The National Association of REALTORS® is calling on its members to help urge Congress to renew the Mortgage Debt Forgiveness Act, an income tax exemption on mortgage debt forgiven in a short sale or a workout for principal residences.
The Mortgage Debt Forgiveness Act expired at the end of 2013, which means that distressed home owners are responsible for paying taxes on “phantom income” from the forgiven debt once the properties are sold. The tax on a 2014 short sale or workout would be due April 15 of next year if Congress does not extend the measure. (Read more about the issue.)
“Unless Congress acts, hundreds of thousands of American families who did the right thing will have to pay tax on ‘phantom income’ — money they never see,” reads an ad issued by NAR, which will run in select Capitol Hill publications this week.
Some families have chosen not to go through a short sale or seek workouts because of the uncertainty surrounding the extension this year.
NAR is urging its members to contact their representatives and senators in Congress to support extending Mortgage Debt Forgiveness Act. At the REALTOR® Action Center, you can access a template for a letter in support of the extension and send an instant e-mail to your congresspeople.
More than 5 million home owners remain underwater, owing more on their mortgage than their home is currently worth. Also, nearly 1 million households are seriously delinquent on their mortgages or are in foreclosure.
When “your world has been turned upside down, the last thing you need is a tax bill for income you’ll never see,” NAR’s ad says.
Also, NAR is issuing a second member-wide call to action this week to garner more support for the Terrorism Risk Insurance Act of 2002 federal backstop program and its extensions. The insurance makes terrorism coverage available for property and casualty lines. It was reauthorized in 2005 and 2007 but will expire at the end of 2014 unless Congress extends it again. If it expires by the end of 2014, NAR says the terrorism insurance market will be disrupted and insurance coverage will become more limited and more expensive.
Join the Calls for Action
In the commercial real estate sector in particular, terrorism coverage is often needed to secure financing, and a jump in premiums could potentially reduce the value of commercial properties. (Read more background about terrorism reinsurance and why it matters to real estate.)
“The program provides stability and creates a viable insurance market, with widely available coverage and affordable premiums at virtually no cost to taxpayers,” NAR officials say. “Sustaining a viable private market for terrorism insurance depends on the federal backstop.”
Members are urged to send a letter to their senators to show their support. NAR has issued a formal call for action, which includes a letter you can access at the REALTOR® Action Center and instantly e-mail to your senators.
By Melissa Dittmann Tracey, REALTOR® Magazine Daily News