Congressional Efforts To Help Struggling Homeowners Fall Short

In the late 2000s, the U.S. real estate market began a dramatic shift. In 2007, residential housing prices started to decline dramatically and, by 2008, home prices saw the largest drop in U.S. history. A real estate crisis had officially come to a head.


As a result, home equity so many middle class homeowners relied upon as an investment had vanished. Many were stuck with underwater mortgages, owing more than the fair market value of their homes. Others saw a jump in monthly mortgage payments as a result of shady mortgage lending practices.

Whatever the reason, U.S. residential foreclosure rates skyrocketed as a result. Aware of the calamity, Washington pledged to take proactive measures to help save the crippling housing market and the rising number of homeowners at risk of losing their homes.

However, Congressional efforts, sadly, came up short.

Federal mortgage relief programs

In 2009, Obama launched the Home Affordable Refinance Program, or HARP as it's referred to, in an effort to aid homeowners stuck with underwater mortgages. The initiative was designed to assist 9 million U.S. borrowers refinance their mortgages into manageable monthly payments and ones that also reflected fair market value. However, two years later, data from the Federal Housing Finance Agency shows that only about 830,000 loans had been refinanced under the program.

In 2010, the Federal Housing Administration launched the Refinance of Borrowers in Negative Equity Positions program, known as "F.H.A. Short Refi," with the intention of refinancing 1.5 million "underwater" homeowners. Now, some 4 years later, it has helped only 4,600 U.S. homeowners-falling short by a whopping 99.97%.

Another relief program called the Home Affordable Modification Program, or HAMP, was passed that aimed to help 4 million homeowners, not necessarily with underwater mortgages, but at risk of foreclosure. The program essentially paid banks or mortgagors millions of dollars to reduce mortgage interest rates for borrowers that surged amid sketchy and coveted subprime mortgage practices that started in the 2000s.

As of May 2012, the HAMP program has assisted about 500,000 homeowners. Millions of eligible borrowers who didn't receive helped were left with no other choice but to allow the foreclosure process to commence.

Mortgage Forgiveness Debt Relief Act

Efforts to help homeowners faced with tax liability for deficiencies owed on foreclosures, short sales, or other modifications, were also promised. Under current IRS rules, debt that is owed, discharged, or forgiven is considered an enhancement in wealth-like income-and therefore subject to tax.

In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act. The law waived the tax liability for borrowers with discharged or deficient mortgage debt. This past April, the United States Senate Finance Committee approved a bill that would have extended the exemption to December 31, 2015, but the bill has yet to receive a vote.

If the bill fails to pass, homeowners with housing debt incurred this year-whether through loan modifications, foreclosures or short sales-will be responsible for paying taxes on that discharged income. According to a report by the Housing Finance Policy Center, present estimates conclude that approximately 2 million borrowers are delinquent or are in foreclosure and will likely face a tax bill in 2015.

And recent data shows that number could rise even higher. Despite forecasts that show U.S. foreclosures have steadily dropped since 2010, new data from RealtyTrac reveals that foreclosure activity has essentially reversed course.

U.S. foreclosure rates from last month were higher than rates from August 2013. And, foreclosure auctions have spiked, particularly in the New England states. The state of Connecticut alone saw an 81 percent rise; New Jersey saw a 71 percent increase.

How the Law Offices of Neil Crane, LLC can help

The lack of help from our elected officials has no doubt contributed to the mounting reasons behind today's real estate catastrophe and disappearing middle class. Fortunately, legal professionals, such as The Law Offices of Neil Crane, LLC, are here to help homeowners wrestling with debt who are struggling to stay in their homes.

The Law Offices of Neil Crane, LLC, is a debt relief agency with 30+ years of experience helping individuals, families, and businesses find solutions to their tax burdens and other debt relief options.