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What Would Elimination of the Tax Break for Mortgage Debt Do To Your Business?

Bloomberg National Poll: Tax Break for Mortgage Debt Is Ready for the Wrecking Ball

WHAT WOULD IT MEAN FOR YOUR BUSINESS AS A REALTOR OR LENDER?

In this morning's editorial, the editors of Bloomberg state the following:  "Forty-nine percent of respondents in a Bloomberg National Poll said they were willing to abandon the mortgage tax break if it meant lower overall tax rates. Only 45 percent opposed the switch."

Bloomberg's editors (no single name at the bottom of the article) believe that "Getting rid of the mortgage deduction is one of the most effective elements of any plan to lower overall tax rates or narrow the deficit. That process should begin in earnest. This is a rare opportunity to make the most of public willingness for change."

  • The UK has done away with the tax break for mortgage debt.
  • Canada has no tax break for mortgage debt.
  • Germany used to have a tax break for mortgage debt, but no longer does.

Whoopee for them! 

What I wondered when I read this morning's editorial was this: What would the elimination of the mortgage tax break mean for the Real Estate and Lending business in the United States of America?

WHAT WOULD IT MEAN FOR YOUR BUSINESS AS A REALTOR OR LENDER?

_____________________

I'm Mike in Tucson, your preferred Tucson Arizona Mortgage Lender.

NMLS #223495

SUNSTREET MORTGAGE LLC ~ Correspondent Mortgage Bank
Offices in Mesa, Tucson, Sierra Vista & Nogales

Comment balloon 23 commentsMike Jones • June 24 2011 07:47AM

Comments

in New Jersey where we have very very high real estate taxes we also have to worry about the elimination of the break for local real estate taxes.

Posted by Bruce Parker (RE/MAX Best) about 8 years ago

12-18 months of consumer and agent confusion and then business as usual.

The market would adjust. 

But, I never coax folks to buy because of the Mortgage Interest Deduction.

Posted by Mike Jaquish, 919-880-2769 Cary, NC, Real Estate (Realty Arts) about 8 years ago

by the way once a tax is levied (or a break taken away) it never gets repealed.  Welcome to Socialism. Comrade Obama

Posted by Bruce Parker (RE/MAX Best) about 8 years ago

If people want a home of their own, they will still buy. I don't think it will make a difference to mindset.

Posted by Toni Weidman, 26 Years Selling Homes in New Port Richey, FL (Sailwinds Realty) about 8 years ago

Mike,

It's not the raise in taxes, presay* it's the accompanying hysteria that will hurt!

Bill

 

*I can't spell in English and my spell checker can't speak French, a fine pair we make.

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) about 8 years ago

Mike~

Great fodder for a real conversation here at AR. I'm "Suggesting" this post!

Posted by . 4Terra Land Brokers .. 828-776-0779 Asheville NC, What's Most Important to YOU? Call(828)-776-0779 ( REAL ESTATE RESOURCES & NETWORK ) about 8 years ago

Mike - most of the people in this country believe in being treated failrly, but something think they are special. I am for a useage tax. We don't have a state income tax here in Tennessee, but we do have a sales tax as does every other state in the country. What I have noticed is that while a lot of states are in big financial trouble, Tennessee not so much. Revenues are down, but not nearly as much as others. I think everyone should pay taxes, but we know that only have paay income taxes, that's not fair in my mind. Those are also the some ones who usually think the tax payers have too many tax breaks. I say it would hurt the economy of the country in a big way.

Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) about 8 years ago

Larry,

Thanks for saying so.

jane-Anne,

Thanks for the "suggest."  I'd like to see a wide-open discussion on this.

Bill,

LOL!

Toni,

Does that mean that you believe your business will be unaffected?

ReMax,

Thanks for your opinion!

Mike,

I hear you!

ReMax,

Thanks for being the first to jump in and comment!  What do you think this would do to your ReMax business?

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) about 8 years ago

Americans will adjust and the boys on Wall Street will mess it up again down the road.

Posted by Harry F. D'Elia, Investor , Mentor, GRI, Radio, CIPS, REOs, ABR (RentVest) about 8 years ago

Perhaps the 49% who are ready to see this go are people who don't own homes, people who do not have this tax deduction calculated into their budget, people who might be added to the growing list of folks who can no longer pay their mortgages for other reasons, such as job loss and rate increases.  To the other 51%, this could be devastating.

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) almost 8 years ago

I think half the people I work with dont know nothing about it anyway.  It would probably put some delay in buyers and slow business down about 15-25%.

Posted by Chuck Carstensen, Minnesota Real Estate Expert (RE/MAX Results) almost 8 years ago

There are numerous advantages to owning your own home and this will not change that fact.

