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MID reform takes a step forward

December 6, 2010 - A commission designed to work out the nation's debt crisis has approved a proposal that would change parameters for the mortgage interest deduction, often considered a major buyer's incentive for those moving into new homes.

The MID allows homeowners to deduct their mortgage interest payments from their tax return, at a cost of about $131 billion per year to the federal government. Eleven of the 18 members of the bipartisan National Commission on Fiscal Responsibility and Reform voted in support of a proposal that would - among other things - scale back what kinds of interest buyers could deduct. The plan would exclude owners from deducting interest from second homes, home equity loans and mortgages worth more than $500,000.

The commission did not get the necessary 14 votes needed to bring the proposal before Congress, but experts said the vote still brought the measure closer to consideration. Real estate trade groups say that scaling back the mortgage interest deduction would seriously hamper moving activity nationwide.

"The consequences would be devastating for housing and the economy," said Bob Jones, chairman of the National Association of Home Builders. "This would further depress home prices, putting countless more home owners underwater and triggering a new wave of foreclosures."

Members of the Mortgage Bankers Association also blasted the proposal, while the National Association of Realtors reported that the move could lower home prices 15 percent.
 

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