Subscribe
Shop Local
Magazine
Gas Prices
Today's Poll!Mortgage modifications may soon be taxed
Attorneys general appeal to Congress to renew tax break for troubled homeowners
Tuesday, December 4, 2012
The “fiscal cliff” is not the only thing looming over taxpayers at the end of the year. If you received a mortgage modification or other financial aid that reduced your mortgage obligation, you might find it's a taxable transaction.
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 may be excluded from a taxpayer’s calculation of taxable income. This exclusion only applies to mortgage debt forgiven on primary residences -- not second homes.
However, that law is set to expire at the end of this year and, with lawmakers focused on a deal to avert the fiscal cliff, the outlook for extending it is uncertain.
'Outrageous'
“It would be outrageous if Congress sticks unexpected tax bills to the very families who need help the most,” said Iowa Attorney General Tom Miller. “If Congress doesn’t extend this exclusion, it would discourage homeowners from taking part in the settlement we designed to help them. That would be a travesty.”
Miller is one of 42 state attorneys general who signed a letter to Congressional leaders, urging an extension of the tax break. His colleague, Maryland Attorney General Douglas Gansler, said failure to do so would harm efforts to stem foreclosures.
"I am urging Congress to extend this homeowner relief so families who are already suffering don't get an unexpected tax bill or become discouraged from participating in the historic National Mortgage Settlement," Gansler said. "Extension of this tax exclusion is estimated to save homeowners about $1.3 billion over the next two years. Unless Congress acts, any debt relief provided under the national settlement and other mortgage debt relief programs will likely be considered taxable income."
Bad timing
The expiration comes at a time when many homeowners are benefiting from the $25 billion national settlement agreement with the nation’s five largest loan servicing companies, which provides direct relief to homeowners. Many other banks across the country also offer mortgage modification and debt relief programs.
Gansler says there is some hope. An extension is included in the Family and Business Tax Cut Certainty Act of 2012, S. 3521, which recently passed the Senate Finance Committee with bipartisan support.
Marry Me
Comments
JCLifer 5 months, 2 weeks ago
It is outrageous that folks who took out mortgages that they could afford, and who made sure their payments are always made on time cannot benefit from the free "modification" like deadbeats who took out monster mortgages or who decided to quit making the payments. Once again, liberal government rewards the slackers at the expense of those who are responsible and do the right thing.
Littleinvestor 5 months, 2 weeks ago
What if one of a couple lost their job and then could not pay? Not every one who could not pay their mortgage was a deadbeat. I do know a lot of people who just walked away and could have continued to pay. I have no sympathy for them, and for the most part it was a foolish decision because you have to live somewhere and their credit is now in the tank for 7-10 years.
connor 5 months, 2 weeks ago
The modern day credit report/score scam needs to be addressed too. It currently is a one sided tool for big finance with Big Government getting in on it as well. Things happen. If a couple lost their job(s) and can no longer afford a big house then the government shouldn't pay to keep them in a place they no longer can afford but the repercussions of such a bad turn of events should not follow a person for decades either.
JCLifer 5 months, 2 weeks ago
Simple. Sell the house and pay off the loan.
JCLifer 5 months, 2 weeks ago
They should have had disability insurance, life insurance, personal savings, or other assets to sell to pay the loan. Personal responsibility.
Littleinvestor 5 months, 2 weeks ago
If you lost your job because it went to India or China, disability or life insurance ain't going to pay. If you have enough assets to pay off the loan, you should not have the loan in the first place. Apparently life has always been golden for you. It has turned sour for lots of people over the years, particularly the last 8-10 years. Horrible things happen to good people.
JCLifer 5 months, 2 weeks ago
Shouldn't it be charity that helps them? Why the government?
Maybe the loan company ought to lose a few now and then. After all, they are the ones who made the loan.
I don't see why it is the government's business to rescue every person, country, etc. when a lot of the rescued are as a result of bad decisions. Meanwhile the people whe make the good decisions and who follow the rules have to pay for the ones who don't. Seems backwards to me- desired behavior/outcomes should be rewarded. Unwanted behavior/outcomes should be penalized. Basic Psychology 101. Why should we support and encourage unwanted behavior/outcomes?
RobHunterJohnson 5 months, 2 weeks ago
I watched a neighbor who lost the house! Longtime resident, do not know the paticulars, but hard struggle, works for the state, loan co would not help with a modification, the Presidents money would not work? House was not worth what had been loaned! This person gave it up, and can now sleep! The problem does not lie so much with Fannie, and Freddie, as with the loan officer at the bank, or loan co, or the refinance co! When I had a little trouble in the 80s the Local Bank helped me with communication of what needed to be done! They would not even talk to this person? There has been at least several on my street that were forclosed on, and I am just one street in this problem! I did learn my lesson in the 80s. Rob
Paroquet 5 months, 2 weeks ago
A lapse of oversight and regulation allowed the banks to make predatory loans and for creditors to buy and sell bad debt.
spelchek 5 months, 2 weeks ago
When you start handing out things like $250,000 variable interest loans to $100 millionaires what do you think is going to happen? We understand bad things happen to good people. We're just not buying into your attempt at shaming us for lacking sympathy for the irresponsible that lied their way to temporary success.
