Legal Question in Real Estate Law in California

Your question does not make sense. If you just refinanced the house must have appraised for over $299,000 or there is no way you should have qualified for the refinance. The tax appraisal process is a fantasy world. You can't rely on them. You have to go with an appraisal from a licensed appraiser, which you should have gotten in the refinance. If your house really has lost that much value and you somehow managed to get a refinance anyway, you are in a pretty bad position. By refinancing, you lost the anti-deficiency protection of your original purchase-money loan. Even so, however, if it really have lost that much money you should seriously consider walking away from it. Commercial lenders almost never file for a judicial foreclosure, and if they do the regular foreclosure with a trustee's sale and no court proceedings, the anti-deficiency law kicks back in. Continuing to make payments on that property is only making your retirement situation worse, because it will never be worth what you paid for it in time for you to retire, and the money you are paying for it is just evaporating.

When you trade in a blue car for a green car, you shouldn't be surprised when you open the garage and see a green car in there. Similarly, if you now have a 40-year loan, it's because that's what you selected -- banks also offer 15 and 30 year loans. The monthly payment is higher on the shorter-payoff loans, but since there are far fewer of them, you end up paying less interest.

As Mr. McCormick points out, don't go by what the property-tax appraiser says. They use theories, formulas and data intended to collect as much tax as legally permitted, not to reflect current market vale. A good source of current and free guesstimates of market value is www.Zillow.com, or ask a local real-estate office to give you a market analysis. Using a licensed appraiser is more accurate, but will cost several hundred bucks.

Finally, we have heard of lenders actually reducing a borrower's principal as part of a workout deal on a problem loan. Used to be rare, but there is now a so-called "HAMP" program, for Home Affordable Modification Program - you can find articles about it via the Web. Not everyone will qualify; you may need a loan-to-value ration exceeding 120%. Since you refinanced so recently, you may be ineligible. It helps to understand the bank's reluctance to knock $50,000 off your principal when the value declines by $100,000 if you think about what you'd say to the lender if it asked you to fork over $50,000 because the value went UP by $100,000! The prospect of a foreclosure as the alternative has changed the banks' thinking, as maybe will the "HAMP" program, but I still see principal reductions as being pretty rarely given.

Your post does not make sense. You want the tax appraised value lower, because that is what your property taxes are calculated from. If your tax appraised value was higher, your property taxes would be higher.

Tax appraised value has nothing to do with market value. Market value is what a willing seller and a willing buyer would agree for your property. The bank would hire a real estate appraiser to determine your market value, and the tax value would not be a factor in that.