A Senate Resolution urging the President and Congress of the United States to extend the Mortgage Forgiveness Debt Relief Act of 2007.

Whereas, In late 2007, in response to the emerging financial crisis, the Mortgage Forgiveness Debt Relief Act (the Act) was signed into law, to relieve homeowners of tax liabilities due to housing debt forgiven by holders of mortgage loans; and

Whereas, Before the act was signed into law, when a homeowner undergoing short sale, foreclosure, deed-in-lieu of foreclosure, or loan modification had mortgage debt forgiven by a financial institution, the forgiven debt was counted as taxable income for the homeowner, which could result in significant tax liability; and

Whereas, The Act helped homeowners who were underwater on their mortgages by providing them with a valuable tax break on mortgage debt forgiven by a financial institution; and

Whereas, In the period leading up to the enactment of the Act, the housing bubble in the United States burst, causing home values to plummet; and

Whereas, Many homeowners in New Jersey and elsewhere were underwater, owing more money to financial institutions than their homes were worth, and having trouble making their mortgage payments, which caused the number of short sales, foreclosures, deeds-in-lieu of foreclosure, and loan modifications to increase; and

Whereas, While Congress has extended the Act twice, the latest extension expired on January 1, 2014, so if Congress does not extend the Act again, people who have mortgage debt forgiven this year and in the future will be forced to pay taxes on the amount of debt forgiven; and

Whereas, This bad situation is even worse for some New Jersey homeowners who have been forced to take buyouts from the State because their homes are in flood-prone areas, which have been heavily affected by recent disasters such as Hurricane Sandy; and

Whereas, When the State makes buyout offers to these homeowners, it can only offer to purchase the homes at fair market value, which is often less than what the homeowners owe on their mortgages, due to the collapse of housing prices; and

Whereas, If Congress fails to extend the Act, these homeowners may be faced with large tax bills if they accept State buyouts, due to the debt which is typically forgiven by banks in buyout situations; and

Whereas, Going through a short sale, foreclosure, deed-in-lieu of foreclosure, or loan modification is a stressful situation for any homeowner, which can be eased by the President and Congress of the United States extending the Act to allow for tax forgiveness to homeowners who have already suffered significant financial losses; now, therefore,

Be It Resolved by the Senate of the State of New Jersey:

1. The Congress and President of the United States are respectfully urged to take all appropriate legislative action necessary to extend the Mortgage Forgiveness Debt Relief Act of 2007.

2. Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Secretary of the Senate to the President of the United States, the presiding officers of the United States Senate and House of Representatives, and to each member of the United States Congress elected from this State.

STATEMENT

This Senate Resolution urges the President and Congress of the United States to extend the Mortgage Forgiveness Debt Relief Act of 2007. In late 2007, in response to the emerging financial crisis, the Mortgage Forgiveness Debt Relief Act (the Act) was signed into law, to relieve homeowners of tax liabilities due to housing debt forgiven by holders of mortgage loans. While Congress has extended the Act twice, the latest extension expired on January 1, 2014, so unless Congress extends the Act again, homeowners will be forced to pay taxes on debts that are forgiven by financial institutions.