In light of the blog I wrote the other day, I am taking the liberty of writing another in considerable disbelief after diving into the article Deficit Cutters Eye Mortgage Tax Deduction. If you are familiar with the incredibly popular Windows Phone 7 commercial, in which ridiculous yet amusing misdirected attention elicits the response of “Really…,” the title of this blog will become clear in less than a minute. Just keep reading; I’ll cue you.
In its attempt to trim $3.8 trillion in debt, The National Commission on Fiscal Responsibility and Reform (an oxymoron if ever there was one) has aimed its sights on the mortgage interest tax deduction. Everybody has weighed in – almost. The President of the National Association of Home Builders leveled the threat that this move would not only cause values to drop and result in even more foreclosures, but that the negative repercussions would travel up and down the entire housing chain. Conversely, according to the article, the consensus among economists is that the current interest deduction is “regressive and promotes overconsumption.”
Before I get into my debate of “good vs. bad,” I cannot help but yell rather loudly here that there is one group that has decided wait to weigh in. The official opinion of the National Association of Realtors is that “any comments ” prior to the commission’s final report due Dec. 1 “would be premature and based on conjecture.” And here we go folks, all together now:
Really … ?
Please. Stand up and be heard. This is your livelihood.
I agree with Mark Zandi of Moody’s Analytics that the deduction provides the opposite effect than what it set out to promote – homeownership as a “reward” for owning your own home. According to Zandi, it costs the treasury $100 billion and is simply reflected in higher house prices and thus does not result in higher housing affordability. But NOW is not the time to do anything that will adversely affect values.
The biggest objection my borrowers give me is that they want to wait for values to stop falling before they commit. After the market stabilizes, I can see entertaining the idea of phasing in some changes, and I certainly see no reason that we can’t regionalize the minimum loan amount. More expensive areas could hold a higher threshold. Why not treat the number like the FHA calculates their maximum loan limits? Makes one think…
Really.
