Legislation Helps Homeowners Who Are in Foreclosure

SACRAMENTO - Assemblymember Joan Buchanan (D-Alamo) voted today to support Senate Bill (SB) 401, a measure that provides relief to homeowners who have lost their homes due to foreclosure.

“I represent the zip code with the highest foreclosure rate in the nation and the zip code with the highest percentage of mortgages underwater. It is both emotionally and financially draining to lose one’s home. Requiring homeowners to pay taxes on mortgage debt is like pouring salt in an open wound. It is not good public policy,” said Buchanan.

SB 401 aligns California tax policy with federal tax codes, simplifying the process of filing tax returns for both taxpayers and tax preparers. Under current law, mortgage debt that has been forgiven by a lending institution is treated as taxable income. SB 401 excludes the first $500,000 of mortgage debt forgiveness from taxable income. The bill is part of a larger legislative effort to assist homeowners who are struggling and to stabilize the housing market.

“The stability of our housing market is critical to our recovery from the current recession and to California’s long-term fiscal health,” Buchanan said.

Organizations that support SB 401 include the California Chamber of Commerce, the California Taxpayers’ Association, the California Bankers Association, and the Center for Responsible Lending and the AFL-CIO.

Contact: Michelle Henry @  (916) 319-2015