The relief a debtor feels upon a creditor forgiving or canceling a portion of a debt often gives way to frustration when the tax man comes knocking. For taxation purposes, forgiven debt constitutes income subject to taxation unless there is a statutory directive to the contrary.

Three years ago, Congress opted to give home owners who have become unable to pay their mortgages a break. Under the Mortgage Debt Relief Act of 2007, taxpayers who had their debt reduced through mortgage restructuring or debt forgiven in connection with foreclosure do not have to include the forgiven debt as income for federal tax purposes.

However, federal taxes are only one component of the overall tax burden; homeowners must also pay state taxes, which are governed by state laws. Recently home owners in California have not been granted similar relief under state tax laws. More

Bankruptcy should always be taken as a last resort. It has long-standing consequences, many of which may be difficult to overcome. However, with 70 people in dire financial need, bankruptcy is the solution that is most prevalent. It is on television commercials, in newspapers, and rampant on the Internet. In fact, one in 50 US households has filed, or is likely to file, bankruptcy. While common, bankruptcy does not have to be the answer. In fact, before you consider filing for bankruptcy, consider these things first:

Is your debt mostly secured or unsecured? If your debt is mostly secured and you are willing to let go of that secured item, whatever it may be, instead of filing bankruptcy, why not short sale instead? A short sale means that you would sell your home or car for well below the market value of the home, with the aim of paying off the amount you owe to your lender as well as any outstanding payments, fees, etc. If you pursue a short sale with the bank, the bank will handle the sale and, in most cases, split the excess profit with you.

Could you walk away? You can effectively perform a short sale on your own without the bank’s involvement. In this case, you would venture to sell your home for slightly more than the note on the property. Just remember that the aim is to be able to pay off your debt, not to make a profit. While you may be able to achieve a small profit, it will be considerably less than you would have earned had you sold the property for the true value. Again, the idea is to simply get out of debt as quickly as possible. More

If loan modification efforts for struggling homeowners prove unsuccessful 2011 could be when the long-feared “shadow inventory” of home foreclosures hit the San Joaquin County market.

That is one of the conclusions of an economic analysis of the county housing market conducted by the Business Forecasting Center at the University of Pacific’s Ebhardt School of Business for the San Joaquin County Council of Governments. More

Worried about real estate? Don’t be.

Former HUD Secretary Henry Cisneros says the future for all types of real estate development is bright – it just might take a few years to get there.

Cisneros was the keynote lunch speaker at the National Association of Real Estate Editors‘ 44th annual conference, which is being held in steamy Austin, Texas. (The weather today is in the 90s and rainy, making it feel a bit like a tropical rainforest.)

Cisneros is the executive chairman of City View, an urban institutional investment firm which finances commercial and residential developers. The company has done more than $2 billion in transactions for 45 projects in 30 markets across 13 states. More

OAKLAND, Calif. (KCBS)  — Treasury Department officials at an Oakland workshop for at-risk homeowners highlighted provisions in the federal Making Home Affordable Program that require banks to “exhaust all options” to modify a loan before beginning foreclosure proceedings.

“And if it turns out that a homeowner can’t afford to stay in their home even with modified payments, the bank can work with them on a short sale or a deed in lieu,” said Andrea Rosato, a spokeswoman for the U.S. Treasury Department’s Home Ownership Preservation Office.

KCBS’ Chris Filippi reports many of the hundreds breathed a sigh of relief to know they had some rights even in dire financial straits. More

The California Association of Realtors is fighting an uphill battle to extend loan protections to homeowners who have refinanced their mortgages.

Alex Creel, CAR’s chief lobbyist, said the state Senate is likely to reconsider the plan Thursday. The body rejected it on a 19-5 vote last week, he said.

At issue is a proposal that would forbid lenders from seeking unpaid portions of a refinanced mortgage after a home goes through foreclosure.

Currently lenders can’t do that if the loan was issued at the time the home was purchased. In a law dating to the 1930s, the homeowner’s liability is limited to the amount the lender recovers from the property at a foreclosure sale — even if that’s less than the amount owed. More

There’s more pain ahead for the housing markets, according to a recent report from Morgan Stanley.

How likely is this nightmare, and what can you do with this information?

“We see potential for another 5-10% decline in nominal prices over the next year,” said the authors of “U.S. Housing Strategy: The Long Road Home,” an analysis out this month from Morgan Stanley.

