Letters seek Congressional Action on Expiring Mortgage Forgiveness Debt Relief Act

Three financial services and consumer advocacy groups have joined to send letters to the House and Senate urging them to preserve the temporary tax exemptions for forgiven debt.  The Financial Services Roundtable, the Center for Responsible Lending, and the Housing Policy Council sent the letters Wednesday to the chairs and ranking members of the House Committee on Ways and Means and the Senate Committee on Finance.

The groups are petitioning for an extension of The Mortgage Forgiveness Debt Relief Act which is due to sunset on December 31.  The legislation was originally passed in 2007 and prevents homeowners who are underwater on their mortgage from receiving a tax bill if they sell their home through a short sale or receive a loan modification that includes principal reduction.   The Senate committee has already reported out an extenders package which includes this and other expiring legislation but it has not yet been taken up by the Senate as a body. The House committee has taken no action on the bill.

The letters state that, "If Congress allows the law to expire, then homeowners who are working with their servicer could end up owing more in taxes if they receive any kind of mortgage debt forgiveness. This would make it more difficult and expensive for these homeowners, who are already financially struggling, to accept short sales and many loan modification offers. Allowing the law to expire would harm these families and their communities, and it would run counter to current loss mitigation efforts."

The letters are signed by the groups' presidents, John H. Dalton, Housing Policy Council; Mike Calhoun, Center for Responsible Lending; and former presidential candidate Tim Pawlenty, The Financial Services Roundtable.