WASHINGTON, D.C. –President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007 into law Friday morning at his desk in the Oval Office. The comprehensive mortgage assistance bill included a provision coauthored by U.S. Rep. Ron Lewis (KY-02) to eliminate taxes homeowners might face when banks renegotiate the terms of a home loan and forgive a portion of the outstanding mortgage debt.

 

“I am pleased that my colleagues were able to join together to pass this critical legislation,” said Lewis. “It is unfair to tax people on phantom income, particularly when they have had suffered serious economic loss and have less ability to pay the tax.”

 

Prior to Friday’s bill signing, only two categories of individuals paid taxes when selling their principal residence: those who were able to realize a capital gain of more than $250,000 ($500,000 on a joint return) and those who lost equity in their home and were forgiven some portion of their mortgage debt. 

 

Lewis’ provision states that no tax will be collected when a lender forgives part of the mortgage on the sale or disposition of a principal residence. 

 

“I appreciate Congressman Lewis’ work to address long-term issues in the mortgage market affecting American homeowners," said Ways and Means Committee Ranking Member Jim McCrery (R-LA).

 

President Bush announced his support for Lewis’ proposal during an August 31st Rose Garden news conference discussing homeownership financing.

 

“The House has Rob Andrews of New Jersey and Ron Lewis of Kentucky introducing legislation that is a positive step toward changing the tax code so people aren't penalized when they refinance their homes,” said Bush “…We look forward to working with them to pass common-sense legislation to help us address this issue.”

 

The Mortgage Forgiveness Debt Relief Act was one of the last bills passed by Congress before adjourning for the year Wednesday December 19th.

 

 

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