To promote neighborhood stabilization by incentivizing short sales, as a preferable alternative to foreclosure, through the Internal Revenue Code of 1986.

Summary: Responsible Homeowner Relief Act of 2010 - Amends the Internal Revenue Code to allow an individual taxpayer a deduction from gross income for loss from the sale or exchange of a principal residence in which such taxpayer resided for at least two years during the five-year period prior to the sale. Limits the aggregate amount of such deduction to $9,000, allowable in three annual installments of $3,000. Terminates such deduction after 2012.

Requires the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to waive any short sale waiting period requirement for certain mortgagors who refinance their mortgage in a short sale. Terminates such waiver authority on January 1, 2013.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Responsible Homeowner Relief Act of 
2010''.

SEC. 2. DEDUCTION FOR LOSS FROM SALE OF PRINCIPAL RESIDENCE.

    (a) In General.--Part VII of subchapter B of chapter I of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. LOSS FROM SALE OF PRINCIPAL RESIDENCE.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction for the taxable year any loss 
recognized on the sale or exchange of property during the taxable year 
if, during the 5-year period ending on the date of the sale or 
exchange, such property has been owned and used by the taxpayer as the 
taxpayer's principal residence for periods aggregating 2 years or more.
    ``(b) Limitations.--
            ``(1) Aggregate limitation.--The aggregate amount allowed 
        as a deduction under subsection (a) for all taxable years shall 
        not exceed $9,000.
            ``(2) Annual limitation.--
                    ``(A) In general.--The amount allowed to a taxpayer 
                as a deduction under subsection (a) for a taxable year 
                shall not exceed $3,000.
                    ``(B) Carryforward.--If the deduction allowable 
                under subsection (a) for any taxable year exceeds the 
                limitation imposed by subparagraph (A) for the taxable 
                year, the excess shall be carried to each of the 2 
                succeeding taxable years and added to the deduction 
                allowable under subsection (a) for such succeeding 
                year.
            ``(3) Exclusion of loss allocated to nonqualified use.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to so much of the loss from the sale or exchange of 
                property as is allocated to periods of nonqualified 
                use.
                    ``(B) Allocation.--For purposes of subparagraph 
                (A), loss shall be allocated to periods of nonqualified 
                use based on the ratio which--
                            ``(i) the aggregate periods of nonqualified 
                        use during the period such property was owned 
                        by the taxpayer, bears to
                            ``(ii) the period such property was owned 
                        by the taxpayer.
                    ``(C) Period of nonqualified use; coordination with 
                recognition of gain attributable to depreciation.--For 
                purposes of this paragraph, rules similar to the rules 
                of subparagraphs (C) and (D) of section 121(b)(5) shall 
                apply.
            ``(4) Application to only 1 sale.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to more than 1 sale or exchange of a principal 
                residence by the taxpayer.
                    ``(B) Special rule for joint returns.--In the case 
                of a joint return with respect to the sale or exchange 
                of a principal residence, if a deduction was allowable 
                under subsection (a) to a spouse for a prior sale or 
                exchange of a principal residence, paragraphs (1) and 
                (2)(A) shall be applied by reducing the dollar amounts 
                therein by the deduction so allowable (one-half of such 
                deduction in the case of a joint return).
            ``(5) Sale or exchange with related person.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any sale or exchange to a related person.
                    ``(B) Related person.--For purposes of this 
                subparagraph (A), a person (hereinafter in this 
                subparagraph referred to as the `related person') is 
                related to any person if--
                            ``(i) the related person bears a 
                        relationship to such person specified in 
                        section 267(b) or section 707(b)(1), or
                            ``(ii) the related person and such person 
                        are engaged in trades or business under common 
                        control (within the meaning of subsections (a) 
                        and (b) of section 52).
                For purposes of clause (i), in applying section 267(b) 
                or 707(b)(1), `10 percent' shall be substituted for `50 
                percent'.
    ``(c) Home Sales Price Must Be Consistent With Local Market.--The 
sale or exchange of a principal residence shall not be taken into 
account for purposes of subsection (a) unless the taxpayer demonstrates 
to the satisfaction of the Secretary that the price for which such home 
is sold (or value received in the case of an exchange) is consistent 
with local property values of dwellings of a similar size and condition 
at the time of such sale or exchange.
    ``(d) Applicable Rules.--For purposes of this section, rules 
similar to the rules of subsection (d) of section 121 shall apply, 
except that paragraph (6) thereof shall be applied by substituting 
`loss' for `gain'.
    ``(e) Election To Have Section Not Apply.--This section shall not 
apply to any sale or exchange with respect to which the taxpayer elects 
not to have this section apply.
    ``(f) Termination.--The section shall not apply to the sale or 
exchange of a principal residence after December 31, 2012.''.
    (b) Deduction Allowed in Computing Adjusted Gross Income.--
Subsection (a) of section 62 of such Code is amended by inserting 
before the last sentence the following new paragraph:
            ``(22) Loss from sale of principal residence.--The 
        deduction allowed by section 224.''.
    (c) Conforming Amendments.--
            (1) Section 165(c) of such Code is amended by striking 
        ``and'' at the end of paragraph (2), by striking the period at 
        the end of paragraph (3) and inserting ``; and'', and by 
        inserting after paragraph (3) the following new paragraph:
            ``(4) to the extent provided in section 224, losses from 
        the sale or exchange of a principal residence.''.
            (2) Section 165(f) of such Code is amended by inserting 
        ``and in section 224 in the case of losses from the sale or 
        exchange of a principal residence'' before the period at the 
        end.
    (d) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by striking the item 
relating to section 224 and inserting the following:

``Sec. 224. Loss from sale of principal residence.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 3. WAIVER OF FANNIE MAE AND FREDDIE MAC WAITING PERIOD 
              REQUIREMENTS AFTER SHORT SALE FOR CERTAIN MORTGAGORS.

    (a) In General.--The Federal National Mortgage Association and the 
Federal Home Loan Mortgage Corporation shall waive the applicability of 
any short sale waiting period requirement with respect to the purchase 
and any commitment to purchase, by such Association or Corporation, of 
a covered mortgage if the mortgagor under such covered mortgage--
            (1) was, at the time of the short sale of the principal 
        dwelling of such mortgagor that was subject to the previous 
        mortgage, current on all payments due under the mortgage 
        satisfied by such short sale; and
            (2) has a credit score greater than the equivalent of a 
        FICO score of 679.
    (b) Definitions.--For purposes of this section, the following 
definitions shall apply:
            (1) Covered mortgage.--The term ``covered mortgage'' means 
        a mortgage under which the mortgagor is an individual who was 
        previously the mortgagor under another mortgage on the 
        principal dwelling of such mortgagor, which principal dwelling 
        was sold in a short sale.
            (2) Short sale.--The term ``short sale'', with respect to 
        an individual, has the meaning given such term under section 
        605(a)(7)(B) of the Fair Credit Reporting Act.
            (3) Short sale waiting period requirement.--The term 
        ``short sale waiting period requirement'' means any 
        underwriting or other requirement of the Federal National 
        Mortgage Association or the Federal Home Loan Mortgage 
        Corporation that requires, for the purchase by such Association 
        or Corporation of a mortgage under which the mortgagor is an 
        individual who was previously the mortgagor under another 
        mortgage that was sold in a short sale, that any minimum period 
        of time elapse after the occurrence of such short sale.
    (c) Sunset.--The provisions of this section shall cease to be 
effective on and after January 1, 2013.