Senator: Ohio Mortgage Relief Needed

George Voinovich, a Senate Republican of Ohio, has penned an editorial in the Cincinnati Enquirer about the fall of home prices and the rise in home loan problems, with many Americans facing the possibility of losing their largest financial asset.
In fact, he writes, home mortgages in foreclosure across the country have already risen 62 percent in April from the previous year.

Ohio mortgage numbers are especially concerning.

The Coalition of Homelessness and Housing in Ohio (COHHIO) found that the state has the highest home mortgage foreclosure rate in the U.S. at 3.38 percent (compared with the 1.19 percent national average).

Yet, at this moment when many Americans are facing home loan foreclosure and experiencing severe economic loss, the federal tax code hammers the nail in the coffin by requiring the government to tax any home mortgage loan “forgiveness” as “income.”

It’s clear that we must act now before this growing foreclosure storm - and the debris it leaves in its wake - becomes a national emergency.

That’s why this month, my colleague Sen. Debbie Stabenow (D-Mich.) and I introduced the Mortgage Relief Act, which would remove this tax penalty and encourage homeowners and lenders to work together voluntarily to settle outstanding mortgage liabilities.

If a mortgage lender agrees to reduce the mortgage principal in order to make a homeowner’s monthly home loan payments more manageable and help them avoid foreclosure, our legislation would prevent this loan “forgiveness” from being taxed as income.

The alarming number of foreclosures in recent years has caught many by surprise. Perhaps that’s because in 2006 nationwide foreclosures were higher than at any point over the last 13 years, increasing in Ohio by 24 percent over 2005, with more than 79,000 foreclosure filings.

And, unfortunately, these numbers are not expected to improve.

Over the next two years, the volume of foreclosures will grow even faster as adjustable-rate mortgages are reset at higher mortgage rates, affecting up to 200,000 mortgages across the state.

Many of these foreclosures are the result of subprime loans given to people who otherwise may have had difficulty obtaining a loan from a bank.

Eager homeowners have been tempted in recent years by Ohio mortgage products with interest-only ARMs - many of which are now coming to fruition, leaving homeowners with steep mortgage payments they can no longer afford.

While these subprime home loans account for less than 20 percent of outstanding mortgages, COHHIO has shown that these loans accounted for 63 percent of Ohio foreclosures in 2004 and 2005.

Some people are angered by these seemingly irresponsible lending practices and have called on Congress to hold these mortgage lenders accountable.

However, our legislation is not a form of mandated debt forgiveness.

That’s because many homeowners and home loan lenders are already working together to settle outstanding loans and arrange more manageable payment schedules.

But now homeowners are being taxed on income that doesn’t exist, and they’re doing so at a time when many families are facing substantial economic losses and have no way of paying more taxes.

While I am an advocate of tax reform to eliminate unfair loopholes and make our tax system more economically efficient, it is unfair to tax people on income that doesn’t exist. And the government should not stand in the way of homeowners and home mortgage lenders who are working together voluntarily.

Congress has been given a tremendous responsibility to represent the needs of the American people and to fix problems when we see them clearly arise. And this problem is crystal clear.

That’s why Stabenow and I have taken this opportunity to reach out to those who need a helping hand. We must work to make this legislation law in time to help those who need it the most.

SOURCE: Cincinnati Enquirer