Jan 03, 2013 14:39 EST In all the fanfare about last night's last-minute buzzer-beater agreement to avert the fiscal cliff, you may not have realized that a major component to the housing market's revival actually survived.
Mortgage Debt Relief Extension Key To Averting Fiscal Cliff, Will Aid in Housing Market ReboundJan 04, 2013 17:03 EST
FORT LAUDERDALE, Fla., Jan. 4, 2013 -- The real estate market should continue its rebound in 2013 now that debt forgiveness survived the Fiscal Cliff and was extended for another year, according to real estate attorney and national commentator Roy Oppenheim.
Oppenheim,the founder and senior partner at Fort Lauderdale-based Oppenheim Law, had feared that Congress would not extend the Mortgage Forgiveness Debt Relief Act of 2007,which was set to expire on December 31st.
"Mortgage brokers, real estate agents, and of course buyers -- none of them really know what Congress was going to do about housing." said Oppenheim, "but homeowners should breathe a small sigh of relief now that loan forgiveness has joined us in 2013."
The extension of the Mortgage Forgiveness Debt Relief Act, which was passed in the final moments of George W. Bush 's presidency, is included in the American Taxpayer Relief Act of 2012, which was passed by Congress on January 1st.
Because of the Mortgage Relief Act's extension, the majority of homeowners who sell their primary residence via short sale or receive a loan modification will not be taxed for up to $2 million of debt forgiveness.
That was one of the main appeals of a short sale for many of Oppenheim's clients and it was why so many of his peers in the real estate industry were seeing improvement, he explains.
Both had become increasingly nervous as the cliff drew closer.
"Let's be real -- Thelma and Louise were inches away from driving over the edge of the Grand Canyon," he added, "Lo and behold Congress actually got the message, and Mortgage Debt relief is alive and well."
Long before the Fiscal Cliff dominated the headlines, Oppenheim urged Congress to extend loan forgiveness in his South Florida Law Blog, and as the year went on many other commentators, and most of the country's Attorneys' General, joined him in calling for its extension.
"Had the Mortgage Forgiveness Debt Relief Act been allowed to expire, the benefits of a short sale would have been eviscerated, along with any chance for the housing market to thrive."
The irony is by continuing mortgage loan forgiveness, Congress has essentially offered a backdoor bailout to the Wall Street banks, Oppenheim states; although one that also benefits homeowners.
"The reality is the large banks benefit from this extension.With each short sale or loan modification, banks will earn a credit towards the $25 Billion national mortgage settlement," Oppenheim says, "Without it the banks would have had to cut checks to the government."
Oppenheim,a noted legal blogger, urges anyone who is considering a short sale to begin the process immediately, as the Mortgage Debt Relief Act was only extended for one more year.
"Despite their name, short sales remain a time consuming process and I don't expect loan forgiveness to be extended again," Oppenheim says, "When December 31st, 2013 comes around, I believe Mortgage Debt Relief will become a thing of the past.