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Bush Supports Stabenow Mortgage Relief Act

by Mike Godfrey,, Washington

04 September 2007

US Senator Debbie Stabenow (D-MI) has announced that President Bush will include the Mortgage Relief Act in his initiative to assist homeowners impacted by troubled mortgages.

The Mortgage Relief Act, introduced in May by Senator Stabenow, would change a current law which forces individuals to pay an income tax when they have had a part of their mortgage loan forgiven, or have been forced to foreclose because of their inability to pay their mortgage. The bill is also sponsored by Senator Carl Levin (D-MI), George Voinovich (R-OH) and John Kerry (D-MA).

Commenting on her proposals, Stabenow argued that "it is wrong to unfairly tax families when they are faced with the prospect of losing their home".

“I look forward to working with the President and my colleagues to prevent additional, unfair economic hardship in the lives of those who find themselves in truly unfortunate circumstances. We need to make it easier, not harder, for Americans to keep their homes," she added.

The IRS currently taxes any loan forgiveness as “income”. The Mortgage Relief Act will relieve families of a tax burden when their lender forgives part of the mortgage on a principal residence.

According to Stabenow, under current law there are a number of situations in which homeowners are unfairly taxed when trying to responsibly address their inability to meet their mortgage. For instance, if a family owns a home with a $100,000 mortgage and can’t afford to make their payments, the bank can step in and refinance the house at a lower value to better reflect the decreased market value. Under current law, if the bank values the home at $80,000 the family would have to pay taxes on the $20,000 difference between the new and the original mortgages.

In addition, the President’s plan will urge Congress to reform current laws to make it easier for the Federal Housing Administration to offer aid to mortgage holders with subprime mortgages. His proposal will also include an increased effort to enforce predatory lending laws and strengthen lending practices.

At a White House news conference last Friday, President Bush pledged to work with Congress to temporarily amend the federal tax code to make it easier for homeowners to refinance their mortgages during the current market stress.

"I believe we need to change the code to make it easier for people to refinance their homes and stay in their homes. And to this end, I've called Senator Debbie Stabenow of Michigan and told her that she's onto a good idea with the bill that she and George Voinovich have submitted to the Senate," Bush stated.

The President added that similar legislation being introduced by Rob Andrews (D - NJ) and Ron Lewis (R - KY) in the House of Representatives is also "positive".

"With a few changes in the Senate version and the House version, this administration can support these bills, and we look forward to working with them - the senators and the members of the House - to pass common-sense legislation to help us address this issue," he announced.

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