Silicon Valley Association of REALTORS® says …

The National Association of REALTORS® (NAR) is again asking REALTORS® to contact their members of the U.S. Senate to warn them about the dangers to the housing market and the economy of reducing or eliminating the mortgage interest deduction and making other tax changes that could hurt home owners. SILVAR members should have received a second Call for Action this week from NAR. Its launch came as a response to the co-chairs of President Obama’s bipartisan Federal Deficit Reduction Commission, charged with the task of finding ways to balance the budget by 2015 and to reduce the deficit by $4 trillion by 2020, release of their recommendations in a draft report titled “The Moment of Truth.”

The plan called for significant reductions to the mortgage interest deduction and other major tax reforms. The panel recommended converting the deduction to a 12 percent non-refundable tax credit available to all taxpayers, capped at $500,000, and limited to principal residences only (no credit for interest from second residence and equity). The panel also recommended the elimination of itemized deductions and the taxation of capital gains as ordinary income.

The deficit commission voted on the plan last week, and while it received a majority 11-7 vote, it fell short of the super-majority needed (a vote of at least 14 of its 18 members) to prompt immediate congressional action. Regardless of the outcome of the vote, it is imperative REALTORS® make their voices heard now because individual recommendations, like cuts to the MID and other programs impacting home ownership, could be included in federal budget legislation in early 2011.

The tax deductibility of interest paid on mortgages is a powerful incentive for home ownership and has been one of the simplest provisions in the federal tax code for more than 80 years. In a new survey commissioned by NAR and conducted online in October 2010 by Harris Interactive of nearly 3,000 homeowners and renters, nearly three-fourths of homeowners and two-thirds of renters said the mortgage interest deduction was extremely or very important to them.
 
Recent progress has been made in bringing stability to the housing market and any changes to the MID now or in the future could critically erode home prices and the value of homes by as much as 15 percent, according to NAR’s research. This would negatively impact home ownership for millions of Americans, including those who own their homes outright and have no mortgage.

Any further downward pressure on home prices will hamper economic recovery, raise foreclosures and hurt banks’ abilities to lend and likely tip the economy into another recession, resulting

Today, in a draft document titled “The Moment of Truth” the co-chairs of the President’s Deficit Reduction Commission proposed how the federal government should address ongoing budget shortfalls and an ever-growing national debt. This week, the 18-person commission is scheduled to vote on this report, which requires a 14-vote majority for approval.

Embedded in the 66-page draft is a proposal to significantly rewrite the federal tax code (figure 7 on page 31 gives the best explanation). Here are the four big tax changes proposed that would impact homeowners and REALTORS®:

• Mortgage interest deduction (MID) would be capped at $500,000, and no deduction will be allowed for interest paid from a second residence or equity loans.
• Continuation of standard deductions, but elimination of itemized deductions.
• Change from a five to three income tax brackets, taxed at the following rates12%, 22%, and 28%. 
• All capital gains and dividends will taxed at ordinary income rates, which will mean an increase for the two upper income brackets.

Regardless of the vote this week, Congress would still need to propose, debate and pass many of these recommendation before the President could sign any into law. The National Association of REALTORS® (NAR) has already announced its opposition to any tax reform plan that does not retain the deductibility of mortgage interest. NAR also opposes any effort to convert the mortgage interest deduction from a deduction to a tax credit, and firmly believes that the MID is vital to the stability of the American housing market and economy.

Specific government incentives for homeownership in this country have existed for more than 150 years. That’s because homeownership helps foster communities, creates social stability, builds wealth over the long term, and contributes significantly to the U.S. economy. Realtors® believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream.

If modifications to the mortgage interest deduction are moved forward, beyond an attack on homeowners, this will also be a three-pronged attack on the middle-class, the state of California, and the next generation of homeowners. Changes to the MID to enhance federal coffers would simply be a transfer from state and local governments, including school districts, that rely heavily on property tax revenues. Many cities in Silicon Valley have median home prices far above $500,000. Under this proposal, the negative impact felt here locally will be unequivocally greater than in other parts of the nation.   

The tax deductibility of interest paid on mortgages is a powerful incentive for home ownership and has been one of the simplest provisions in the federal tax code for more than 80 years. In a new survey commissioned by NAR and conducted online in October 2010 by Harris Interactive of nearly 3,000 homeowners and renters, nearly three-fourths of homeowners and two-thirds of renters said the mortgage interest deduction was extremely or very important to them.

To help consumers navigate the home buying process, the U.S. Department of Housing and Urban Development (HUD) and the National Association of REALTORS® (NAR) unveiled three how-to videos to help prospective homeowners find a home they can afford, shop for a mortgage they can sustain, and learn what to expect when they go to closing.

HUD produced the three consumer education videos in coordination with NAR and released them at the REALTORS®’ annual convention in New Orleans. Each video focuses on a critical part of the home buying process, including Shopping for your Home, Shopping for your Loan, and Closing the Deal.

HUD’s videos are easily accessible from both HUD and NAR’s websites, as well as from HUD’s YouTube channel. They include:

Shopping for your Home – The home buying process obviously starts with finding a place you’ll want to call home. This short video will instruct viewers on assessing how much of a home you can afford, working with a real estate agent and what happens once you find the home you want to buy. Housing counselors can assist home buyers and home owners on issues such as home buying, fair housing, credit issues, and foreclosure prevention.

Shopping for your Loan – Once you’ve found the home of your dreams, the next step is to shop for a mortgage loan. This video will help consumers use the good faith estimate (GFE), which is a form that spells out the terms of a loan offer, to shop for the best loan for them. Consumers will learn how to use the GFE to determine how long an interest rate is available for a particular loan and how to identify key loan terms and costs of a particular loan offer. HUD suggests consumers shop and compare GFEs from multiple mortgage brokers and/or lenders in order to get the best loan for their situation.

Closing the Deal – Finally, this video walks consumers through the actual closing process, including how to make sure the loan they were offered closely matches what they encounter at the settlement table. In particular, HUD will walk the viewer through the HUD-1 Settlement Statement and demonstrate ways consumers can compare their actual costs with those reflected on their Good Faith Estimate.

To view HUD’s new home buyer education videos, visit HUD’s YouTube channel at www.youtube.com/HUDchannel.