RobHunterJohnson 5 months, 2 weeks ago
No one trying to shame no one here, except the problem started with Clinton, and finished with Bush 2. Would it have not been wise to have a little regulation from our Goverment, before this problem got out of hand? Good old George just sat their wide eyed like a kid in a smoke filled room, with not a worry in the world, saying I am a republican, and I pledge allegiance to no new regulations, or taxes? Just think if some of the clowns he surrounded himself with would have thought about anything else, but pumping OIL out of Iraq? Rob
spelchek 5 months, 2 weeks ago
Again Rob, what party completely controlled the purse strings the last two years of Bush's presidency? Again Rob, both parties voted for war in Iraq. Again Rob, what should have Bush done after watching 3,000 Americans die on national television? Again Rob, why didn't Clinton take OBL when he was offered on a silver platter in the 90's? Again Rob, the World Trade Center was bombed under Clinton's watch and he did relatively nothing (but hey, they got us the second time....Bush is so lucky). Again Rob, Bush was never impeached over telling a bold face lie to the American people like the womanizer in chief, Slick Willy. Again Rob, you use oil and liberals don't want us to drill on our turf to achieve energy independence, so where do we get our oil from? Bush was not a good President and neither is Obama. I refuse to be enslaved by any party that wants more control of my life while destroying what liberty and dignity we have left. Never thought I'd see the day you could win an election blaming everyone else for what you ran to fix and voters would see that as leadership.
asb 5 months, 2 weeks ago
Excep that when millions of loans that shouldn't be made, are, and then sold off by unregulated goons for billions in profits, while the economy shrinks by double digits . . . then perhaps a large case-by-case adjustment is reasonable. After all, the actual value of any parcel or home is determined by everybody's real estate prices, not just theirs. Nobody's an island here folks. If you know somebody who deadbeated or cheated, turn them in, the adjustments were designed to be reviewed, and still can be.
JCLifer 5 months, 2 weeks ago
Criminal charges should be brought against consumers who misrepresented their ability to make the payments on these huge loans. I am always hounded by loan companies to accept their credit cards, get bigger mortgages, borrow more, etc. and I know what my ability to pay them off is, so I do not apply for these loans no matter how hard these loan companies dangle their low and no interest offers.
Personal responsibility needs to be taken. I highly doubt that any loan company held a gun to these losers and made them apply for bigger loans than they could handle. Why our government wants to bail out these deadbeats is beyond me. Instead, they should reward the responsible folks who make the payments on time.
Of course, i am OK with being sympathetic to folks who lost their jobs or have other financial tradgedies that make it impossible to pay their loans. However, that is why they should have disability and life insurance, personal savings, etc. to pay off their debts. Just because times are tough should not be an excuse for failure to pay your debts.
Paroquet 5 months, 2 weeks ago
Graceful? It was DE-REGULATION under Bush what brought about the recession and subsequent bailouts. Clinton isn't himself exonerated either. However, the investors and firms were given the ball and trusted to play by the rules, and smartly, bu Bush. They ran around the rules, obfuscated facts, lied, and cheated, sold it that they were being honest, and then we footed their bill because they'd made themselves "too big to fail", and failed.
To be quite frank? I would've housed Madoff free of charge...in the old coal bin attached to my cellar. I wouldn't let the guy suffer, no. I'd do every thing I could to keep him alive & healthy for every last minute of his 150yr sentence in the same level of comfort afforded by our county's jail...instead of some federal "resort" penitentiary.
Paroquet 5 months, 2 weeks ago
"Too many people prefer their irrational ideology to reality. "--Graceful
You got it in one. Now, view your reflection. Earnestly. I promise, it'll hurt, but you'll be all the better for it.
I wiped my hands of government work and contracts when I heard the word "idealist" delivered with a sneer and scornful mocking tone by a certain Chairman of a prominent Commission.
Hmmpf. Idealists don't have the worst in mind. We just believe in doing things right the first time, rather than blathering over mi$ake$ born of favoriti$m on account of campaign donation$ and paying more to correct what could've been done right the fir$t time.
My challenge to any and all politicians or would-be's: cater to the middle ground. I don't really care from which "party" you hail. Extremism isn't working for the greater good. You are blind if you can-not see that.
