Senate Finance Committee Chairman Ron Wyden (D-Ore.) on April 1 introduced a tax bill that would renew the Mortgage Debt Forgiveness Relief Act for two years. The provision, which expired Jan. 1, prevents underwater borrowers from being penalized when they engage in a short sale or when mortgage debt is cancelled as part of a loan modification.
Industry and consumer groups had sought an extension that would be retroactive to Jan. 1. "Congress' failure to extend mortgage debt forgiveness last year has created a situation where the federal government is now spending money on programs to prevent foreclosures, while threatening to tax the very homeowners they are trying to help," according to a letter signed by 23 industry and other interest groups.
Wyden's tax bill also extends the deduction for mortgage insurance premiums for two years.