No Taxes on Forgiven Mortgage Debt

A collective sigh of relief from a lot of Americans...

Congress passed legislation Tuesday to protect mortgage borrowers from getting a surprise tax bill when they restructure their loans to avoid foreclosure.

The House adopted legislation passed by the Senate last week to spare homeowners for three years from taxes as high as 35% on canceled mortgage debt.

"Homeowners who restructure their mortgages to avoid foreclosure should not be hit with a tax bill as a result," Treasury Secretary Henry M. Paulson Jr. said. "This legislation will temporarily exclude homeowners who have restructured their mortgage loans from having to pay taxes on the mortgage debt forgiven."

Here is the full article...

Bush Subprime Mortgage Plan - Devil Is in the Details!

Yes I stole that title from the article I am about to reference. Why? Because it is a little catchy (especially for a Monday morning) and it is do true. Here are some excerpts from the Bankruptcy Law Network article...

Harvard Professor Elizabeth Warren says the plan “seems to be nothing more than a guideline for when some lenders or servicers might let some borrowers extend lower interest payments for a while before the interest jumps up later. The loan on the house stays the same, even the family owes much more than the house is now worth–a circumstance that will cut off any refinancing option and any real resolution of the problem. The plan doesn’t require any new laws or government intervention because no one is bound to anything.”

And...

There is no help in the plan for people whose ARM rates have already reset and payments increased, those who have already missed a mortgage payment or two and are facing foreclosure, and those who owe more mortgage debt(s) than the home is worth, according to the plan summary document.

You can read the entire article here...

Severe CDO Rating Cuts Over...

While reading over at Money Central I saw this article which caught enough of my attention while drinking my coffee...

The worst of severe rating cuts of collateralized debt obligations tainted by U.S. subprime mortgages is probably over and 2008 should begin a "healing process," a senior director at Fitch Ratings said.

Deteriorating value of U.S. subprime mortgage debt has resulted in $67 billion of rating cuts of CDOs by Fitch, including top-tier "AAA"-rated debt that now has been lowered on average to "BB"-rated debt known as junk bonds.

Asked if Fitch expects further CDO downgrades ahead, Richard Hrvatin, a managing director at Derivative Fitch in New York, said the worst cuts were behind.

"I never say never, but I think the answer is the rating action that we've taken is meant to be adding stability to the ratings," Hrvatin said on Sunday, during the Opal Financial Group CDO Summit. "I think the answer to that question is no."

Fitch last month completed a global review of CDOs tied to deteriorating subprime mortgage debt resulting in total downgrades of $67 billion, including affirmations of $10.7 billion of structured finance CDOs across 158 deals.

Got to love those subprime mortgages! Here is the rest of the article...