Get Your Mortgage Rate Quote in Just 30 Seconds

Mortgage rates change every day, and your rate will vary based on your location, finances, and other factors. Get your FREE customized rate comparison below.

Debt Forgiveness Bill Approved

Debt Forgiveness Bill ApprovedH.R. 3648 to waive tax liability on modified or foreclosed loans

December 19, 2007


Congress has approved legislation that would waive tax liability for borrowers whose mortgage balance is reduced through foreclosure or loan modification.

The U.S. House of Representatives announced Tuesday it approved H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007. The bill included an amendment by Senate Finance Committee Chairman Max Baucusa.

In addition to a 3-year amendment permanently waving tax liability for debt forgiven following mortgage foreclosure or renegotiation, the bill extends the tax deductibility of private mortgage insurance for three more years and eases restrictions for qualifying as housing cooperative corporations.

Triad Guaranty Insurance Corp. applauded passage of the legislation, noting the mortgage insurance provision will provide savings low- and moderate-income borrowers and makes mortgage insurance more attractive.

“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,” said Ways and Means Committee Chairman Rep. Charles B. Rangel, who authored the bill, in the announcement.

The U.S. Senate, which ushered through its own version of the bill, S. 1394, the Mortgage Cancellation Relief Act of 2007, unanimously approved the House version of the bill last week. The Senate’s original bill was sponsored by Senator Olympia J. Snowe.

“Homeowners who restructure their mortgages to avoid foreclosure should not be hit with a tax bill as a result,” Treasury Secretary Henry Paulson said in a statement. “Preventing avoidable foreclosures will reduce the impact of the housing slowdown on homeowners, our communities, and our economy.”

Passage of the legislation was hailed by the National Association of Home Builders, which noted President Bush is expected to sign it. The group explained that un-taxable forgiven debt will be capped at $2 million and only apply to primary residences.

The bill is now headed to the White House for the president’s signature.

next story

back to current headlines

Popular posts

7 Refinance Strategies
7 Refinance Strategies

Refinance to a lower interest rate: If interest rates have dropped since you took out your original mortgage, refinancing to a lower rate can help you save money on your monthly payments and reduce the overall cost of your loan. Refinance to a shorter loan term:...

7 Refinance Strategies
Is Refinancing With Your Present Lender Preferable?

Do Not Accept the First Refinancing Offer You Receive Homeowners should not accept the first refinancing rate provided to them. This is particularly important if you are applying with your existing lender. Some mortgage lenders have mechanisms in place that prioritize...


Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

Fannie Mae Profile

Fannie Mae Profile

Last Updated December 27, 2018 7:38 PM Central   full list | other directories | bank search | SEC...