The expiration of the Mortgage Forgiveness Debt Relief Act on Dec. 31 is affecting the broader housing market. The law's mortgage debt forgiveness exemption proved invaluable to many homeowners who ended up with underwater mortgages during the housing bust. However, thousands of short sellers in most parts of the country could face hefty income tax hits next year if Congress does not reauthorize the statute retroactive to Jan. 1. Short sales have declined from 10 to 12 percent of home transactions in recent years to 4 to 5 percent this spring, according to the National Association of Realtors. Some potential short sellers are even choosing to file for bankruptcy due to the uncertainty over the renewal of the exemption. The statute has been pulled into a partisan battle in the Senate, but tax analysts and lobbyists say there is strong support for renewing mortgage forgiveness relief.