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Health & Fitness

U.S. Senate Whiffs on Helping 'Underwater' Homeowners

On December 31st, the Mortgage Cancellation Tax Relief Act will expire.  The San Mateo County Association of REALTORS® (SAMCAR) in conjunction with the National Association of REALTORS® (NAR) has been working with Congresswomen Anna Eshoo and Jackie Speier -and- Senators Barbara Boxer and Dianne Feinstein since early in 2013 to extend this important real estate tax provision. 

Without an extension, homeowners who have any amount of a mortgage forgiven by a lender either in a short sale or foreclosure would be subject to paying “phantom income tax” on the amount of the forgiveness. Homeowners shouldn't be forced to pay tax on money they've already lost with cash they never received -and- never will receive.  

There are two bills (S. 1187, the “Mortgage Forgiveness Tax Relief Act” and H.R.2994, the “Mortgage Forgiveness Tax Relief Act of 2013”) at play in the Senate and House, respectively.  These are non-partisan, ‘no brainer’ pieces of legislation. So what happened? The House of Representatives adjourned for the year without taking action on H.R. 2994 (sigh). Stee-rike One!

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But the more egregious action came in the Senate. Sen. Debbie Stabenow (D-MI and author of the bill) conducted a discussion, known as a colloquy, with a number of colleagues on the Senate Floor to underscore the importance of passing this legislation. After the colloquy concluded, Senate Majority Leader Harry Reid (D-NV) came to the floor to request unanimous consent to bring up and pass a number of expiring tax provisions, including Mortgage Cancellation. 

Get this… under Senate rules, only one Senator has to object to stop the process, and Senator Reid’s request was, you guessed it, objected to – Stee-rike Two!

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And Senate rules don't require disclosure of the objecting Senator so we don't know who objected or even how many objected. Stee-rike Three! The following is an unvarnished IMHO: So one (or more) Senators can screw an entire population of struggling homeowners on a whim?!

Assuming the embarrassment of having this happen, Senator Reid announced his intention to work with Republicans (read that last part again v-e-r-y  s-l-o-w-l-y) to pass a tax extension bill – including mortgage cancellation, early in 2014 that would be retroactive. 

While there are still many procedural obstacles to overcome, the upside is that Congress WILL move on an extension of Mortgage Cancellation relief in 2014.  As was the case with a previous extension, they'll retroactively apply mortgage forgiveness relief to include transactions between January 1, 2014 and the enactment of the extension… but know this: timing of a House vote is far less certain as House Republicans contemplate a vote on a larger tax reform package. 

BTW: Should you be wondering, Sen. Boxer is already a co-author of S. 1187 while Sen. Feinstein has yet to make a decision. Neither Reps. Eshoo nor Speier have stated their position on H.R. 2297.

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