Posted by Melissa Juarez (Massachusetts Buyers Broker Agency, LLC) almost 8 years ago

Mike...

Two things ....

It would not be catastrophic but it would not reduce the national debt. 

Posted by Richard Weisser, Richard Weisser Retired Real Estate Professional (Richard Weisser Realty) almost 8 years ago

Mike, I have a feeling the 49% weren't home owners. It sure would simplify doing taxes every year. Not many people can meet the minimum deduction for doing Schedule A without the mortgage tax deduction.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA almost 8 years ago

Mike - I also think people will adjust to the change, it is just a matter of time.

Posted by Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional, Palm Harbor, Dunedin, Clearwater, Safety Harbor (Charles Rutenberg Realty) almost 8 years ago

Good post Mike. 

No one knows what will happen if this is imposed. It is likely that the market will absorb the changes and adjust.  However, "adjust" means adjust at lower property values with lower demand.  It is a basic math issue.  If the value of the asset is diminished it will be worth less.

Additionally, the timing of this proposal is ridiculous.  While the housing market is suffering greatly and is the anchor which is postponing economic recovery, it seems foolhearty to experiment with policy which would surely have a negative impact on demand. 

Perhaps if this were proposed in 2004, it would have made more sense.

Posted by Howard and Susan Meyers (The Hudson Company Winnetka and North Shore) almost 8 years ago

Are there any numbers on how many this would affect? As mentioned above, if you don't pay taxes it won't matter and if you don't have a mortgage it won't matter. How many homes are owned free and clear?

Posted by Gary Burleson, Myrtle Beach Homes, Condos, Foreclosures, Investment Propery (Beach Water Realty - www.beachwaterrealty.com) almost 8 years ago

All,

I appreciate your comments, but the question is What would this do TO YOUR BUSINESS in the near term?

I'm sure we would all adjust as buyers and business people just like the folks in Japan are adjusting to the new reality caused by the Tsunami.

What would it do to YOUR business?

Mike in Tucson

Posted by Mike Jones, Mike Jones NMLS 223495 (SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) ) almost 8 years ago

Besides the great news coverage of our great demise, I'm sure the American people will deal with over the course of a couple years. Housing should be for living, not tax advantage planning. In the long run, it will allow stronger hands to own homes and not have this kind of debacle again.

Posted by Bill Pohl (Tetra Homes, Inc.) almost 8 years ago

I think one thing that could be expected if the tax break is eliminated is that the debt-to-income ratios Fannie Mae, Freddie Mac, FHA and USDA will allow for loans will be reduced as it will become more expensive overall for Americans to own homes.  With the issue of foreclosures still on the market and properties that have been defaulted on that still have not been foreclosed on we may well see property values drop yet again in many areas.  Even if the drop in values matches the drop in buying power, declining property values tend to have a negative effect on jobs and the economy.  More people will end up upside-down in their mortgages, especially on higher end highly leveraged properties. The cycle of foreclosures will then likely continue and the economy continue to stagnate.  Over all, the potential number of qualified borrowers would be reduced and more borrowers would have troubled credit.

I think realistically that this would slow my business down in the near term. 

Posted by Bill Rozek, NMLS #214260 (Embrace Home Loans, Inc.) almost 8 years ago

My thinking has always been . . . when the mortgage interest is defined differently the get rid of it.  But when the first years of the mortgage only goes to interest (with very little principal reduction) the tax write offs on the mortgage interest makes sense.  Because no one pays the principal down . . . just look at any amortization table.  The banksters have that calculated since way, way back.  The mortgage interest always goes to them first.  The cream off the top of the mortgage payment.  Tax write offs on the mortgage interest is fair.  Perhaps getting rid of them AFTER ten years in the property would be the solution.  An owner can use the mortgage interest write off the first ten years in the property, then they go away. 

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) almost 8 years ago

Mike - I can't see how it would be a good thing for our business, our real estate market or our economy.  I'm not economist, but it's my understanding and has been amplified over the last few years that our economy runs on the back of our housing market.  If that's true, how could it be a good idea to possibly undermine that market by eliminating the mortgage deduction.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) almost 8 years ago

NAR has been fighting this with FUD (fear, uncertainty, and doubt) by convincing agents that the MID is necessary.  As you point out, it's not.  The reality is that a reduction in income taxes that matches the value of the MID would mean a "net zero" change in the tax paid by the homeowner.  A study by NAR found that 76% of buyers would buy a home even if it lost money.  I don't think they'll care if the MID is gone so long as they can own the home.

Posted by Bryan Robertson almost 8 years ago

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