Statement on President Bush's Signing of Mortgage Forgiveness Debt Relief By NAR President Richard F. Gaylord
WASHINGTON, December 20, 2007 -
“On behalf of the many individuals and families who would have been burdened by a tax after losing their home, the National Association of Realtors® thanks President George W. Bush for signing the Mortgage Forgiveness Debt Relief Act into law. Today the president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home due to a short sale, foreclosure, deed in lieu of foreclosure or any similar arrangement that relieves the borrower of the obligation to pay some portion of their debt.
“NAR has been advocating for such a change to the IRS tax code for nearly 10 years. We have always believed that it is clearly an issue of fairness and of not kicking people when they are down. By making the forgiven debt taxable income, individuals in already unfortunate situations most likely faced IRS actions because they did not have the money to pay the additional taxes. This legislation will relieve that additional burden and may also encourage families to work with their lender to negotiate terms, knowing they will now not be subject to an IRS bill.
“Today’s bill will ensure that any debt forgiven on a mortgage secured for a principal residence will not be taxed. This is very significant legislation. This may also mean that some day in the future these families can once again achieve the dream of homeownership.”
This Bill is helpful but not significant in the overall scheme of things. Forgiveness of the IRS tax liability has not always been applied to many of these transactions, and speculators may not receive the exemption until a test case arises.
A better solution for local markets is funding to provide those markets hard hit by foreclosures with surveillance equipment to counteract crime activities, and prevent the spread of loss in market valuations. This results in lower tax revenues for municipalities.