JCLifer 5 months, 2 weeks ago
And unfortunately you will be penalized by the poor judgement of others as you will have to bail them out time and time again.
connor 5 months, 2 weeks ago
Oh please... The mortgage banks and financial institutions went wild with the loans because they had no other choice. If they had turned down any minority, sexual deviant, multiple single mother or illegal alien for a loan they would have had ACORN or some other community terrorist group occupying their lobby.
No one is prosecuting these firms because they were doing the will of the government handed down in regulations and enforced with law suite after law suite for discrimination if they didn't give loans out like water.
So they have these toxic assets, the ones they couldn't sell outright to FANNI or FREDDI and they did the only thing they could with them. Resold them. Now the investors realize just how bad these loans are, made under duress and they won't touch them any longer.
Liberal ideology and strong arm tactics caused the bubble and 07 collapse. Clinton's "Community Re-Investment" farce and Frank's housing bill or whatever it was called.
Paroquet 5 months, 2 weeks ago
Umm, dude? The '07 collapse was engineered long before it hit. You can't--o.k. you can if you like--blame Dems for it. It happened because of a Republican, and mentally challenged, President who was by and large an invisible heart patient. You know him as Dick Cheney-Haliburton--wait, I mean G.W. Bush.
Quit blaming the Left/Libs for Bush's failures. Instead, use that knowledge to grow from his/their mistakes.
Ain't asking you to switch parties or not to vote your conscience. I would, and i am so bold, ask you to change your affiliation to (I), and let them both (R) & (D) worry about earning your informed vote.
I like some of the policies and tenets of both. Hard to get that anymore. Register as an (I) and you keep them guessing instead of commiserating.
connor 5 months, 2 weeks ago
I am an (I) BTW. Not a Republican. I just haven't seen anything from a (D) that wasn't outright toxic in over a generation.
Believe me I have seen it with my own eyes, these loans were made under duress. The banks would have laughed at these people trying to get these loans before the strong arm tactics of the Left kicked in. I personally know more than one, all members of one of the protected groups who got loans and had never held a job longer than a few months their entire lives. I think a few of them never made more than 1 payment but if they had not been given those loans it would have been used against the financial institutions as evidence of discrimination.
More Cleftwing toxic policies.
Sequoia 5 months, 2 weeks ago
Banks weren't forced to make loans to minorities. The banks made high-risk loans because they were able to chop them up, bundle them, and sell them as "collateralized debt obligations" and other instruments (enabled by the deregulation that the banks ASKED for) now known as "toxic assets."
These toxic assets are what destroyed the economy. There actually wasn't a terribly huge mortgage default rate, but once everyone realized that this mortgage risk had been sold off across the entire economy, we had that huge credit freeze. That's the economic collapse.
Fannie and Freddie didn't cause this... they DID get caught up in the same irrational belief as everyone else. I covered the real estate boom, and I can tell you I heard a LOT of people (who should have known better) tell me that "real estate will never go down, it will always go up."
The banks weren't forced to make these loans. They were pushing them out the door as fast as they could... get the commission, sell the CDOs. Get your money now and leave the suckers holding the bag. That's how it works!
Certainly, both Republicans and Democrats, going way back, advocate home ownership. They got too caught up into the hype, but they didn't create the hype. Banks did, and got bailed out. What I don't understand is why we didn't "bail out" the homeowners... reduce the foreclosure risk, and there's no panic that infects all the CDOs. But that's what you get when Wall Street owns Washington.
And some of you guys never say a cross word about private enterprise... as if this whole mess was caused by minorities and "the gubment." Please. Follow the money. Look who cashed in. Don't be fools.
Unlike any of you, I can cite actual journalism that takes a nuanced look at these problems. Most of you fakes never cite anything. You just beat dead horses with wiffle bats.
theatlantic.com/business/archive/2011/12/for-the-last-time-fannie-and-freddie-didnt-cause-the-housing-crisis/250121/
All you whack MCs better go home and practice.
JCLifer 5 months, 2 weeks ago
"What I don't understand is why we didn't "bail out" the homeowners... reduce the foreclosure risk, and there's no panic that infects all the CDOs. But that's what you get when Wall Street owns Washington."
AMEN! Instead of bailing out banks, bail out the people who needed it so they could pay their loans and keep their houses. Instead of bailing out Government Motors, give the money to the people so they can buy new cars and keep the carmakers busy.
Government robs money from taxpayers and gives our money to the cronies. It is dispicable.
RobHunterJohnson 5 months, 2 weeks ago
Remember the commercial, "Somebody help me, I am in Dept up to my eyeballs"! Rob
JCLifer 5 months, 2 weeks ago
A payday loan is the solution to every problem!
Please review our Policies and Procedures before registering or commenting
Or login with:
OpenID