January 2nd, 2013 2:38 PM by Sherry Lee
Whether or not the Mortgage Debt Relief Act 0f 2007 would be extended beyond 2012 has been a major discussion this past year. Well the wondering and wait has come to an end as lawmakers have managed to pass the extension. It seems the Act may now have another year to provide relief to many homeowners who may lose their home to foreclosure or short sale as a last resort.
Since the MDRA was established countless homeowners have received tax relief if they had to short sale their property because they lost equity during the housing crash. With short sales making up over 20% of residential sales during recent quarters, this can be a major success for everyone hoping the bill would be approved.
Not only does the law apply to short sales and foreclosures, but homeowners who receive a modification that provides a true principle reduction may be taxed on the amount forgiven. This has not been an issue (until recently) as lenders continue to refuse to provide any sort of balance reduction regardless of how far the home is underwater. However, this has caused concern with the recent National Mortgage Settlement that offers principle reductions on a 1st mortgage and sometimes full forgiveness of a 2nd mortgage. Homeowners have been leery to sign agreements without knowing whether or not the Act will be extended.
“The one-year tax relief extension for Florida’s distressed homeowners is a substantial victory for homeowners who have mortgage debt forgiven. This extension will help struggling homeowners take full advantage of the assistance offered them by the national mortgage settlement and other foreclosure relief programs,” stated Attorney General Pam Bondi.
Along with Florida Attorney General Pam Bondi and Attorney General George Jepsen, 42 other State Attorney Generals have joined them in a request sent to the Senate and house requesting the Mortgage Debt relief Act be extended beyond its expected expiration date of December 31st. We have another year or financial relief as the Act is now set to expire January 1, 2014.