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Oct. 5 - Relief Bill For Homeowners Advance
Information for Sellers
WASHINGTON – Oct. 5, 2007 – Financial relief for homeowners facing foreclosure or in bankruptcy advanced in the House Thursday when the House approved legislation to help financially strapped homeowners. The bill, passed by a 386-to-27 vote, would give a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan. No taxes would be owed on the value of any debt forgiven or written off. Currently such debt forgiveness is taxable income.
While the measure is anticipated to reduce taxes of some strapped homeowners by $650 million, the cost to the government would be offset in part by limiting a tax break available on the sale of second homes. “Families dealing with the pain of a foreclosure should not have the ‘double whammy’ of a large tax bill,” Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee and co-sponsor of the bill, said.
President Bush praised the House action. “I urge the Senate to swiftly consider this legislation and make it temporary,” Bush said in a statement.
The House vote was the latest congressional reaction to a mortgage crisis touched off this spring by a blowup in high-priced home loans for risky borrowers, throwing a pall over the economy. Foreclosures are at record highs and late payments are spiking. Lenders have been forced out of business and investors have taken huge financial hits.
An estimated 2 million to 2.5 million adjustable-rate mortgages – worth some $600 billion – will jump from low initial “teaser” rates to higher rates this year and next. Steep prepayment penalties have made it difficult for some to get out of their mortgages, and some overstretched homeowners can’t afford to refinance or sell their homes.
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