The forgiven debt in shorts is not currently taxable by the irs or ftb. The irs change rules like a year ago and the ftb more recently (I actually had to call the office of the sponsoring state senator).

There are some limits on this but basically you’re probably safe.

Fannie Mae (as well as other debt buyers) are coming out with guidelines that indicate 5 year wait on purchasing after foreclosure vs a 2 year wait following a short sale.

They did this because the way it was before meant foreclosure was equivalent or easier on the credit report. This was a really bad incentive structure.

Since the short sale negotiators are now dealing with sellers who are making their payments, that means the collateral damage from a short can be actually rather well contained. For my clients in escrow now, that means that they will have a charge-off and a short sale on their credit report. There will be no delinquency, no non-payment, no default, and no foreclosure.

There will be a 100k+ chargeoff and a 2-year purchase moratorium though.