Rep. Charles Rangel, D-N.Y., has introduced a bill aimed at extending tax relief to Americans in danger of losing their homes.

The Mortgage Cancellation Relief Act of 2012 would extend for two years a tax provision that prevents a federal income tax liability for struggling homeowners as a result of mortgage debt forgiveness from a financial institution. Rangel originally introduced the provision in 2007 when he chaired the tax-writing House Ways and Means Committee before stepping down in the midst of revelations of his own tax problems.

“The sanctity of our homes is at the heart of the American Dream,” Rangel said in a statement. “The collapse of the American housing market that began in late 2006 has brought our economy to its knees and left Americans from all walks of life without a home or struggling to keep a roof over their head. While the law cannot repair the borrowers' credit or punish those who misled them into taking out inappropriate loans, it addresses a fundamental unfairness in the lives of those who find themselves in these dire circumstances."

Over the past five years American homes have lost $7 trillion in value, forcing many families facing foreclosure to “short sell” their homes for less than they paid, and sometimes for less than the outstanding mortgage debt. Before Rangel introduced the Mortgage Cancellation Relief Act of 2007, many homeowners were unaware that any loans forgiven after a “short sale” or foreclosure would be considered taxable income.

The 2007 tax relief is set to expire at the end of 2012. H.R. 4202 would assure that the relief will be available for two more years, through 2014. There are currently 12 million Americans on the verge of losing their homes because they owe more money than their home is worth. An estimated 4 million Americans have lost their homes to foreclosure since 2007.

“Congress must not let the Mortgage Cancellation Relief Act expire at the end of the year,” said Rangel. All of the Democratic members of the Ways and Means Committee have joined as original co-sponsors of the bill.