Mortgage Debt Relief - The Act of Relief
Mortgage debt relief refers to a new bill that was passed on Friday December 14, 2007 called “ The Mortgage Debt Relief Act of 2007. This bill offers a bit of breathing room for those people that are going to lose their home due to a foreclosure, or sell their home on a short sale.
This act will help homeowners that had sub-prime loans. Many of these people are ending up losing their homes because as the rates move up, most people are in a situation where they can no longer afford their mortgage payments and may possibly lose their home.
Before this act was passed, the homeowner that had their mortgage forgiven still had to pay tax on the forgiven loan. That meant that if they sold their home at a cost less than their mortgage amount, a short sale, they would have to pay the tax on the difference between the mortgage value and the sale price. This new act is good news for home owners that were forced into foreclosure, because since the tax is gone, they can sell the property at less than the cost of the original mortgage and not go into further debt. The banks are more likely to consider selling a house at less than the mortgage value because there is nothing being gained on their side by just holding the house. On top of that, the bank must also pay for a property manager to take care of the house, and pay for normal upkeep of the house.
When the house is sold as a short sale, there is no record as there is when there is a foreclosure. It is a benefit to all parties involved to sell the house for less than the mortgage price, and passing this act has made life much simpler for the home owner with a mortgage problem.
