In late December, U.S. Senator Debbie Stabenow (D-MI) joined President George W. Bush at the White House, as the President signed Stabenow’s mortgage tax relief legislation into law. The legislation changes current law requiring individuals to pay an income tax when they have had a part of their mortgage loan forgiven or have been forced to foreclose.

“This law is critical to ensuring that families across our state who face foreclosure will not be hit with an additional tax bill this year. It adds insult to injury when someone loses their home and gets a new tax bill on top of it,” said Stabenow. “I appreciate the support of the President and my Senate and House colleagues in turning my legislation into law. I look forward to continuing the critical effort to help the thousands of Michigan families faced with the prospect of losing their home.”

Declining home prices and rising foreclosure rates have left too many middle-class families having to sell their homes for less than they paid for them, and sometimes for less than the outstanding debt. The IRS currently taxes any loan forgiveness as “income.” The Mortgage Forgiveness Debt Relief Act will relieve families of a tax burden when their lender forgives part of the mortgage on a principal residence.

Michigan has recorded over 135,000 foreclosure filings on the year. The Detroit metropolitan area ranked second highest in the third quarter for the rate of households in foreclosure in the 100 largest metropolitan areas, with one out of every 33 households.

Related articles:

Foreclosure Crisis - Stabenow: No Tax on Forgiven Debt, Nov/Dec 07 Leaders’ Edge

The Story Behind the Mortgage Crisis in Michigan, Sept/Oct 07 Leaders’ Edge

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