Mcnerney Pushes for Foreclosure Tax Fairness

Press Release

MCNERNEY PUSHES FOR FORECLOSURE TAX FAIRNESS

Washington, D.C. - Continuing in his effort to push for a response and solution to the current home mortgage crisis, today, Congressman Jerry McNerney (CA-11) supported a measure to eliminate an unfair, hidden tax on those facing foreclosure.

"Anyone confronting the possibility of home foreclosure - and there are too many foreclosures in San Joaquin County - faces anxiety and an uncertain financial future," said Rep. McNerney. "Hitting families with a penalty as they try to work through a foreclosure or negotiate with a lender to keep their home is just unfair."

The way the law currently works, if a bank forecloses on a home, homeowners could lose their home and face a large tax bill. This double whammy can occur because current law taxes homeowners on debt that is forgiven by banks, such as when the value of a home is less than the homeowner's outstanding obligations on their mortgage. Even taxpayers that restructure their mortgages to avert foreclosure can face tax bills.

The Mortgage Forgiveness Debt Relief Act of 2007, H.R. 3648, eliminates that tax burden. The bill passed the House today by a vote of 386 to 27 and significant bipartisan support.

The bill has broad support from the housing and mortgages industries, including the National Association of Realtors, National Association of Home Builders, Mortgage Bankers Association, as well as the Bush Administration.

This comes on top of House passage of the Expanding American Homeownership Act of 2007, H.R. 1852, on September 18. That legislation would ensure Federal Housing Administration-backed mortgage loans for low and middle income families by authorizing zero down payment loans, direct the Department of Housing and Urban Development (HUD) to serve higher risk borrowers who may otherwise turn to predatory and high priced mortgage loan alternatives, and by raising loan limits so that Federal Housing Administration can serve high cost housing markets.

Rep. McNerney chose to speak on the House floor today in support of H.R. 3648, The Mortgage Forgiveness Debt Relief Act of 2007. His remarks, as delivered, appear below.

"Mr. Speaker, in my district, the city of Stockton and the surrounding county, San Joaquin, are the very epicenter of the growing national home mortgage crisis.

"San Joaquin County has the second highest level of foreclosures in the country. Nearly 1 out of every 50 homes is being repossessed. Stockton has the highest foreclosure rate of any United States city. This tears apart communities.

"To add insult to injury, former homeowners who lost money when their house was sold, have to pay taxes on their losses. And those able to negotiate a reduction in the amount they owe are forced to pay taxes on that amount. That doesn't make sense

"Thankfully, the legislation we're voting on today will eliminate this "phantom tax" and provide some breathing room for people in financial crisis.

"I strongly support this bill."

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