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Will the Mortgage Forgiveness Act get extended/renewed?

Discussion in 'Foreclosures' started by ilzho, Dec 4, 2013.

  1. ilzho

    ilzho LoanSafe Member

    Hello:


    The mortgage forgiveness act is set to expire at the end of the year.
    Does anyone know if there are plans to have this law renewed?


    Thanks.
  2. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    We are unsure and can only hope the Act will be extended at least one more year, however here are the bills that would do so:

    H.R. 2788: Mortgage Forgiveness Tax Relief Act

    Introduced: Jul 23, 2013

    Sponsor: Rep. Joseph Heck [R-NV3]

    Status: Referred to Committee

    Mortgage Forgiveness Tax Relief Act - Amends the Internal Revenue Code to extend through 2015 the exclusion from gross income of income attributable to the discharge of indebtedness on a principal residence.



    H.R. 2994: Mortgage Forgiveness Tax Relief Act of 2013

    Introduced: Aug 02, 2013

    Sponsor: Rep. Tom Reed II [R-NY23]

    Status: Referred to Committee

    Status: This bill was assigned to a congressional committee on August 2, 2013, which will consider it before possibly sending it on to the House or Senate as a whole.

    Mortgage Forgiveness Tax Relief Act of 2013 - Amends the Internal Revenue Code to extend through 2014 the exclusion from gross income of income attributable to the discharge of indebtedness on a principal residence.
  3. galenaz

    galenaz LoanSafe Member

    Thanks for asking ilzho, I was wondering the same thing - our condo foreclosure auction is set in Feb 2014. Keeping my fingers crossed it gets extended. I remember the end of 2012 the same "unknown" was floating around and last minute it was extended.

    Thanks Evan for the bill numbers. I will keep an eye out
  4. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    We can only hope the same will happen again this year! With hundreds of thousands of mortgages still in default it's crucial the Act gets extended at least another year!
  5. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    AG Jepsen Urges Congress to Grant Distressed Homeowners Tax Relief Through 2014 | LoanSafe

    For the second year in a row, Jepsen has co-authored a letter with Florida Attorney General Pamela Bondi to ask Congressional leaders to extend the tax relief. After receiving the letter they sent last year, Congress passed a one-year extension of the exclusion through the end of 2013. Unless Congress acts again, however, the tax relief will not extend into 2014.

    “As seen following last year’s National Mortgage Settlement, mortgage modification and debt relief programs have provided real relief to homeowners that are fighting to keep their homes or trying to get back on their feet,†the Attorney General said. “Unless Congress acts again, any debt relief that would be available in 2014 under various mortgage debt relief programs, will likely be considered taxable income and further hinder the economic recovery of those who have already lost so much.â€

    The letter can be viewed here.
  6. ilzho

    ilzho LoanSafe Member

    A few months ago I contacted my congressman and he said 2 bills are in committee and he said one will not get out of committee and the other one may, but don't hold your breath.

    He also mentioned that if it does not get extend, there is other legislation with similar verbiage that might get passed early next year, but he wouldn't elaborate.
  7. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Thanks ilzho and I concur, I listed (I believe) the two bills he was referring to previously in this thread. Various states have passed similar laws that will protect homeowners from tax consequences after foreclosure or short sale, but IMO it's crucial that the Act is extended nationally for at least one more year!!
  8. chazIII

    chazIII LoanSafe Member

    There is also a bill in the Senate Finance Committee, see below, it has not made it out of yet. Hopefully one of them goes through!

    S 1187
    Summary: A bill to prevent homeowners from being forced to pay taxes on forgiven mortgage loan debt.
    Introduced: June 19, 2013
    Status: This bill was assigned to the Senate Finance Committee on June 19, 2013 which will consider it before possibly sending it on to the House or Senate as a whole. The committee chair determines whether a bill will move past the committee stage.
    Sponsor: Sen. Debbie Stabenow [D-MI]
    Co-Sponsors (4): Heller, Dean (R-NV)
    Isakson, John “Johnny” (R-GA)
    Menéndez, Robert “Bob” (D-NJ)
    Boxer, Barbara (D-CA) (joined June 27, 2013)
  9. Greener

    Greener LoanSafe Member

    I'm assuming that the Mortgage Forgiveness Tax Relief didn't get extended. Has anyone heard any different?
  10. Evan Bedard

    Evan Bedard Call 1-800-779-4547 Loan Safe Mortgage

    Unfortunately, at this time it does not look like the Act has been extended. There are several proposed bills and many state officials have been pushing for the Act to be extended one more year..
  11. buchanovich

    buchanovich LoanSafe Member

    Strategies, not just the "strategic" ones, will hinge on this. The last time it was extended (2013), the legislation didn't pass until the 9th of Jan., so we all should have our fingers crossed. However, if it does not get extended, many borrowers will be forced to bankruptcy rather than a negotiated foreclosure or even a regular one, taking a risk on a deficiency or defending it. A $100,000 "forgiven" debt on a 1099-c can be a $25,000 or greater tax bill. A BK7 wipes the debt, which eliminates the "forgiven" part, which eliminates the tax. While BK is not a simple step, nor one to be taken lightly, and usually is a last resort, it may come to the front as the only solution.

