Friday's vote by the National Commission on Fiscal Responsibility and Reform on a proposal for reducing the national deficit did not garner enough support to send the proposal, which includes major alterations to the mortgage interest tax deduction, directly to Congress. The deficit commission favored the proposal by an 11-7 vote; 14 commission members must approve the package for it to move automatically to Congress.
The commission released its recommendations for the national budget last week in a report titled ‘The Moment of Truth.’ The commission's proposal would drastically alter the mortgage interest deduction (MID), limiting its use to principal residences and first mortgages. The deduction would also apply only to mortgages of up to $500,000 – half of the current $1 million cap.
The commission's proposal was soundly rejected by the mortgage and real estate industries last week. Mortgage Bankers Association Chairman Michael D. Berman said the MID changes would have a ‘devastating impact.’ The National Association of Realtors estimates that modifying the MID could hurt home values by as much as 15%.