The Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Foregiveness Debt Relief Act of 2007 may help homeowners who sell their property on a 'short sale'. For more information on short sales, please visit my website at http://drewludlow.com/default.asp_Q_f_E_cpg_A_pg_E_ShortSales.

According to President Bush, "When your home is losing value and your family is under financial stress, the last thing you need is to be hit with higher taxes. So I'm working with members of both parties to pass a bill that will protect homeowners from having to pay taxes on cancelled mortgage debt." http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html

I am not a CPA, so I can not give tax advice. For more information, please consult with your tax professional. Having said that, it used to be that when you short sale your home and the debt is forgiven by the lender, you would be 1099'd at the end of the year for the forgiven debt. Danmed if you do, damned if you don't!

Now, it seems as if you have some protection from paying taxes on money you never really received.

Although this quite significant, many lenders are not forgiving debt when allowing short sales to proceed. They simply release the lien on the property to allow the sale to go through, but are still retaining the right to the promissory note and all subsequent debt by the borrower. Still, regardless of whether or not your debt is forgiven, a short sales is always better than a foreclosure!