(Washington D.C.)- The House of Representatives today approved H.R. 3648, the Mortgage Debt Forgiveness Relief Act, by a wide bipartisan majority [386-27] to help address the subprime lending crisis and ongoing turmoil in the housing market.  Included in the bill was a provision authored by Rep. Sander Levin (D-MI) to extend the deductibility of mortgage insurance premiums. 

The provision would allow homeowners who purchase mortgage insurance between January 1, 2007 and December 31, 2014 deduct their premiums from their income when they file their taxes.  Mortgage insurance offered by the Federal Housing Administration, the Department of Veterans Affairs and private insurers typically require lower down payments, and allow borrowers with less than perfect credit to obtain a mortgage.

“Mortgage insurance allows aspiring homeowners to take out safe, stable mortgages with lower down payments and provide an attractive alternative to so-called ‘piggyback’ loans.  It levels the playing field among different mortgage options,” said Levin. “Making mortgage insurance more affordable will help millions of families afford the American Dream of homeownership.”

Also included in the legislation approved today is a provision that provides relief to families who have lost their home through foreclosure, or who have negotiated partial forgiveness of their mortgage in order to stay in their home. 

Under current law, the tax code treats forgiveness of mortgage debt like income, and requires that tax be paid on that income.  In the case of a foreclosure, an individual would owe income tax on the difference between the outstanding principal on their mortgage and the amount their lender gets for selling their house. The legislation approved by the Committee would eliminate this unfair tax.

“It is simply unfair that we send people a tax bill when they lose their home to foreclosure, and this legislation will correct that” said Levin.

To view a summary of HR 3648 please click here.

To view Congressman Levin speaking on the House Floor in support of the Mortgage Forgiveness Debt Relief Act of 2007 click here.

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