Something that concerns me greatly but has not received much press coverage is the soon to expire Mortgage Debt Forgiveness Act passed in 2007. The Act exempts certain types of debt forgiveness from Federal Income Tax. The Act has allowed homeowners to short sell their principle residence, without paying income tax on the forgiven debt. It also allows debt forgiven through mortgage restructuring to be income tax free.
At the end of this year when the act expires, it will place a significant tax burden on anyone attempting to short sale a property or on foreclosed homes that are re-sold for less that the debt that was owed. It will also have a significant genitive impact on the HAMP program, an important part of President Obama's economic recovery program.
There is limited action in Congress at this time to extend, or re-write this important Act. As I see things it could further limit the already small inventory of homes for sale, and possible lead to an increase in foreclosures, or have other effects on our shaky and fragile economy. Not much has been written about this and I would like to hear from other realtors and our affiliates as to your take on what I see as a huge issue facing the RE community.
My name is Dale E. Bledsoe with Crown Key realty and as always I may be reached at 209-481-6031.
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