Bush signs bill giving struggling homeowners relief

President George W. Bush speaks before signing the Mortgage Forgiveness Debt Relief Act of 2007 in the Roosevelt Room of the White House, December 20, 2007. Joining Bush are from L-R: Bush, Treasury Secretary Henry Paulson and HUD Secretary Alphonso Jackson.

WASHINGTON (Reuters) - President George W. Bush on Thursday signed into law a measure that will waive taxes on many homeowners who must restructure their mortgages as they face foreclosure.

The new law principally erases the tax bill that many homeowners would face if a lender erased some debt in order to ease burdensome home loan payments. Before the law, debt that was forgiven in a foreclosure or as part of a loan workout was considered income.

"The provision will increase the incentive for borrowers and lenders to work together to refinance loans," Bush said at a signing ceremony, "and it will allow American families to secure lower mortgage payments without facing higher taxes."

As many as 1.8 million mortgages are due to reset to sharply higher rates next year. The Bush administration has encouraged lenders to try to ease those terms where they can.

(Reporting by Patrick Rucker; Editing by Jonathan Oatis)