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REALTOR®: Realtors Applaud House Passage of Mortgage Cancellation Tax Relief

Monday, October 8, 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. “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.

The Senate has not yet considered similar legislation. The White House supports a three-year mortgage debt exclusion instead of a permanent exclusion as passed by the House.

NAR and the California Association of REALTORS® have worked very hard to pass H.R. 3648. Members of the San Mateo County Association of REALTORS® (SAMCAR), who are also members of NAR and C.A.R., are pleased to see this legislation move through the House with overwhelming support.

SAMCAR is a professional trade organization that organizes Realtors and affiliates on the Peninsula. The association provides members with opportunities for community involvement and access to a network of professional resources and business contacts. Realtors must abide by a strict code of ethics and participate in additional training above and beyond state real estate license requirements.

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

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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