04-15-2010 , A measure (SB 401) signed by Gov. Arnold, waives state taxes on mortgage debt forgiven in a foreclosure or short sale.
Borrowers are required to be owner-occupants of the principal residence, show financial hardship and have a first lien mortgage originated on or before Jan. 1, 2009 with a principal balance that does not exceed $729,750. In addition, the borrower’s total monthly mortgage payment must be greater than 31% of his or her monthly gross income.
The new state provision applies to mortgage debt forgiven by lenders during tax years 2007 to 2012.