(Huntington, NY) — Brian Leibowitz, CEO and Owner of Affordable Financial Services LTD, says the government’s proposal to do away with the mortgage interest deduction (MID) will negatively impact the mortgage lending industry as prospective homeowners will hold off on buying a home and fewer purchase applications are filed.
U.S. Congressman Dave Camp of Michigan, who chairs the Ways and Means Committee, is leading an effort to eliminate the MID as part of a tax code overhaul. Many economists and tax policy experts argue that the deduction does not encourage homeownership and benefits the upper class, who do not need it.
“The mortgage interest deduction is geared not towards the rich, but towards lower- and middle-class families,” Mr. Leibowitz said. “The National Association of REALTORs has pointed out that more than two-thirds of homeowners who enjoy the deduction earn less than $100,000. These homeowners are struggling to pay the bills and any money they can get back — whether it is a tax refund, a credit or mortgage deduction — will help them make ends meet.”
According to the Congressional Joint Committee on Taxation, 40 million Americans receive tax breaks on the mortgage interest they pay; these deductions are valued at almost $100 billion a year. The maximum amount of eligible mortgage debt for the deduction is $1 million for either a first or second home and up to $100,000 on home equity loans.
“If this tax break for the middle-class borrower is taken away, there will be a steep decline in lending activity because that group of future homebuyers will not enjoy the deductions,” Mr. Leibowitz said. “The government has already instituted more stringent lending requirements that have impeded the borrower’s access to capital. Eliminating the MID will not only impact the homeowners but the mortgage servicing industry as well. We will see fewer applications being filed as a result.”