President Bush on Thursday signed a measure to provide tax relief for financially strapped homeowners facing foreclosure. The new law will provide a temporary, three-year change to the tax code to eliminate any taxes home owners may face if a lender forgives a portion of outstanding mortgage debt — whether a deficiency in foreclosure, or a loan modification. The bill, HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, had been passed by Congress earlier in the week. Calling the bill “a really good piece of legislation,” President Bush said it “will increase the incentive for borrowers and lenders to work together to refinance loans — and it will allow American families to secure lower mortgage payments without facing higher taxes.” The President also put his weight behind a proposal to allow the use of municipal bonds to fund refinancing of troubled borrower’s existing loans. “There’s more work to be done,” he said. “The Congress needs to pass legislation permitting state and local governments to issue tax-exempt bonds for refinancing existing home loans. Congress needs to pass legislation strengthening the independent regulator of government sponsored enterprises like Freddie Mac and Fannie Mae, so we can keep them focused on the mission to expand home ownership.” I can so totally see why everyone wants to use the municipal bond market to fund a subprime bailout. Like, it so totally makes complete sense. Because, when you think about it, that’s exactly the sort of extra risk exposure our nation’s municipalities need right now, what with outfits like ACA Financial and MBIA wreaking havoc on things and forcing rating agencies to issue warnings on hundreds of thousands of bond issues.