(Source: AG Mike DeWine) – (COLUMBUS, Ohio)—Ohio Attorney General Mike DeWine today joined Attorneys General from 40 States and Guam in urging Congress to pass legislation extending tax relief for distressed homeowners who receive relief from the National Mortgage Settlement. The request was made in a letter sent to House Speaker John Boehner, Senate Majority Leader Harry Reid, and other leaders of the House and Senate.
“A home lost to foreclosure depresses future home sale prices, damages the value of surrounding homes, and harms families, neighborhoods, and our general economy,” DeWine and the Attorneys General said in their letter. “Requiring a homeowner to pay income tax on forgiven or canceled mortgage debt would make the National Mortgage Settlement much less effective.”
In February, DeWine and 48 Attorneys General signed a National Mortgage Settlement with the nation’s five largest mortgage servicers. The Settlement provides $17 billion in debt reduction and other relief to homeowners. A report issued yesterday by the settlement monitor noted that to date, the servicers reported providing more than 4,500 Ohioans mortgage relief totaling than $165 million.
Pursuant to the Mortgage Debt Relief Act, which went into effect in 2008, many types of forgiven mortgage debt provided to a homeowner in financial hardship may be excluded from a taxpayer’s calculation of taxable income. However, this tax relief expires on December 31st of this year. The letter from the Attorneys General requests congress to extend this tax relief to ensure homeowners neither face unexpected tax bills nor are deterred from participating in the settlement.
“Unless Congress acts, all of the remaining debt relief to be provided in 2013 under the National Mortgage Settlement, as well as other mortgage debt relief programs, will likely be considered taxable income,” DeWine and the Attorneys General wrote. “Failure to extend this tax exclusion will result in $1.3 billion in tax increases on the very families who can least afford it.”