The time is now to remind your Member of Congress or Senator about the critical issues facing the real estate economy and what needs to be done when Congress returns to Washington, DC after Labor Day. Use the following talking points on the Mortgage Interest Deduction and loan limits to communicate with your Member of Congress during the Summer 2011 recess.
Mortgage Interest Deduction (MID) Talking Points:
First, Do No Harm
- Raising taxes on homeowners would further stall economic recovery.
- Housing is not recovering at the rate it should be.
- Prices remain unstable, and inventories of homes for sale continue to grow in many areas.
- The housing market remains far too fragile to sustain any tax increases.
- Any limitation on the mortgage interest deduction is a tax increase on America’s homeowners.
- Congress must DO NO HARM to housing.
Just the Talk of Eliminating Home Deductions is Spooking Buyers and Sellers
Homeowners and prospective buyers do not distinguish among Congressional proposals. They just hear in the news ―Congress may eliminate home mortgage deductions‖ and set aside their plans to purchase, even when they are otherwise qualified to buy a home. That angst among buyers and sellers continues to have a chilling effect on the market.
Reducing the Mortgage Interest Deduction Would Have a Very Uneven Geographic Distribution
Cutting the amount of mortgage debt that is eligible for a mortgage interest deduction would be an immediate tax increase on homeowners everywhere, but in high cost housing markets such as California, New York, and Northern Virginia such a tax increase would be especially devastating. In many of these high cost housing markets $500,000 is a modest middle class house or condo.
Any changes to the tax code should be done in public as part of comprehensive reform, not by 12 Members of Congress behind closed doors.
Targeting certain parts of the tax code without addressing comprehensive tax reform is just another band-aide on our fiscal problems. Tax reform without a full open process involving all our representatives is un-democratic.
FHA and GSE Loan Limits Talking Points:
Legislation has been introduced in the House to make the current FHA and GSE loan limit formula permanent. H.R. 1754, the “Preserving Equal Access to Mortgage Finance Programs Act”, is sponsored by Reps. Gary Miller (R-CA) and Brad Sherman (D-CA). In the United States Senate, Senators Robert Menendez (D-NJ), Dianne Feinstein (D-CA) and Johnny Isakson (R-GA) have introduced S. 1508 to extend the current loan limits. With housing markets remaining fragile, they cannot handle a mortgage disruption like lowering the loan limits.
Mortgage Loan Limits Will Drop without Congressional Action: The current loan limit formula is set to expire on September 30, 2011. Unless Congress acts, the FHA and GSE formula will drop to 115% of local area median home price with a cap of $625,500 from the current limit of 125%, with a cap of $729,750.
Decreasing the Limits Impacts Nearly Every State – NOT JUST HIGH COST AREAS: FHFA and FHA have published the new limits; more than 669 counties in 42 states and the territories would be negatively impacted by the loan limit formula and cap change. The average decline in loan limits would be more than $68,000. Only 8 states will see no decline (AR, IA, KS, MS, NE, ND, SD, & OK). Every other state will see a drop in loan limits. 1
The Number of Families Impacted Will Be High: On October 1st, 2011, some 5 million homes – roughly 27% of all owner-occupied homes in the United States – will become ineligible for mortgage financing, since there is little to no private mortgage financing available. Moreover, 59% of all owner-occupied housing will be ineligible for affordable FHA financing.2 If families can’t sell their homes and others cannot buy, the inventory of homes for sale will grow, further reducing housing values nationwide.
Housing Markets are Rebounding, but the Recovery will be slowed: With tight underwriting already constraining mortgage availability, lowering the FHA/Fannie/Freddie loan limits will only further restrict liquidity. Even with the current higher limits, borrowers are finding it more and more difficult to obtain affordable mortgage financing. Making the current limits permanent at levels appropriate for all parts of the country will provide homeowners and homebuyers with safe, affordable financing and help stabilize local housing markets.
It’s a Matter of Fairness: Retaining the current loan limits will allow homebuyers in higher cost areas to have access to affordable mortgage financing and share the same opportunity to achieve homeownership that borrowers in other regions of the country enjoy.
Congress Cannot Wait: Although the limits don’t expire until September 30, 2011, action cannot wait. It takes FHA and the GSEs several months to reset their underwriting systems to accept any changes in loan limits. The result will be to unnecessarily force homebuyers and those looking to refinance into less affordable mortgage products.
We all must do our part to work diligently toward a sustainable recovery.
Call or write today!