Washington D.C. – Congressman Charles Rangel introduced the Mortgage Cancellation Relief Act of 2012, H.R. 4202 in the House of Representatives this week. The bill extends for two years the tax provision that prevents struggling homeowners from a federal income tax liability as a result of mortgage debt forgiveness from a financial institution. Rangel originally introduced the provision in 2007.

“The sanctity of our homes is at the heart of the American Dream,” said Rangel. “The collapse of the American housing market that began in late 2006 has brought our economy to its knees and left Americans from all walks of life without a home or struggling to keep a roof over their head. While the law cannot repair the borrowers' credit or punish those who misled them into taking out inappropriate loans, it addresses a fundamental unfairness in the lives of those who find themselves in these dire circumstances."

Over the last five years American homes have lost seven trillion dollars in value. These declining prices have caused many families facing foreclosure to “short sell” their homes for less than they paid for them, and sometimes for less than the outstanding mortgage debt. Before Rangel authored the Mortgage Cancellation Relief Act of 2007 many homeowners were unaware that any loans forgiven after a “short sell” or foreclosure would be considered taxable income.

The 2007 tax relief is set to expire at the end of 2012. H.R. 4202 would assure that this relief will be available for two more years, through 2014. There are currently 12 million Americans on the verge of losing their homes because they owe more money than their home is worth. An estimated four million American have lost their homes to foreclosure since 2007.

“Congress must not let the Mortgage Cancellation Relief Act expire at the end of the year,” said Rangel. “A culture of deregulation and irresponsible consumer lending that was widespread during the George W. Bush Administration caused an unprecedented housing crisis which has affected every town across America -- big and small, Republicans and Democrats alike. Consequently American families everywhere are still suffering. We must work together in Congress to rebuild our housing market and help people get back on their feet."

At the time of its introduction, no Republican Members in the House Ways and Means Committee have signed on to Rangel's bill, while all 14 other Democratic Members joined as original co-sponsors.

Added Rangel: "Republican or Democrat, none of us in Congress wants to see our constituents who have just lost their homes be forced to pay unforeseen taxes when money is already tight. We should put our political differences aside to do what is right for the American people."