MBA, Trade Groups Urge Congress to Act on Tax Provisions

The Mortgage Bankers Association and other industry trade groups urged the House and Senate to approve two tax provisions set to expire at the end of the year they said would provide “much-needed certainty to the residential real estate market.

The House and Senate will return to Capitol Hill after the Thanksgiving holidays to finish out the 114th Congress. Among legislation under consideration is a broad “tax extenders” package.

MBA; the National Association of Home Builders; and the National Association of Realtors focused on two specific provisions:

The first provision ensures that any mortgage debt forgiven by a lender in connection with a principal residence will continue to be excluded from the taxable income of the borrower. This would prevent “underwater” homeowners from being taxed if their lender reduces the principal balance or a portion of their mortgage debt is forgiven in connection with a so-called “short sale.”

“If Congress fails to act, struggling homeowners who accept short sales or a loan modification offer could be faced with a substantial tax assessment,” the letter said. “The current provision, if extended, would aid many loss mitigation efforts and provide borrowers with the certainty that they will not be faced with a large, unexpected tax bill.”

The second provision would extend the tax deduction for mortgage insurance premiums paid by homeowners. For a $200,000 home, many homeowners are presently able to deduct between $600 and $1,000 from their taxes.

“Retaining this deduction beyond 2016 will greatly benefit the large number of homeowners, particularly first time home buyers, who cannot afford a 20 percent or greater down payment and who use mortgage insurance in order to purchase a home,” the letter said.

The House and Senate are expected to take up the bill before adjourning on Dec. 15.