[Congressional Record Volume 158, Number 51 (Wednesday, March 28, 2012)]
[Extensions of Remarks]
[Page E477]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    THE HOMEOWNERS TAX FAIRNESS ACT

                                 ______
                                 

                           HON. JIM McDERMOTT

                             of washington

                    in the house of representatives

                       Wednesday, March 28, 2012

  Mr. McDERMOTT. Mr. Speaker, I rise today to introduce the Homeowners 
Tax Fairness Act. In February of this year, the 49 state attorneys 
general announced that they had completed negotiations with the 
country's five largest mortgage servicers to settle claims arising from 
mortgage fraud and wrongful foreclosures. The settlement, which amounts 
to over $25 billion is the largest settlement this country has seen 
since the 1998 Master Tobacco Settlement.
  This historic settlement will allow hundreds of thousands of 
distressed homeowners to stay in their homes through enhanced loan 
modifications and principal reduction, and it will also provide 
payments to victims of unfair foreclosure practices. Unfortunately, 
under current law, those settlement payments would subject the 
homeowners and servicemembers who receive them to additional tax 
burdens. For instance, homeowners receiving relief in the form of 
mortgage debt forgiveness and direct cash payments for wrongful 
foreclosure could be subject to federal income tax. Moreover, 
additional tax would be owed on the payments made to servicemembers who 
were wrongfully foreclosed on while deployed overseas.
  To prevent that injustice, the Homeowners Tax Fairness Act would 
extend the exclusion for debt forgiveness on a primary residence 
throughout the term of the settlement agreement, and exclude the relief 
payments from income for homeowners and servicemembers. This bill also 
considers the particularly egregious actions taken by the five largest 
banks in violation of the Servicemembers Civil Relief Act. Over the 
past three years, the five largest servicers violated the law and 
wrongfully foreclosed or overcharged mortgage interest on 
servicemembers, many of whom were deployed overseas in combat zones. 
Accordingly, the Homeowners Tax Fairness Act not only excludes this 
relief from income to servicemembers, but denies these banks the 
ability to deduct these payments from their federal income taxes.
  The estimated 1.7 million homeowners eligible to benefit from this 
settlement deserve to receive the full benefit of this relief--relief 
that was negotiated in good faith by the states, the banks, and the 
federal government. Collecting federal income tax on relief for 
struggling homeowners is not only bad policy, but is simply the wrong 
thing to do.
  As we move forward from one of the worst recessions in American 
history, we must be vigilant and provide as much help to the American 
people as possible. This bill will do just that, and will ensure that 
our homeowners and servicemembers get every bit of relief they deserve.

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