The Senate Finance Committee on Finance is reviewing the Mortgage Forgiveness Debt Relief Act, designed to spare underwater homeowners from being taxed if their lender reduces principal or they sell their home through a short sale.
If reinstated, it will continue to make “many loss mitigation efforts more successful,” wrote William Killmer, the MBA’s senior vice president for legislative and political affairs, in a letter sent to the Senate Committee on Finance chairman Ron Wyden and ranking member Orrin Hatch. But if Congress fails to act, “struggling homeowners who accept short sales and many loan modification offers will be faced with a substantial tax assessment.”
The MBA supports extending the tax deduction for mortgage insurance premiums, which can save borrowers $600 to $1,000 annually for a $200,000 home and benefit “homeowners who cannot afford a 20% or greater downpayment.”
Another critical provision of the EXPIRE Act, according to the MBA, is the option to maintain a fixed interest rate for affordable housing projects financed with the Low Income Housing Tax Credit. If Congress does not act to pass the EXPIRE Act and a variable interest rate is required on LIHTC projects, the MBA warns, such change “will likely make it more difficult for projects to secure necessary financing and could cause a slowdown in production of future affordable housing projects.”