top of mind
Plight of Current Home Owners
Changes to the MID would punish those who make 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 an 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 con-
trasted with the current clamor in the
nation’s capital to regulate future home
buyers’ financial standing. To keep mort-
gages 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 nation-
wide, 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.
Sam DeBord is a state
director for Washington
REALTORS® and managing
broker of The Seattle Homes
Group with Coldwell Banker
Danforth. [ firstname.lastname@example.org]
Note: Opinions expressed in “Commentary” do not necessarily reflect the position of the National Association of REALTORS® or REALTOR® Magazine.
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Lending rules have changed so much that
many owners couldn’t get approved to buy
another home if they needed to downsize.