The Mortgage Forgiveness Debt Relief Act

The Mortgage Forgiveness Debt Relief Act of 2007 is set to expire at the end of this year.  The Act allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.  The Act also applies to debt forgiven in a short sale on the primary residence.

This exclusion is a big incentive for sellers who have short sold over the past several years.  Without the forgiveness, sellers actually have to pay income tax on the debt. Many sellers cannot afford this and it pushes them into foreclosure instead.

The ability of sellers to short sell instead of go into foreclosure has helped many of our local neighborhoods not lose more value than they have over the past few years.

Contact your local Senators and Representatives and tell them that this act needs to be extended.

• U.S. House of Representatives: Resolution 4336 and Resolution 4202
• Senate: Senate Bill 2250