The Choice Being Made to Further the Housing Crisis…

NAR President, Charles McMillan

Here’s an article from MSNBC regarding a proposal coming from the White House to reduce the mortgage interest deduction written into the current tax code.

An excerpt from the MSNBC article…

“According to NAR’s analysis, changing the mortgage interest deduction will not only negatively impact the 2 percent of families who own homes targeted by the proposal, but also will impact home prices and values across the board. The middle class would see their home values reduced even further by such action, and NAR cautioned the Obama administration that any further pressure on home prices will hamper the economic recovery, raise foreclosures and hurt banks’ abilities to lend.”

A recent Wall Street Journal article states…

“Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments. The changes would be phased in gradually over the next few years. For the 2009 tax year, the 33% tax bracket starts with couples with taxable earnings of $208,850, when adjusted for personal exemptions and various deductible expenses. A taxpayer in the top bracket paying $1,000 of mortgage interest, for example, would see a tax break worth $350 reduced to $280.”

National Association of Realtors President, Charles McMillan responds…

“There is never a good time to propose something that undermines the basic foundation of homeownership, but given our current housing crisis, this has to be the worst possible time.”

“The tax deduction of interest paid on mortgages is both a powerful incentive for homeownership and one of the simplest provisions in the tax code. It should not be targeted for change…”

“Bank balance sheets will bleed as collateral value of their mortgage-backed securities falls even farther. We can’t afford another credit crisis before we resolve the current one.”