Can’t afford your mortgage? No problem…

WASHINGTON (Dow Jones) - U.S. President George W. Bush signed mortgage debt relief legislation into law Thursday, saying the measure will help struggling homeowners deal with “serious strains” in the housing market.

“With this bill, Congress has taken a strong step to address the turbulence in the housing market,” Bush said during a brief signing ceremony at the White House.

The Mortgage Forgiveness Debt Relief Act of 2007 will let homeowners avoid income tax on mortgage debt forgiven through refinancing. In the past, homeowners had to count forgiven debt as taxable income. The bill would create a three-year exception for debt forgiveness on home loans.

“If you’re worried about making your payments, higher taxes are the last thing you need to worry about,” Bush said.

With foreclosure rates increasing as subprime adjustable-rate mortgages reset into more expensive monthly requirements and housing prices fall in many parts of the country, the White House is under pressure to help troubled homeowners. It is encouraging loan investors and servicers to speed up refinancings, an effort that could allow certain borrowers to have their interest rates frozen for up to five years.

“In recent months our nation’s housing market has faced serious strains,” Bush said.

To further address those strains in the months ahead, Bush said Congress should pass legislation permitting state and local governments to issue tax-exempt bonds for refinancing existing home loans, strengthen the independent regulator of Fannie Mae and Freddie Mac, and finish a bill overhauling the Federal Housing Administration.