Troubled homeowners who get a break from their mortgage lenders might not be so lucky with the federal government, and could face hefty tax bills unless Congress acts to extend a key provision, the Wall Street Journal reported today. The tax provision currently allows some homeowners—mostly those facing foreclosure—to avoid paying taxes on certain relief they receive on their mortgages. The provision covers mortgages where lenders forgive a portion of the principal, a key component in the $25 billion federal-state settlement over mortgage-foreclosure abuses. It also affects homeowners who do "short sales," where banks agree to allow a property to be sold for less than the debt owed.
