But it's not. The Mortgage Forgiveness Debt Relief Act is set to expire in 10 months, and there are early indications on Capitol Hill that it might not make the cut. The law, first enacted in 2007, allows homeowners who have received principal reductions on their mortgages as the result of loan modifications, short sales or foreclosures to avoid income taxation on the amounts forgiven.

Loss of that tax help would endanger huge numbers of distressed mortgage arrangements in the months ahead. For example, the $25 billion mortgage settlement with state attorneys general requires the banks to provide more than $10 billion in principal reductions to borrowers. Meanwhile, other lenders and mortgage servicers who are not parties to the settlement already provide principal reductions to troubled borrowers. Many of these owners would face hefty and ill-timed taxable income hits if the law is not extended.

Yet election-year politics and a contentious lame-duck, year-end congressional session loaded with tax and budget issues could doom renewal of the debt relief tax legislation.

Republican strategists say the cost of continuing the program — $2.7 billion for two years — is substantial enough to catch the eyes of budget-deficit hawks. They add that some members of Congress may be opposed to what they see as another targeted federal benefit for people who didn't pay their mortgages — subsidized by taxpayers who did the right thing and stayed current on their loans, even while underwater or facing financial distress.

Douglas Holtz-Eakin, president of the center-right American Action Forum, former director of the Congressional Budget Office and economic adviser to Sen. John McCain's 2008 presidential campaign, said in an interview that there is “a powerful sentiment,” especially among conservative freshman House members supported by the tea party, that tax code “bailouts” to delinquent and underwater homeowners are fundamentally unfair.

“It's going to be an uphill fight” to get an extension through, he predicts.

Real estate and housing groups are worried about the same political dynamics and are gearing up campaigns to try to save the mortgage debt cancellation tax provisions in advance of the November elections, well before the expected year-end squeeze. Some industry lobbyists put the current odds of getting a pre-election, stand-alone extension bill through Congress at less than 50-50.