N.C. group urges extension of mortgage debt act

The Durham-based Center for Responsible Lending is urging Congress to pass an extension to a piece of legislation that keeps troubled homeowners from having to pay taxes on mortgage relief they are offered.

Generally, most debt discharged counts as taxable income. The Mortgage Forgiveness Debt Relief Act, passed in 2007, changed that for mortgage relief on principal residences, but the law is set to expire at the end of the year.

In letters to the U.S. House and Senate committees reviewing the law, center president Mike Calhoun says allowing that would "threaten" the fledgling housing market recovery.

"This would make it more difficult and expensive for these homeowners, who are already financially struggling, to accept short sales and many loan modification offers," the letter says. "Allowing the law to expire would harm these families and their communities, and run counter to current loss mitigation efforts."

The letters are also signed by Tim Pawlenty, the one-time Republican presidential candidate new head of the Financial Services Roundtable, and John Dalton of the Housing Policy Council.