Kicking the Little Guy While He is Down

According to an article in the San Diego Union-Tribune on January 15, 2012, Congress did  it again, and did it without getting the front page headlines this story deserves, and that's just as big a shame.
 
Washington Post Reporter Kenneth Harney's article has the headline "Congress Is Making Owning Home More Expensive."  First, let me say that I am a very strong believer that home ownership is a very good thing, for individuals, for families, and for society.  Pride of ownership is much stronger than for renters.  Pride of ownership produces stronger ties to the community.  It means a property is better maintained, and so improves the entire neighborhood.

Mr. Harney's article begins, "Though its demise drew little attention because of the partisan year-end brawl over the payroll tax cut extension in Congress, a key mortgage financing benefit disappeared at the end of December: The ability of large numbers of homebuyers and owners to write off the premiums they pay for mortgage insurance.

The loss of that tax deduction — plus mandatory new fees imposed by Congress on all new conventional and FHA loans — could ratchet up the costs of homeownership this year."

His article continues:  "The expiration of mortgage insurance deductibility will hit... virtually all new mortgages closed this year where the down payment is less than 20 percent. Though industry experts do not have precise numbers, their estimates range into the millions of existing owners and new purchasers potentially touched by the deductibility termination. Borrowers using guaranteed veterans and rural housing loans, where down payments can drop to zero, also are affected.

David Stevens, who served as FHA commissioner and is now chief executive of the Mortgage Bankers Association, says the loss of deductibility of mortgage insurance “hits a segment (of consumers) — middle-income and first-time buyers— where affordability is especially important.”

At a time when the Federal Reserve is warning that there can be no broad economic improvement until housing recovers, it may strike you as odd public policy to raise costs for homebuyers and refinancers in order to fund unrelated, temporary tax relief. But that’s not the way they saw it on Capitol Hill in the rush to holiday recess."

What makes me crazy is that the mortgage deduction laws definitely do need fixing, but this is the wrong fix.  A law that promotes home ownership should not include any deductions for a second home!  A law that promotes home ownership should not include recreational vehicles!  A law designed to promote home ownership should not allow interest deductions on homes valued at up to $1,000,000!  And yet, current law allows all of those deductions.  To me, these are all no-brainer facts.  While I don't have hard figures, some research strongly supports my contention that changing the law to reflect these three simple facts would save billions and billions of dollars, and all without harming the premise of the law one cent!  

You can't convince me that this Congress doesn't know what they are doing, that my premise escapes them.  Only logical conclusion:  they don't care!