(Washington, DC – Insurance News 360) – In testimony before the U.S. House Ways and Means Subcommittee on Tax Policy in March, a representative of the National Association of Realtors urged that mortgage forgiveness tax relief should be made permanent. This is an exclusion for forgiven home mortgage debt following a foreclosure, short sale or loan modification should be made permanent to provide relief to troubled borrowers and minimize the damage to families, neighborhoods and communities.
“The exclusion for mortgage debt cancellation delivers a huge dose of fairness. When the investment in a home goes well, and the owner sells at a gain, the tax code generously waives capital gains up to $500,000,” said Realtor® Barry Grooms, 2018 vice president of Florida Realtors®, who testified on NAR’s behalf. “But what happens when things go sour, equity is lost and the family is forced to sell short? Up through last year, the exclusion stepped in and relieved the often-impossible tax burden. If allowed to expire, we are left with a tax policy that rewards good fortune but piles on when the tables are turned. This is neither fair nor smart.”
While the home equity situation in America is much better today and the volume of short sales and foreclosures has receded from record highs, there are still about 2.5 million homes underwater, according to industry data. This is down considerably from the downturn, when as many as a quarter of mortgaged homes in the U.S. had negative equity. Nonetheless, there are still a significant number of individuals struggling to keep up with their mortgage payments, and the exclusion is vital for lessening the financial impacts of a foreclosure, short sale or loan restructure and saving distressed families from a dire hardship.
In his testimony, Grooms urged Congress to make mortgage cancellation relief a permanent provision since the exclusion has already expired, leaving the future of troubled borrowers in serious doubt.
“Cases of negative home equity will ebb and flow as well, even with a stronger economy,” said Grooms. “This is why we need a permanent exclusion to minimize the damage to families, neighborhoods and communities.”
Additional information on NAR’s mortgage debt cancellation tax relief efforts is available at www.nar.realtor/topics/mortgage-debt-cancellation-relief .
Source: National Association of Realtors.