Realtors® Applaud House Passage of Mortgage Cancellation Tax Relief

WASHINGTON, October 04, 2007 - The National Association of Realtors® praised the U.S. House of Representatives for today’s passage of the Mortgage Cancellation Tax Relief Act, H.R. 3648, by a vote of 386 to 27. Since the early 1990s, NAR has advocated for repeal of the current law, which forces individuals to pay an income tax when they have had a loan forgiven or have had to foreclose because of their inability to pay their mortgage.

“Congress made a good decision today that will affect many Americans who find themselves in a truly bad situation,” said NAR President Pat V. Combs, of Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt. “Changing the IRS code is an issue of fundamental fairness. It would relieve a tax burden at a time when an individual or family has experienced a true economic loss arising from the sale or loss of their home. These families are already in financial distress and are most likely unable to pay additional taxes.”

NAR has expressed its commitment to continue efforts to make the horror of losing a home less burdensome for families. “This is not only about the subprime turmoil we are currently experiencing. This is also about families who have lost their home or a need to sell that home for less than the amount owed on their home mortgage because of job loss, divorce, health issues, a decrease in the value of the home or other unfortunate circumstances. Clearly it is unfair to tax people on phantom income when they most likely have no cash with which to pay the tax,” said Combs.

The current tax code requires a lender who forgives debt to provide a Form 1099 to the IRS stating the amount the borrower has been forgiven. This disclosure applies whether it is a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt. If the property is sold at foreclosure or is sold for less than was borrowed, that difference is considered income and is subject to the tax.

H.R. 3648 would ensure that any amount forgiven on mortgage debt secured by a principal residence will not be taxed. The legislation has a provision to safeguard against abuses. That provision is similar to one that already exists for commercial real estate owners and would treat commercial and residential property equally.

“Realtors® are about building communities, not just selling homes. We must work together to prevent the dream of homeownership from becoming a nightmare” said Combs. “This is just one step that will help families get on with their lives and begin rebuilding their economic security.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.


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