House Panel Approves Mortgage Forgiveness Debt Relief Bill

Location: New York
Author: RiskCenter Staff
Date: Tuesday, October 2, 2007

The House Committee on Ways and Means last week unanimously approved H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, in response to some of the tax issues that have arisen as a result of problems in the subprime mortgage market.

Under current law, debt forgiven following mortgage foreclosure or renegotiation is considered income for tax purposes, resulting in tax liability for individuals and families.

The legislation advanced by the committee would provide relief to those families by permanently excluding debt forgiven under these circumstances from tax liability.

The bill would also help would-be homeowners secure their investments through a long-term extension of the tax deduction for private mortgage insurance, and would ease restrictions for qualifying as housing cooperative corporations.

Finally, the bill would tighten requirements taxpayers must meet to exclude gain from the sale of certain homes that have been used as a vacation home or rental property.

“Families dealing with the pain of a foreclosure should not have the double whammy of a large tax bill for terminating their mortgage through no fault of their own,” said Committee Chairman Charles B. Rangel.

The bill – which has received support from the National Association of Realtors, Mortgage Bankers Association and National Association of Home Builders – next goes for debate and a vote by the full House.

Source: www.creditandcollectionsworld.com

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