The U.S. Congress has adjourned for 2016 without extending the Mortgage Debt Forgiveness Act, which will now expire at the end of the year.
Originally passed in 2007, the act has protected underwater homeowners from incurring tax bills on the debt forgiven during a short sale. Four times now, the act has come close to expiring, but strong lobbying efforts NAR had managed to extend it; last month, NAR, the NAHB and the Mortgage Bankers Association sent a letter to Congressional leaders, urging them to extend the act.
William E. Brown, NAR’s president, offered some context on the failed extension in a statement to Chicago Agent, including the fact that not all hope is lost for short sellers looking to avoid IRS taxes on their forgiven debt:
Congress adjourned for the year without taking further action on mortgage debt cancellation relief, which is a disappointment. That said, people should know that because this provision doesn’t expire until the end of this year, they will still be eligible for mortgage debt cancellation relief when they file their 2016 taxes. What’s no longer covered is any mortgage debt cancelled in 2017 or beyond, which means Congress will need to extend the provision at some point down the road to ensure homeowners are protected into the future. NAR will encourage them to do just that in the year ahead.”
This is important news. Homeowners facing foreclosure are now much more likely to let their properties hurdle toward auctions rather than risk the specter of a 1099. Poof!
Please extend the Mortgage Debt Forgiveness Act ! I have been gridlocked in a Foreclosure for years and am in hopes of settling this year.
Will Congress be extending the act in 2017? people are still in process of short sales now into 2017. I started in October 2016 but sill not resolved in January 2017.
Shay,
we’ve received no word from our sources that Congress is taking up a bill to extend the act through 2017, but we will continue to monitor this legislative session for any updates.
https://www.congress.gov/bill/115th-congress/house-bill/110/text
It looks to be reintroduced to congress for an extension for 2017. This was brought forward by Rep. Julia Brownley of California and referred to the House Ways and means committee.
Does anyone know if there has been any resolve with this? I saw this was back in Jan that they were trying to get this passed again?
I am trying to save my home and have been trying with no luck to get a loan mod. IF they reduce the principle I’ll never be able to pay the taxes on this. I would greatly appreciate all efforts to get this extended to those who get relief in 2017. Thank you
My husband and I sold a home in a short sale transaction in 2011. The lender did not send us a 1099-C, even after several requests, so we never reported it on our taxes. Now, 6 years later, we are trying to buy property again and in order to do so, we may need them to send the 1099 C. Will the Mortgage Debt Forgiveness Act work for us since the sale was in 2011, even if it is not extended through 2017?
Hello, is NAR actively pursuing the Senate and House to come up with a bill that can actually go to finish line without stalling? So many homeowners who are seeking SS and other other ways to off load a property that is toxic.