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Washington's Budget Band-Aids and Their Effect on Recovery
By Andrew King
While the national housing market continues to rebound, real estate agents and mortgage brokers are bracing for another round of scary headlines out of Washington that once again have the potential to thwart the recovery.
The problem is as simple as it is severe: our government doesn’t have enough money to pay its bills. To make matters worse, our leaders can’t agree on a long-term solution and tend to opt for short-term budget deals that make us all too familiar with terms such as “debt ceiling,” “fiscal cliff” and now “sequester.”
As first bouts of austerity settle in and we’re about to run out of money again this spring, one of the scenarios keeping real estate and mortgage professionals up at night is the possibility of a cut to the mortgage interest tax deduction.
“It could bring the whole housing market down,” says Gary Winfield of Cherry Creek Mortgage, a Colorado-based company that sells mortgages in 27 states. “Growing national debt, you don’t want that, but the national housing market is in the process of recovering. (Eliminating deductions) will stall the housing market recovery, impacting the middle class. … The mortgage interest deduction is one of the biggest incentives for buying a home.”
Under the last deal, the MID has been kept in place for the first $1 million borrowed, but that hasn’t stopped the government from skimming real estate finances elsewhere. Fred Glick, principal of US Loans Mortgage LLC and US Spaces Inc., notes that the increasing GSE fees are something mortgage lenders should be concerned about.
“By having add-ons for mortgages, a piece of those loans goes to the Treasury. This is where they’re getting the money from,” says Glick, who’s based in Philadelphia but also does a lot of business in California. “It’s just a tax. Nobody is complaining because rates are in the 3s, but rates and fees are higher because of the government doing this.”
With all the fees and new banking guidelines set during each crisis, Glick explains that brokers aren’t playing from the same playbook with regard to mortgage interest rates.
“It’s hard to say ‘what’s the rate,’” says Glick. “You just have to go to someone who you trust, who’s been recommended to you.”
Fortunately—despite talk of “reforming the tax code,” “closing loopholes” and “finding new revenue”— the MID will live on for at least another year, thanks in part to special interests within the real estate community.
“The Big Kahuna in all this is the National Association of REALTORS®,” adds Glick. “They want to protect the MID under all circumstances. They have drawn the line in the sand.”
Andrew King is an award-winning journalist with 15 years of experience with the Gannett newspaper company, appearing in The Journal News (Westchester, NY), Asbury Park Press and USA Today. He also contributes to The Real Deal, TheLadders.com and TechPageOne.com.