The Treasury Department's Office of Homeownership Preservation called on mortgage servicers to put pressure on Washington to extend the Mortgage Debt Relief Act of 2007, which expires at the end of 2012.

Speaking Tuesday at SourceMedia's annual mortgage servicing conference in Irving, Texas, Laurie Maggiano, the office director of policy, said the Treasury is working with counterparts such as the Mortgage Banking Association and Hope Now to encourage lawmakers to make the extension.

The 2007 federal provision allows taxpayers to exclude debt reduction income resulting from mortgage restructuring or foreclosure. If it expires, homeowners and servicemen who receive settlement payments and mortgage debt forgiveness for wrongful foreclosure after 2012 will be subject to federal income tax.

“I encourage you strongly to make your voices heard on Capitol Hill,” Maggiano said to the audience of mortgage service professionals. “We’re not supposed to lobby, but this is something we feel strongly about.”

By making that statement, Maggiano implicitly endorsed the Homeowners Tax Fairness Act, which was introduced by lawmakers in March and extends the Mortgage Debt Relief Act beyond 2012.

Lawmakers who introduced the new bill said it is intended to “protect homeowners and servicemembers who were wrongly foreclosed on and entitled to relief under the historic national mortgage settlement from additional tax burdens.”