The National Commission on Fiscal Responsibility and Reform, proposed limiting the mortgage interest rate deduction on taxes, one of the primary incentives for owning a home.
President Obama created the bipartisan commission in February to provide options on overhauling the tax system and reducing the national deficit. According to a November report, one option excludes citizens from deducting interest payments on second residences, home equity loans or mortgages over $500,000.
Other options would be to tax dividends and capital gains at the ordinary rates. The commission said its extensive plan would reduce the deficit by nearly $4 trillion through 2020. Cutting mortgage interest rates was, expectedly, met with resistence from the housing industry.
Michael Berman, chairman of the Mortgage Bankers Association
, warned that now is not the time to be cutting back incentives.
"The mortgage interest deduction is one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain," Berman said.
Lawrence Yun, chief economist for the National Association of Realtors
even told the Wall Street Journal that limiting the mortgage interest deduction would bring on another recession.
"We share the widespread concern over the growing national debt and want to help identify reasonable solutions," Berman said, "but we cannot support proposals that would chip away at the foundations of the real estate market."
Write to Jon Prior