Congress makes permanent a tax break for homeowners with forgiven mortgages.
H.R. 917 — Mortgage Debt Tax Forgiveness Act of 2025 · Filed by Julia Brownley (D-CA) · Introduced Feb 4, 2025 · Referred to committee
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What it does
This bill makes permanent a tax break that allows homeowners to exclude forgiven mortgage debt from their taxable income. Currently, when a lender forgives part of a mortgage (e.g., in a short sale or loan modification), the forgiven amount is treated as taxable income; this bill eliminates that tax hit permanently, effective for mortgages discharged after December 31, 2025.
Why we flagged it
The bill's sole operative mechanism is to make permanent an existing tax exclusion for homeowners whose mortgage debt is forgiven. It is a straightforward tax-code amendment with no riders or hidden provisions.
What the text implies
- Lenders may face reduced incentive to pursue deficiency judgments against borrowers in short sales, since borrowers no longer face a tax penalty for forgiven debt—potentially shifting loss-absorption toward creditors rather than homeowners.
- The permanent exclusion removes a fiscal cliff that previously required Congress to periodically renew the provision, reducing legislative uncertainty for mortgage servicers and borrowers planning loan modifications.
- By eliminating the tax on forgiven principal-residence debt, the bill may modestly increase the attractiveness of principal reduction as a loss-mitigation tool for servicers, relative to other workout strategies.
Section numbers refer to the bill text the analysis read — linked under Primary records below.
Who it affects
Homeowners facing mortgage forgiveness (short sales, loan modifications, principal reductions) avoid a sudden tax liability that could otherwise force them to pay income tax on debt relief they did not receive as cash. This reduces financial hardship for households in distress and removes a perverse incentive that discourages lenders from forgiving debt.
Who stands to gain
- homeowners with forgiven mortgage debt
- mortgage servicers and lenders (reduced deficiency-judgment leverage, but simplified compliance)
Named in the bill
Internal Revenue Code of 1986, IRC Section 108(a)(1)(E), homeowners, mortgage lenders, mortgage servicers
Where it stands
- Feb 4, 2025 — Introduced · Congress.gov: “Introduced in House”
- Feb 4, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”
Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.
Money around this bill
1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $20,000 in lobbying spend. A filing names 1 bills on average, so that figure is what each filing reported, not a share belonging to this bill.
More lobbying clients named this bill than 0% of bills with at least one filing.
Julia Brownley, the sponsor, reported $296,500 in PAC receipts in the 2026 cycle.
- City of San Buenaventura (f/k/a Ventura Water (a Department of the City of San B — $20,000 on 1 filing
Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.
How this was measured
Analysis — Quorum's AI read the bill text published by Congress.gov (476 characters) on May 5, 2026. Section numbers in the findings refer to that text, linked below; transparency and hidden-provision scores are compared against the median of 16,222 analysed bills.
Status and sponsors — Congress.gov's bill record — actions, committee referrals and cosponsors — loaded nightly. The timeline shows status changes, not every procedural action.
Money — Senate Lobbying Disclosure Act filings whose specific-issue field names this bill for quarters ending Jun 2026 to Jun 2026. A filing's amount is reported whole beside the median number of bills a filing names; it is never divided across them. PAC receipts are FEC-reported contributions to the sponsor's candidate committee in the 2026 cycle.
As of — lobbying records through Jul 20, 2026 · page rendered 2026-10-20.
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