Tax plan’s mortgage changes setting off political tiff

first_img “I would not be so cynical as to say it helps the red states more than the blue states, but if you look where the prices are really high, it’s where the blue states are,” said Daniel Blake, director of the San Fernando Valley Economic Research Center at California State University, Northridge. So here are three basic questions about this tax credit proposal: Will the mortgage credit be available for owners of houses costing more than the FHA loan limit in their community? Will owners of homes costing more than the FHA limit be able to take the interest credit up to the loan limit? If the answer to the last question is yes, just how the heck will the credit be computed? Turns out there’s no basic answer, at least not now. Tara Bradshaw, spokeswoman for the tax advisory panel, could not find anyone in the federal government who could answer those questions Friday. She did know that more details will be forthcoming when the full report is released Nov. 1. That will go to the secretary of the treasury, who will review it and pull out a final set of recommendations that will be sent to President George W. Bush. The White House is not tipping its hand. “We’re not going to prejudge a set of recommendations we have yet to receive over here. But the president is dedicated to increasing homeownership in the country,” said White House spokesman Ken Lisaius. Critics wonder how taking away the mortgage interest deduction will encourage someone to invest in a house. Freddie Mac, the mortgage giant that got its charter from Congress in 1970, can’t take a position on this hot political issue, a spokeswoman said. But it did crunch some numbers that might turn up the heat on proponents of the credit. The FHA loan limit averages about $300,000 nationwide. This year, 42 percent of mortgages issued by lenders were for homes costing more than $300,000. So it looks like the panel’s recommendation will have a broad impact. Expect intense lobbying efforts against the proposal by real estate-related trade associations. Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said that the group is still trying to digest what the tax panel served up. It’s not going down easy. Home sales are on record levels, so why mess with a good thing? “We’re not too supportive,” Hobbs said. “We believe that the deduction, the way it’s set up right now, fosters homeownership.” Robert Kleinhenz, deputy chief economist at the California Association of Realtors, thinks this proposal will go where others like it went. Nowhere. “It won’t get out of the starting blocks,” he said. Gregory J. Wilcox, (818) 713-3743 [email protected] local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! Now that the President’s Advisory Panel on Tax Reform recommends eliminating the big home-buying carrot, this much is clear. The real estate industry is seeing red and home buyers in California and other high-price areas are feeling blue. And the nonpartisan panel has set off what should be an intense political tiff. Early last week the panel released its plan for simplifying the complicated federal income tax code. Among the recommendations: eliminate the mortgage interest deduction and replace it with a 15 percent credit for mortgage interest paid during the year. That part sounds OK, since a credit is a dollar-for-dollar reduction in how much tax you owe. AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREWalnut’s Malik Khouzam voted Southern California Boys Athlete of the Week What doesn’t sound OK is that the size of the mortgage qualifying for a credit is limited to the Federal Housing Administration loan limit. In Los Angeles County, the limit is $312,895. Houses here cost a lot more than that. The median price in September for a house in the county – be it new, used, single-family or condo, was $494,000, according to DataQuick Information Systems. In the Valley it was $545,000 for a previously owned house or condo, said the Southland Regional Association of Realtors. Still unclear is just what impact this will have in high-cost markets. last_img read more