Even after home prices hit bottom, Morgan Stanley’s experts think home prices will stay low “for another three to four years, during which annual appreciation may reach only as high as inflation or income growth.”

Only a few economists still expect a big drop to home prices this year, though most expect prices to sag. More

California’s foreclosure crisis has spawned an unusual operation by a bankrupt Orange County businessman who takes control of vacant homes and rents them out, according to police, property records and neighbors.

From an office at an Anaheim massage clinic, Blair Hanloh has recorded deeds on at least 12 vacant houses in Southern California that he does not own. Property records show no evidence that the owners deeded interest to him—and five owners interviewed by The Orange County Register said that they had not.

Hanloh uses his deeds, to homes in Orange, Los Angeles, San Bernardino and San Diego counties, to line up tenants and to placate police, who are inevitably called by neighbors to oust new residents they believe to be squatters. More

The JPMorgan Chase & Co executive was at a congressional hearing in Washington when a lawmaker asked him who mortgage borrowers could turn to if they felt his bank’s employees were not helping them hold onto their homes.

“Come to me,” said David Lowman, chief executive for JPMorgan Chase & Co’s home mortgage business in response to the question from Massachusetts Democrat Barney Frank.

Minutes later, around 50 borrowers burst from the audience and presented Lowman with a 6-page document alleging his bank reneged on a pledge to help struggling homeowners. More

WASHINGTON, Feb. 15 (UPI) — The U.S. housing market faces uncertainty as government support programs change direction, industry observers said.

With the Federal Reserve Bank set to stop a $1.25 trillion mortgage-backed security purchase program in March and a federal tax credit for first-time home buyers ending April 30, opinions vary on whether the market can stand on its own versus which direction it may fall, The New York Times reported Monday. More

The Hercules Redevelopment Agency occasionally buys homes and resells them or puts them up for rent. But what you have to do to get one is a bit of a mystery.

The Homeownership Retention and Loss Mitigation Program was established in May 2007 with the primary aim of helping homeowners who previously borrowed money from the agency avoid foreclosure by their primary lender. The agency has bought 11 homes under the program, city records show. In some instances, the agency paid off the existing bank mortgage and stepped in as first lender; in others, the agency bought the home.

Five of the 11 purchases occurred in the last half of 2009, all but one as short sales. The agency since has resold one of the homes, and rented two others back to the owners it acquired them from. The other two — a condo at 1209 Devonwood and a condo at 16 Amber Court — are vacant.  More

Bank of America’s newly-minted CEO Brian Moynihan announced last week that the company has hired additional loan management staff “to ensure we are doing all we can” to help homeowners. Yet he neglected to mention that any customer seeking guidance on, say, avoiding foreclosure just might reach one of B of A’s helpful “home retention” reps — in Mumbai.

That’s where B of A (BAC) has recruited at least some of its loan specialists, according to a November 2009 ad that ran on Indian job-hunting sites including TimesJobs.com and eBharatJobs.com. One thing to note is the experience required for candidates: 0-5 years. More

The heartbreak of foreclosure has been felt all around the Bay Area.  The Cardosos are one of the most recent to face this situation.  Only problem is, they paid cash for their house.

The Massachusetts couple had purchase a future retirement home in Spring Hill with cash in 2005.  They filed a lawsuit on January 20 that alleges he Bank of America seized the house, removed the belongings, and changed the locks on the their home.

The bank had an incorrect address on foreclosure documents.  The house it meant to seize is across the street and about 10 doors down.  But the Cardosos and a Realtor employed by Bank of America were unable to convince the company that it had the wrong house.  More

Donna Strange doesn’t want to see more homes built in Manteca until foreclosures that are plaguing neighborhoods – including her own south of Woodward Park – are absorbed by the market.

That is why she spoke out last week against two proposed neighborhoods with a combined total of 863 single family homes that are envisioned for vacant land immediately south of the Jasmine Hollow, Emerald Glenn and Rose Garden neighborhoods near Woodward Park.

“What happens to the foreclosures in our neighborhood?” she asked the City Council if even more new homes are built nearby. More

“While home prices have been trending up since spring 2009, existing, new and pending home sales are waning, which suggests that lower prices are on the horizon,” said the statement.

