Mortgage Forgiveness Debt Relief Act Extended for Homeowners

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The Federal Savings Bank is optimistic about the housing market due to an extension of the Mortgage Relief Act of 2007.

VA and FHA home loans at The Federal Savings Bank

The Federal Savings Bank

Too often, homeowners facing foreclosure believe there is nothing they can do, but there is.

The Federal Savings Bank believes that the avoidance of the fiscal cliff gave some homeowners new life as the Mortgage Forgiveness Relief Act of 2007 was extended through 2013.

The Mortgage Forgiveness Debt Relief Act of 2007 was sent to Congress on September 25, 2007, and was implemented as a law on December 20, 2007. The legislation gives relief to homeowners who owed taxes on forgiven mortgage debt when they were near foreclosure.

The extension of the legislation will give homeowners who sell their primary residence in a short sale or lose their home as a result of foreclosure the freedom of not being required to pay taxes on their losses. While avoiding taxes, homeowners will also avoid having their credit score lowered by a foreclosure.

Congress voted to pass an extension of the Mortgage Forgiveness Debt Relief Act as part of tax bill H.R. 8. The act is now be extended until December 31, 2013, giving homeowners who are underwater a chance to consider other alternatives as opposed to having to opt forgo a short sale or loan modification.

"For distressed homeowners, the extension of the Mortgage Debt Relief Act is amazing news," said Dawn Wooldridge, CDPE of Keller Williams American Premier Realty. "Before this act, homeowners would negotiate a loan modification or avoid foreclosure through a short sale only to find they owed an equally unmanageable tax debt afterwards."

Do your homework
According to Forbes, homeowners should do their homework if they plan on taking advantage of the Mortgage Debt Relief Act. Mortgage refinancing has become more popular and could be a sensible option for many Americans who are looking to pay less than they have in the past.

"I'm committed to helping homeowners who are struggling," Wooldridge said. "Too often, homeowners facing foreclosure believe there is nothing they can do, but there is. In fact, the options available to homeowners are better than ever."

Wooldridge added that lenders are aware of how much foreclosures cost, which makes them favor short sales and other alternatives before allowing a home to go into foreclosure, encouraging lenders to work with homeownersmore than ever.

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