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In order to conform state law to the federal law that recently passed extending mortgage debt forgiveness, the California Association of REALTORS® (C.A.R.) is sponsoring Senate Bill 30, so California homeowners on the brink of foreclosure can get much-needed debt relief.

One of the major successes Congress reached in the “fiscal cliff” negotiations was the extension of the Mortgage Forgiveness Debt Relief Act for another year. The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including any principal reduction) or foreclosure.

While debt relief has been extended at the federal level, the state exemption expired at the end of 2012, so forgiven mortgage debt is considered taxable state income for now. SB 30 (Calderon, D-Montebello) will extend the sunset date in California law to January 1, 2014. Upon its passage, the measure will be retroactive to January 1, 2013.