Q: What are you doing to help struggling homeowners?
A: Millions of Americans are feeling the financial difficulties of the nation’s recent housing decline. Faced with increased mortgage payments, many families are confronting the reality of defaulting and losing their home or working with lenders to reduce their loan. As homeowners do the right thing and fight to keep their homes through loan restructuring, they’re hit by taxes due to debt forgiveness from the lender. It’s vital for these families and the economy that homeowners do not default or foreclose on their homes. As ranking member of the Senate’s tax-writing committee, I was a lead sponsor on legislation that brings debt forgiveness relief to those who are working hard to keep their homes. The legislation passed the Senate and House of Representatives in December with overwhelming support, and I am optimistic it will receive similar support by the White House bringing much needed relief to those trying to reduce their home loan debt.
Q: How does your legislation work?
A: The legislation is simple. Under the current law, if a lender forgives or cancels a mortgage, the tax code treats the forgiven debt as income subject to tax. The Senate passed legislation excludes qualified cancellation of debt income for three years helping bring a temporary reprieve. This legislation was coupled with a September letter I wrote to the Treasury Department and the IRS urging them to take action to help working families with this tax situation. The White House and Treasury Department addressed the housing issue earlier this year by manufacturing a deal that allows lenders the option to freeze interest rates on select mortgages for five years in an effort keep up to 1.2 million people in their homes. I’m hopeful that this executive action together with the Senate-sponsored provisions will help our nation recover from the housing turn down and be part of getting this important sector of our economy back on track.