Still Struggling With Your Underwater California Mortgage? Could Relief Be Headed Your Way?

If you purchased your California home during the most recent real estate boom, you may be struggling with a mortgage that is significantly higher than your home’s value — often deemed an “underwater mortgage.” Although a number of federal and state mortgage relief programs can help make your home more affordable by modifying your interest rate or mortgage term (or even forgiving a portion of principal), there can be some very steep tax consequences associated with the decision to pursue loan modification. In some cases, the assessment of state income taxes on forgiven mortgage principal could put you in a worse place than you’d have been if you never sought mortgage modification in the first place. Read on to learn more about how a recent legislative proposal introduced by Senator Cathleen Galgiani could provide relief to California homeowners struggling with the potential tax consequences of a deed in lieu of foreclosure or short sale.

What are the financial implications of short selling your California home or seeking a mortgage modification?

Under the principle of imputed income, many states (and the federal government) will assess income taxes on forgiven debt. This treats the amount of debt forgiven as an equivalent amount of income to be taxed according to state or federal tax rates. For example, if you sell your home at a short sale for $15,000 less than the mortgaged amount and this deficiency is forgiven by your mortgage lender, you’ll be taxed on an additional $15,000 in income for the tax year in which you sold your home. This principle also applies to homeowners who had a portion of their mortgage principal forgiven pursuant to federal regulations or who sought a deed in lieu of foreclosure (often called “cash for keys”).

For low-income homeowners, retirees on a fixed income, or those whose mortgages were heavily underwater, the assessment of taxes on this on-paper-only income can be an enormous burden. 

What does Senator Galgiani seek to change about this process with Senate Bill 907?

This California Senate bill proposes to eliminate state income tax on most mortgage-related imputed income, potentially protecting many families from being saddled with a heavy tax bill the year after they short sell a home or seek forgiveness of a portion of mortgage principal. Senator Galgiani’s bill has enjoyed some bipartisan support from those whose constituents have been affected by this tax provision, and stands a high chance of passage this session. If you’ve already received a tax bill from your short sale, it may be worth a call to an attorney to see if this legislation can help you; and if you’re considering mortgage modification or a short sale, it could be prudent to wait until this bill is put into law.  

What Constitutes Good Ethics In Politics? Defining Features And How They Apply

There are two areas of ethics in politics. Both are necessary if a political candidate wants to win an election with the platform of being morally upright and just. An example of this would be Kathy Hamilton, the elected official of the DuPage Board. She has demonstrated both the ethics of process and the ethics of policy. Here is what these two areas of ethics in politics mean, their defining features and how they apply to politicians currently.

Ethics of Process

The ethics of process questions the moral behavior and actions of someone already in office or someone who is attempting to get into a political office in morally objectionable ways. Examples of this type of political ethics is an election recall when it is suspected that the winning candidate may have stuffed the ballot box, or exposing a college president’s spending habits when money that should have gone to the school’s budget was instead spent on personal luxury items. To avoid ethical scandals, many candidates opt for total transparency, which places every purchase, every expenditure, every contribution and every decision in the public eye for the public’s scrutiny.

Ethics of Policy

The ethics of policy spotlights a political candidate’s choices in public policy, regulation and law. It asks that the public examine how an incumbent provided for and protected the constituents in his or her district. Laws and regulations made that served the people well, such as the denial of a tax or college tuition increase that would allow everyone an equal opportunity at life and an affordable education, are examples of good ethics of policy. Additionally, the refute of a millions of dollars of federal grant money when it is not needed and would be uncovered as fraud and waste by the organization that takes it is also good ethics of policy.

How Political Ethics Apply to Current Politicians

Some politicians have clearly got the concept of good political ethics down. Others do not. When you know what constitutes good political ethics, you can judge for yourself when the news prints scathing and scandalous stories about politicians that serve your district and your state, as well the President and presidential candidates. Then it remains up to you and your personal and moral views to decide if a candidate has upheld sound political ethics or has brushed them under the rug for a more personal pursuit of their ideals.

Running For Local Elected Office? Do You Need A Campaign Consultant?

If you’ve always dreamed of making a difference by engaging in public service — or if you’re simply tired of the existing leadership strategies in your community and want to help make a change — you may be interested in running for a local elected position. However, even the world of local politics can be rife with misinformation, “smear campaigns,” and other tactics designed to help tilt the outcome in favor of one candidate or issue. What can you do to ensure that your campaign message is clear and conveyed in a manner that will allow it to reach (and resonate with) the largest number of potential voters without stooping to low levels? Read on to learn more about the role of a campaign consultant, as well as some factors that can help you determine whether you need a consultant for your political campaign.

What does a campaign consultant do?

A campaign consultant is essentially a public relations representative with specific campaign experience. A consultant works closely with a candidate and his or her campaign committee to craft the campaign message and talking points, review (or assist in writing) campaign speeches, and manage any media exposure (both positive and negative) surrounding a campaign. For example, if a newspaper article misquotes you or wrongly attributes a position, your campaign consultant may work with the paper to rectify this mistake while simultaneously working on a press release that will help negate any negative effect of this publicity. 

Do you need a campaign consultant for a local elected position?

If you’re running for city council or the school board, you may feel that hiring a campaign consultant is “overkill” for a relatively small position. However, even if you opt not to use a consultant for the duration of your campaign, nearly all candidates can benefit from at least an initial consultation. 

Because voters as a group tend to have relatively short attention spans, it’s important to craft your message in a way that will allow voters to hear and react. While you may have a solid plan for improving your school system’s performance or your city’s budget, if this plan is buried in a dense wall of text on your campaign website or on promotional flyers or brochures, it’s unlikely to be very effective in garnering votes. By running your ideas past a campaign consultant, you’ll get some actionable tips and tricks on distilling this information into more easily digestible “sound bytes.” 

A campaign consultant can also be key if you’re planning to enter a hotly-contested race. Your primary job as candidate should be to focus on getting your message out to as many people as possible — and if you spend your time responding to unfounded attacks or criticism by other candidates, you’ll be unable to put on a good offense. A campaign consultant can help manage bad press, emphasize the good you’re planning to do, and take some of this burden off your shoulders.