    It would appear, based on some other legislation, that the attitude of members of Congress who hold sway is to let the poor folks hang out and twist in the wind. Take, for example, the failure to extend unemployment benefits. The reality is that these people will be put to poverty. Yes, there may be some abuse but law, by it's nature cannot be surgically precise. The failure to pass was, to the minds of a number of members of Congress, a way to force people back to work. This attitude, extrapolated to the Debt Relief Act, may be used to force people to stay in their homes instead of moving for whatever reason. Financial columnists have recommended this, suggesting it as a strategy to that very goal. Such may have unintended consequences, more detrimental to the banks than they might imagine when they pull the strings of their marionettes in Congress.
  12. TomEason

    TomEason LoanSafe Guide Staff Member

    buchanovich

    Thanks for your post.

    I don't agree that borrowers will be forced to file BK as the only solution. If the debtor is liable to the IRS due to CODI, he/she can file a insolvency exemption on IRS Form 982.

    Members can visit the IRS site for more details.
    Last edited: Jan 4, 2014
    1 person likes this.
  13. buchanovich

    buchanovich LoanSafe Member

    While you are correct, if one runs some test numbers it won't be as easy for the average person to "qualify" as it might appear. No, it's not that I am disagreeing - I'm not - but that provision works very well for someone who has absolutely nothing or someone more upscale who is totally overwhelmed with debt. As I said, BK is a last resort but one that may be m,ade more likely if that law is not extended in some usable form (and, not the usual "games" the Congress loves). ANother aspect one needs consider, that I forgot to mention in the earlier post, is to qualify for the waiver of tax under the "Act" the money has to have been used for purchase or improvement of the primary home. Suppose part of the forgiven debt was in a HELOC, part of which may have been used for some other purpose. SOmeone in a short-sale of foreclosure situation had best run the numbers before making final decisions. If nothing else, start structuring assets for protection, if possible in one's situation.
  14. kriptik

    kriptik LoanSafe Member

    Question: If you give the house back to the bank before foreclosure, and your house is what they take if you default on the loan (non deficiency/recourse state), are you still going to get jammed up with the tax bill?
  15. TomEason

    TomEason LoanSafe Guide Staff Member

    kriptik

    Thanks for your question. I recommend you consult with your tax person, as he/she knows your financial situation.
    Last edited: Mar 29, 2014
  16. buchanovich

    buchanovich LoanSafe Member

    As Mr. Eason said, consult with a tax expert/attorney. I don't know the laws in Washington so I can't address one aspect of the question. The other part of the question, dealing purely with the tax part depends when the house closed/transferred title - such as an actual closing in a deed in lieu - you didn't specify how "you give the house back", that's important, so I'm just speculating. Assuming that has not yet happened, it depends on the extension of the Act under discussion. If it is extended, and it was a primary home and the money was used for purchase and/or improvement, and the wording stays the same in prior years, you likely can avoid the tax. If it is not extended, it depends on "forgiven debt". Otherwise, it's insolvency. However, again depending on legal advice from someone conversant with Washington law, if there is no recourse on the loan, then there is no "forgiven" debt, which means no imputed income. (California has done this) I hate so many "ifs" and conditional answers but there are dependencies.
  17. kriptik

    kriptik LoanSafe Member

    Thank you Tom and buchanovich. It was just something I had been thinking about and I know I need to do some research. I hope we get a extension. Been here four years without a payment. I'm planning on moving out this year.
  18. kriptik

    kriptik LoanSafe Member

  19. keepthefaithyall

    keepthefaithyall LoanSafe Member

    Thanks for this information it is so very helpful. Thank you!
  20. buchanovich

    buchanovich LoanSafe Member


    The House last night passed enabling legislation for extending the financing, avoiding a "cliff" and a House committee passed a "compromise" $1.1 tril. funding bill. The full House is supposed to get this by tomorrow (15 Jan.) and then the Senate. Things such as the relief act "usually" are included in such packages. I looked at the detail (published on CNN) and did a search using "mortgage" as a term. Nothing. SO, the likelihood is dropping. That is not to say it can't hap[p[en separately but as I commented, the current leadership in the House has a "screw the working Joe; get to work and work until you drop" attitude. We'll see. I am watching this closely as it impacts directly the next step in my strategy, basically a determining factor for my next move.

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