Signed into law in December 2007, The Mortgage Forgiveness Debt Relief Act of 2007 protects American families from higher taxes when they refinance their homes. Under the previous tax law, if the value of your house declined and your bank or lender forgave a portion of your mortgage, the IRS could treat the amount forgiven as money that could be taxed.
The new law creates a temporary (through 2012) change to the tax code to eliminate any taxes home owners may face if a lender forgives a portion of outstanding mortgage debt (whether through a deficiency in foreclosure, or a loan modification/refinance). It increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes. Learn more at
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