Comments on: Mortgage Interest Deduction in Jeopardy

By: Clint

Clint — Fri, 27 Mar 2009 06:18:29 +0000

The mortgage interest deduction is a subsidy to the lenders rather than an effective incentive for home ownership. It provides an incentive for home owners to avoid paying off their mortgage ahead of time. A one time credit or deduction for buying a home based on a percentage of the price would make more sense because it provides the proper incentive… I think you people need to see past your own self interest here… Sarah – have you ever picked up a book on economic theory? hmmm….

By: Ditech Home Loans

Ditech Home Loans — Wed, 11 Mar 2009 18:06:50 +0000

Reducing the mortgage interest deduction could slow consumer spending, and prolong a recession, by limiting the incentive for home equity financing, which helps create economic demand for products, services, and jobs.

By: Sam

Sam — Thu, 05 Mar 2009 01:32:47 +0000

Voodoo economics makes a return, this time on the other end of the spectrum. Removing the deduction makes no sense – just increases gov’t revenues and will lead to even more failed loans!!

As a lender, few folks look at the deduction as making a larger home or loan more affordable, because such is not seen as real money.

We got where we are due to the removal of the Glass-Steagall Act of 1933 as a barrier between depository institutions and investment institutions, which occurred in 1999 – see Citigroup/Travelers merger.

After that we got all the “sophisticated” investment instruments which led us to the abyss on the edge of which we now teeter.

By: Chris

Chris — Wed, 04 Mar 2009 01:53:14 +0000

This is the worst idea that I have ever heard out of the Washington think tank. Only a genius from the government could come up with such a gem.
Thank goodness for the new administration. The negative feedback loop was running out of bad news.

By: Sarah

Sarah — Wed, 04 Mar 2009 01:22:43 +0000

His plans are really beginning to scare me, it is obvious to me he is not well versed in economic theory. Eliminating this tax deduction would only serve to fuel a further down-turn in the housing market. I would be interested to hear how his plan is based on sound economic theory and facts. Please tell me how Obama believes this plan will work.

By: s2kreno

s2kreno — Tue, 03 Mar 2009 16:53:45 +0000

I think now is not the time to push through any legislation that will further depress home prices. Fuel to the fire.

By: Keith

Keith — Tue, 03 Mar 2009 16:06:15 +0000

I find some very fundamental flaws in Edward’s logic and his “5 Problems”. First and foremost, being involved in the real estate industry in many different positions for over a decade, I have yet to run across a buyer that makes the statement, “lets get a bigger house and bigger mortgage payment so that we can have a bigger tax deduction.” My experience has shown me that the consumer is more concerned with finding a property that meets their needs (beds, baths, etc.) as well as it being located in the desired geographic area. While the interest tax deduction is used a an incentive for first time homebuyers or a benefit of homeownership, my experience has shown that it barely, if at all, is part of the decision making process on how much to spend or how leveraged to be on a home purchase.
Secondly, as outlined in Problem #3, Edward’s argument is wildly misleading. While his statement that the tax savings for incomes above the $250,000 is 10 times greater than that of the earners between $40,000 – $75,000 may be accurate he neglects to mention that the interest payments made by these same high income earners will mirror that multiplier. Also keep in mind that according to IRS data the top 25% of income earners in the US pay nearly 83% of all the income tax. This figure INCLUDES the interest deduction. A flat tax credit would only make this percentage grow.
The removal of the tax deduction for interest on a mortgage is a poor idea and will hurt the real estate industry even further. Especially if it is restricted to income earners identified in the proposal. Pride of ownership will stimulate consumer spending especially in a newly purchased home. Rarely is the case when a home is purchased and it includes everything the new owners want. Think rugs, blinds, appliances, landscaping, etc. The larger and more expensive the house the higher the price tag on these items and the more spending that will be required.
As it has been said many times, “The housing industry lead us into this recession and it will be up to them to lead us out.” If that is the case why would we want to place additional obstacles in the way of making that happen?