We missed a story in a rather hectic week at work. The House passed the Mortgage Forgiveness Debt Relief Act on October 4, by a vote of 386-27.
Under the current tax code, cancelled mortgage debt on primary residences is counted as taxable income. The bill will permanently let borrowers to avoid this burden as long as the debt forgiven by a bank is for a foreclosed primary residence.
Walz has voted to change the tax code:
Congressman Tim Walz voted to ease the financial burden on families going through home foreclosure by supporting H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007. This bipartisan legislation will close an unfair provision in the tax code that forces people who have their homes foreclosed on to pay taxes on debt forgiven by their bank.
Walz said today that the relief offered in this bill will restore fairness to homeowners in financial and economic distress by eliminating that tax burden.
"This is a critical issue for families throughout the country," said Walz. "Currently, when a bank forecloses on an individual's home, the bank forgives the debt and takes the home. But the homeowner still needs to pay taxes on the value of the property, even though they no longer own it. That is patently unfair to people who are already in a bad situation. This legislation will eliminate that unfair provision in the tax code and allow people to get back onto their feet more quickly and, in turn, help to stabilize families and neighborhoods across the country."
The subprime mortgage market expanded rapidly from 2002-2005, however in 2006 the housing market declined and resulted in late mortgage payments and foreclosures across the country. The Mortgage Forgiveness Act is timely legislation that will help to stabilize the tumultuous housing market.
With the exception of Michele Bachmann, all of Minnesota's congressional delegation voted for the bill. The Bush administration supports temporary relief, and hopes to make changes to the legislation as it makes its way through both houses of Congress.
Certainly the mortgage crisis is troubling to many Americans. A recent Minnesota Poll found Mortgage crisis worries 70%.
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