Why MBA Chief Is OK with Ditching Mortgage Interest Tax Deduction

Image: Bloomberg
Image: Bloomberg
"Entry-level homebuyers typically don't deduct, don't itemize, and wealthy borrowers won't really care," said David Stevens, president and CEO of the Mortgage Bankers Association.

The Mortgage Bankers Association is "not religiously wed" to the mortgage interest deduction, so long as any change comes as part of a comprehensive tax reform proposal rather than a one-off change to the tax code, said President and CEO David Stevens.

"If the entire tax code were to be looked at through a formal process and it was thorough and the mortgage interest deduction then became part of that dialogue, we certainly would support that," Stevens said in a television interview Wednesday.

Nearly 33.6 million taxpayers deducted $72.4 billion in mortgage interest from their 2014 taxes, and that figure could rise to as much as $96.4 billion by 2019, according to estimates by the Congressional Joint Committee on Taxation. That makes it one of the largest tax breaks taken by individuals.

Middle-class homebuyers benefit the most from the deduction. About 43% of taxpayers who took the deduction had adjusted gross incomes between $100,000 to $200,000, according to the committee's estimates, while another 40% of taxpayers who took the deduction made less than $100,000.

Stevens' statements are a departure from the MBA's previous opposition to any attempt to eliminate or even reduce the deduction.

The group opposed a November 2010 proposal on scaling back the deduction, citing the fragile state of the housing market. The group called the deduction "one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain."

At the start of 2013, the deduction survived contentious negotiations on a deficit reduction bill. But it has remained a target for those looking to increase revenue for the government.

So why the change in course?

"Entry-level homebuyers typically don't deduct, don't itemize, and wealthy borrowers won't really care," Stevens said, adding later, "You can't say, 'touch everybody else's pocketbooks, but not mine.' So I think it needs to be part of the discussion."

"I do think that everybody needs to recognize that the American that benefits from the mortgage interest deduction is a middle-class homebuyer and not on either end," Stevens said. "So ultimately, that impact needs to be understood so we can understand what that's going to mean to household demand and affordability. As long as that's considered in the overall dialogue, we're eager to participate."

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Comments (2)
Mr. Stevens' comments were reckless. The potential elimination of the MID will have unintended consequences both in terms of a real and psychological impact on our housing market. He failed to mention that housing is helping to keep our stagnant economy afloat, much like what happened in the mid 90s.
Posted by 33 Year Mortgage Industry Professional | Thursday, September 01 2016 at 6:01PM ET
David Stevens should NOT have made such a broad statement on eliminating the entire Mortgage Interest Deduction without speaking to the membership and gaining consensus as to the parameters of such a plan. I fear this will be taken out of context and viewed as a area of weakness. I am not a Washington insider as is David Stevens. I respect his views and knowledge. But to make such a sweeping statement which goes to the core of our industry's belief system is not warranted in my opinion.
Posted by MortgageVeteran | Thursday, September 01 2016 at 1:45PM ET
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