Q.How does the Mortgage Forgiveness Debt Relief Act of 2007 Help Homeowners?

A.The Mortgage Forgiveness Debt Relief Act of 2007 (the "Act") creates a three-year window from 2007 through 2009 for homeowners to refinance their mortgage(s) and pay no income taxes on any debt forgiveness they receive. Under the prior law, if the value of a property declined, and the bank or lender forgave or cancelled a portion of the mortgage debt owed, the tax code treated the amount of debt forgiven as taxable income.

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