alone – but when you give too much of yourself to be who someone else wants you to be – you die a little inside and when you die a little inside too much for too long – you die yourself so the smart ones dont get married and move on – the ones that hope that things will change will end up in a marriage where they cant be themselves and have to always pretend to be someone else to make them happy..

      but in life its always a balance – each one has to give up a little of themselves but still be themselves the majority of the time because if you dont give a little of yourself then it means you only care about yourself.

      but in general the average person is immature , wants to satisfy their own needs, always looking for the greener grass and takes things for granted and thinks that someone will always be there for them and feel they deserve so much more – when they already have more then they deserve.

      but no ones perfect and the complexity and hassles sometimes of being together far outweighs of that being alone – because those that continously search for somethng better and excitement have an emptiness inside that needs to be filled by something else to make life worth living – which means they are still searching for themselves – and unfortunately half the people out there fall into that camp and will never be happy- they will never be happy because they keeping hoping of being like someone else – anyone but themselves.

      then there are those that never take the chance and never really live life as it should be for better or worse – and that is the biggest mistake of all.

      I may be the one making the biggest mistake of all not taking the chances in life that matters most and concentrating on the things that dont really matter and just going thru the motions.

      You have lived a full life already – I havent and that is my biggest regret of all even beyond this horrendous economy and the fallout that everyone is going thru because I have made it and lost it several times never taking the chance to smell the real roses.

      so you your sons and in-laws are rich beyond anyones imagination compare to others even as you struggle

    1. steve

      one job was in San Mateo, one was in San Francisco – neither was my ideal location.

      I swallowed my pride this afternoon and applied for another job with a cut in pay and title and decided that a job is better then none – and this one is in San Mateo also since they seem to be hiring – I sent in the application by the deadline which was 11:59 pm tonight and I know I will get an interview and I know I will be one of the finalist like the other two – but now I no longer believe I will get an offer – just a chance for one.

      I applied for others in Davis, Sacramento, Contra Costa , Half moon Bay, Santa Clara, San Luis Obispo – decided I wont sacrafice moving to places I wouldnt want to live because that is really important for the quality of life – these I dont think will call me back since I know when theres a fit and the ones that I just send it out for a hail Mary – 8 to 5 job with good pay in a fairly good area is still my goal.

      thanks for responding especially when youve had a longer time doing what I am doing now. And yes I am finally getting around to getting back in the shape I was when I worked out 6 to 7 days a week and taking some time to do and learn new things.

      only half the of my demise was due to the economy – the rest I did to myself – when you have an emptiness inside you find other ways to fill them – I ended up gambling away my future in the stock market and put myself in this predicament.

      Your sons Mansions are hard to sell is true – I am selling my house close to half what I paid for it but once he downsizes he may be happier with less stress to worry about – less stress of having to keep the mansion will improve his quality of life.

      I guess I am just a little behind the curve from going over the pain of being where I am and you are farther along and came out the other end already. I guess maybe you already found yourself already and I AM the one that is still searching for himself.

      Anyway just to let you know I am ok and back to attacking my problem and havent given up yet.

      Have a nice weekend and thanks for helping me snap out of my moment of despair – I am hoping I find a job before my house sale is completed – moving once is tough – moving twice – not thinking about it just yet .

      if you dont want to go to the gym – best workout video is Jackie Warners – the workout – it is great not too hard not too easy – combine it with jogging and or walking and youll be in great shape.

      If youve lived in Santa Barbara before – living in the central valley is like night and day.

      I live in Fairfield and like it since Napa is close by, Benecia is close by, Vacaville , Sacramento and Davis is close by – away from the Rat Race – yes even if I get the lower pay other San Mateo job – dreading the move – ie. hoping something else pops up.

      you lived in Santa Cruz or Monterey before thats like the Santa Barbara of the North – youve lived in very nice places – Ive been to Asilomar a few times since they have conferences there and its beautiful there too.

      in the late 70s like 79 – disco was the big thing – I remember alot of the hotels had disco dance floors and UC santa Barbara taught ballroom classes as well – I was at UC santa barbara in 79 myself

    1. Wiese

      I’m glad you’re doing better…it’s tough. I still have my occasional meltdowns too, although now that fall has arrived, things seem to feel a bit lighter.

