I'm a CA resident who needs to "walk away" from my condo that I own in the Bay Area. I want to start the foreclosure process. I'm seeking some advice/awareness of foreclosure in California. Mainly, all the costs involved. Do I need a lawyer? With the new laws, what are the taxes on the forgiven balance? (home value is ~$80,000 less than the current mortgage which is $297,000).

Thank you,

Hello g:

Taxes have been forgiven. I don't think it costs YOU anything. What do you need a lawyer for? Walk away. Yeah, your credit will be trashed. Assuming, however, that you've already missed lots of payments, it already is.

excon

First, YOU don't start a foreclosure. A foreclosure is a process used by your lender to recover the property secured by their loan to you. They decide when they want to start the process.

Second, if they do foreclose, then the property will be sold at auction, whatever they receive will be applied towards the balance of the mortgage. Any balance will still be your responsibility. The lender may "forgive" the blanace but that will mean the balance will be reported as income for you and added to your income for the year to determine tax liability.

Thanks econ and Scott for your answers! I've been making payments, but am considering stopping the payments as of next month. I read somewhere that only the CA state taxes are forgiven, but not federal. Which would be huge. Figure 30% of $80,000 (negative equity) is $24,000 in taxes! Yikes. Anyone have info on how the mortgage lender deals with forgiving balances etc?

Thanks again for your help!

Hello again, g:

Here's the IRS website.

excon