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President signs The Mortgage Forgiveness Debt Relief Act of 2007 into Law

December 28, 2007

What is the Mortgage Forgiveness Debt Relief Act... simply put, you will not have to report personal income for the debt that was forgiven in the case of a foreclosure or short sale. This will alleviate the notion of "Kicking a person when they are down" mentality. It is bad enough that good people lose their homes to foreclosure... then to get a tax bill on top of it was adding insult to injury. This bill we also enable more people to negotiate a short sale without the worry of the tax bill that may come with it.

The real question is what happens to the people that were foreclosed on before this bill was passed. Here an excerpt from the actual White House notice that was released. The link to the actual release is below.

From the White House website, released December 10, 2007:

"Today, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which will help Americans avoid foreclosure by protecting families from higher taxes when they refinance their home mortgages. This Act will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.

* This Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes."

White House Website

Posted By Darin at 02:18 PM
Comments (9) | Categories: Foreclosure Laws, Short Sale | Tags: short sale mortgage forgiveness debt relief act of

Comments

Does it affect Credit History ?

Posted By David on January 29, 2008 at 03:25 PM

my house is in foreclosure the auction is taking in place in a week. I want to know if having a short sale in progress will stop the foreclosure?

Posted By juanita torres on March 06, 2008 at 12:32 AM

The bank has the power to stop the auction up to 5 minutes before it happens, if they are willing to look at the short sale. The question is this: Is your short sale packet complete? Do you have all the required documentation needed to complete the sale or does the bank have to wait on more? If you do not, the bank will more than likely proceed with auction. Also, it depends on the foreclosure attorney - who will not work in the best interest of you, the homeowner, as he does not represent you. It may be in the best interest of the bank to hold the sale, but I have not found an attorney yet who would agree with this - I firmly believe it is because the attorney gets paid more once the sale is complete and less if they stop it and complete the short sale - which is clearly a breach in his/her fiduciary duty and putting himself/herself first, however, that seems to be VERY common practice in this area - it has even bee told to me by 3 different foreclosure attorneys - call the it the "human error" part of the problem they said.

Anyway, short sale success is all about the packet you submit and time. You must be patient for the bank to go through their short sale process; and sometimes there is just not enough time prior to the auction to do so. I do not even try to sell homes that are already scheduled for auction simply because I have never gotten one through - but I get about 80% of the homes not scheduled for auction to go through.

I hope this helps.

Posted By John Youker, Real Estate Broker on March 10, 2008 at 10:24 AM

what is a short sale?

Posted By theresa serrano on July 22, 2008 at 11:12 AM

Started with American Home Mtg, who went bankrupt. Tried to talk to them, but they have idiots on their CS lines who give bad information; tried to do a deed in lieu, they then declined it; tried to do short sale, got an offer, they set a foreclosure hearing anyway. The "negotiator" got them to stop foreclosure to take short sale offer, but because we were not late on all our other bills yet, they wanted us to sign a 30 yr promissory note, for $200/mo. We can't afford to do that and every atty. I spoke to told us to play hard ball and refuse to sign. So, because we only missed 6 mos of payments ever in our life and are not regular deadbeats, they are asking us to do what they don't ask others to do and pay them more money to do the short sale! Deutsche Bank took over this mortgage when AM HM Mtg.went bankrupt, so who knows who we are dealing with? I thought the Short Sale Ctr. was a disinterested 3rd party, but they aren't! They work for the mortg. company!! It's a disaster out there for all of us and the banks and big companies get gov't bail out money, we get screwed!!! Next step will be foreclosure and bankruptcy I guess.

Posted By Sharon on February 26, 2009 at 08:46 PM

Like you said the are idiots, you can call 3 times a day and received different answers, and guess what if the loan back up by freddie or fannie the put a lien on lien on your credit for the deficience..rediculous we all should send letter to our congress man that is what im doing
they only think the lendes does is take the money and pay bonus to idiots, The gov has a very BAD package to help people in trouble..

Posted By margie on April 10, 2009 at 12:00 AM

If the loan is not back up by freddie or fannie
sorry i missed the NOT

Posted By margie on April 10, 2009 at 12:02 AM

We are in GA and just filed for CH 13 bankruptcy because of Wachovia and you all are right when u say that they could care less for us little homeowners. I am so determined to get someone to help me with them because I do believe they totally mishandled our 1st loan mod application request from March 09' and did not follow the way the process should be done because I was getting denial letters from Wachovia before the process had barely started and when I contacted the person i was to speak to and told him about the letter he said just ignore it because my request was still pending. Anyway that is just the beginning but many things were screwed completely up and they were my 2nd lienholder but 1st had already (Chase Home Finance) had us on a trial period payment plan so it did not make sense Wachovia did not approve us because owe chase 2x the amount of Wachovia's loan. anyway contact your congressman because I did and received a letter 2 days ago that he is going to look into my situation with Wachovia because I told him it was mishandled. Write your congressman & Obama from white house link because I did and don't give up because our homes are all we have. Fight these big banks and the let your elected officials know you mean business and we are not giving our taxpayers funds to banks for their benefit. they are suspposed to help homeowners, REMEMBER!!!! WRITE THEM NOW!!

Posted By THUNDERMOM3X on December 26, 2009 at 04:36 PM

The people are loosing their moral while becoming modern. The
society needs to be attentive that moral value.

Posted By Debt Help on August 28, 2010 at 07:37 AM

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President signs The Mortgage Forgiveness Debt Relief Act of 2007 into Law

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