US Congress Moves a Step Closer Towards Amending Tax Code to Relieve Those in Foreclosure As the Ways & Means Committee Approves Mortgage Forgiveness

WASHINGTON – The House Committee on Ways and Means unanimously approved H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, today 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 today 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 bipartisan 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 Ways and Means Committee Chairman Charles B. Rangel. I am pleased the Committee joined together to unanimously pass this critical legislation and I look forward to bringing this measure before the full House."This proposed legislation is supported by both the National Association of Realtors and the Mortgage Bankers Association.