Market analysts and policymakers at the Federal Reserve are closely watching the battered housing sector and the weak jobs market to gauge whether the U.S. economy can go on growing and to determine when the central bank may start raising interest rates.

Recent data showed U.S. existing home sales dropped by a monthly record of 16.7 percent in December, while new home sales fell by 7.6 percent, S&P noted.

U.S. home prices increased in June 2009 in seasonally adjusted terms for the first time in nearly three years and prices continued rising through November, S&P said.

But in nonseasonally adjusted terms, the S&P composite index of home prices in 20 metropolitan areas slipped 0.2 percent in November.

The recent fall in home sales is boosting the number of existing homes on the market, which grew to a 7.2 months supply in December from 6.5 months in November, S&P said. More

In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040.

“People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?”

After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing. More

Will your house hold its value as a financial investment and a good place for you to live during the next decade? What’s ahead for the housing market?

To answer those questions, homeowners and homebuyers should watch four trends:

1. Echo boomers’ entry into their peak homebuying years.
2. Baby boomers’ entry into their peak home-selling years.
3. The new demand for smaller homes.
4. The new demand for more energy-efficient homes.  More

The US government may be fueling another housing market bubble, according to a report released last week by the the Special Inspector General of the Troubled Asset Relief Programme (SigTarp).

To the extent that the crisis was fueled by a ‘bubble’ in the housing market, the Federal Government’s concerted efforts to support home prices…risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.

And yesterday, Paul Volcker, the former Fed chief who is now proposing a ban on proprietary trading at deposit-holding banks, reiterated the risks of too much government backing for the mortgage market, calling the mortgage market “broken” and saying that Canada’s banking system had avoided the worst of the effects from the housing bubble collapse by keeping its mortgage market private. More

There is good reason to be skeptical that the real estate market will heal rapidly from the self-inflicted wounds of the mortgage crisis. Even as home sales pick up and the shares of real estate investment trusts and home builders rise ahead of the market, the hangover from last decade’s building boom continues to be felt.

Vacancies, regardless of property type, remained at or near all time highs in the U.S. in the last three months of 2009 according to Census data. Predictions that demand for homes and properties are being constrained only by the recession are likely just wishful thinking says analyst Josh Levin at Citigroup. More

The Great Bailout is mostly over for the banks. But for those troubled behemoths of the nation’s housing bust, Fannie Mae and Freddie Mac, the lifeline from Washington just keeps getting longer.

Fifteen months after Fannie and Freddie were effectively nationalized, neither the Obama administration nor Congressional leaders see a quick solution to one of the thorniest problems in American finance: how to fix the twin mortgage giants without choking the flow of credit to homeowners and dealing a blow to a still-fragile housing market.

The administration had said for months that it would begin charting a new course for Fannie and Freddie when it released its budget proposal on Monday. The companies, crucial pillars of American housing, already have consumed over $112 billion of taxpayer dollars. More

SACRAMENTO, Calif. – (Business Wire) The California State Department of Real Estate (DRE), the state department that issues licenses to real estate professionals and protects consumers in real estate transactions, revoked a record number of real estate licenses for cause in 2009. The DRE also accepted another record number of license surrenders from licensees facing disciplinary action. All told, over 775 licensees had their license revoked or simply surrendered their licenses while facing accusations.

Over the past two fiscal years, the DRE averaged 446 license revocations and 59 license surrenders. In 2009, license revocations jumped over 50%, to 672, while license surrenders jumped nearly 80% to 105. The 122 cases that resulted in license suspensions in 2009 remained relatively unchanged from the 125 license suspensions averaged in the past two fiscal years. More

The government’s loan modification process (Home Affordability Modification Program or “HAMP“) is an abject failure in its current form. Complaints abound from underwater homeowners (it’s estimated that over 1/4 of homeowners owe more than their home is worth), banks and loan servicers about the documentation; the ability to morph from temporary modifications to permanent ones; and the inequality of first and second mortgage holders.

Almost every expert agrees that loan forgiveness is the key, but thus far, banks have been reluctant to write down loans because of the balance sheet impact. This “pray and delay” or “extend and pretend” strategy can only work if the economy and house prices recover quickly. Anyone think that’s happening? More

Have you considered buying a new home in Modesto?

Good luck trying. No subdivisions are building, and virtually all Modesto home developers have mothballed their projects or sold out.

