Despite the controversy over 'fiscal cliff' negotiations involving increased taxation versus spending cuts (an argument sure to linger on for the foreseeable future), Congress did make some important and forward-thinking decisions which should positively affect the housing market and further stabilize the recovery.
Among these decisions are the renewal of two major tax provisions: the mortgage interest deduction and the Mortgage Debt Relief Act, both extended for another year.
Signed in 2007, the Mortgage Debt Relief Act ensured that debt incurred on loan modifications, short sales, and foreclosures was no longer taxable and was set to expire at the end of 2012. If not extended, many feared that home owners would not agree to short sales or principal reduction loan modifications when faced with tax bills based on banks' forgiven debts. This would have led to increased foreclosure starts and overall market instability. Thankfully, Congress avoided these pitfalls and reaffirmed policies that will help lower the number of foreclosures and support the slow rise in home prices we saw developing over the last months of 2012.
Related Articles:
http://www.cnbc.com/id/100349018
http://www.car.org/newsstand/news/mtgdebt
http://www.dsnews.com/articles/mortgage-debt-relief-act-to-see-another-year-2013-01-02
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