WASHINGTON - The House of Representatives 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, authored by Ways and Means Committee Chairman Charles B. Rangel, would provide relief by permanently excluding debt forgiven under these circumstances from tax liability. The bill would also help would-be homeowners secure their investments through an extension of the tax deduction for private mortgage insurance, and would ease restrictions for qualifying as housing cooperative corporations.
"This bill will prevent families going through foreclosure from getting hit with a large tax bill in addition to the pain of losing their homes," said Ways and Means Committee Chairman Charles B. Rangel. "Current law treats forgiven mortgage debt as income, but it is simply unfair and unconscionable that families would have to suffer through a foreclosure only to be dealt a second blow in the form of a tax bill when their net worth has not increased. Congress has given its strong support for these provisions and I hope the President will sign this bill into law immediately to give taxpayers the relief they need to help them weather the housing crisis."
The House first passed H.R. 3648 on October 4, 2007. Today’s passage follows recent action in the Senate to amend and pass the bill. H.R. 3648 now awaits President Bush’s signature before becoming law.