Only Habitat for Humanity’s nonprofit Hope Village has construction plans for 2010, and those houses will be built by volunteers.

That’s no surprise considering the dismal housing market. Just 249 home-building permits were issued during 2009 in Stanislaus County, with only 38 in Modesto. More

The four-county region continues be a joy to bargain hunters, offering an abundance of foreclosed homes, especially in Sacramento County.

But finding a home could be a challenge. About 5,800 homes were on the market last month, 46 percent fewer than December 2008 — and much lower than the record 15,300 in August 2007.

Fewer homes on the market translated to fewer opportunities, as sales dipped 1 percent last month compared to November and 22 percent off December 2008, according to a Trendgraphix report released Tuesday.

Many of the homes available were bank-owned. Foreclosures increased 22 percent last month compared to November, as federal government moratoriums on such actions faded at the end of the year. And foreclosures — which have dramatically dropped home prices — will likely dominate the market this year. More

Even as the housing market shows signs of improvement, including in new data released Tuesday, economists warn that it could take up to a decade for many homeowners to regain equity in their homes, while some people in the hardest-hit regions of the country may not see a recovery during their lifetime.

Home prices have fallen 30 percent since reaching their peak in 2006, and many economists think they will take another tumble this year as more foreclosures pile on the market. The pace of recovery will vary throughout the country, with homes in the most battered markets taking the longest to regain value. Meanwhile, millions of homeowners who are “underwater” — owing more on their mortgages than their homes are worth — face years of negative equity that puts them at a higher risk of foreclosure. More

Bonus bucks – part of Manteca’s development lexicon since 1998 – saved Manteca from having to face tough decisions to cover annual general fund budget shortfalls from 2002 through 2006 to the tune of $5,709,500.

This current fiscal year bonus bucks bridged $6 million of a $14 million deficit that was triggered by a precarious dip in property and sales tax revenue and the foreclosure mess. The general fund infusion was enough to cover the payroll and benefit costs of 46 public safety workers or just over a fifth of the entire budget.

Bonus bucks have also paid for soccer field lighting at Woodward Park, covered part of the cost of the Union Road fire station, and paid for the skate park and traffic signals along the Tidewater Bikeway among other items. More

Want to know one of the scariest things out there right now when it comes to the precarious state of the housing market?

It’s the huge amount of shadow inventory banks and other lenders are sitting on, ready to dump on the market as prices start to move upward again.

Of course, shadow inventory is the fancy name for foreclosed homes and condos that banks have taken back, but have yet to put on the market.

The numbers are staggering – 1.7 million homes across the country – owned by banks which eventually plan to dump them back on the market. More

The new president of the Fresno Association of Realtors is emphasizing training this year — and even many veteran agents may need it.

That’s because short sales and foreclosures, once a minor part of any housing market, have come to the forefront. When home values started plunging, bankers started calling. The time of reckoning arrived for many people who owed more on their property than it was worth. More

Following a national downward trend, renters in the largest apartment complexes in Santa Cruz County are paying an average of 6.7 percent less than they were a year ago, but they’re still paying more than any other community in the state, according to a market survey of the last quarter of 2009 by RealFacts, a data services company.

The survey, however, only takes into account figures relating to rental communities comprised of 50-250 units. In Santa Cruz County that equates to about 1,610 units in 13 rental communities in the city of Santa Cruz and two communities in Capitola. More

SAN FRANCISCO – (Business Wire) Falling inventory levels and strong sales activity in December, 2009, helped to drive continued improvement in San Francisco’s housing market, according to the latest Market Focus report issued jointly by Rosen Consulting Group and the San Francisco Association of REALTORS®. The median single-family home sales price increased for a third consecutive month in December reaching $755,608. That represents a 7.9 percent increase from December, 2008. The report attributes the improved market conditions to a drop off in foreclosure sales and a growing proportion of sales in higher priced neighborhoods. More

WASHINGTON (MarketWatch) — Concerns about the poor job market and a further wave of home foreclosures depressed the spirits of U.S. home builders in early January, an industry trade group reported Tuesday.

The home builders’ sentiment index declined to 15 in January from 16 in December, the National Association of Home Builders reported. The index, now at the lowest since June, has declined in three of the past four months.

At 15, the index indicates that about one-in-six builders thinks the market is “good.” More

While the pace of commercial real-estate sales remains anemic, a few real-estate experts are saying prices have stabilized and are even, in some cases, rising from their lows of the recession.

