President George Bush signed HR 3648 into law today. This new mortgage legislation is designed to help folks stuck in the mire of the subprime mortgage loan “meltdown” of 2007. In many cases, a homeowner with an adjusting mortgage rate in a declining value market would seek to refinance only to find they did not have any equity to do so. In that event, a lender might forgive part of the current mortgage to allow the homeowner to obtain a better, more affordable loan. Under the law, the forgiven portion of the law was considered taxable income and would be taxed at the end of the year. This could place a very large tax burden on the homeowner.
With this new legislation, the forgiven portion of the prior mortgage would no longer be considered taxable income, thereby saving the homeowner a lot of money come tax time. “When you’re worried about making your payments, higher taxes are the last thing you need to worry about,” Bush said during the bill-signing ceremony.
I think this is a good move and should help many American’s facing the potential of foreclosure if they can’t refinance. I am glad Congress is trying to do something. My only fear is that they will not only offer too little too late, but when they do make the final moves that they will over regulate the system and cripple it. Let’s all hope they figure something out.
