In 2007, an important piece of legislature was passed aimed at helping homeowners suffering at the hands of foreclosure. The Mortgage Forgiveness Debt Relief Act protects those who restructured their mortgages, pursued a short sale or lost the home in foreclosure by waiving the tax penalties on the transactions. Now that the bill is set to expire at the end of this year, homeowners experiencing mortgage troubles could face further problems.
Continued Relief From Penalties?
While foreclosures are tearing through our nation like a tornado, more homeowners have suffered at the hands of mortgage trouble than ever before. Prior to the 2007 tax relief bill, homeowners who has a portion of their mortgage debts forgiven in a short sale or foreclosure were required to pay taxes on the forgiven debt amount. Since the bill was implemented, more homeowners have been able to avoid foreclosure and pursue other mortgage debt solutions without the worry of tax penalties.
While bankruptcy can provide an effective way of resolving mortgage debts and foreclosures, not all homeowners struggling to pay their mortgages would qualify or benefit. It is clear that the housing industry has a continued need for mortgage help and many government officials are pushing for the tax bill to be reinstated at the end of its term this year. Even with the price tag of an estimated $2.7 billion to renew the bill, industry experts say the bill is vital if the market is to continue some level of recovery over the next few years.