U.S. Senator Scott Brown (R-MA) today cosponsored the Mortgage Forgiveness Tax Relief Act (S. 2250) to ensure that homeowners who owe more on their mortgages than their homes are currently worth are not burdened with an additional income tax if their home is sold as a result of a foreclosure. This bipartisan bill would extend an existing tax protection provision for struggling homeowners through 2015. Without legislation, the provision will expire at the end of 2012.
"Families who are losing their homes to foreclosure should not also be hit with a brutal tax penalty," said Senator Brown. "With foreclosures once again on the rise in Massachusetts, we need to make sure that struggling families do not get hit with this tax when they can least afford it."
Prior to this tax protection provision, the IRS taxed any loan forgiveness amount as income, which forced families with underwater mortgages to pay thousands of dollars in income tax for "phantom" income associated with the foreclosure that they did not earn or see.
The Boston Globe reported today that the number of foreclosures in Massachusetts increased more than 32 percent in May 2012 compared to May 2011.
Other actions by Senator Brown:
Senator Brown cosponsored the Prompt Notification of Short Sales Act (S. 2120), which would require home mortgage servicers to respond promptly to homeowners' written request for a short sale and would allow homeowners to bring a civil action for violation of the act.
On September 29, 2011, Senator Brown authored an op-ed in the Boston Globe about his support for allowing homeowners to refinance at market rates.
On March 8, 2012, Senator Brown authored an op-ed in the Taunton Gazette about mortgage refinancing and the bipartisan Prompt Notification of Short Sales Act.