Madam Speaker, I rise in strong support of the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648).  This measure is a necessary and compassionate step in helping individuals and families recover from the problems caused by the continuing mortgage crisis. 

Unscrupulous lending practices have taken their toll on hard-working families, who are increasingly unable to keep pace with their ballooning mortgage payments.  We have all seen how the skyrocketing interest rates associated with nontraditional mortgages, such as adjustable-rate mortgages, have devastated families nationwide.  These families are often left with few options.  They may either try to renegotiate the terms of their mortgage for fixed interest rates, or be forced to foreclose on their homes.  Both options can be emotionally difficult and are further complicated by the hefty taxes that may result. 
 
Under current law, when a lender forgives all or part of a loan, it is required to report the amount of debt forgiven to the IRS and to the homeowner.  That amount is subsequently treated as “phantom income” and is subject to taxation by the IRS.  At a time when families are already in financial dire straits, it is fundamentally unfair to penalize them by taxing the money they recover through either refinancing their mortgage or foreclosure of their homes. 

I am proud to support the Mortgage Forgiveness Debt Relief Act, which will change the tax code to prevent forgiven mortgage debts from being assessed as gross income.  This improvement will limit the financial penalties families incur when refinancing their homes at fixed rates and could even keep some families on the brink of foreclosure from losing their homes.  I am also pleased that, under this legislation, people would not be unfairly taxed when a lender voluntarily agrees to waive prepayment penalty fees.

The Mortgage Forgiveness Debt Relief Act is a critical measure that will help address the persistent problems in the housing market resulting from unfair lending practices.  This legislation is another important step toward fixing the mortgage crisis nationwide, and will help stabilize families throughout the nation and our economy as a whole.