The Mortgage Debt Relief Act
The Mortgage Debt Relief Act
In late 2007, President Bush signed the mortgage debt relief act for American homeowners. This new bill was designed to help struggling homeowners deal with the current housing slump faced in the United States.
For many months previous to the signing of the steel act, housing prices in the unite states have fallen drastically. Many American homeowners found themselves owing much more for their homes then they could actually sell them for. At the same time though, a large portion of those homeowners also had adjustable rate mortgages. This meant that there are monthly mortgage payments were going through the roof, much faster than they were able to pay for them.
Before President Bush signed the new mortgage debt relief act, if a homeowner were to refinance their mortgage loan, or do what’s called a “short sale”, then they would have to pay additional taxes for various reasons.
A short sale is when a homeowner is given permission by their lender to sell their home for less than what they owe on it. In the lender will usually forgive the difference. If for example, a homeowner still owed $100,000 on their mortgage loan, but their home was only worth $65,000, a short tale would allow them to sell the whole $465,000, and their lender would simply write off the $35,000 difference. The IRS however, would expect the homeowner to pay taxes on that $35,000 difference which of course is just compounds the problems of the homeowners have.
The mortgage debt relief act now allows homeowners to not have to pay taxes on a short sale difference. They also do not have to pay taxes on games acquired by refinancing their homes. In fact, for the next several years homeowners do not have to pay taxes on any debt forgiveness related to their homes.
These are simple small steps of course, but they can be of great assistance to homeowners in dire need. Additional steps were taken to help existing American homeowners deal with the current mortgage and housing prices, hopefully help stimulate the slumped housing market, and helping lenders as well.
