Why Did Obama Wait Until December 2015 to Extend Mortgage Debt Forgiveness Act?


Look, I’m glad he finally did it too.  I’m talking about extending the Mortgage Debt Forgiveness Relief Act of 2007, which the president signed on December 18, 2015, thus extending its benefits to homeowners through 2016.

At the same time, he made it retroactive back to cover 2015 as well.  And I’m glad he did that too.  How else could anyone possibly feel about the whole thing? 

I thought it so important that I wrote all about it a few days ago, you may have read it HERE.  But I can’t stop thinking about it, I mean why it happened the way it did… and what that waiting caused for someone considering a short sale in 2015.

In case you’re not up to speed on the subject, the Mortgage Debt Forgiveness Relief Act that Obama just extended allows people to short sale their underwater home in order to avoid foreclosure, without having the amount of debt forgiven turning into a 1099, and resulting in a large income tax liability for the homeowner.

If you’re not sure what I’m talking about, just imagine selling your home for $200,000 when you owed $400,000 on your mortgage.  The bank agreed to let you sell the home for $200,000 because that’s the property’s current market value, and since a short sale is better than a foreclosure in terms of damage to your credit score, that’s the route you wanted to take.


Well, without the Mortgage Debt Forgiveness Relief Act having been extended through 2016, going ahead with that short sale would be very expensive. as the $200,000 in debt being forgiven by your bank would have been considered ordinary income by your bank and the IRS, and you’d receive a 1099 for $200,000, and a tax bill of something close to $66,000 the following year. 

Obviously, most folks could not afford that sort of tax liability, so it’s easy to imagine that without the Act being extended, someone might choose foreclosure over short sale.

Most folks looking at such a scenario wouldn’t go ahead with a short sale under those circumstances, nor would they want to receive a principal reduction for the same reason… it would be considered ordinary income for tax purposes without the Mortgage Debt Forgiveness Relief Act being extended through 2016.

Although I always thought Obama would extend the Act for obvious reasons like he wanted to reduce the number of foreclosures as opposed to increase them… and he did ultimately extend the Act… finally, at least… he didn’t do it until the very end of the year… December 18, 2015… only a week before the Christmas holiday, at a time few would have seen it, including me.  I didn’t know that he had extended the Act until the end of January when a reader called to say that he’d read it somewhere.

And isn’t it nice that he thought to make it retroactive so it would cover 2015 too?  Yes, I’m sure glad he remembered to include the retroactive part in his extension of the Act.  Thank you Mr. President… as they say.

What I want to know is WHY DID HE WAIT UNTIL THE VERY END OF THE YEAR TO EXTEND THE BILL?  I know he made it retroactive to the beginning of 2015, but it would have been much nicer if he would have just signed it at the beginning of 2015, so the folks trying to make decisions throughout last year had been able to do so with the Act extended instead of trying to figure out what Obama might do at the end of the year.


I can’t help but wonder how many people chose foreclosure last year because the Act had not been extended and they couldn’t afford the tax liability that would result from a short sale… only to find out now that they didn’t need to chose foreclosure because Obama made the extension retroactive.

Of course, he didn’t do it until Christmas of 2015, so there’s no way they could have known… they did the best thing they could do absent the knowledge that the president was going to make it retroactive and extend it through 2016.

I don’t know, but if it were me in that situation, I’d not only be really mad at President Obama, but I think I’d just be forever scratching my head over how the whole thing had happened.  Why in the world did President Obama wait until December 2015 to extend the Mortgage Debt Forgiveness Relief Act that’s been on an annual extension loop since it was signed by President Bush back in 2007.

What happened Mr. President?  Too busy to get to it?  Maybe it got lost on your Oval Office desk?  Someone spilled something on it and you had to send it out to be cleaned?  Or did friends come in from out of town?  Did you not understand how the whole waiting-until-the-end-of-the-year thing would impact America’s underwater homeowners?  Did you simply forget to extend it all year?  WTF happened, sir?

I mean, I’m not saying you were intentionally playing games with homeowners, sir, but if I were someone who was pushed into foreclosure by your not attending to the Act’s extension until the very end of the year, I think I’d have to wonder why you did what you did… to me.  It would be hard not to take it kind of personally, you understand that sir, don’t you?


Keep in mind, if this were the first signs of an uncoordinated and uncaring response to the housing crisis it would be entirely forgivable and I don’t even think I’d be mentioning it now, but sir… this is just another link in the chain of ill-conceived or incompetent actions and poorly planned programs that’s been part of a non-stop hit parade since 2009, so at this point it’s really getting old, sir.

Okay, well I’ve said my piece on this topic.  And I’ve got no hard feelings about it… it’s all water under the bridge or spilled milk at this point anyway, right.  Better to just move on… I agree.

Just try not to do anything else to generate foreclosures for the rest of the year, would you mind at least trying to keep that sort of goal in mind?  Please?  I’m not asking you to even try to prevent foreclosures anymore… I’ll be happy enough if you could just try not to increase them.

Deal?  Lord, I hope so.


Mandelman out.


P.S. Now, Governor Brown in California is apparently refusing to sign and extend the State of California’s version of the Mortgage Debt Forgiveness Relief Act.  Do you have anything to do with this Mr. President?  Why won’t Governor Brown sign it, sir?  It can’t be the money, because the amounts involved are rounding errors on either the federal or CA state budgets. 

So, what is it Governor Brown?  Why won’t you sign California’s version of Mortgage Debt Forgiveness Relief Act, so homeowners can get out from under their underwater homes without having to go through foreclosure?

I called Governor Brown’s office, got transferred to the press office, someone wrote down my number and email, and I haven’t heard a word about it since.  It’s weird… I thought Democrats were supposed to be compassionate about things like this… guess not.

Maybe you share some of my questions about this subject… and if that’s the case, perhaps you could fire off an email or two asking either Governor Brown why he’s refusing to sign… and/or asking President Obama why he waited so long to sign the extension.  One or the other… or both would be great. 

And please do let me know if you hear anything… I’ll do the same.

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