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Us House Panel Approves Bill Providing Tax Relief To Mortgage Holders

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US House panel approves bill providing tax relief to mortgage holders

WASHINGTON (Thomson Financial) - A key House committee approved legislation

today that the Bush administration has touted as a way to help borrowers who are

struggling to keep up with escalating mortgage payments.

The House Ways and Means Committee approved a bill that would allow

borrowers to avoid paying taxes on debt that they are forgiven on their primary

residence. The bill would have this change take effect as of the beginning of


Under current law, cancelled mortgage debt on primary residences counts as

taxable income, which means decisions by banks to forgive part of a mortgage

results in a higher tax bill for the borrower.

Earlier this month, the Bush administration said this piece of the tax code

should be changed in order to provide relief to borrowers, many of whom are

having trouble keeping up mortgage payments, due to variable rates that have

begun to rise. Rising mortgage delinquencies have in turn led to market turmoil,

as many mortgage-backed securities have dropped precipitously in value.

A bill reflecting the White House request was introduced this week by

Committee Chairman Charles Rangel of New York, and approved by the tax-writing

committee today by a voice vote. One House aide said the bill is expected to be

considered by the full House in the coming weeks, and that a similar bill is

expected to be introduced soon in the Senate.

The White House has also called for reforms to the Federal Housing

Authority, and has called on lenders to work with struggling borrowers to come

up with flexible plans allowing homeowners to make their mortgage payments.

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