Wednesday, October 26, 2011
California Housing Finance Agency has already taken twenty-one homes and is poised to take four dozen more. John Hill with the California Senate Office of Oversight and Outcomes said the foreclosures are based on an overly strict interpretation of federal tax law. The law was intended to keep borrowers from profiting on below market interest loans.
“They didn’t want people using the program, exploiting the program, trying to set themselves up as landlords, so they have this rule," said Hill, "but the rule did not take into account the real estate market would go the way it’s gone.”
One hundred and eighty-six mortgage holders in violation of the rule have been ordered to apply for a one-year waiver, move back in, or sell. Seven other states allow the renting of such properties outright. Another ten allow it in some cases. Cal HFA said it is reviewing its policy.