      My son and his wife have found a buyer for their home and they, in turn are buying the buyers home (2 lawyers)- so they’ll have no mortgage payments, no debt and some cash. A great deal. The house even looks like their house, only a smaller version. They got lucky!

      Re the quote from Angela Davis, I got it from a book when I was in college…but, yes, I was somewhat of a hippie with long straight hair and I even painted flowers on my face and sewed my own clothes. There were different kinds of hippies too, depending on where you were from. I loved the SB hippies, they seemed more natural, vegetarians, just different. The dance club in Ila Vista was a place my older brother told my girlfriend and I to go to – we were too young and didn’t stay very long. As soon as a couple of guys tried to hit on us, we left. We were seniors in high school.

      Asilomar is lovely. I esp. love Monterey and Pacific Grove and Carmel Valley. I lived in Monterey and loved every minute of it.

      I have myspace that I use bascially to store favorite music videos on my “blog” – and I have facebook that I use as a soapbox to spread info on causes I care about, and to stay in touch with my nieces. There’s one photo of me with my son and grandson in my home. I rarely check them and don’t really like the whole thing. I feel funny even writing on this blog… Do you have facebook or myspace?

      I’ll have to check out Jackie’s workout! I’ve not been good lately…I need to get back on track! I’ve always been a thin person, but I need to tone.

      1. steve

        wow, your son got lucky – to end up like that is like best outcome possible, my house sale is still pending, still in limbo, still nightmarish.

        You can buy Jackie Warners workout on ebay or if your only interested in working on the abs – you can watch it on comcast exercise TV for free – I bought it months ago but just starting using it 2 weeks ago – I do all 60 minutes.

        I kind of guested from your previous emails your were slim and probably has classic fitures – so your lucky – working out then is for your health and not for looking better.

        I only signed on Facebook when I left and my secretary and another girl that worked there wanted to stay in touch – so I set up the account and only included the two of them and one other person that used my email account to try to add me as her friend – but I havent used it much since when the word got out I had a facebook account – people from work started trying to add me as their friend – and other nosy people – but I left them off and stopped posting – but yes I have a facebook account – I filled in all the bio and put in small album of pictures there.

        Pacific Grove – was nice when I drove by their leaving Asilomar I thought I was in a forrest of redwood surrounded by bright beautiful people -I am sure theres only a lucky few that can afford to live there – its that kind of lifestyle wish that probably caused me to loose the tiny few million I amassed to nothing – ie. inability to stop – like a gambler wouldnt. I am thinking of dating again – but that financial thing on my back and little income is kind of like a cloud on my back that makes it hard to take it too seriously right now until I get a job offer even though I have the time now – catch 22 , when I get the job – I probably wont have the time – hard to win on this one

        I was in Napa today – stopped by a Whole Food Store – love those stores – they have everything you want from organic to things you cant find anywhere else – a little pricey though.

        yes autumn is here I love the cool weather.

  18. Wiese

    When I lived in Monterey, my son lived in Pacific Grove (aka, PG) and I had a girlfriend who rented a house in PG – her husband taught physics at the university. They got lucky and got on a low-cost housing list and were able to buy a house in the military area that Monterey turned into housing. I had a another friend whose husband wrote for a TV series (they never would say which one, but it was lucrative) and they have a beautiful home in downtown Monterey not far from city hall.

    I know what you mean about the time thing – I need to do things to my house before I sell it and I have the time, but not the money right now. When I finally get work, it’ll be the other way around…

    Napa is beautiful. LOVE that area. Whole Foods is great, expensive, but nice.

    Is it kosher to post your facebook account so I can have you add me as a friend??

