The Mortgage Forgiveness Debt Relief Act  set to expire in December 31st 2013

As soon as January 1st hits the calendars, the Mortgage Forgiveness Debt Relief Act is set to expire. 
Homeowners seeking the help of a short sale to alleviate their "upside down" status on their properties, will lose the ability to be exempt on taxes imposed by the IRS  on the amount forgiving by their lenders.
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation was signed into law in December 2007 and last year was extended until December 31st 2013.
When you owe a debt to someone and they cancel or forgive that debt, the canceled amount may be taxable according to IRS rules.
The Mortgage Debt Relief Act of 2007 was enacted to allow taxpayers to exclude income from the discharge of debt on their principal residence. 
Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for this relief that  is set to expire in a few days now. Its expiration could help prolong the misery for so many (still) struggling homeowners to remain in homes worth less than their mortgages and in turn. . slowing the housing market's recovery going into 2014.
The housing market in my opinion is relatively in its infancy of complete recovery, not extending this law could possible be the worst time for homeowners that risk losing this exemption..that could potentially cost them tens of thousands of dollars.
I recently did a radio interview with NPR (National Public Radio) where I stressed on behalf of distressed homeowners across our nation, to extend this law with a direct appeal to Congress to act now.
As I expected it. .there was an opposite view during the same program to allow Congress to let it expire because "enough is enough. David Stevens, President and Chief Executive Officer for the Mortgage Bankers Association assessed from a different angle, calling it to be a "potential impediment" for our market place. 
You can hear the interview by clicking "play" below:
The process of a short sale is extremely stressing and emotionally straining. Before attempting this road many homeowners weight the consequences of their actions. Before 2007 when this law was not in effect; a lot of short sales were completed having the homeowners assume thousands of dollars in NEW" taxes. 
Considering this was the result of having to (essentially) lose their home as well. .it was the worst of times for them
My question now is:  
What the difference now?
Families still need help in many areas of the country. Many have signed up on loan modifications that only benefited the lender as homeowners were obligated to sign them . .if they wanted to keep their homes.
A lot of homeowners are slowly realizing that their loan modifications have committed them to purchase their home one more time, paying exorbitant amounts so they can just remain in their homes and reduce their monthly mortgage payments by a few hundreds of dollars. . temporarily!
Those homeowners are going to be the last of the short sales we will see inside our markets in my opinion. They will succumb to the pressure of rationalization. .and ask themselves the real question: 
Am I a homeowner or just a mortgage owner? 
What happens to my existing clients doing a short sale now?
As per Bryan Tutas a member and founder for Short Sale Superstars in Florida: "a short sale has to be "CLOSED" by 2013 as the closing becomes the taxable event" 
 if the short seller is to be exempt from taxes, you need to close it by the end of 2013.
The possible good news is that this law can be extended in 2014 and be retroactive to 2013 if Congress  approves it. 
So we are here, entering a new year in real estate and we see the light at the end of the tunnel for a strong recovery in our futures. Let's hope our leaders help to preserve the hope for the remainder distressed homeowners  that are going to still need help.
About the Author:  Fernando Herboso  is a licensed real estate broker 
with the Maryland Department of Labor, Licensing and Regulation. He is also licensed in the Commonwealth of Virginia and registered with the Real Estate Board. 
Fernando is a member in good standing with the Greater Capital Area Association of Realtors GCAAR. 
and has helped hundreds of homeowners avoid foreclosure trough private and group consultations and performing individual Short Sales Help  throughout  the Washington DC Metropolitan that includes Maryland and Virginia.