I always thought the tax on a short sale was stupid, they didn’t net anything and most are in no position to pay at that point, I’m sure someone will point out an example but I can’t think of another scenario where you lose and you get taxed to boot. If I lose on stocks or blackjack for that matter, I don’t get taxed, I’m only taxed if I win. I wouldn’t worry about this causing people to walk away, that wasn’t always taxed and sometimes is not forgiven, depends on the loan, it was the person who worked with the bank and sold for less than the debt but maintained the property while listed that got taxed, often the “short” price would be equal to or greater than what it would end up going for as a brown lawn repo. This does quicken the decline if the banks allow the shorts, which isn’t guaranteed. Instead of waiting a year for the repos to supress the market, the shorts will do it next week.

The PMI part changes nothing, the 80/20 or 80/10 had found the loophole, this just eliminates the previous rule that neccesitated the work around, instead of eliminating the loophole, the eliminated the need for it.

I’m with contrarian on this one, this doesn’t save anyone and may accelerate the price drop. I’m for this one as I understand it, the tax didn’t make sense in the first place.