Want to Help Your Neighbor... and Yourself?

First, the obvious: Today’s housing market is finally recovering from the Great Recession.

The not-so-obvious: There are still too many homeowners unable to meet their mortgage obligations. Estimates show that about 5.3 million homes are still “under water” (i.e., are worth less than they were when purchased due to no fault of the home owner.) In addition, there are still more than 1 million homes in the process of foreclosure.

However, if Congress doesn’t act quickly (yes, a huge oxymoron), many of these home owners face an uncertain future.

Why? Congress has not yet extended the Mortgage Debt Forgiveness Tax Relief Act, which stops the IRS from treating mortgage debt forgiveness as income. If Congress does not step in before the end of the year, these homeowners will face an inflated tax bill based on “phantom income” they did not actually receive. And if they can’t pay, they may be forced into foreclosure anyway.

Here’s the problem: the Mortgage Forgiveness Tax Relief Act technically expired in December of 2013. Many families (including your neighbors and possibly even you!) have decided not to go through with short sales or seek mortgage loan workouts because of the uncertainty over the status of the waiver. This is not only unfair but is harmful to San Mateo County families, neighborhoods and communities.

If House Resolution 2994 is not enacted, hundreds of thousands of families who did the right thing by short-selling their home will have to pay income tax on this ‘’phantom income.’’ Moreover, more distressed homeowners will decide to take a pass on opportunities for short sales, opting instead for continued delinquency or possible default until foreclosure, or simply walking away from their property.

Here’s the good news: To date, both our Representatives (Jackie Speier and Anna Eshoo) have expressed support for H.R. 2994 (with the mirror bill in the U.S. Senate being S. 1187).

Now the bad news: Nobody in the “Lame Duck” session of Congress is moving with any sort of alacrity to take action… nor is anyone expecting Congress to actually do something about the matter. Lots of sound; no fury.

Odd since The Mortgage Forgiveness Tax Relief Act is one of the few pieces of legislation that is truly bipartisan in nature. It would extend this expired provision that has helped millions of distressed American families by allowing tax relief for home owners when lenders forgive some portion of the mortgage debt they owe. Without this change, debt reduced through mortgage restructuring and debt forgiven after a foreclosure or short sale would be treated as income and be subject to income tax.

So if you’re a fan of letting the IRS force you to pay taxes on income you never actually received… do nothing and you will surely be rewarded. If, however, you don’t feel this is fair, contact:

https://forms.house.gov/speier/webforms/email_jackie.shtml

https://eshoo.house.gov/email-me/

Urge them to urge their brother and sister Representatives to act on “The Mortgage Forgiveness Tax Relief Act” before the end of 2014 and help provide certainty for struggling home owners (like you!) and stability for our nation’s housing markets.