Mortgage Compliance

A Change of Heart on Mortgage Interest Deduction

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home-builders-consider-pros-cons-home-mortgage-interest-rate-deductionFor as long as we can remember, everyone involved in home building, selling, and financing have strongly supported the home mortgage interest tax deduction. People financing their home could reduce their federal income tax by a large amount, if not all, of the interest they paid on their mortgage loan during the year.

This is considered a good thing for housing and for those who choose to own and finance their homes. Things could be changing. Under current tax reform proposals, the long-standing third rail of tax deductions could come under fire.

Proponents say that for many this tax deduction has become meaningless. Further, if the standard tax deduction is doubled, as proposed under the current reforms, many more taxpayers might not benefit from this deduction. It could only benefit those who still might itemize their tax deductions.

Now, comes along a major player in the housing industry, the Home Builders, who say that maybe they can live without this deduction. They’re willing to back off to help support the Trump administration’s efforts to deliver on its promise of lower taxes overall.

That’s a big change from their position over the past 75 years. This deduction was considered sacrosanct; housing wouldn’t survive without it.

Not so fast.

 

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The builders say they’ll consider the elimination of the home mortgage interest deduction if there are other tax incentives offered for homeownership. A little quid pro quo.

NAHB agrees that the tax code needs reform. It’s a win-win if we can put more money back in the hands of the middle class, while still providing some tax incentives to homebuyers.

It may be time to broaden the options on tax incentives when it comes to housing. The idea is: more options, more incentives, more opportunities for homeownership equals more business for all. Not a bad idea.

BTW, Home Builders are also business people who support a lower business tax rate.

What’s your take?

  • Do you think elimination or further curtailment of the mortgage interest deduction would have a drastic adverse impact on housing?
  • Does this deduction play an important role in a consumer’s decision to buy a home?
  • Could doubling the standard deduction, coupled with some tax incentives to buy a home, be better for housing, consumers, and the economy?

 

I believe in the end that people will still buy and own homes, it’s the American Dream. Many today do not use the mortgage interest deduction.

The right tax reforms could spur more homeownership as more low to moderate income consumers may have more money to buy a home and put toward their housing needs.

Yes, some may benefit more than others. That’s usually the way it is with reforms. But, that’s not a good reason to scrap the whole plan that may still provide much-needed help to all.

Whatever became of the flat tax? I guess too many special interests benefiting from all those existing deductions and exemptions.

Michael Vitali

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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Michael Vitali

About Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
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