Debt “Forgiveness” Act passed by House

[hipmatt]

http://www.capemaycountyherald.com/article/10710-mortgage-forgiveness-bill-passes-house

By Joe Hart

WASHINGTON –– U.S. Rep. Frank A. LoBiondo (R-2nd) was one of 165 GOP members in the House to support the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648), a measure meant to help address the ongoing turmoil in the housing and lending markets.

The popular bill passed 386 – 27 with overwhelming bipartisan support. Similar legislation is pending before the U.S. Senate.

According to a release from the House Ways and Means Committee, “Under current law, debt forgiven following mortgage foreclosure or renegotiation is considered income for tax purposes, resulting in tax liability for individuals and families.”

This bill would provide tax relief to families by permanently excluding debt forgiven under these circumstances from tax liability.

The release noted that an estimated 2 million American families could lose their homes to foreclosure due to rising interest rates in the current housing market crisis.

“I am happy that Congress came together to give bipartisan support for this common sense bill to help alleviate the pressure American families are feeling due to the subprime mortgage crisis,” said Ways and Means Committee Chairman New York Rep. Charles B. Rangel (D-15th), who wrote and sponsored the bill.

“It is just not right or fair that families struggling through a foreclosure would then face a tax bill in addition to losing their homes when they have seen no increase in their net worth. This bill rights that wrong and provides tax relief to millions of American families.”

The measure would also allow homeowners who purchase mortgage insurance between Jan. 1, 2007 and Dec. 31, 2014 to deduct premiums from their income when they file their taxes, according to a release from Michigan Rep. Sandy Levin (D-12th).

“Mortgage insurance allows aspiring homeowners to take out safe, stable mortgages with lower down payments and provide an attractive alternative to so-called ‘piggyback’ loans. It levels the playing field among different mortgage options,” said Levin.

“Making mortgage insurance more affordable will help millions of families afford the American dream of homeownership.”

Contact Hart at (609) 886-8600 Ext 35 or at: [email protected]

[hipmatt]

This bill doesn’t attempt to prevent foreclosures, keep home prices high, or even keep people in their homes. Instead it almost encourages people to throw in the keys to their home.. hey you won’t even have to pay the taxes like you thought, might as well just walk away.

Since most lenders aren’t renegotiating loans, can we assume that this is a win for the RE bears?

[hipmatt]

This bill doesn’t attempt to prevent foreclosures, keep home prices high, or even keep people in their homes. Instead it almost encourages people to throw in the keys to their home.. hey you won’t even have to pay the taxes like you thought, might as well just walk away.

Since most lenders aren’t renegotiating loans, can we assume that this is a win for the RE bears?

[Deserted]

The only effect I can see from passage of this bill will be an acceleration of the downward spiral of real estate values in bubble markets such as San Diego.

Although this measure really only corrects an unreasonable tax provision, it is still typical of governmental interference in an existing market: it will have the opposite of the desired effect.

[Deserted]

The only effect I can see from passage of this bill will be an acceleration of the downward spiral of real estate values in bubble markets such as San Diego.

Although this measure really only corrects an unreasonable tax provision, it is still typical of governmental interference in an existing market: it will have the opposite of the desired effect.

[temeculaguy]

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.

[temeculaguy]

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.

[Author]

Posts