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Senate Passes Tax Bill That Includes Key Mortgage Deductions

The Senate approved a bill late Tuesday that would retroactively extend over 50 expiring tax provisions for one year, including one that shields distressed homeowners from paying taxes on any mortgage debt forgiven in a short sale.
The Senate approved the bill 76 to 16, which extends the provisions until Dec. 30 of this year (the one-year extension is retroactive). The House passed the bill 387 to 46 on Dec. 3.

At one point, House and Senate lawmakers were close to a deal on a two-year extension. But the White House objected because key business tax provisions were given permanent status while others affecting low- and moderate-income households would still have had to be extended each year.

"In my view, any agreement on permanent tax policies must be balanced between support for businesses and support for working families. A deal that only makes corporate policies permanent — or one sharply skewed in that direction — would have failed the test of fairness," said Sen. Ron Wyden, chairman of the Senate Finance Committee.

Under the bill, homeowners can deduct the cost of mortgage insurance premiums on their 2014 tax forms. This tax break covers private mortgage insurance premiums as well as premiums paid on Federal Housing Administration, Department of Veterans Affairs and Rural Housing Service guaranteed loans. The U.S. Mortgage Insurers welcomed the extension.

"USMI commends passage by Congress last night of a one year extension of vital homeowner tax relief. We are especially pleased that the legislation includes the tax-deductible treatment of mortgage insurance premiums for low and moderate income borrowers. We look forward to working with Congress towards permanent enactment of this important tax relief for homeowners," according to the private mortgage companies
.
About 3.6 million taxpayers claimed the mortgage insurance deduction in 2009, according to analysts at Compass Point Research and Trading LLC.

The bill also ensures underwater borrowers that sold their homes in a short sale in 2014 will not be penalized.
Prior to the housing bust, troubled homeowners had to pay taxes on any mortgage debt that was canceled or forgiven by a lender. The amount of forgiven mortgage debt was treated as ordinary income and taxed accordingly.
The "Mortgage Forgiveness Debt Relief Act is crucial to foreclosure mitigation efforts such as principal forgiveness and short sales," said Isaac Boltansky, an analyst with Compass Point.

In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act so that distressed borrowers would not be penalized for doing a short sale. Congress extended this tax relief in 2009 and 2012, but failed to pass a tax extender bill at the end of 2013.

Since 2008, more than 800,000 distressed homeowners have taken advantage of this tax break, according to Rep. Charles Rangel, D-N.Y., an original sponsor of the debt forgiveness bill in 2007.

Short sales have been declining over the past few years due to an improving economy, lower foreclosures and the uncertainty over the tax consequences of a short sale or deed in lieu transaction, where the homeowner simply signs over the deed to the house to the bank and vacates the property.

Fannie Mae and Freddie Mac servicers completed 27,800 short sales during the first eight months of this year, compared to 87,740 in 2013 and 125,232 in 2012.

Boltansky noted that the retroactive reauthorization for 2014 also gives Federal Housing Finance Agency Director Mel Watt a shield to resist Democratic pressure to permit principal reductions on Fannie and Freddie loans.

Watt "will have additional political cover to reject calls to embrace the principal reduction through HAMP as the tax consequences could limit borrower participation" he wrote in a Dec. 2 report.

For the full article, please visit http://www.nationalmortgagenews.com/news/regulation/senate-passes-tax-bill-that-includes-key-mortgage-deductions-1043384-1.html.


7 Comments to Senate Passes Tax Bill That Includes Key Mortgage Deductions:

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chanel bags on Friday, December 19, 2014 2:13 AM
The suspensions apply only to eviction lockouts related to REO properties owned by Fannie Mae and Freddie Mac and will not affect other pre- or post-foreclosure processes.
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http://www.themosh.org/visit.asp on Friday, December 19, 2014 2:20 AM
During this period, legal and administrative proceedings for evictions may continue, but families living in foreclosed properties will be permitted to remain in the home. The suspensions apply only to eviction lockouts related to REO properties owned by Fannie Mae and Freddie Mac and will not affect other pre- or post-foreclosure processes. “The holidays are meant for families to spend time together, especially if they’ve gone through the stress of financial challenges and foreclosure,” said Terry Edwards, executive vice president of credit portfolio management at Fannie Mae, in a statement. “No family should have to give up their home during this holiday season," he said.
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Stock Tips for Today on Wednesday, June 03, 2015 7:26 AM
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Free Equity Market Tips on Thursday, November 05, 2015 1:57 AM
Bill passes on key mortgage deduction gives some tax benefit so as to make a right choice for a right value in the market to pay.
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replique montre rolex on Friday, April 29, 2016 1:18 AM
At one point, House and Senate lawmakers were close to a deal on a two-year extension.
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