New 'Fiscal Cliff' Law Has Positive Impact on Short Sales

Toward the end of 2012, it looked like the Mortgage Debt Forgiveness Act could die, and the number of short sales went up. Distressed homeowners sought to avoid the tax penalty on forgiven mortgage debt after a short sale by taking advantage of the law in the third and fourth quarters of 2012.

In fact, as Diana Olick reports for CNBC, around 98,000 short sales were done in the third quarter alone.

But with the so-called "fiscal cliff" crisis ostensibly solved, the Mortgage Debt Forgiveness Act is extended for another year.

This, in turn, should have a positive impact on struggling homeowners.

Olick quotes a finance professional with Guggenheim Partners, which is headquartered in Chicago:

"An extension of the tax break is positive for home values by reducing the number of foreclosures and helping more troubled borrowers stay in their homes. That means less supply on the market."

Fiscal cliff negotiations resulted in the American Taxpayer Relief Act of 2012, which was passed on New Year's Day, and signed by President Obama on Jan. 2.

Source: 'Fiscal Cliff' Deal Favors Housing Recovery

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