The following is great news for California homeowners who are looking to purchase a home and any short sellers who sold in 2013 and may buy or sell in 2014. Napa County cap is $592,250 for Fannie and Freddie loans, $521,000 for a VA loan and $729,250 for an FHA loan.
The Federal Housing Finance Agency has announced that the 2014 maximum loan limit for mortgages acquired by Fannie Mae and Freddie Mac will remain at $417,000 for one-unit properties in most areas of the country. There is a cap of $625,500 in high-cost areas.
Short sales in California are generally not subject to state or federal income tax for cancellation of debt. The Franchise Tax Board (FTB) issued a letter yesterday stating that, as nonrecourse obligations, short sales in California are not subject to state income tax for cancellation of debt. The FTB’s position conforms with the federal treatment of short sales stated in an IRS letter as we previously reported on November 15. These letters will provide welcome relief for short sale sellers given that the tax break for a qualified principal residence under the federal Mortgage Forgiveness Debt Relief Act of 2007 will expire at the end of this year, and similar protection under California law already expired in 2012. The FTB letter includes transactions that closed in 2012 but, as always, sellers should consult with their own tax professionals.
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