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REALTOR®: New Law will Provide Mortgage Forgiveness Debt Relief for Homeowners

Monday, January 14, 2008

The U.S. Senate has passed the Mortgage Forgiveness Debt Relief Act (H.R. 3648), which would remove the tax on "phantom income" when lenders forgive portions of the balances on mortgages of financially-stressed homeowners. The Senate bill was identical to the House-passed version and President Bush signed the measure into law on Dec.20, 2007.

The bill provides a three-year window of tax relief from Jan. 1, 2007 through January 1, 2010. The law also extends the tax deduction for mortgage insurance premiums through Dec. 31, 2010.

The San Mateo County Association of REALTORS®, along with the National Association of REALTORS® (NAR) and the California Association of REALTORS® (C.A.R.), has worked hard the past 10 years for the passage of this relief measure.

In the past, the forgiven debt was considered taxable income and individuals in already unfortunate situations most likely faced IRS actions because they did not have the money to pay the additional taxes. This legislation will relieve that additional burden and may also encourage families to work with their lender to negotiate terms, knowing they will now not be subject to an IRS bill.

“We have always believed that it is clearly an issue of fairness and of not kicking people when they are down,” said NAR President Dick Gaylord. “Today’s bill will ensure that any debt forgiven on a mortgage secured for a principal residence will not be taxed. This is very significant legislation. This may also mean that some day in the future these families can once again achieve the dream of homeownership.”

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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