Fiscal Cliff Deal Favors Housing Recovery
The housing market is on firmer ground today, as two major tax provisions survived the “fiscal cliff”. Congress did not touch the mortgage interest deduction, and it extended tax relief for one year on mortgage debt forgiveness.
Under a law signed in 2007, debt relief on loan modifications, short sales, and foreclosures were no longer taxable; that break expired at the end of 2012. The new law will extend it for one year.
Borrowers have received $6.3 billion in mortgage principle relief through September, according to the settlement’s moniter, Joseph A. Smith Jr. The average loan balance reduction was $150,000.
The “fiscal cliff” deal also allows borrowers to deduct the amount they pay for private mortgage insurance, which has become increasingly prevalent in todays tighter mortgage market.