Mortgage Debt Relief Act Ended on December 31-2013
- katerinatristan
- Feb 9, 2014
- 2 min read
Mortgage Debt Relief Act Ended on December 31-2013
For six years now underwater struggling homeowners were able to use the benefits of the mortgage debt relief act to avoid having to pay taxes on the part of the shortfall on their note in a short sale and in some foreclosure cases.
When the subprime housing market crashed Congress enacted this act to give homeowners a break in the reduction of their mortgage debt.
Each household that was underwater was exempted from federal taxes under the 2007 law for up to $2 million. The law expired on December 31, 2013 at midnight.
Housing advocates claim that there are still 6.4 million homeowner underwater on their mortgages. This means that they owe more on the loan than their property is worth.
JP Morgan Chase and the government reached a settlement of $13 billion in November, which was a record case. The settlement was for Chase’s involvement in selling toxic mortgage-backed securities. Chase is supposed to provide $4 billion in principle reductions and other aid to homeowners.
When lawmakers come back for this new session they are supposed to be revisiting this law. If they choose to extend the mortgage debt relief act they can make it retroactive. This is what they did last year.
42 state attorney generals sent letters to congressional leaders in December urging them to extend the mortgage debt relief act.
Housing advocates say that a middle income homeowner who sells his or her home as a short sale and has a debt forgiveness of $20,000 would owe around $5,600 in a text bill if the law is not extended.
One of the reasons that Congress was slow to do anything about this act is because of the housing rebound. If the housing market rebounds there’s not really a reason for them to do an extension of the act. However, many housing advocates say that the housing market has not rebounded enough to be able to do away with the act based on the fact that there are still so many homeowners who are underwater.
The mortgage debt relief act was supposed to only last from 2007 to 2010. It is been extended twice since then.
If you’re interested in seeing the mortgage debt relief act extended please contact your Congressman and let them know
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