Looks like congress is going to extend the debt forgiveness on short sales. Why is that important? Well it means that the loss incurred by the lenders on the amount short of the full debt is not considered income to the family that needs to sell.

This means that now is still a good time to do a short sale and not just walk away. Short sales are not fun for anybody that I have met yet, however those that I have helped have all felt better about the transaction once it was done. 

This is an interesting article about all the reasons why the debt forgiveness should continue. Give it a quick glance and let me know what you think.

April 12, 2012 Sponsored by Lowe's Congress considers extension to mortgage-debt relief deadline Action not expected until post-election By Ken Harney Inman News® Share This For anyone hoping that a fractious, election-bound Congress can manage to extend a law that is crucial to the housing recovery -- the Mortgage Forgiveness Debt Relief Act -- here's a little good news: Before heading home for the Easter holiday recess, key members of the House and Senate tax-writing committees introduced bills that would keep the law alive through 2014. Without action by Congress, the law -- which allows homeowners whose mortgage debts have been written off by lenders in short sales, foreclosures, principal reductions and deeds-in-lieu of foreclosure to escape heavy federal taxation on the amounts forgiven -- would expire Dec. 31, 2012. Real estate and mortgage trade groups believe that any expiration would be disastrous for large numbers of underwater owners trying to rid themselves of smothering debt loads. It could also sharply reduce the appeal of short sales and other resolutions needed to clear out distressed inventories. If homeowners thought they'd be penalized for agreeing to principal reductions and debt cancellations, they'd be far less likely to participate. That, in turn, could hamper efforts like the $25 billion nationwide robo-signing mortgage settlement, which features more than $10 billion in debt forgiveness, as well as the Obama administration's efforts to spur short sales and principal reductions at Fannie Mae and Freddie Mac. Until the tax code was amended in 2007, the Internal Revenue Service treated owners whose unpaid principal balances were canceled as having received actual income from the transaction and hit them with tax bills. For example, in a short sale where the lender wrote off $100,000 of unpaid mortgage debt prior to 2007, the federal tax code treated the $100,000 as ordinary income to the seller and the IRS imposed tax levies at regular rates. Though the prospects for quick action on the issue are virtually nonexistent, the sudden introduction of multiple bills on both sides of Capitol Hill can only be a positive sign. In the Senate, Finance committee member Debbie Stabenow (D-Mich.) joined with fellow Democrats Robert Menendez (New Jersey), Sherrod Brown (Ohio) and Jeff Merkley (Oregon); and two Republicans: Dean Heller (Nevada) and Johnny Isakson (Georgia), on a proposed extension (S 2250) through Dec. 31, 2014. In the House, 14 of the 15 Democrats on the Ways and Means Committee -- the point of origination for most tax legislation in Congress -- are co-sponsoring a bill (HR 4202) with the same provisions as Stabenow's. One Republican on the Ways and Means Committee, U.S. Rep. Tom Reed of New York, also is introducing an extension bill, but the text and bill number were not immediately available. President Obama's fiscal 2013 federal budget proposal calls for an extension through 2014, which congressional analysts estimate would cost the government $2.7 billion in tax revenues over the coming two years. In a statement, Stabenow said, "It is bad enough that so many families are faced with mortgages that now exceed the value of their home. "But to add insult to injury, without this bill the IRS would once again require these families to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That's just wrong." The lack of more Republican co-sponsors on Reed's bill may point to difficulties for the debt relief extension that could materialize as early as the end of this month. The Republican-controlled Ways and Means Committee says it plans to look at all "extenders" -- expired or soon-to-lapse special benefit programs ranging from corporate research and development tax credits to individual homeowner write-offs for residential energy improvements -- within the next two weeks. If the Republican majority decides that mortgage debt relief is just another contributor to the federal deficit, the House version of bills could be derailed indefinitely. (Remember that last December, House and Senate conferees deferred action on a long list of extenders -- including deductions for private mortgage insurance premiums -- and they all remain in legislative limbo.) But tax analysts and lobbyists on Capitol Hill say the most likely scenario shapes up something like this: Though the National Association of REALTORS® and other groups will push for early consideration of the debt relief extender, it's unlikely that Congress will be able to focus on a major revenue package until after the November elections. Then, the victors and lame ducks from both houses will have to do the year's tough lifting: They'll take up the entire range of budget, deficit and debt-ceiling issues during several frenetic weeks, and finally hammer out an omnibus bill that includes either a one- or two-year new lifeline for mortgage debt relief. Though there's a chance the entire process will break down again as it did last year, Jim Tobin, chief lobbyist for the National Association of Home Builders, told me last week, "We remain optimistic that once we get past the election and into a robust lame duck session, Congress will do the right thing" on mortgage forgiveness. "But any way you look at it," he added, "taxing (financially distressed) homeowners on phantom income is just inequitable." Plus, it makes absolutely no economic or political sense for either party -- whether we have a President Romney and Republican majorities in both houses, or President Obama and the Democrats come away big winners -- to kick homeowners when they're already down. Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance. Contact Ken Harney:

How are a tree, a shadow and our reputation connected?

"Character is like a tree, and reputation is like a shadow. The shadow is what we think of it; the tree is the real thing." -- Abraham Lincoln, 16th President of the United States I thought about this and did not think too much about it. Then I went to lunch I saw a tree shadow. That is when it got interesting. I noticed several things. The more I looked at different trees and shadows the more I thought about the quote. We put a lot of stock in our reputations and we should to a point, why? Our reputation maybe someone else s first impression of us. Is this what we always want? I had some crazy thoughts going on. Please bear with me on this. I said I noticed several different thinks about the shadows. One it was hard to tell what kind of tree it was just by the shadow. I looked at Palm trees, Pine trees, Cottonwood trees, Elm trees and Ash trees. The Palm was the most distinctive while the other trees were harder to tell what they were by the shadow. Two, where the shadow was cast made the shadow clearer or less distinct. Example if the shadow was on grass it was less distinct than on pavement and pavement was less distinct than if it as cast on a car. Why did I find this interesting. If our reputation is like the shadow of a tree, what would make us clear and distinct would be up how we cast that shadow on someone else. The other thing that came to mind was that it would be the reality of whom we cast that shadow on and their take on us. This does not always me it would be an accurate representation us. Think about it. How many times have you been talking to someone then finally introduce yourselves and they say "your that person. Your are nothing like so and so you described you." I thought that was interesting about the quote, "the tree is the real thing, or character". The shadow is representative of our character not always our true character. The shadow or reputation maybe represent part of us not always give clear or distinct representation of ourselves. We should endeavor to make the most of a good reputation however we are not in full control of the shadow we cast. Our reputation is based on how someone else sees us and interprets our actions or words and then projects them. Our shadow can become defused, indistinct and not even represent us. Part of it is up to us to make very clear, very distinctive and positive impressions on those we touch in our lives so the shadow we cast is as representative of our true character. Just something to think about.