Last Minute Thoughts on Fiscal Cliff
As I write this article on the morning of Monday, January 31, 2012, Congress and the President are trying to compromise regarding the fiscal cliff. There are two issues tied directly to the cliff negotiations which will have a direct impact on the mortgage industry. The Mortgage Forgiveness Debt Relief Act expires at year-end, should Congress not extend the Act. The consequence of not extending the Act would result with homeowners owing additional taxes on forgiven debt associated with short sales, loan modifications and other resolutions. Experts say that if the deal is allowed to lapse into 2013, it will put a significant burden on people who already can't afford to deal with the financial problems related to having an underwater home loan. The second issue is the proposal to eliminate the mortgage interest tax deduction, a popular tax benefit of homeownership. If this deduction is cut, it could cost the average American family thousands of dollars per year. Personally, I believe the mortgage interest tax deduction will not be included in the fiscal cliff negotiations. The deduction effects too many people and is not considered a special interest. It is important to note that both Parties are in favor of keeping the current tax structure in place for all homeowners, with the exception of the upper income earners. However, if a compromise is required on the mortgage interest tax deduction, we may see a limit imposed on how much interest may be deducted based on the homeowner's annual income or mortgage amount. During the next 12 hours and 56 minutes, deliberations shall be intriguing.