[Congressional Record (Bound Edition), Volume 160 (2014), Part 2]
[Extensions of Remarks]
[Page 2958]
[From the U.S. Government Publishing Office, www.gpo.gov]




                    THE HOMEOWNERS TAX FAIRNESS ACT

                                 ______
                                 

                           HON. JIM McDERMOTT

                             of washington

                    in the house of representatives

                       Friday, February 14, 2014

  Mr. McDERMOTT. Mr. Speaker, I rise today to introduce the Homeowners 
Tax Fairness Act. In 2012, 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 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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