Backers of this theory point to the loosening in the public capital markets, which has allowed dozens of real-estate investment trusts to raise debt and equity financing to fix up their balance sheets. The bulls also say investors who had been sitting on the sidelines are becoming more active, especially foreign buyers like HSBC Alternative Investments Ltd., which is buying 1625 I St. in Washington in a deal that values the office building at a respectable $203.4 million.

But one major index shows values continuing to decline as of late last year. Market bears note that with unemployment high and rents and occupancies continuing to fall nationwide, values also have further to drop. Both sides agree that any real-estate recovery would be imperiled if interest rates rise significantly. More

In the cast of corporate characters, Fannie Mae (FNM) and Freddie Mac (FRE) are A-list villains, thanks to the central role they played in the 2008 financial meltdown. The two mortgage-finance firms failed as spectacularly as AIG, the poster child for finance-gone-wrong, with the combined Fannie-Freddie rescue totaling about $111 billion so far—the biggest bailout of all. Both firms are effectively nationalized, and the government would probably wind them down except for one thing: They underwrite about three quarters of all the mortgages issued in the United States.

You’ve probably heard that the economy is recovering, that consumers are more optimistic, and that companies might soon begin hiring more workers than they’re firing. Hooray. We’ll all be thrilled when the economy stops quivering. The only problem with an upbeat prognosis is that large chunks of the U.S. economy remain addicted to financial painkillers or dependent upon dysfunctional institutions like Fannie and Freddie, and we’ve never gone through the kind of withdrawal that’s set to take place this year. More

Even as Sacramento entertains ambitious proposals for a new NBA arena, economists Friday warned it will take up to four years for the region to recover from its overbuilding and overspending spree.

Analysts Friday told 150 residential and commercial appraisers that area recovery could begin taking shape in mid- to late 2011. But it will be prolonged, slow and susceptible to setbacks, they said during a 2010 economic forum sponsored by the Sacramento Sierra chapter of the Appraisal Institute. More

The concept of “principal residence” is critical in our tax laws. To qualify for the first-time-home-buyer tax credit, the house you buy must be your principal residence. If you want to claim the exclusion of up to $500,000 in capital gains ($250,000 if you are not married) when you sell your home, that property must be your principal residence.

When you file your annual income tax return, you can deduct the interest you pay on your mortgage (up to a certain limit), and you can deduct the real estate tax paid to your local government. The deductions are available for your principal residence and for one vacation home.  More

Billionaire and famed real estate investor Sam Zell, Founder & Chairman of Equity Group Investments joined Maria Bartiromo for a ” CNBC Exclusive” interview on Wednesday.

Housing will gradually begin to recover in the second half of this year, David Goldberg, UBS’ home-building analyst, writes in a client note today. That assertion comes with 10 predictions for the year. (We’ll be happy to check back in 2011 and see how he did.)

1. “Fundamentals will remain ‘choppy’ in the first half of the year, with conflicting data points making it difficult to ascertain whether we’ve actually reached the trough in housing.”  We can’t argue with this one: Data points have turned into a roller coaster.
2. “Headline risk, primarily driven by the government’s efforts to extract itself from the mortgage market, will drive the homebuilding stocks down 15% or more from current levels.” Mr. Goldberg continues: “With the longer term path for fundamentals offering limited clarity, we expect the homebuilding stocks to remain quite volatile and extremely sensitive to news flow.” We don’t need to remind investors how far they’ve already fallen from peak levels — or how they bounce around day-to-day! More

The housing market is in for a long slog back up from the bottom, according to a new forecast out this afternoon from the Mortgage Bankers Association.  The trade group, which represents lenders and real estate finance firms across the country, issued its projections for 2010 and the years to come today. And they do not project a return to the high-flying days of years gone by any time soon.

In fact, they predict that the fourth quarter of 2009 may be the high-water mark for existing home sales for some time to come, as tax-credit-fueled bargain hunters snapped up homes at a healthy clip. But it’ll be at least 2013 before we see sales at that rate again, the MBA expects. (data is on an annualized basis; quarterly through 2010, then full year for 2011 and 2012). More

Most Manteca new home builders aren’t even breaking even these days on their investment despite enjoying a robust year in comparison with the rest of San Joaquin County.