Tax Relief Act For Short Sales and Foreclosures In Effect Until 2014

Great news on the housing front! As part of the 2013 Fiscal Cliff negotiations, the Mortgage Debt Relief Act has been
Mortgage Debt Relief Act extended through 2013extended through 2013.


Originally passed in 2007, the Mortgage Debt Relief Act gives homeowners who short sell their property the opportunity to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage refinancing or loan modification, as well as mortgage debt forgiven in connection with a foreclosure, qualifies under this act as well.

The Mortgage Debt Relief Act originally applied to debt forgiven between the calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible under this act, or $1 million if married filing separately. This will not apply if the forgiveness of debt is due to services performed for the mortgage company or lender, or any other reason not directly related directly to a decline in property value or the homeowner’s financial status.

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As a Certified Distressed Property Expert (aka CDPE), Montemayor and Associates specializes in helping homeowners who are in need of guidance and assistance when it comes to issues with their home. One of the questions we get asked quite often is, “How would a short sale affect my credit score?”

This question can have many answers, but here is a quick summary…

There are a few things that must be considered when determining how big the “Hit” on your credit will be when completing a short sale. These factors are, but not limited to:

  • Your initial credit score

  • Your credit history and how consistent you were prior to the short sale

  • Other items that are currently not being paid

In addition, we have seen credit scores reduced between 50-350 points, with the majority of them falling in between the 100-250 range.

The good news is that we have seen our clients be able to rebuild their credit score as soon as 6 months, and in most cases over an 18-24 month period, which will be perfect timing to re-enter the market and buy their next home.

Check out this short video to see Brandon discuss the factors that directly impact the affect of short sale on your current and future financial situation.

If you have any further questions, please call us directly at 661-510-2789, email us at, or check us out on the web at

We look forward to hearing from you and hope you give us the chance to help you and your family.

We are excited to have received a recent client testimonial from a client who recently avoided foreclosure when we helped him with a short sale:

Hey Brandon,

Hope all is well and that you’re enjoying the holidays!

Just wanted to pass along some info that may be interesting to you, and helpful to other clients of yours who might be considering a short sale, etc.

We recently took a look at our credit after the short sale, etc. We were amazed that both of our scores were in the mid 700s (it’s been about 6 months since the sale I believe). I know that everybody’s situation is different, but there is life after a short sale – strictly in terms of your credit, you can come out of it okay and that was something I was concerned with from the outset.
Take care,

Eric H.

Now, while every case is different, typically a short sale is much less damaging to one’s credit as opposed to letting their home go to foreclosure. Also, the above clients have put themselves in a good position to purchase another home when they are ready. Know that typically, a foreclosure on your credit record will result in you not qualifying for a conventional loan for AT LEAST seven years, while a short sale, on average, results in a potential home buyer qualifying for a loan within 24 months.

Are you in over your head? Do you know someone who is struggling to make their mortgage payments, especially if they are upside down on their mortgage? Now is the time to act. We are here to answer your questions professionally, and without obligation. Find out more about our foreclosure prevention programs by going to, or by calling us direct at 661-290-3802.