.Re: being taken to court for Deficiency Judgment: ONLY IF YOU DO A SHORT SALE will you be safe from the bank ever coming after you for a DJ, if the 1st & / or 2nd lien holder AGREE to the terms of a Short Sale, they MUST release you of "any & all liability" & the loan is considered "PAID IN FULL".
If you "just walk away", it is not over & they Can come after you.
The Mortg. Debt Forgiveness Act, whether it expires or not, won't affect you if you have a purchase money loan or loans, since CA is a non-recourse state, you can talk to a CPA about this, it's the way the IRS rules handle 'cancelled debt'. Even if you have a refinanced loan or loans, although typically a refi'd loan becomes non-recourse, if you didn't take any cash out, it can still be treated as though it's non-recourse because you didn't receive "income". What could affect Californians if the MDFA is not extended is the liability to pay STATE income tax only on the negative debt & even then, it may be possible in your situation to prove insolvency, like with IRS Federal form 987.
What Can be taxed is if you took out $100K in an equity loan & went & bought a boat or paid off credit cards etc, however if you can prove that some of that money or all of it went into upgrading or repairing your home, your tax consequence may be less.
If you're talking about short selling investment property or property that you Cannot claim you lived in for 2 out of the last 5yrs, you will be taxed regardless of the Mortg Debt Forgiveness Act expiring.
Just about every Realtor these days can talk a thing or two about short sales, but not all can walk the walk. I have seen agents who have listed 100 short sales, but only successfully have closed 20 or have listed 15 & only closed 3. I have a 100% success rate, every short sale listing I've taken has successfully closed w/ an avg approval time of 65 days w/ the major lenders. Between myself & my team, we've closed over 760 short sales since 2007.
Shoot me an email if you'd like to talk about your situation further, I don't look back on this same Trulia thread for answers posted after mine.
Emily S. Knell
Realtor Since 1996
Realty ONE Group
Short Sale Specialist - 100% success rate