Important information for Servicers – the Mortgage Debt Relief Act of 2007

On December 20, 2007, the Mortgage Forgiveness Debt Relief Act of 2007 (the Act) was signed into law. This will exclude from borrowers' income amounts of "qualified mortgage indebtedness" cancelled between January 1, 2007 though December 31, 2009. Debt cancellation could otherwise constitute taxable cancellation of indebtedness income ("COD income") to borrowers.

The Act did not change the law about reporting foreclosures or cancellation of debt on IRS Forms 1099-A and 1099-C. Freddie Mac Servicers must continue to comply with existing tax filing requirements as described in Chapter 55 of the Single-Family Seller/Servicer Guide.

Freddie Mac does not provide tax advice to Servicers or borrowers. It is the responsibility of each borrower to determine whether an exception to COD income applies in his or her particular case. Borrowers with questions about this issue should be referred to their tax advisor.