Short Sellers? Friend: Mortgage Debt Relief Act
Back in 2007 Congress passed the Mortgage Debt Relief Act which eliminated income taxes on the forgiven debt in a foreclosure or short sale up to $1 million for an individual and $2 million for a couple. ?Previously, a short sale or a foreclosure would automatically trigger a tax bite. Imagine here in California with homeowners routinely underwater for $100, 000, $200,000, $400,000 and $500,000 what would happen if ?already financially-battered short sellers had to add those amazing amounts to ?their tax returns.
Luckily, with the financial crisis looming, ?Congress realized the problems this would cause and acted. In the original act, the debt forgiveness extends for a 5-year period from 2007-2012. Obviously, no one imagined the financial meltdown would last so long or that housing, once the shining star of our economy, would become an anchor dragging down the whole.
Mortgage Debt Relief End in 2012
Well, here we are in 2012 and millions of homeowners are still underwater with little hope of recovering lost equity. With a ?normal? Congress the protection of the 2007 act would most likely be extended for another few years. But, wait, we no longer have a normal Congress. We have the Congress that refused to raise the debt ceiling and almost tanked the economy. This Congress did manage to get the United States credit rating lowered for the first time in our history, costing over $1 trillion in extra interest payments So, what will happen now? This Congress is famous for getting the least amount done, the least legislation passed, even less than the famous Do-Nothing Congress of President Harry Truman?s day.
Congress is now, of course, adjourned until September. All these do-nothing, government-hating congressmen have discovered that they love hanging around in Washington in the corridors of power, doing nothing, and they want to be re-elected. This is especially true in the House, of course, whose freshman Tea-Partiers ?have stonewalled to the point of almost shutting the government down.
Senate Finance Committee Extends
The Senate Finance Committee, before leaving on vacation, did?approved a bipartisan bill that would extend the Mortgage Forgiveness Debt Relief Act through 2013. Only one year is not enough time, but ?it shows someone in Washington is at least aware that millions of homeowners are still suffering.?The bill now moves to the full Senate for possible action next month and also would extend tax write-offs for mortgage insurance premiums for 2012 and through 2013 and continue some energy-efficiency tax credits for remodelings and new home construction.
Will Congress Extend the Mortgage Debt Relief Act?
Next problem, though, will be getting this bill or one extending the relief for a least two to five years more through the entire Senate and then through the House. This debt relief does confer a government benefit. ?Tea Party representatives may see it as another costly bailout funded by taxpayers. The estimated revenue cost to the Treasury for a two-year extension is $2.7 billion. The cost of NOT extending the credit can be counted in bankruptcies, suicides and heart attacks, not to mention chaos in the housing sector which is just starting to show signs of recovery.
To make matters worse, this is an election year as few have failed to notice. The relief to short sellers ends December 31, 2012. When Congress returns in September, it?s all about the election. After the election in November, it?s a lame-duck session in which traditionally little gets done. This year Congress is faced with extending or letting expire the ?Bush tax cuts? which will almost certainly dominate the discussion. The big question then becomes: will this Congress pass the extension?
In the meantime, anyone contemplating a short sale is best advised to get the sale underway as soon as possible.
Thinking about selling or short selling ?your home? I can help you sell your home for maximum proceeds to you or short sale your property and never pay the bank another penny. Send me an e-mail at?drdbroker@gmail.com.?I will contact you for a free consultation.?
When we talk, I will explain how I will sell your home ?and answer any questions you may have. Or, if you prefer, you can call me at (626)641-0346.
Diane Butler specializes in helping Pasadena Homeowners. ?Pasadena, Pasadena Home Sales, Pasadena Short Sales, Pasadena Home Sale Agent, Pasadena Home Sale Broker, Pasadena? Short Sale Realtor, Pasadena? Realtors, Pasadena Realty, Pasadena Realtor. Altadena Short Sales, Altadena Short Sale Realtor.? Azusa Short Sales, Azusa Short Sale Realtor.
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About Diane Butler, Ph.D.
Diane Butler,Ph.D. is a real estate broker with Evergreen Realty. She has lived in and around Pasadena since 1983 and first got her real estate license in 1992. Since 2008, Diane has focused mainly on distressed properties and short sales, offering specialist assistance to distressed homeowners in Pasadena and surrounding areas. Additionally, Diane has worked extensively not only with standard sellers, but also with investors throughout Southern California. Call her at 626-641-0346. Email to drdbroker@gmail.comSource: http://pasadenashortsaleblog.com/2012/08/10/pasadena-short-sale-mortgage-debt-relief-extension/
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