Tax Break for Underwater Borrowers may Expire

A tax break that gives homeowners the opportunity to save thousands may expire by the end of the year unless it is renewed by Congress. CNNMoney informs MHProNews the Mortgage Forgiveness Debt Relief Act of 2007 protects homeowners from having to pay income taxes on the portion of their mortgage that is forgiven in a foreclosure, short sale or principal reduction. If a borrower owes $200,000 on a house and it sells for $150,000 at a foreclosure auction, without the Mortgage Forgiveness the borrower would have to pay taxes on the $50,000 difference. With 50,000 homeowners going through foreclosure each month, and short sales equaling 500,000 each year, the gain to the federal government if the exemption is not extended could be as much as $1.3 billion a year. Jaret Seiberg of Guggenheim Securities thinks Congress is not interested in much legislation as the end of the year approaches. Jamie Gregory, chief lobbyist for the National Association of Realtors, says, “Both parties, both houses of Congress agree its good policy and it needs to get done. The hold up is in the process.”

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