Congress is on track to pass a tax bill before the lawmakers adjourn for the year that would allow most first-time homebuyers to deduct the cost of mortgage insurance premiums for the first time ever.Passage of the tax deduction would be a major victory for the private mortgage insurance companies, which have seen their market shrink in recent years as homebuyers opted for piggyback loans (80-10-10s) to avoid paying MI premiums. It also applies to insurance premiums in Federal Housing Administration single-family loans. "If passed, MI tax deductibility will be a positive development for the mortgage [insurers] as it would remove a competitive advantage enjoyed by 80-10-10 loans," a research brief by Friedman Billings Ramsay says. The MI deduction is limited to first-time homebuyers with incomes of less than $110,000. Mortgage industry consultant Howard Glaser noted that the MI deduction would also benefit Fannie Mae and Freddie Mac, since the two secondary-market agencies securitize most of the mortgages with private mortgage insurance.
