Of course this needed to be extended, or there would be more foreclosures and bankruptcies. This will certainly encourage more short sales; help liquidate the distress inventory at a faster pace. Because of the huge shaddow inventory (loans 90 days late, loans having received Notice of Default (NOD), REO's not yet on the market) there may be another 5 years of this deleveraging process.
The Mortgage Debt Foregiveness Act is a real bonus for home owners as many of them refinanced the equity out of their homes during the 2002-2007 years. The economic stimulus created by home owners refinancing during those years was greater than the TARP stimulus in 2008 to bailout the United States Financial System. And now those folks have an opportunity to have their mortgage debt forgiven and not taxed as forgiven debt.
This is a huge bonus for homeowners unable to keep their homes because of financial issues. And this requires real estate agents to direct their education to a whole new level.