First and second mortgages are forgiven and the debt erased at the discretion of mortgage lenders, according to Bankrate.com and SFGate. As of 2013, some lenders such as Bank of America chose to completely forgive second mortgages, reporting the loan as paid and closed, according to Bankrate.Continue Reading
In 2012, several banks, including JP Morgan Chase and Bank of America, extended over $42 billion dollars of partial and full debt erasure to their customers, as Bloomberg Business reports. During the same year, Bank of America cancelled more than 150,000 second mortgages as part of the 2012 National Mortgage Settlement and the extension of the Mortgage Forgiveness Debt Relief Act, according to Bankrate.
Mortgage lenders may continue to forgive first and second mortgages, but the forgiven debt amounts, whether partial or full, were only covered by the Mortgage Forgiveness Debt Relief Act until the end of 2014. However, the government is expected to review the coverage of the act for 2015, according to the Minnesota Homeownership Center.
Full or partial cancellation of mortgage debt is usually granted as part of a nationwide response to the high number of foreclosures through debt reduction and loan modification in compliance with the act, according to the IRS. After 2014, the forgiven mortgage debt amount becomes taxable unless congress extends the coverage of the Debt Relief Act.Learn more about Credit & Lending