Industry News

White House: Foreclosure tax break should be temporary

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The Bush administration is seeking to narrow the scope of a bill that would give homeowners facing foreclosure a tax break when lenders forgive part of their debt. The administration supports a provision of the bill that would amend a section of the tax code that allows the IRS to tax as income any debt that's forgiven in a foreclosure sale, or when mortgage lenders agree to modify loan terms or allow short sales. But the change to the tax code should only be temporary, the administration said Tuesday, "to avoid distorting consumer and lender decisions on new mortgage loans" after mortgage markets emerge from the current "transition period." "The tax code already protects people who are insolvent or whose debt has been discharged in bankruptcy from having to pay tax when debt is cancelled; therefore, the most financially stressed mortgage borrowers are already protected under current law," the administration said in a policy statement. The White House said it "looks forwa...