Mortgage relief faces a tax-law nightmare
Given the huge public and private resources now being devoted to helping financially distressed homeowners — including the recently announced $25 billion national mortgage settlement with five major banks — you might assume that a key federal tax-law benefit underpinning these efforts would be a shoo-in for renewal.
But it’s not. The Mortgage Forgiveness Debt Relief Act is set to expire in 10 months, and there are early indications on Capitol Hill that it might not make the cut. The law, first enacted in 2007, allows homeowners who have received principal reductions on their mortgages as the result of loan modifications, short sales or foreclosures to avoid income taxation on the amounts forgiven.
Are you a struggling homeowner? Check out our Avoiding Foreclosure section for resources and tips.