The House last month passed legislation to expand backing of mortgages by the Federal Housing Administration, which now insures some 3.7 million loans in the event of default, with a view to helping struggling homeowners avoid foreclosure. “Families dealing with the pain of a foreclosure should not have the double whammy of a large tax bill,” Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, said of the tax-relief measure he sponsored. To help offset the $650 million in tax revenue, the legislation also makes it harder to get breaks on capital gains taxes for the sale of second homes. The White House supports the tax measure but wants the mortgage relief to be in effect for three years, not permanent, as approved by the House. President George W. Bush is opposed to limiting tax breaks on the sale of second homes. The Mortgage Bankers Association expressed strong support for the tax-relief bill, but fiercely criticized the bankruptcy measure. “Lenders will have no choice but to move to foreclosure right away to ensure that they are not covered by the onerous provisions of this bill,” the group said in a statement. “In the longer term, investors and speculators who overpaid for homes at the height of the housing bubble will have an incentive to file for bankruptcy, walk away from the loan and property, and reap an undeserved windfall.”160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! WASHINGTON – Financial relief for homeowners facing foreclosure or in bankruptcy advanced in the House on Thursday as the House approved legislation to help financially strapped homeowners. The bill, passed by a 386-to-27 vote, would give a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or a reworking of a loan. The value of that forgiveness, which is now taxable as income, would become tax-exempt. While the measure is anticipated to reduce the taxes of some strapped homeowners by a total of $650 million, it also looks to help offset that by limiting a tax break available on the sale of second homes. Another measure, narrowly approved by a House Judiciary subcommittee and opposed by Republicans on the panel, has been sent to the full Judiciary Committee. It would revise the bankruptcy code to help homeowners facing default and foreclosure, biting into already hard-hit profits at mortgage lenders. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREChargers go winless in AFC West with season-ending loss in Kansas CityThat bill would allow judges to order mortgage lenders to ease terms for homeowners in bankruptcy proceedings. Currently, mortgage lenders can foreclose against a homeowner in default 90 days after the filing of bankruptcy. Legislation similar to both bills is pending in the Senate. Mortgage lenders would be “terrified” of getting wrapped up in bankruptcy proceedings, said Brian Gardner, a research analyst with investment firm Keefe, Bruyette & Woods. The House vote was the latest congressional reaction to a mortgage crisis touched off this spring by a blowup in high-priced home loans for risky borrowers, which has thrown a pall over the economy. An estimated 2 million to 2.5 million adjustable-rate mortgages – worth some $600 billion – will jump from low initial “teaser” rates to higher rates this year and next. Steep pre-payment penalties have made it difficult for some to get out of their mortgages, and some overstretched homeowners can’t afford to refinance or sell their homes. Foreclosures are at record highs and late payments are spiking. Lenders have been forced out of business and investors have taken huge financial hits.