David Stevens, president and CEO of the Mortgage Bankers Association, said his trade group stands ready to advocate for the survival of the mortgage interest deduction, but it’s too early to react to political slogans about ending the popular tax deduction.

“I think the most important thing right now is to not overreact to the kind of policy vetting that goes on in political campaigns, particularly a few weeks away from an election,” Stevens told HousingWire. “We are not going to react strongly to any comments made prior to the election.”

Presidential contender Mitt Romney suggested that his tax plan could include the scaling back of the mortgage interest deduction.

Two years ago, the National Commission on Fiscal Responsibility and Reform, which was created by President Obama to fix the nation’s fiscal woes, suggested limiting mortgage interest deductions on second residences, home equity loans or mortgages valued at more than $500,000.

Stevens, to date, has stayed away from the political fray and is patiently waiting to see where the election and tax policy goes.

But his trade group keeps the view that the deduction is needed and remains a key part of middle-class homeownership.

“We need the housing market to recover — particularly the home purchase market—to recover for the broader U.S. economy to get back on track,” Stevens said. “Any uncertainty around the impact of consumers on the most significant tax benefit that the U.S. tax system has for the U.S. consumer could be very disruptive.”

Stevens said the deduction is important for middle-class homeowners making roughly $40,000 a year. He says after state and federal taxes, these homeowners take home about $28,000. Out of that amount, they make approximately $14,000 in annual mortgage payments, leaving them with only $14,000 for other expenditures. But if they can deduct a portion of the interest paid on their home loan from taxable income, they can gain back $4,000 in tax benefits, Stevens said.

He warns that looking at broad tax reform is necessary, but viewing “the mortgage interest deduction in isolation is very dangerous to the recovery.”

“It’s easy to poke at the mortgage interest deduction because it is sizable, but it’s an investment in a housing system that contributes to the gross domestic product,” Stevens asserted.

Mark Calabria, a housing policy analyst at the Cato Institute, has suggested previously that the deduction distorts housing and market realities and even contributed to the housing bubble by encouraging borrowers to have more debt than equity in their homes.

Cato researchers have also argued that the benefit mostly helps affluent families living in high-cost, urban area. 



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