Mortgage Forgiveness Debt Relief Act: 2015 and 2016 Update for Homeowners Regarding Foreclosure and Real Estate Short Sale

Initially a limited offer in 2007, the Mortgage Forgiveness Debt Relief Act protects homeowners facing foreclosure and real estate short sale from harsh income tax consequences. Extended by President Barack Obama through 2014, a new bill is before the Senate Finance Committee that would extend the much-needed act through 2016.News Update: As of December 15, 2015, the Mortgage Forgiveness Debt Relief Act was extended for an additional two years, 2015 and 2016.

Mortgage Forgiveness Debt Relief Act 2015

By Mario in Atlantic City, NJ


What is the progress of the extension as of now? As the year 2015 is soon to be over, what are the chances of the Act being extended again?

Thank you for your attention.

Ask Kate answers: Mortgage Forgiveness Debt Relief Act 2015

Dear Mario,

As of December 13, 2015, Congress has not extended the Mortgage Forgiveness Debt Relief Act.

Last year, Congress retroactively extended it on December 14, 2014 but then allowed it to expire on December 31, 2014.

As I have mentioned, contact your representatives in Congress to instruct them to extend the act through 2016.

Best wishes,


News Update: As of December 15, 2015, the Mortgage Forgiveness Debt Relief Act was extended for an additional two years, 2015 and 2016.

Background to Mortgage Forgiveness Debt Relief Act of 2007

In December 20, 2007, President George Bush signed the Mortgage Forgiveness Debt Relief Act. Offering relief to homeowners of principal residences for the following 3 years, distressed borrowers were protected against additional taxation after foreclosure.

Prior to the act, homeowners in the United States unable to avoid mortgage foreclosure or real estate short sale were subject to harsh income tax consequences.

The heavy burden of IRS debt was the last thing struggling homeowners needed after the stress of foreclosure. Talk about piling it on!

The Mortgage Forgiveness Debt Relief Act of 2007

Signed by the President of the United States

The President:

"I'm pleased to sign a bill that will help homeowners who are struggling with rising mortgage payments. The Mortgage Debt Relief Act of 2007 will protect families from higher taxes when they refinance their homes. It will help hardworking Americans take steps to avoid foreclosure during a period of uncertainty in the housing market.

In recent months, our nation's housing market has faced serious strains. Home values have fallen in many parts of our country. At the same time, many homeowners with an adjustable rate mortgage have seen their monthly payments increase faster than their ability to pay. And now some homeowners face the prospect of foreclosure.

The bill I sign today, Mortgage Debt Relief Act, will help by ensuring that refinancing a mortgage does not result in a higher tax bill. Under current law, if the value of your house declines and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as money that can be taxed. And of course, this makes a difficult situation even worse.

When you're worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. The provision will increase the incentive for borrowers and lenders to work together to refinance loans - and it will allow American families to secure lower mortgage payments without facing higher taxes.

By taking these steps, we can help our homeowners - and we'll help more Americans become home owners. We want people to have a place they can call their own.

After all, it's an essential part of the American Dream. And we want that dream to extend throughout our nation." - George W. Bush, December 20, 2007

Remember, the relief available through the act is limited in time and must be renewed by Congress to extend past 2014. Write your representatives today and ask for an extension.

How to Contact Washington D.C., Write Your Government Agencies, and File a Mortgage Complaint

You have the power to make a change! Contact your elected representatives and government agencies to tell your story, file a complaint, express an opinion, and request changes that affect homeownership.

1. Submit a complaint with the Consumer Financial Protection Bureau, established by Congress to protect consumers, or you can call 855-411-2372.

2. Go to, 'Contact Us' to reach Corresponding with the White House. This is is a quick and simple way to write the President, telling about your struggles with homeownership and ask for specific change.

3. Go to, 'Find Your Senators', scroll down to your state and click. You will be given your US Senators with contact information. Send the same letter you sent to the White House.

4. Go to, 'Find Your Representative' and fill in your zip code. You will be given your House of Representatives with contact information. Send the same letter you sent to the White House and Senate.

5. Go to Of course, first fill in your state's name. Then on your state website, do a search (for example, 'mortgage help') to find contact information. Send the same letter you sent to the White House, Senate, and House of Representatives.

6. Call your Better Business Bureau to report specific companies. For example, report Rust Consulting to the BBB if you did not receive your settlement check.

Assistance a Click Away

Haven't found what you're looking for? Here's the solution! Go ahead and Ask Kate for answers.

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