Politics & Government

Realtors: Mortgage Reform Could Hurt Housing

Realtors and bus tour highlight mortgage financing issues in the federal debate over deficit-cutting.

If Congress chooses to do away with real estate tax deductions and reduce housing loan limits on the way toward cutting $1.5 trillion from the federal deficit, the dream of homeownership could grow more distant for some Americans, said a group of Realtors on Wednesday in Rockville.

The Home Ownership Matters Bus Tour, sponsored by the National Association of Realtors, rolled into Rockville on Wednesday with that message during a stop at the Metropolitan Regional Information Systems offices on Key West Avenue.

Among the changes to government programs and incentives being considered are:

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  • Reduction or elimination of the ability to deduct mortgage interest on tax returns. More than 72 percent of Maryland homeowners claimed an average of about $14,000 in the deductions last year—the highest rate in the country, according to NAR.
  • Tightening of Federal Housing Administration loan limits from 125 percent to 115 percent of the local area median home price. Montgomery County would see loan limits reduced by more than $100,000—from $729,750 to $625,500—if limits are allowed to expire at the end of the month, according to NAR. (A cap that would take effect on Oct. 1 would reduce loan limits to a maximum of $625,500.) Buyers wishing to purchase a home with a mortgage of more than $625,500 would not be able to get an FHA-insured mortgage.
  • A qualified residential mortgage rule that would require borrowers to make a 20 percent down payment.

Such changes “would undermine the American dream of homeownership,” Bonnie Casper, president-elect of the Greater Capital Area Association of Realtors, said during a news conference on Wednesday.

The proposals create uncertainty and “potential roadblocks” to potential homeowners, said Bill Armstrong, NAR treasurer.

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Leaders of the regional and national Realtor groups on Wednesday welcomed Joseph Giloley, the county’s chief of housing and code enforcement and representatives of county and federal lawmakers, including Ann Humphrey.

Humphrey represented U.S. Rep. Christopher Van Hollen Jr. (D-Dist. 8) of Kensington, who is .

“Somebody needs to take charge and say ‘No, not now. This is just not the time to be looking at things like this,’” Armstrong said during the news conference. “Housing has brought us out of so many of these down markets, these recessions, and it will do it again. But we have to leave housing alone. Back off.”

The mortgage interest deduction could be seen as "one of the lowest-hanging fruits" when lawmakers look for ways to make deficit cuts without slashing defense or social programs, Kenneth R. Harney recently wrote in The Washington Post.

Doing away with the mortgage interest deduction could make the “backend arithmetic” of mortgage financing tougher on many middle-class and first-time homeowners, Casper said. Without the deduction, some may find it difficult to pay their property taxes, she said.

“The change will have more impact in Montgomery County than in many places because of the cost of living here, the cost of mortgages, the cost of homes,” said County Councilman Philip M. Andrews (D-Dist. 3) of Gaithersburg, who was one of two elected officials to attend, along with County Councilwoman Nancy M. Floreen (D-At large) of Garrett Park.

Still, Andrews said that he does not think that many people are aware of the potential changes.

The County Council has sought to keep property tax rates at affordable levels, not only for people looking to buy a home, but also for those looking to stay in their homes, he said.

But the slow economy and uncertainty about a Congress deadlocked over what to do about the deficit “freezes people” from jumping into the market, Andrews said.

That’s not good for Realtors or for the economy of which real estate is a large and vital part, Casper said.

“If Congress is serious about generating an economic recovery, this is not the time to make radical changes that risk further undermining of the real estate industry,” she said. “In fact, Congress should be looking to the real estate industry as the basis of the economic recovery.”


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