WASHINGTON, D.C. — U.S. Senator George V. Voinovich’s (R-OH) Mortgage Relief Act – legislation to change current law that forces individuals to pay income tax when they have part of their mortgage loan forgiven or are forced to foreclose because of inability to pay their mortgage – today overwhelmingly passed the House by a vote of 386-27. Sen. Voinovich called on Senate leadership to rush the bill to the floor for speedy passage:
“Homeowners need relief and they cannot wait any longer,” said Sen. Voinovich, who, along with along Sen. Debbie Stabenow (D-MI) introduced this bill on May 15. “If we don’t get this to the president’s desk soon, the turmoil in the housing market may get even worse. We don’t want people filling out their 2007 tax returns and discovering a very frightening and expensive surprise.”
The House bill has some differences when compared with Sen. Voinovich’s version that will need to be addressed. Sen. Voinovich is working with the White House and members of the House to move forward as quickly as possible.
“Removing this tax penalty encourages homeowners and lenders to work together voluntarily so that payments are manageable and foreclosure can be avoided,” Sen. Voinovich said. “This tax actually penalizes those who are trying to work it out in a responsible manner.”
Declining home prices and rising foreclosure rates have forced more and more families – often minorities, the elderly and immigrants – to sell their homes for less than they paid for them, and sometimes for less than the outstanding debt. The Internal Revenue Service 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, whether as part of a work-out, a short sale, or a foreclosure.
“Clearly it is unfair to tax people on income that doesn’t exist,” Sen. Voinovich said. “This is particularly true at a time when they have experienced a substantial economic loss on the most significant asset they own and have no way to pay the tax. This tax is unfair and must end immediately.”
Nationwide, 2006 foreclosure rates were higher than any of the last 13 years. As a state, Ohio has the highest foreclosure rate in the nation at 3.6 percent (compared with the 1.4 percent national average). 2006 Ohio foreclosure filings increased by 24 percent over 2005, with over 79,000 foreclosure filings. Thirty-two counties had an increase in foreclosure filings above 24 percent, including eight major metropolitan counties: Cuyahoga, Franklin, Hamilton, Lucas, Mahoning, Montgomery, Stark and Summit.