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Panel Acts to End Tax on Forgiven Mortgage Debt
Legislation approved by the House Ways and Means Committee on Sept. 26 to help American families avoid foreclosure and stay in their homes, H.R. 3648, would eliminate any taxes home owners might face from banks renegotiating the terms of a home loan and forgive a portion of the outstanding mortgage. The change in the tax law would apply only to principal residences.
"With the whirlwind of problems in the mortgage finance system, H.R. 3648 can help stabilize families, their neighborhoods, the surrounding community and the economy as a whole,” NAHB said in a letter sent prior to the vote to all members of the committee.
The legislation also follows one of the policy provisions approved at NAHB’s board of directors meeting last month in Seattle to address the mortgage credit crunch.
“Families dealing with the pain of a foreclosure should not have the double whammy of a large tax bill for terminating their mortgage through no fault of their own,” said Ways and Means Committee Chairman Charles Rangel (D-N.Y.). “I am pleased the committee joined together to unanimously pass this critical legislation and I look forward to bringing this measure before the full House.”
H.R. 3648 also includes an NAHB-supported provision that extends the deductibility of mortgage insurance. Mortgage insurance is especially critical for low- and moderate-income first-time home buyers, many of whom may not qualify for a market-rate mortgage.
By enabling mortgage insurance premium payments to be deducted, NAHB said in its letter, "homeownership is made more affordable for thousands of families who would now be able to buy a home without having to resort to more costly subprime or predatory alternatives."
The current deduction, which is set to expire on Dec. 31, would be extended through 2014 under the House bill.
A similar bill addressing the tax consequences of mortgage debt forgiveness, S. 1394, is pending in the Senate.
To read the legislation, click here and enter the bill number in the box at the center of the page.
For more information, e-mail Greg Brown at NAHB or call him at 800-368-5242 x8421.
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