This article was originally published in Realtor Magazine:
Changes to the MID would punish those who make mortgage payments on time.
With another year of deficits underway, Congress is again eyeing the reduction of tax benefits such as the mortgage interest deduction for a quick influx of cash. There’s no official timeline for when Congress will bring the matter to a vote—or whether it will at all—but it’s important that we as REALTORS® keep the pressure on to save the MID from the ax.
While our defense of the MID is staunch, the vision of exactly whom we’re defending can get a bit blurred. We often focus on the prospects for future home buyers because we want to ensure a healthy real estate market for them. When looking at the potential effects of an MID change, though, we should be keenly aware of how it would impact our clients who already own homes.
There are roughly 75 million home owners in the United States. Most used our services to buy homes. These home owners worked with their lenders to find an affordable financing plan. They budgeted for mortgage payments, insurance, utilities, and annual taxes, and they put away enough money to pay their bills on time. In short, they followed the rules.
Proposals to limit or eliminate the MID would change those rules mid-course. They would ignore more than 100 years of tax precedent that these home owners relied upon in their budgeting. The changes would haphazardly increase some home owners’ housing expenses, negating their planning to ensure they could make those mortgage payments.
It seems wrongheaded when contrasted with the current clamor in the nation’s capital to regulate future home buyers’ financial standing. To keep mortgages as safe as possible from default, new rules bar lenders from writing loans for home buyers who don’t meet strict “ability to pay” guidelines.
And what of those poor saps who already own a home and consistently made their payments throughout the downturn? Some legislators are attempting to “backdoor” their years of planning and saving because, ironically, lawmakers couldn’t do the same for the country.
It’s clear that home owners’ concerns don’t garner the same attention as those of their neighbors who walked away from their homes. Distressed home owners have benefitted from various pieces of legislation written to lessen their financial pain. But for the home owner who’s still playing by the rules, the ability to pay seems to be taken for granted.
Proponents of MID reductions say that the tax break’s benefit is spread unevenly and hides behind a purported social ill in the tax code. If that were truly the case, there could be an attempt to disqualify future home purchases from the MID without harming current home owners. Of course, there isn’t nearly enough money in that endeavor to fill the current budget, so a much wider, less socially conscious net is being cast. With a blind eye turned to the all-too-recent struggles of real estate markets nationwide, the budgetary silver bullet for some appears to be strapping another weight onto home owners’ already overladen backs—and hoping that they don’t break again. For many current home owners, it would be too late to avoid changes in the tax laws. They’re locked into long-term mortgages. Lending rules have changed so much in recent years that many current owners wouldn’t even be able to get approved to buy another home if they needed to downsize.
Home owners don’t want a bailout, new protections, or entitlements. They merely ask that their legislators honor the rules that were the basis for making the biggest investment of their lives.