Obama Mortgage Relief Act: Ask a Tax Professional Before Walking Away From Your Home

Change has been the catch phrase surrounding Obama since he began his campaign for president. The theme has been one of many ideas with lofty hopes. He as initiated many programs and made many statements that have all been based on the idea of change and the need for reform. All of which have been prefaced with a phrase that is sometimes overlooked: “This change will take time.” Well in a sense he is correct any type of change will definitely take time but this in itself begs the question, ” How much time?” The answer to that question is unknown and is one that ironically enough, only time will tell.

The notion that President Obama based his entire campaign and now his entire Presidency on the idea of change signifies that there were negative sentiments coming from the American people about the current situation. More so it was a sentiment based out of desperation to prevail over these hard times. Throughout these difficult economical times many people have begun to struggle financially. Whether its because of a lost job, a medical emergency, losses linked to stock market blunders or simply living outside of their means many people are having problems paying their bills. Personal and business financial situations continue to worsen as debts accumulate and incomes decrease. All of these struggles are signs that our wonderful country is in the midst of an economic recession.

With the Credit Card Act, there will be significant limits on the unilateral actions that affect interest rates and other credit card use conditions. At one time, those who issued credit cards had the ability to alter terms and agreements nearly at will. Consider some of the key protections that will result from the new Credit Card Act. These companies dealing with credit giving cards, won’t be able to change their rates compared to the current system of raising rates at any time or any reason. These companies will no longer be able to increase interest rates during cardholders first year. After the first year, the issuer can only increase the interest rate when the holder is 60 days or more in making a payment.

His recent push for health care reform has overshadowed his previous efforts pertaining to credit card reform and Obama mortgage relief act. Attempting change the health care system and how it operates is a courageous goal for President Obama and one that will take many years to complete. Hopefully the results correlate with his desires and the program will be looked back upon as a success.

The 2007 Mortgage Forgiveness Debt Relief Act exempts a borrower from as much as $2 million in forgiven debt. There are several catches with this law. First, the debt had to be acquired before January 1, 2009, so any amount of debt incurred after that date does not qualify for the exemption. Second, the amount of debt had to have been used solely to buy, build, remodel or repair a primary residence. If the borrower took money out of the home equity to pay tuition, medical bills, vacations, cars, downpayment on a second home or investment property, that debt is not eligible for exemption. There is a chance that the homeowners could avoid the taxes if they can prove that they were insolvent at the time. Insolvency means that the total value of the debt exceeds the total assets. This is a tricky proposition, as the amount of insolvency is determined first and if the amount of the debt that is discharged is greater than that amount, there still may be taxes owed. The bottom line is that before a homeowner takes what they think might be the only alternative, that person should check with their tax advisor to determine if there are any tax consequences to the decision.

Learn more about Obama Mortgage Relief Plan Qualifications.