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As tax reform unfolds, MBA urges Senate to consider mortgage finance needs

Committee proposal preserves the mortgage interest deduction

The debate on tax reform continues to unfold, as the Mortgage Bankers Association sent another letter to Congress, outlining what the mortgage finance markets needs from any tax reform efforts. 

The MBA sent the letter to the Chairman of the Senate Committee on Finance Sen. Orrin Hatch, R-Utah, and Ranking Member of the Senate Committee on Finance Sen. Ron Wyden, D-Ore., ahead of the committee’s scheduled mark up of the Tax Cuts and Jobs Act on Tuesday. The letter looks at the chairman of the committee’s recently released mark up of the Tax Cuts and Jobs Act.

Reiterating past calls, the letter stated, “We recognize and appreciate that the Chairman’s mark would provide both owners and renters with more take home pay by lowering overall tax rates and nearly doubling the standard deduction. We are also pleased that the proposal preserves the mortgage interest deduction and retains the current $1 million cap.”

“However, we are concerned the cumulative impact of the changes to mortgage interest and property tax deductibility will erode home affordability and eliminate important financing options for many Americans,” the letter continued.

The future of the mortgage interest tax deduction is currently a hot topic in the industry, with several housing groups advocating for it. 

Unlike the House tax reform bill, which slashed the mortgage interest deduction in half to $500,000, the Senate plan elects to keep the mortgage interest deduction intact.

But to the MBA, this decision doesn’t mean there aren’t other parts of the plan that negatively impact housing.

For example, the letter stated that home equity is a critical source of financing for low- and middle-income households for home improvements, college tuition, and other emergencies.

“MBA believes deductibility of a portion of home equity indebtedness should be retained. In addition, the deduction for property taxes helps families overcome affordability challenges in high cost and/or high tax jurisdictions,” the letter stated. “We believe these features should be preserved, and that the Finance Committee – and the Congress as a whole – should take this opportunity to think creatively about new homeownership incentives targeted more efficiently to low- to moderate- income borrowers.”

While there are parts of the Senate committee’s mark up of the plan, such as the business interest deductibility for real estate and other key real estate investment incentives, that the MBA is pleased with, there are still specific areas that could hinder housing.

“As the tax reform debate unfolds in the coming weeks, we look forward to continuing to work with policymakers to find the right balance that both reduces the tax burden on American families and spurs economic growth,” the letter concluded. 

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