Posted on 12/23/2007 11:26:25 AM PST by an amused spectator
THE PRESIDENT: Thank you all for coming. Welcome to the White House. I'm pleased to sign a bill that will help homeowners who are struggling with rising mortgage payments. The Mortgage Forgiveness Debt Relief Act of 2007 will protect families from higher taxes when they refinance their homes. It will help hardworking Americans take steps to avoid foreclosure during a period of uncertainty in the housing market. I want to thank members of Congress for getting this bill passed. I appreciate it very much. It's been a joy working with you...
**snip**
...The bill I sign today will help this effort by ensuring that refinancing a mortgage does not result in a higher tax bill. Under current law, if the value of your house declines and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as money that can be taxed. And of course, this makes a difficult situation even worse. When you're worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation. The provision will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes...
(Excerpt) Read more at whitehouse.gov ...
The pirates at the IRS forced to walk the plank on this one...
Nice; A family runs up the debt on their house to buy a motor home. Can I get a ride ?
How about forgiving student loan debts too while your at it Bush?!
Irresponsible borrowers (and house flipper geniuses) get taxpayers to help them pay for THEIR mortgage problems.
Is this a great country, or what?
Possibly, but it also addresses those who walk away from a mortgage they can’t pay - only to receive a bill from the IRS on their “earnings” on the house.
That doesn't strike me as a promotion of personal freedom at all.
Agreed, this just rewards foolish borrowing and lending.
Whatever happened to caveat emptor?
Love the fact that I am effectively punished because I only bought a house I could afford payments on. While people earning less then me are buying houses twice the size and now get forgiveness.
Hence, irresponsible and careless living is worthy of reward at the cost of responsible living.
Why be responsible?
I must be missing something here.
Everyone is saying that people who overstretched their credit by buying a house that was above their means, is getting ‘government’ help to pay the mortage.
That’s not how I read it here.
“Under current law, if the value of your house declines and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as money that can be taxed.”
Which means, if you buy a house for ,say, $200,000 (taxes and interest included) and the bank agrees to let you refinance at a lower rate, which will reduce your total by, say, $10,000 (arbitrary figure), under current law you can be ‘taxed’ on the difference from your old loan total ($200,000) and your new loan total ($180,000), which is $10,000.
This bill will, in effect, stop the IRS from collecting taxes on the difference between the old loan total and the new loan total.
I don’t see it as a ‘handout’ by the government to these people because there are no ‘funds’ being given to these people.
Maybe I’m reading it wrong.. I’m sure someone will ‘straighten’ me out if I am.
Primary dwelling only, I believe - which deals out "Flip This Dipsters". I'm concerned about the IRS pirates showing up at your door with a bill for the "income" you got (NOT!) from things relating to the financing of your primary residence.
The IRS was nailing people who couldn't pay their mortgage and threw up their hands and walked away.
The bank would resell the house (for much less in most instances) and the difference between the mortgage value and the resale price would be taxed as "income".
No, I believe you are correct.
:-)
That’s the way I’m reading it too.
Oh,,oh,,,oh,,,
My first STAR!!!! *
Thank you!!!!
:0)
If you pay taxes you are getting a ride, the bank bailout on honest peoples back of 2007.
Thinking about it, this should have the nanny government alert on it.
You are correct in that it is not a government bailout, but it is a little more complicated than you explained. Say you bought a house for $200K and had a loan for $200K. If you sold your home or refinanced your home for $180K and the bank forgave your debt (because foreclosure is more expensive option for them) under the current tax code you are taxed on the $20K 'gain' of the debt forgiveness. This law makes the $20K you lost in home value offset the $20K in debt forgiveness resulting in no tax due.
Sounds good but that dog will not hunt.
This has nothing to do with debt forgiveness except for the tax consequences of it. This bill makes perfect sense. If you lose $20K of home value and if the bank volunatarily forgives that debt, then under this law the loss offsets the gain resulting in no tax due. The way it should be.
Another seller I had had a husband die and the wife and two daughters were attempting to make the payments but couldn't keep up. They had to face taxes on their 'gain' as well.
Yes, there are plenty of people who have not made the best choices in life but I could never make sense of the IRS taxing the loss as a gain.
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