House Passes Mortgage Tax Relief

The House has passed a mortgage tax relief bill that encourages loan modifications and extends a deduction for mortgage insurance premiums -- clearing the way for the legislation to be sent to the president for his signature.The Senate passed the same bill (H.R. 3648) on Dec. 14. It ensures that homeowners are not penalized when a lender reduces the principal amount of their mortgage in a restructuring or foreclosure. Currently, any reduction in mortgage debt by a lender is treated as income for tax purposes. The tax relief is temporary, as requested by the Bush administration, and it applies to a discharge of debt on a principal residence before Jan. 1, 2010. Meanwhile, the bill extends the deduction on MI premiums for three years. Continuing this tax deduction is an "important step forward as Congress seeks solutions to the current housing and mortgage crisis," said Kevin Schneider, president of Genworth Financial Inc. "Many potential buyers can't make a traditional 20% downpayment, and a loan with tax-deductible mortgage insurance may make the difference in their ability to become homeowners safely."