Senators would extend tax breaks for people who renegotiate mortgages

Although most real estate markets have rebounded from their recession lows, this harsh fact remains: About 7 million homeowners continue to be stuck in the tar pit of serious negative equity, with mortgage debt at least 25 percent higher than the value of their property, according to the research firm RealtyTrac.

Many of these owners are also hurting financially. They are behind on mortgage payments, often in negotiations with their lenders on ways to modify their loan terms or write off a portion of their debt. Or they may be discussing a short sale to avoid foreclosure — selling the house for less than the mortgage amount owed to a new buyer with the lender forgiving the unpaid balance. Improvements in housing prices have largely bypassed these folks, as has the overall economic recovery in the past several years.

All of which underlines the significance of a legislative effort now getting underway in Congress to spare these people from punitive federal taxes on any amounts forgiven.

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