Congressman Jeb Hensarling did not get the memo. He said,
Will our generation perpetuate a system that demands “more house” today only to ensure that our children are confined to “less house” tomorrow? Today’s system of boom, bust, and bailout is retarding economic growth and helping fuel what all acknowledge as unsustainable levels of national debt.
The wind is blowing the other way. Nick Timiraos reports,
An earlier proposal, issued in April 2011, said the skin-in-the-game rules wouldn’t apply to mortgage securities containing loans where borrowers made at least a 20% down payment.
Now, regulators want to scrap that requirement, meaning that banks would have to retain 5% only of mortgages that allow borrowers to make “interest-only” payments or that don’t fully document a borrower’s ability to repay a mortgage—a much smaller portion of the market that includes the riskiest loan products that caused much of the crisis-time losses.
Hensarling wants to get the government out of the business of deciding what makes mortgages eligible for government insurance subsidies, by eliminating those subsidies.
Right now, because of the Dodd-Frank Act, Washington has more control over who can buy a home than your local bank. The PATH Act addresses these devastating rules head on, getting Washington out of the way to allow banks to lend, builders to build, Realtors to sell, and home buyers to buy.
One would expect mortgage questions to become an excellent “red versus blue” issue. I know this isn’t directly about the mortgage interest deduction, but one would expect politicians from red states to be more willing to take it on than blue-stare politicians. In his case, many if not most TX mortgages simply aren’t big enough to qualify for the homeowner’s deduction, which only “matters” if it (plus other Schedule A deductions) combine to be higher than the standard deduction, which is over $12K for married filing jointly. No state income taxes make it even less likely that a TX homeowner sees much benefit from the mortgage deduction.
Even if the combination is bigger, the added tax benefit for the deduction is fairly marginal unless you have a *big* (ie, CA, NY, or Washington DC-sized) mortgage, and pay a lot of other state taxes.
One could make a rather good argument that “red state” taxpayers are subsidizing rich “blue state” types with the mortgage interest deduction.