Mortgage Debt Forgiveness Act Extended Through 2013
January 1st, Congress passed the American Taxpayer Relief Act of 2012.
Part of this Act is a one year extension for the Mortgage Forgiveness
Debt Relief Act. Created in 2007, this act granted exemption from
income tax to homeowners who had all or a portion of their mortgage debt
on a primary residence forgiven through a waiver of deficiency as part
of a short sale or foreclosure. Without the act, the forgiveness of
mortgage debt is called debt discharge income and is treated similarly
to ordinary income by the IRS.
Experts worried that if the Mortgage Debt Forgiveness Act, originally passed as part of the Bush tax cuts, was not extended that homeowners might elect to walk away from their upside down properties rather than seeking loan modifications, short sales, or other alternatives to foreclosure. This could have spelled trouble for the fledgling housing recovery that has begun to take shape in Las Vegas and across the nation. Las Vegas could have been especially vulnerable to en masse foreclosures, considering the fact that, to spite the steady rise of median home prices over the last year, more than 60% of all Las Vegas homeowners are still underwater.
This one-year extension provides a unique opportunity for these Las Vegas homeowners. Short sales have become particularly attractive over the last year in Las Vegas. Home prices have risen steadily for over a year, bringing current home valuations much closer to the mortgage balances owed by those who bought at the height of the market in 2005-2007. This may make banks more willing to negotiate short sales for these owners as their potential loss margin narrows.
If you are interested in listing your home for short sale here in Las Vegas call Team Plantone for a free consultation to determine your options.