    1. steve

      my brothers a anesthegiologist, and my two sisters are PHDs only one of them can afford to live in Pacific Grove, I could have until I lost millions.

      read the below news article , I was in it years ago:

      http://philadelphia.bizjournals.com/philadelphia/stories/2001/09/24/story4.html

      http://www.facebook.com/home.php?#/munhoi?ref=profile

      the above is my facebook – you can use it to send me individual emails if you want – I am sure I am nothing like you envisioned I was

      If I could afford to , I’d live in Pacific Grove in a heart beat – its paradise out there just like Santa Barbara was but a little more intellectualized

      I am starting to feel the pressure to find a job soon, my dentist neighbor came by o give me a fresh canned salsa and they didnt know that i lost my job just that I have a sale sign on my house – the bank appraiser coming by next week – since I have a pending sale offer.

    2. steve

      looks like I gave you a link to facebook that doesnt open.

      just go to Facebook and search for my email address munhoi@aol.com and I am the one in the yellow shirt in the Sacramento region

  19. Angela

    I’m about to short sale my condo that I bought for $300k… I got an offer for $120k… if you had to do it all over again would you have short saled or forclosed? I know you have to pay taxes on the difference, but i heard if you forclose you will be forced into bankrupcy because the banks try to garnish your wages.

    1. Xeno Post author

      You need to consult a real estate attorney and a good tax firm. Ask the attorney if you are open to a deficiency judgment on the first and the second loans. Bring him/her your original loan documents. The lawyer should not charge you more than about $250 to do this review. If you are in California and depending on when you made the purchase and if this was your primary residence and depending on if you get a 1099 form, you may or may not have to pay taxes on the difference. A tax firm got me the answer on this in my case over the phone for no fee. I will probably use them to do my taxes this year.

      No, I believe that what you heard is false. Foreclosure does not force you into bankruptcy. It shows on your credit as a black mark for a certain number of years, but according to both my lawers and tax firm, there was no difference in the financial consequences for me of a short sale vs a foreclosure.

    2. steve

      I just completed my short sale back on March 15, 2010.

      I negotiated with the toughest bank to put language in my settlement to release me from all liabilities for any deficiency and fromt he PMI insurer as well.

      if you can do the short sale with only being 60 days behind that will limit the damage to your credit – ie its the days behind in payment that kills your credit more then the settled for less short sale code.

      I am trying to limit the damage from the short sale reporting and credit agency thing right now – not sure I will be successful. If your insolvent you will not have to pay any State taxes either.

      I wiped out $400,000 in debt although it was sold way less then it should ( ie I put close to $200,000 in upgrades that no other house around me had so the buyer got it like a christmas present)

      I dont see how you would keep a condo thats $300,000 when its only worth $120,000 – if you have a job and can afford to pay your mortgage – there is a chance the banks wont approve your short sale unless you are like 6 months behind and by then your credit is damaged – if your have no income and lost your job or insolvent then the short sale is pretty much a done deal.

      I hope you didnt have a refinancing – then you have to negotiate with Bank to get rid of the promissory note deficiency which isnt relieved in a short sale since CA only protects the first and not the refinancing.

      where you do live where your condo price dropped that staggering amt?

  20. SL

    Hi Steve, Xeno

    I’m trying to do a short sale on my home in CA, that I bought for 410k and is currently worth 155K. I lived in the house for 3 years and then because of job change I had to move to San Jose and then I put that house on rent. Its still on rent but I have to pay almost $1300 each month to make up to the mortgage. I have 2 loans on that. I then bought another house in San Jose and have been living here since last 2 years. Would my previous home still be considered as my Primary house (as I had lived in there) and would I qualify for the Debt relief act 2007? As I still have a good job, I’m not sure if bank will approve my short sale. Should I foreclose or short sell? Any advice as you guys have been through this. -SL

    1. Xeno Post author

      Best to get your original loan docs to a qualified attorney and discuss your options. Since you no longer live there your situation is different than mine.

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