AUGUSTA – December 19, 2013 – (RealEstateRama) — Fearing a setback for financially strapped homeowners and for the slowly improving housing market, Attorney General Janet T. Mills is urging Congress to extend tax relief for distressed homeowners into next year.
While the national housing market has shown signs of improvement, foreclosure filings are on the rise in Maine and could set a record in 2013. “With Maine on track to see nearly 44,000 default notices sent to homeowners, clearly now is not the time to take away an important tool in helping struggling families,” said Attorney General Mills.
Under the federal Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification provided to a homeowner in financial hardship is excluded from a taxpayer’s calculation of taxable income. This exclusion only applies to mortgage debt forgiven on primary residences, not second homes.
“I urge Congress to again extend this critical policy so that families that have been able to receive mortgage debt relief do not then face a tax bill that they cannot afford,” Attorney General Mills said. “I believe this tax relief is critical not only for struggling families but also for any housing market recovery.”
Attorney General Mills has been reviewing the foreclosure process in Maine this summer and fall at the request of the Legislature’s Judiciary Committee. Attorney General Mills met personally with dozens of interested parties and convened two panel discussions with homeowner advocates, mediators and lenders to discuss how Maine’s foreclosure process is working and what can be done to improve the system. Attorney General Mills will report back to the Committee in January.
“In my discussions with homeowners and banks, I hear that a short sale or a deed-in-lieu foreclosure is often the best option for both parties,” said Mills. “I also hear that it doesn’t happen frequently enough. Placing another barrier to this process by requiring a homeowner to pay taxes on the amount forgiven is exactly the wrong direction to go in. Congress needs to act on this immediately.”
An extension for 2014 is included in the Mortgage Forgiveness Tax Relief Act (S. 1187 and H.R. 2788), both of which are in committee; it is uncertain when these bills will be considered. The current Ryan-Murray budget proposal does not include the exemption provision.
More than 40 attorneys general from across the country are joining in this request to congress.