The Mortgage Forgiveness Debt Relief Act implemented in 2007, greatly benefited homeowners faced with a short sale or foreclosure. Before 2007, homeowners who sold their house for less than what they owed on the mortgage had to declare the difference as income. Since the Mortgage Forgiveness Debt Relief Act, the difference in not considered income, therefore the owner is not taxed on that money.
The Act was set to expire on December 31, 2012. Realtors played a huge role in advocating the extension. With the end of the year drawing near, homeowners scrambled to pay off their short sale. Congress has agreed to extend the debt relief for 2013, which excuses homeowners from paying taxes on debt from their mortgage. This is good news for homeowners that still owe money. Taxes on mortgage debt can add up to thousands of dollars.
Three types of sellers will benefit from the extension:
- Foreclosure – the lender attempts to take possession of the property as collateral for the debt. Short sale is the best solution in this case.
- Short Sale – a homeowner owes more on their house than what it is worth.
- Principal Reduction – the lender reduces the monthly payment of the mortgage to prevent foreclosure.
The extension will especially benefit those who owe more on their house than what it is worth. It is important to stay informed on what is happening in the real estate market. This will help you avoid any confusion . In order to help save the housing market, supporters are pushing to extend the Act passed 2013, in the hopes of reducing the amount of short sales. Call our office today at 636-573-1200 for more information about the Mortgage debt relief act extension.